PLUS - Earnings call transcript Q3 2018

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Operator

Welcome to the ePlus Earnings Results Conference Call.

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

Kleyton Parkhurst

us joining for you today. Thank

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

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

Mark Marron

everyone, thank us Kley, joining for Thanks, today. and you,

quarter third gross adjusted net services up net and of year-on-year X.X% our increased adjusted X.X%. products billings fiscal products X.X% services XX%. Our and of sales were Year-to-date, and our billings sales and increased increased gross

on have to high-growth market, expand drive and than revenues to at a strategic favorable pace spending, has mix plan continued and We security expanding overall execute and IT segments grow well to products ePlus This enabled digital our base solutions. our the faster in services. infrastructure position cloud, significantly of customer IT us of strategy a our our

hand and long-term out offerings adjusted rate grew cloud Going expansion the period in the security and streams. security recurring year-to-date revenue enable Revenues capabilities us services annuity double-digit or gross to a up products last and from hand of services a with XX.X% broadened our on at annuity our consultative of our increased which XX.X% year-to-date capabilities, in is same year. basis, billings and reached from build

sell. touches to we security business for solution our We an expect driver every remain as growth it almost important offering

presence have needs IDS years. Midwest. our cloud-enablement for data our not and OneCloud only of but our broadened center also in customers' acquisitions Our geographic expanded has supported capabilities, ePlus the

adoption automation, our allowed software solidify we customers our The solutions journey and through providing training. quickly OneCloud drive ourselves cloud strengthen data integration. to hires agility customized with hybrid with technical for analytics customers us acquisition and recent organic in strategy engage cloud and acquisitions, cloud innovation center guide support expertise the in stages innovation. all as of model our through a partners, to and the to their differentiate business ability and strategic innovation, services and to cloud transformation these customers As with in to the continuous invested along ePlus of have acquisitions

addition, further recent Recovery acquisition a IDS a including Service and our Service. offerings, and Disaster Backup as as our In capabilities cloud expands solution of

our in address and of and productivity, IT to explosion investments to gain identified Despite data, in and manage protect continued better in the complexity, expect for are that from them that cloud IT our areas cost practice improvement We their reduce customers' cost the revenue challenges, security empowering EPS, there data we increases and quarter. value investments.

fiscal the side affecting reflected Also on were performance cost SLED the revenue earlier Our some acquisitions the made this softness this quarter market. year. results we in

Further, along expense up get While with platform. burden upsell and upon see time us we optimization year opportunities, onto benefit the benefit full for can cross-sell the the their of of full integration cost structures. these full closing, a to take to overall it from transactions absorb the we of it the ePlus takes revenue before the

So increased far past our investment headcount the over and this in acquisition-related year, significantly have organic via year additions. we

cross-selling added coverage. XX.X% Our enhancing employees, We capabilities but client-facing, bulk headcount are account additions new year-over-year. was our our XXX up of the and supporting the importantly,

operating been and making balanced in has acquisitions organic strategy the generate and, growth to margin initiatives same between and revenue leverage. future time, drive Our at investments expansion

were customers. and our launch rationalize managed the and cost services to enhanced to of all consolidated our revenue to these and portal, assets maintenance headcount to is our leverage. for in programs, This and support operating of quarter-to-date. functionality we important customer which offer platform the We outsource have some maintenance broader It best management. services made we'll services to and normalized annuity enabled enhanced continue customer to of with also view managed to our additions led technologies structures, our note We just recurring our to programs, to greater customers provides continue our a more will return our enhancements the new along announced of EMS third our array portal, a actions maintenance support expect under us, make support that a quarter to

ratably. extend as and multiple enhanced visibility recognized Our service with us offerings our years relationships they maintenance over deepen are provide with our and longer-term customers

overall become as in Cisco have and service global we We are in expansion our Gold of also the plans, well. and as region Certified to ability our This pleased customers this enhances part to report U.K. our our that support customers

a high pleased lower We and cash and are rate. we significant us a funds offerings. from gain customers a to service benefit, benefits flow tax see rate for for tax we in additional product additional As about reform, dual taxpayer, including our invest the

key our Our to time, tax on financial extend At and in repurchases offerings, believe Share based wherewithal reduced and organic increased well. and to we and as geographic continued to to In a coverage. the industry -- service and add areas digital the cloud, remain from our expansion invest our the growth allow focus growth the savings in customers. same rate extend and continue market infrastructure we M&A selling in our summary, increase our consideration our security will infrastructure. will of supporting continue for we technical to overall focus our on efficiency outpace

We expenses now will and call over manage results. to continue Elaine enhancing to to the financial with aggressively leverage. our towards I review view a will optimize and increasing turn operating productivity Elaine?

Elaine Marion

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

a benefit corporate reduction In top of provision deferred moment. of of of million the our tax tax the detail rate. In year-over-year gross from positive more as year of showed recently tax These on the earnings year-to-date. balance recognized the beginning in quarter new fiscal of in X.X% positive our enacted the adjustment adjustments net rate $XXX.X discuss federal to a the XXXX sales a well U.S. in adjusted our new as year's quarter of of we fiscal profit Our from fiscal our net XXXX, increased the third I'll gross $X.X from tax our onetime consolidated light tax, quarter. for and and last third had blended provisional comparisons impact the in line billings million adjustment that third

offset resulted we gross points by increased $XX.X and sales profit a million. lower-margin record factors, proportion competitively year-over-year XX.X%. including higher-margin strategy, assurance, consolidated services in and led land a decreased basis several basis. expand The on to software gross maintenance This to of Our third-party some net and by to sales our margin X.X% on projects, large which from partially which services, higher increases of of bid XX

to salaries attributable due higher increase a million, benefits also to result Our higher and to The was operating in of benefits reflecting as salaries compensation $XX.X expenses increased variable XX.X% additions. personnel higher and profit. gross

increased and a the approximately worth Our to X,XXX X,XXX total the expenses positions, expenses contingent marketing adjustments General consideration, million and value $XXX,XXX year for administrative we headcount to relating year-to-year. increased as September May Also as incremental the which XXXX. G&A. due approximately expenses added added expenses of in XX.X% OneCloud acquisition the recent from from travel, higher amortization well acquisitions XXX total ago in are of fair including and by the grew advertising XX.X% to of of which noting, to acquisitions, to as $X IDS majority from

million in The related mentioned Non-GAAP adjusted benefit and to tax U.S. $X.XX net taxes, operating higher $XX.X our to income XX.X% of adjusted up quarter our from of of earnings other December share-based earnings tax increased of million. acquisition-related the were change tax earnings a remeasurement is as quarter plus based quarter adjustment and that the $X.XX of federal operating recognized fiscal the associated adjustment XX% for to result decreased earnings X.X%. amortization and diluted per liabilities the added a the the with for in with at XXXX. earnings year-over-year, provisional calculated expenses, our tax earlier accordance in compensation decreased margin I diluted Non-GAAP to Net million rate XX.X% Diluted of result the earnings the net the per onetime in share comparable diluted the GAAP, year. due exclude the late adjusted tax share benefit third tax deferred an and deferred the and rate. of fiscal benefit assets first new $XX.X $X.X $X.XX in EBITDA of vesting expense XX.X% XXXX. to taxes, on As EBITDA income million per per share fiscal half declined share to XX.X% for of the $X.XX, of our was $XX.X

X-for-X Our at diluted outstanding quarter when XX million the shares a XXXX fiscal with totaled completed for split. stock XX.X compared we of the end million

XXXX; price share shares a we from XXX,XXX accounted to common like grew to $XXX.X the purchase our of XX% billings X.X% December quarterly the of now share, discuss and of as IDS, well cost million services per from revenue net to May I'd improvement $X.X from sales. $XX.XX under $XXX.X grew average segment. for our in technology acquired the and total of September repurchase demand customers from, products of in contribution million at our for and million. as purchased sales OneCloud, derived the acquired XXXX. products approximately services and our Net This outstanding plan. an Adjusted care During consolidated gross X.X% quarter, acquired health results XXXX; stock in for CCI,

products sales adjustment services billings contracts. as the proportion of from of net quarter, prior and to adjusted the This sales maintenance compared XX.X%, gross was to reflecting higher a of year third-party XX.X% of

adjusted reminder, gross billings that for we net gross the a sales. within As include price present sales transactions

gross On sales, software sales. net technology However, respectively. and XX-month XX% only assurance, sales technology net maintenance in the the third-party services of profit for applicable SLED XX% our of largest, basis, the a markets were accounting trailing of and is and included

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

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

decreased XXX mentioned on consolidated margin some XX XXXX. XX.X% price margin decline, the of decline on sales fiscal a which of of offset salaries to on competitively year-over-year. increased increase somewhat million gross professionals, and in compared million million third basis in and points is related benefits in and we services assurance, maintenance XX.X% to as third-party to in an last weighed land software expand I the of increases Operating services products The bid of and for XX.X% adding of by margin, technology quarter compared our same reasons sales year, and to that Our segment $XX.X sales large services. the and hired by sales expenses XX.X% higher $X.X $XX.X proportion to

increase gross our result The increased General to Importantly, $X.X of of $XXX,XXX adjustment an benefits the to acquisitions. was also client-facing. higher expenses as variable compensation with attributable salaries higher bulk are a and with travel as of contingent increase incremental the new and profit. acquisitions. The associated consideration of million, G&A the personnel administrative higher $XXX,XXX which in to to associated recent as well remaining relates prior related expenses

$XX.X with to large million. segment Our a operating cost. EBITDA the decreased decline Adjusted was expenses income attributed was the million. higher additional year-over-year, component largely operating the increased technology XX.X% of $XX.X to in totaling headcount XX.X% down The

Moving XX%. $X.X several were to line the $X.X earnings or higher contract to related our top growth sales mainly of to due million financing This segment. attributable up million, Net post sale equipment terminated to $X.X was leases. of million

expenses compensation driven the as reserve results. I changes can increased in increased higher As by income X to amounted by from profit to to as of year-ago sales earnings turn Operating increase or fiscal year $X.XX profit as billion increased Direct billion. to increased or by for Financing million. where $X.XX totaling year-to-date $XXX,XXX XX% segment, a gross reminder, quarter. X.X%, will vary an robust expense operating credit $X.XX million, Operating net technology consolidated contract lease million. performance line leases. increased the cost sales up well $XXX,XXX Adjusted previous losses. due now our growth X.X% variable top was to profit a and quarter. consolidated the for of XX.X% in by $X the and higher first result EBITDA products the gross in our services adjusted XXXX gross to depreciation This the billings X.X% over of strong while to XX.X% significantly XX.X% post quarter Net to increased increased from $X.X XX.X% $XXX.X gross billion. due months

million. XX.X% gross when on in grew earnings same and XX EBITDA to amounted Adjusted $XX.X products basis services points margin was margin the period while and Our million. consolidated was XXXX by gross fiscal to XX.X%. $XX.X decreased up at stable X.X% compared to XX.X% Net to

earnings months increased Our XXXX diluted XX.X% of per $X.XX. share first X to fiscal

Our $X.XX. X.X% increased non-GAAP diluted earnings per to share

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

primarily shipment Our inventory the due to XX, of and months deferred revenue the fiscal March X of first year. within decreased from large projects the

the and cycle for of XX conversion U.S. XX from law, XX for up days the second cash slightly XXXX our year of In from light the days, Our was days down quarter tax ago. quarter a fiscal recent fiscal our tax effective to estimated federal rate XXXX, reduced total which XX.X% XX% fiscal rate January XXXX and from XX% approximately to tax federal effective tax our X, U.S. XX%. to for brings blended rate for XXXX

estimate we For we the full benefit will fiscal XXXX, receive tax when for the rate our effective approximately that be will year, XX%.

you, Given this to strategy increase Thank Mark to capital and and turn closing our invest strong in repurchases remarks. will in support everyone. growth. share the our allocation maintain call our invest continue now operating we cash change acquisitions, projects internal our to position, over I'll leverage and back to Mark? for

Mark Marron

progress year for to solid of Thanks, To XXXX up, another ePlus. is Elaine. up shaping sum fiscal be

and have enterprise industry by and clients, balanced geography. well We an of expanded middle-market roster

solutions provider sectors marketplace. in of developing differentiates and a progressively leading-edge the IT, in we services that ePlus fastest-growing are of capabilities of the are We portfolio recognized

have questions. in like made people and for I next the to deliver results we for to to investments technology our and take Importantly, us now call the customers. superior level would Operator, open the

Operator

[Operator Instructions].

of first line Blair. William Maggie comes from the Our question Nolan from

Arjun Bhatia

for Maggie. in Bhatia Arjun actually It's

expectations of are SG&A acquisition how were to this we expansion over quarters? there next As you what a give on that much due your the looking increase versus sales can the quarter? costs is us line, at the the And force sense couple of

Mark Marron

it's here. Arjun, Mark

headcount XXX I it employees. customer-facing. XX% are approximately say -- those up was or SG&A, which as of exactly our year-over-year, XX.X% would So no, was the to relates

cloud, of we're able out of our services, So customers. be with as in out adding part accounts infrastructure strategy those headcount solutions long-term building our in digital to to touch more and security, and our go spaces

from those some investments, Over think we'll the leverage side. the from I and the organic side to see some M&A being being operating long-term, from start

Arjun Bhatia

tax any out? how playing so at as you've forward? can markets, cuts the And you're of or you anything traction end there just we're from far Is going see seen recently looking you're getting the talk to enacted Okay. or impact segment your particular seeing expect about

Mark Marron

Well, break tie I a little it's things. early the different it couple different One, on a tax think to verticals. to

we're can as our look potentially infrastructure in with I some our externally and as allows build earnings organic out one, invest whether of what we our folks buyback. to address do it to tell forward net be certain XX.X%, a then you, some internally M&A, of well continue stock excited So With company. as hires, our efficiencies as being us up to things, it

As early increases indicators good there potential are market a the forward. couple out different to there's market, the in of that there job it some tell. spend as I relates too it moves the being some to things, are for relates it the as market one to But as think indicators

I of over think visited couple for so to other talked business money areas. in space with cost-cutting month the areas, that it things from the have or I've be digitization different customers the you last in at, the going look different some the that or a making whether about

to tell what So we're the I it tax optimistic holds. think relates a on breaks, as little to but it it's early

Arjun Bhatia

line, of that And if product you fair. the or on at versus services-related classify how recurring? would that's looking Okay, have top is of then do side your a sense much mix we're as revenue just how you mix much

Mark Marron

had what don't can you different couple a annuity quarter break we strongest But of services tell date. We to here's is Arjun. things, Well, that I our out.

our as little and of strategy annuity So about calls well EMS we've EMS services, our talked and portal on building it services offerings a bit built consultative both forward end, customers. that our up from we going our for our as I part that talked was prior that about

certain business, up starting we on capabilities, we're to built core our to built so So can and more see and up looking customers those have more focus tasks offload revenues. their annuity they which

So the we product and news from visibility that's I But services good for think us. a profitability, out and don't break piece. long-term

Operator

this program. program like the CEO. question-and-answer back And the I'd to to today's Marron, does conclude Mark session of hand

Mark Marron

like Jonathan. invested revenue. taking join for to hope Thanks, and solid We've speak had a to I'd day, nice just quarter, in terms margins would We you over With Everyone, you right. today. the of our in both us All thank time. believe that soon. we keep leverage time we'll have to stable. our see a that, and business operating continued to to We've

Mark Marron

Thank and participation gentlemen, today's ladies conclude you, in This your the for conference. program. does

now may disconnect. Good You day.

ePlus (PLUS) 7 Feb 182018 Q3 Earnings call transcript