PLUS - Earnings call transcript Q3 2017

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Operator

Good day, ladies and gentlemen. Welcome to the ePlus Earnings Results Conference Call.

As a reminder, this conference call is being recorded. I would like to introduce your host for today's conference, Mr. Kley Parkhurst, SVP. begin. may you Sir,

Kley Parkhurst

joining for us you today. Thank

you issued afternoon projections. may deemed call Actual Marion, XX, materially Chief the and I afternoon no the in to statements future future risks may including the to forward-looking and detailed company historical filed. and our to management's the Form XXXX, information current of XX-Q due when uncertainties Exchange facts is this we March based vary Stoecker, responsibility and and anticipated Mark our these Elaine President; forward-looking want earnings are update remind for moment on undertakes a not our any and with release CEO filings to ended plans, take in that the Financial we of be Counsel. light statements XX-K make Marron, for General XXXX, year On or new that this Officer; September periodic are Form The Commission, be and Erica statements estimates events. the XX, Securities to certain ended quarter and results and

ending of stock outstanding average Mark XX, like and share the make Marron. in the XXXX the financial a www.eplus.com. of XXXX. share to and per to Reclassifications reference made conform and amounts to now split. include the due stock split we stockholders turn periods effect statements on and addition, period XXXX September non-GAAP over for the related retroactively information posted weighted and the call, to per recognized the on Mark? numbers effect stock call period March financial been The presentation GAAP the shares XX, in X-month of to shares we of The our the to have the to the reconciliation website have at In data. I'd measures, financial share shareholder during each common all of may split the was section current of amounts prior amounts equity

Mark Marron

Thanks, Kley, profit was solid XXX million a thank to call X.X% profitability discuss margin gross and Consolidated to XXXX XX.X%. participating of for today's gross performance you $XX.X basis points and our across metrics. results. grew quarter second key This quarter in to increased

strong the a the quarter adjusted achieved the growth second this higher gross quarter and that sales our compared while current sales billings a reflected Following X.X% sales were to the as net flat XX% period, basis, that increased year-ago quarter. in we proportion year, the part of on of reported first products because quarter were for in of services

the We of areas benefit from cloud, in and our digital to continue high-growth infrastructure. investments security,

security and increased And second are XX basis year-on-year services metric products our the to to and first half grew and in We points mind services pleased this of report XX%, security for compared of billings quarter. top In continues half represented security the be first points gross basis sequentially. of XXXX, adjusted adjusted the XXXX, products as gross of customers. billings to of that XX.X% XXX

services high the by of in point progress our growth, revenue last is and offerings human growing as Another quarter capital. and months X expanded measured

to ePlus to over to and to other the our penetration OneCloud expanded as cloud train and ePlus engineering help trained trainers continue value We orchestration, enterprise service products our these services sales forefront trainings consultants, acquisition that increase unique by sales drive architects, significantly customers. the to in services, our developers in we us technologies. moving proposition IT deliver OneCloud's believe mid-market utilizing teams and highly related Our We're and OpenStack technology and completed new DevOps, expand disciplines offerings OneCloud also May, customers. traditional and and skill to of sets X,XXX our and OneCloud's the will and their of automation of continuing

standard move for to A a continue was key level looking for drive benefits able example properly ePlus. health effective to opportunities. of service We efficiency cross-sell number transparency, growth to service service services a differentiator on-prem downtime. we're price. a to and and and recent around-the-clock a was local with are An sales, and higher upsell the OneCloud a driver and project as higher better care a tool example migration without assurance with the XXX combines to at the team and to platform customers. Microsoft bundled customer's levels in managed cloud maintenance. and scalability This capabilities set how into capability help investments client long-term annuity can accounts. provides provided India IT leverage margins, than give enterprise our that global this which their creating results helping We're and and them visibility time, leveraging a e-mail this our a both lapses coverage and leverage program added consultative or offering a We leading marginal we're third-party for OneCloud's services, maintenance us to our they of the of traditional IT XX/X our to facilitate in the center to the vendor also ensure from it and services outcomes. software enhanced and other that before It alerting resolution to is state patient encounter reduce can view customers protected albeit monitoring so – real-time higher and of problem with Office in cost expands U.S. over from customer methodology we maintenance it resources a strategy both We thus services how managed better that service us gives for is subscription while a migration, programs. provide provide and program, faster and helping support, We're be ability to call resources seeing for ePlus our resources replicated which service selling work an significant

Storage geographic X-year of locked also a strategy the M&A services reach professional with revenue margins. traditional into it a deal executed our Integrated mid-September, our ePlus, base of to service. bring a service cycle. In at services, higher the our client is us acquisition and support the again expanding to we to on and life managed Over of For customers typical or our also line customer managed and every ePlus disaster engineering expands our ePlus strong highly-credentialed with services, offerings personnel and base, customer sales as and new a cloud marketing engineers service IDS. hosting backup bolsters annuity transaction to customers recovery Data Midwest time, and also, investments see with This to IT salesforce, element for card phase in significant scale to their critical been opportunities broader as enabling services these we drive offerings in acquisitions, have growth. into of and products broader presence our and

our the award investments their activation our life of Management we that cloud that of year. services for assist and Global realize Cisco's help infrastructure. practices the the ensure of brings Lifecycle Partner yesterday, life announced award entire just digital received This their cycle cycle security, made highlights The technology over to including the software, purchase, has and investments across also value ePlus customers Award ePlus fact, In the which ePlus customers adoption. to reinforces

of holding growth. is is investment this increase future well client second roughly While believe focused the necessary cost, in we XX% success we for a quarter it's for on line worth facing, which on and positions remain the future headcount XX% us our emphasizing that

On as our We this of are scaling due financing sales our our broadening geographic requirements as emerging coverage the technologies. human quarter XX% marketplace portfolio financing in to growth well early the of meet for meet terms in to capital part demand net of terminations increased cloud segment, the agreements. and to

across to can outpacing services demonstrating to somewhat allow specific revenue with increased customers year-on-year, service create sizable to earnings expand services our that continue post-contract to We're lumpy IT existing base. and overall Sales solutions business growth be acquired our increase transactions. and with strong acquired mid-market acquisitions geographic relating for plan offerings revenue and and reach supplement our spending and our XX.X% performance. us enterprise to significantly growth our customer solutions, first financing Our customers. demand ePlus cross-sell tends our pleased and organic to to half We bumps

sheet quarter continued for good balance culture for acquisition positions capital as transactions positive for strategic was our with excellent progress this solution substantial scaling an and achieved strong expanding a platform metrics up, ePlus in ePlus on and provides growth. profitability Our our results portfolio. To some key made

Elaine? detail. emerging are Elaine from moving second seeing with half around our customers supports to rapidly second financial our in ePlus fiscal results momentum, quarter now year. our positioning confidence First I growing XXXX our and half will of in into solutions demand more the the ask review we together

Elaine Marion

Thank everyone, call. you, Mark, and thank joining the for you,

in profit We experienced gross second the margin quarter. are improvement and pleased the with gross we

investments results, and year-to-date XXXX. the our for double-digit across Our overall year grow to in of growth high-growth showed benefits areas spending position of board, IT the ahead fiscal us the

start our last in XX.X%. at to were growth XXXX, when year's of essentially revenues flat million Let's consolidated overview. quarter our consolidated quarter of the with In quarterly second net compared fiscal $XXX.X second sales

X.X%. adjusted Our and services of grew products billings gross

and net up widened sure products of quarter, which billings services. software year-over-year of by maintenance XXX margin to services, as manufacturer compared built be team by XX%, transparency accounted and The find Gross improvement gross revenues. customers sales adjusted technology as driven gross the the and of a profit as third-party in was a XX.X%. higher gross of prior was to the $XX.X of are in to to increased basis was in their that process we net our which of for from the services and basis, these proportion well making lapse without sales mix XX% adjustment bring reflecting product an year specializes service higher This assurance, to services and support million, value, efficiency covered We've points margin the investments and to continue agreements. X.X%

salaries due Our increased of higher to operating to benefits The and personnel. increase expenses majority this in increase reflects $XX.X X.X% million.

other adjusted to to from acquisitions X.X% EBITDA and increased million, million year. sales ago and benefits salaries X.X% including primarily $XX.X majority Our earnings from attributable quarter and second to positions, share XXX also X.X% $X.XX earnings by X.X% XX $XX.X for increased $XX tax year-over-year. compensation grew the benefit income Diluted headcount to of health to XX% per the and X.X%. diluted our X.X% metric increase and associated the Non-GAAP related total the than quarter quarter engineering a acquisition-related This million in higher for the costs. share year $X.XX, Adjusted were the X,XXX comparable per basis for $X.XX earnings increased increased personnel. increased the XXXX. in up and X,XXX points of from the quarter. taxes customer-facing during margin of EBITDA income Net higher The of on with and expense care income expenses, fiscal last with Operating XXXX. was share-based Non-GAAP amortization excludes vesting effects

totaled technology diluted sales. our quarter XX March on our Technology from Our the services million $XXX.X million $XXX.X billings adjusted roughly gross to net which for while XX, X-for-X outstanding of grew net adjusting of quarterly segment, I'd results to like accounted in segment compared and the declined million, for our X% second split shares after technology last discuss X% year X.X% product sales XXXX. the to now million. of the with quarter stock for in XX.X

which net of were proportion on area. a are services, of Our as higher a sales maintenance this net to impacted quarter and on presented third-party we by continue focus this basis software assurance, sales

adjusted trailing technology are assurance, of net software a third-party for exclude billings XX-month products the sales, sales the our incurred adjusted services XX% services. and XX% of and largest, the to technology and sale gross and a On maintenance respectively. in SLED were As markets and basis, applicable reminder, costs accounting

telecom, by of several was was customer XX%. health entertainment, financial services and from XX% followed The for and XX% at which Next types. remaining XX% other media care sales, at accounted net

We continue to have size a diversified industry, and geography. customer base by

$XX.X XXXX. IDS to related related to which we XXX on maintenance XXXX, a revenues. which year, increase margin are shift more of XX.X% related due million salaries and or acquisition basis product in the $X.X mix, December acquisition presented of a increase on last to acquisition the by Communications IT Services Consulting of of in services OneCloud compared expenses September The professionals points Operating May, and product was XX in XX of second to and and in benefits margin million and an XX.X%, sold an the quarter. $XX XXX XX the in services, related increase as to to Consolidated which in related the technology in to to expansion Our basis business in an to XX.X% segment million XXXX, third-party of of service expanded sales net increased gross

primarily general addition, XX.X%, Operating operating to respectively, expenses administrative expenses and for XX.X% and due acquisitions. in In technology segment the and $X million, to increases adjusted due and expenses. increased the marketing decreased higher to income EBITDA related expense

to was million an post segment. Revenues mainly agreements, million, increase gains. consumption or Moving early growth from contract XX.X%. offset earnings due structured to $X.X were lower line our of an up well of by financing certain top in This financing as revenue $XX transactional $X.X somewhat attributable to terminations as agreements increase in million

future second related quarter early to benefited terminations earnings they While our potential the equipment the originally financed. results, for the eliminate will

segment often from our revenues events. have due I As customer-specific past, in mentioned financing to the fluctuate,

robust $XXX.X sales XX.X% million. Adjusted where products profit $XXX for months billings decreased our profits changes to consolidated to by Operating sales X XX.X% consolidated credit $XXX.X strong This sales high-margin XXXX gross and, million. EBITDA performance the X.X% gross now $X.X of to or $XXX.X fiscal financing Net increased was I and year-to-date results. by reserves XX.X% segment, increased adjusted to expenses to lower XX.X% expenses. $XXX,XXX the to while due increased for million, operating result, a income a in technology losses. growth reflecting services lesser more increased net will in to $XX.X than XX.X%, turn million, revenue first doubled Operating of gross mainly million. extent, million. increased our the driven As and to to

XX.X%. consolidated margin $XX.X decreased to $XX.X XX.X% by while earnings services X.X%, expanded basis Net to adjusted to X.X% Our X gross XX increased to grew products million. and million on basis margin points and gross points XX EBITDA

share share half non-GAAP per of earnings to first X.X% to per $X.XX, diluted XXXX XX.X% diluted Our increased while fiscal $X.XX. increased earnings

cash to of now of used consulting decrease half acquire fiscal Turning balance The equivalents with was XXXX. sheet. and $XXX.X due first ended with March of compared XXXX million, cash to as IDS. $XX.X We primarily and our the million to quarter cash OneCloud and XX,

partially inventory was March large competitively bid and revenue project deferred delivered a XX, half. the from as Our in decreased first

XX Despite sequentially. the in for cycle we're XX was a days quarter conversion year-over-year up year quarter at increase, from cash days, Our the of first for XX ago. days the down XXXX the and direction moving from right

Our cash hiring can strong evaluate of used and acquisitions, be additional position to repurchases. and fund share all personnel remains constantly We of these opportunities.

turn for half for low-single-digit an second solutions remain developing and the I'll we XXXX, remarks. digital Mark? with that For well the cloud, of market now focused confident back Thank closing positioned on growth outpace We overall Mark are remain on we customers IT and to call the foreseeable infrastructure. emphasis existing everyone. for new the you, over future. to security IT

Mark Marron

Elaine. Thanks,

our continue that with net margin of as the pleased believe IT gross growth market. we and being security, We of customers and a well products the higher-end XX.X%. the provider, digital to us services We need on and are growing infrastructure move year-to-date to market in focusing faster around XX.X% of annuity cloud share capture sales segments and positions the towards profitably consultative IT

business have customers and on outcomes they across to goals. call and We base the multiple would now achieve to an their open rely questions. I us mid-market who need over industry, to established X,XXX of like the deliver growing for enterprise Operator,

Operator

Blair. comes Our Instructions] question Anil [Operator with Doradla first from William

Anil Doradla

that really you little of else? previous something revenues color, provide So sales is revisiting a what say it quarter? was again, Or were the Mark, Is to bit fair you of technology on there but flattish happened? in revenues, pulled those know the the some front, it just did

Mark Marron

terms there's a Elaine the things think had Yes, that well, gross I very so One, of to large happened couple that a in sales. noted adjustment call. of we on net

that you As other that of large a cyclical, we in believe if about, have we did it's have but we've calls, nature as will all we always where will. expand do down, forward. But thing about have our we and talked we go project it's opportunistic, program, opportunities lumpy the talk in land we it's also our wound

look So a on are. get first we take months half would we our XX a better think at numbers to the feel of I trailing where or

Anil Doradla

these netting be is is to often? going thing going this a this And of something some like forward, effect something we'll on then? – revenues, now more see this is and one-off that that Or more seasonal

Mark Marron

seen can thing. if terms awhile know I one-off I in We've a for seasonal of net. Well, gross don't it the to it call

Now design, some of by is Anil. this

customers. upgrading that on service managed our of importantly, So as programs. more well with enhanced we've as focus service of doing programs them some these But maintenance teams types renewals got to our

So them a recurring then what well. revenue customers, these with happens in we increased margins lock for go in and a as as lot we and of we years have X cases forward

So it deal. depends the on on the customer and depends

Anil Doradla

contribution sure out? wasn't about that you I Did Mark, talked whether of guys applications revenue? point in you your security the

Mark Marron

we Anil. at to Yes, the – if I snapshot. look actually give if quarter, were We I going did, you

One our of was the security. points strong

In products year actually was billings basis gross half and terms of we're last That's services for up up for adjusted points versus year our first security security, year-on-year, the and security. in of this XX% XX.X%. XXX

Anil Doradla

this this any not line? a we front? that quarter? the pop Is norm, emphasizing? front. always mean, component perturbations revenue this your the revenues, can us bump strategy And But again and – you we not should be remind again, Again, I is just new nice financing there. that on something saw, on one-off Or financing on is see color Elaine, that on this you is We these what guys this are movements expecting

Elaine Marion

early financing Sure, Anil. of from leases. segment benefited The this some termination quarter

certain quarter. in the negotiated – residual value the back that disposition early we're we end the leases terminated of of essentially, So

road profitability the the term. in quarter for eliminating end particular the down the per But did it we're get negotiated customer's potential So the of at this request. that

Anil Doradla

this see thing? Going again, more forward, Or a these? one-off we can is, of

Elaine Marion

Well, sort we stream of be an event an early fluctuating it's could segment, lease buyout, related whether to we some sell the that have to it's buyout, whether lease, or it's the termination. always earnings early gains transactional this a would occurs of whether in the where particular at termination related or

So relating in customer specific, specific those financing and particular. transaction, term really to are the

Operator

comes question next Stifel. Sheerin Our with from Matt

Matt Sheerin

me. Just a couple of from questions

the done gross then, the organic that On on year? you the last in the maybe you've the was revenue growth billings. What number acquisitions exclude and if

Mark Marron

what know are? you they Do

Elaine Marion

For the half, roughly XX% it's and first XX% organic acquisition.

Mark Marron

you go. Here

Matt Sheerin

of quarter? the terms And the In have number? okay. in growth, you the For do quarter,

Elaine Marion

Yes, have quarterly number, the I don't Matt.

Matt Sheerin

trying Okay. And the impacting segment, then look gross just And terms the of profit that And like dollars that's big in just out how quarters. a having in perhaps growth in I'm year-over-year. figure looks a dollars and about impact I'm you technology netted of if you talked much to negative in function revenue seasonality were on the effect just of I the up down growth. looking, program down the percentage at that several lowest is one or X% that. But mean, profit gross winding that number they

Mark Marron

me Well, take for. you're Matt, it answer looking let I'll at couple touch things a then maybe it'll of shot and will different try a and on what

quarter, think on we're probability So I at a really of lot if metrics. we the well our satisfied with look But quarter. we don't executed the

points, security for really our effect. The up larger big in of executed XXX M&A a net net. our up And well was a basis We solutions was on portfolio. out a of X.X%. gross as on to lot one noted margins of for services, earlier profit This and our which of plans kind gross gross – we as building to terms I our the our strong quarter were Anil. our gross So had had

So the that on definitely our had net factor sale, to a sales.

you remember had I'd kind we growth of The other mind ask to thing in keep QX, little bit is a in just QX. XX% a in

first are we the with we're actually half, at half. pleased where look we very through when first the So

continued net growth invest I And to in earnings. in got sales headcount. it, we've net well then at So a as double-digit look as we've when

of noted we've which are Elaine XX% So sales customer-facing services. and heads, in the a added XXX

So to March year feel, give this systems I'm of March of you had sorry, XXX engineers. in fiscal XXXX, a – we

of end XXX we've As got of SEs. the September,

to we today's So of kind be the continue we in engineering market. need to in competitive talent invest

Elaine Marion

Yes, from to XX.X% increased our from product That's Matt, to to – margin just XXX XX.X% services XX we basis to that, gross add – XX.X%. on points. and

growth on GP the was So basically X.X% sales. flat

quarter So say segment, I in pretty tech executed in well this particular. that would in we driving the profitability more

Matt Sheerin

that program. XX% this that had Okay. you of the pretty down about point? much complete in at Is last that talked winding And the you fiscal that customer year,

Mark Marron

multiple I we the end would say a continue that But that's project that work with is on customer sure. towards to for projects.

So it's mentioned to the towards we've as big life that of it yes, end prior Matt. the cycle, project relates project in quarters,

Matt Sheerin

And or that look appreciate don't is the in seasonal. is in your technology XX% somewhat. typically if forward know I I it's obviously, the And segment plus give a years business But at guidance. Okay. you X X down that quarter, range changing you the sequentially, last December and the

acquisitions, you of quarter? got us help there terms can Anything in in cetera. directionally You've December et

Mark Marron

Yes, it with let give see things – – if me a it's forward-looking, I and always tough could – few Matt. where the I'll maybe

X terms some has like offerings our in of opportunities continuing we changed customer in or or you in capabilities. pipelines, nothing of terms earlier trends expand and a notes, I wouldn't talked to of in a anything have terms So demand, few ago if there, that in deals that. forecast were year those my had. terms about We're downward of of and will,

there So forward. we streams new us go income as are for

that other I'd that notes in highlight thing we our during didn't or went we that talk the The about through. release

– income basis, $X.X was a operating up sequentially at you from QX look our a income at actually if QX, operating to so sequentially, number on our at look you If million. consolidated our

some within give are things of may that you happening a the that feel So the business. of

Matt Sheerin

From QX to QX?

Mark Marron

Yes, sequentially.

Matt Sheerin

the to December I'm quarter. not sure that with what do has

Mark Marron

guidance to give what we December. since you I – from gives I give Well, trend was you, trying on can't it forward to don't QX you QX give is a

There's and here's tell about That's quarter. to Those always come in. of you I that tell But and is a the predict. there, their our I'd you what still forecast. is is So always demand is in this confident, the was forecast the pipeline comfortable tough what are earlier out year-end management always trying customer team spend. lot to there, there very deals

Matt Sheerin

Okay.

are to so have You rolling for one going tough that comps, all right? off obviously, that's program,

Mark Marron

have Well, tough But I'd is, months, to of I you what always half what's mentioned look our it, happening you look always whether business. first at or comps. you Anil feel you XX that true at would within gives at our a our trailing

You're we profitability or opportunities cyclical. foot opportunistic. lot have over the always come the then A we'll in with we'll that time. the about get of going to like deals the large door land times expand, in We're and kind and and of out. talk – grow They're

And they so opportunities normally they from great and yield pop time time. in to

So answer it's kind exact of give to there. an you tough

Matt Sheerin

a And we and up variable flattish part the you cost at it that was know number up commissions. SG&A about in terms of think tied to the would that quarter, the as and was a is imagine, flat will OpEx reasons right? for sort about? But sales to of is a investments. best, I I stated the the expenses be percentage think OpEx of And Okay. December

Elaine Marion

the OneCloud not to contingent XXX with did quarter. the adjustments year-over-year. Mark We in we SG&A, the SG&A. acquisitions We heads quarter marketing the as We're as the several unpleased following and quarter itself, acquisition. replicate added, up acquisition with of terms said, as obviously picked some some specific which new offices expenses, consideration will are well that the IDS like some this expenses related expenses have related the as to In specific well

those So roll well. through as expenses will

Matt Sheerin

the up following the and from so gross year, without profit lumpy the been just earlier question on segment, the year-over-year. extra would incremental revenue results very or $X have that is that down from – million which And acquisition Okay. financing or that

any did going that, helped definitely terms out play last the would Do any happened have you – events like into quarter, visibility you So quarter of have the that? that in that you.

Elaine Marion

customers having Well, termination, conversations but I about – brought were early the we by that's of think terms an our that's we something with client. in

whether have they occur us and we X in contact or to occurs sometimes not visibility doesn't and So we in do sometimes or X advance it advance, do that. months months

Operator

Thank call Marron any Mr. today's the session. would question-and-answer back remarks. you to for for I now closing like participating in over to turn Mark

Mark Marron

Okay. operator. Thanks,

So happy healthy season. I'd to I a February. come you wish want first joining speaking like call. could great off, We on holiday forward if day. to everyone I a look thank you And Have us today's and to with for

Operator

today's the gentlemen, thank and you conference. participating in That for conclude Ladies does program.

and disconnect, day. all may You wonderful have a

ePlus (PLUS) 4 Nov 172017 Q3 Earnings call transcript