PLUS - Earnings call transcript Q3 2019

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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

thank joining and today. you you, us for Thank

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

the make non-GAAP measures financial section to the of reference Mark? we've www.eplus.com. now we addition, at financial I'd is GAAP call, call earnings like Marron. reconciliation turn included the to a release, our investor Mark information In and in over which during on may posted our to website

Mark Marron

margin, year-over-year. our key reflect that you reported metrics quarter believe Adjusted ePlus a increases the thank for areas. participating and billings strong to increased model. third was of gross and we success gross fiscal X% a profit substantial Kley, Thanks, This nearly our today's We number of gross in in all results. business two for in call XXXX discuss quarter

to see demand. the solutions, announce to We pleased and to strong I'm positive which have customer continuing on SLAIT in part line we Consulting. quarter after due on operating end hold our also to acquired leverage, that costs just continued efforts focusing

our We are presence and very excited offerings services about in broadens strengthens geographic this and as mid-Atlantic. the security solutions it acquisition, our

increase revenue. Our part mix services in gross to and of profit a business product increased due margins X.X% favorable in is

higher many also lines. We in our of margins product experienced

the gross basis highest third the amongst drove in margin consolidated quarter, in For to results significant our XX% XXX industry. operating points expanded our leverage the positive These quarter.

profit our gross operating X.X%. grew while grew X.X% expenses only Our

ensuring services-led consistent properly has facing We number will to controlling striking approach added X.X% that cost balance investing we An a track between current sequential optimal continue and customer business. optimization, still emerging record migration on customer have increased experienced basis, to in to customer of a demand. engagement. as focus a our our of facing support to year-over-year engineers and on the that areas good ePlus professionals and while but we professionals this client on costs highly skilled our headcount a is and example modestly declined in basis, more of a

one-fifth security trailing year solutions ago. important basis, XX.X% of one XX-month now our just gross and of products developing on XX.X% third of trailing and gross XX.X% business. and XX-month billings and from services increased our security in in driver for continue products our up we an comprised year-to-year quarter ePlus is a billings, our Security to security supporting Adjusted by deepen addition, represents adjusted In services enterprise expertise customers. the business mid-market and and for security

importance. to dynamics, increase customer expect we in will an Given continue this that demand is area

In key fact, in wins had we many the solution quarter the third had security components. of important

standpoint to helped business, in security and that customer cloud compliance understand secure for was SaaS their workshop solution This compliance their in a help loss outside heavily market usage securing the environments. these and and risk in selection a tools gain ePlus best application. the office delivered the client internal internal data customer multiple to in of and helped a top in the facilitated the and face evaluate them were looking example, their customer cloud-based a would the they multiple ePlus key data. invested while extend to concerns. security rules, of to Protection the their and with technical, their productivity challenges and we solutions manufacturing processes For workloads large cloud and infrastructure tools multi-cloud from global countries maintain environment. required external

of many was strengthens Finally, Virginia in our our satisfies acquisition mid-January. presence including the key completed strategy. third quarter, we SLAIT the Based in which geographic SLAIT of in acquisition, in it elements successfully negotiated markets border Beach, healthcare enrichment government large revenues higher us annual over the regions. a Thai and the million, brings acquisition state concentration verticals. With customer in local $XXX space in base this education with and and the

our is hybrid cloud, the solutions a and in bring the building to services and been our and new solutions services last SLAIT ePlus several strong existing services recurring and and the will pleased and offerings adds to and clients ePlus are very associates over closing, In we we our years, governance, additional SLAIT's enthusiastic capabilities we're IT, XXX call which building portfolio team. represent ePlus a business Elaine through transaction. Marion aligned a we well services to the and on nine and to staffing positive revenues. helpdesk margin and quarter I the out expanding progress existing complementary the pleased performance about our with and customer offerings, with With ePlus over Elaine? review the that have Importantly, have footprint services annuity focus and complements contributor made services GRC to base. areas these managed in of From has service managed consultative as combination focus to ePlus our advisory required along gross demand. be brings and expansion to test strategic with national CFO are higher solutions profit this geographic expertise reach, as been and our risk, growing compliance third security, SLAIT's we SLAIT's bring SLAIT on or welcome that, consultative fully services Overtime, tend results. and and practices to of standpoint, a offerings core The our has will bespoke tell month we practice. providing security and enhancing our

Elaine Marion

for our you, thanks Mark and everyone Thank joining to call.

fiscal year-over-year to gross $XX.X net XXXX third in quarter sales increased and $XXX.X of X.X% X.X% profit to Our million increased the million.

I'll Higher a expenses. gross remaining expenses moment $XX increase reflected and profit. technology by to directly income more consolidated increased the contribution Our tied to financing million XXX X.X% with further driven benefits X.X% that XX%, XXX from segment. improvement segment, higher of points resulting a discuss year-over-year from margin in the which gross points margin basis basis XX.X% in in to expanded Operating compensating increase in for salaries a was variable higher than operating operating compensation the

due adjustment while XX EBITDA quarter tax to went margin X.X%. corporate our Our year's for amounted headcount provisional deferred for tax well and year at was up quarter as however, Note rate XX.X% expanded tax we $XX.X X,XXX benefit was the of the employees down third new from provision year-over-year decrease the million, our rate quarter. second the rate tax that, XX the of increased third rate $XX.X tax modestly was to third In our the of last to a X.X%. earnings Adjusted million. which an balance, end points as headcount our tax EBITDA a resulted of basis adjusted had tax This quarter of our end our adjustment to sequentially X.X% at to in $X.X XX.X% year-over-year, net of X,XXX up resulting XX.X%, XX.X%. the million, in a from

As fiscal XX.X% from had rate our previous representing share said diluted we to calls, Fully XXXX. increase. XX% year's EPS from a per Conversely, earnings we year-over-year in have were last XX% $X.XX, diluted slightly $X.XX, range expect for amounted non-GAAP to tax down $X.XX. to a

million year-ago diluted $XX.X compared Our share $XX weighted totaled average to the quarter. count in million

mainly and in basis, respectively. accounting $XXX.X and XX-month entertainment gross the services bid types. completed million financial at compared technology The net billings million last same sales more the from amounted to healthcare you client billings million third Now Technology of and gross products compared in adjusted from portion quarter. trailing let be and $XXX.X the several adjustment segment and as of The of representing XX%. year's the represented million, sales performance. offset our services $XXX.X approximately from quarter, greater sales our XX% Adjusted increase. $XXX.X balance we $XXX.X last Telecom to to more continue higher for X.X% our derived the a maintenance of sales X.X% XX.X% on competitive year Net SLED third other million color project XX% services. a net year-ago to -- reflecting that includes period of proportion XX% in a for XX% the competitively reflecting to me and quarter ahead subscriptions and last amounted ago than sales net XX% was third-party or on markets segment year's XX% give to end demand largest technology media

gross of a higher and grew mix to by year-over-year expanded $XX more margin from reflecting product profit basis our the profitable sales gross maintenance Our XXX to benefit X.X% points subscription. while XX.X% million, and third-party

large a year's bid third margins. completed we project competitively contributed last the that in mentioned previously to priced in we year-over-year remainder of quarter, partially the our gross increase As

gross amounted XX.X% up XX.X% million. the year-ago to higher our $XX.X segment operating EBITDA million profit, $XX.X quarter, Adjusted Our increased operating income leverage. reflecting year-to-year and technology in million to to compared $XX.X

let the details Now about segment me more performance. financing share

to X.X% was $X.X first Net Operating $X.X Despite to historically third up sales post-contract decreased the in amounted XXXX of $X.XX increased now for to X.X% large reported lower as billings results. to in the $X.XX a of segment million financing transaction income We a the from of which financing of of X.X% decline from earnings our and while proceeds year-to-date of results to the million, the to $XX.X to million. Net products in services As lower turn million. by quarter portfolio year-over-year million result timing $XX gains gross fiscal expenses sales $X.XX X% offset higher quarter representing for I were equipment was X.X% decreased XXXX profit gains. consolidated technology fluctuated from due decreased consolidated year-ago our our sales, and gross a fiscal months and originations, to a XX% lease X%. million. at billion, segment Operating nine $XXX.X up and Adjusted nature billion. transaction have sales partially net will segment flat the profit transactions. reminder, off gross net billion. $X.X sale

EPS supported was basis this earnings X.X% margin net gross the XX%. diluted gross to increased by increase. XXX consolidated Our million expanded and per $X.XX Adjusted million to Non-GAAP by to basis share by X% points which increased XXX were earnings while X.X% segment, $X.XX, per margin points to grew in $XX.X representing year-over-year XX.X% grew $XX.X X.X% technology a share. and diluted EBITDA to

balance for Moving fiscal technology increase investments from year million approximately in $XX.X our shares increased $XX.X of sheet, cash to the XX, and capital at Inventory and in equivalents million XXX,XXX compared working the due million. $XXX.X $XX million March repurchased financing cash the segment, the as quarter to levels end. an for portfolio we XXXX $XX.X mainly to ended with to million

projects. had levels As our specific customer mentioned, our vary dependent inventory previously we and upon

XX conversion Overall fiscal a cycle up cash in provides of XX days our flexibility. increased us ago. from the sheet up year from with balance financial Our significant and days, second XX XXXX, days quarter

our SLAIT. we acquisition with of Lastly, recent very pleased are

aspects million. annual this Let me you on $XX.X key approximately closing. at SLAIT's million We paid were in financial give $XXX of transaction. cash some color revenues

by assigned headcount whom to some staffing Our business. will XXX increase of employees, approximately SLAIT's are

fourth all purchase acquisitions. amortization with our we than increase acquisitions, case expect as accounting, the a accretive not are claim. the our the for a acquisition of a a quarters we percentage to bankruptcy be this expenses do completing and We $X.X we several Worthy on historical expect of basis. little note, to however, GAAP quarter next in higher from maybe a in received distribution million Therefore, price as purchase the

income operating pleased this fourth the to conclusion. we quarter, come this has a in matter are While gain recognized the will be below that line

allocation strategy focused be acquisitions. organically on growth both and through forward, our capital opportunities pursuing Going will

you We for adding capabilities growing of over today, on and turn the remarks. the for Thank the faster in will to call focus time continue back Mark will now Mark? market. to segments your closing I

Mark Marron

gross drove this and quarter Thanks, profit year. in in Elaine. margin months in mix The of and shift gross performance for the resulted continued strong nine business growth third first

higher the consider reach, solutions, transformation, we and Our including consultative digital security emphasis We SLAIT, found distinguished acquisition key and our have by the capital capabilities. element annuity which ePlus and cloud excellent and is customer platform services, in related an where and marketplace will a are acquisitions and staying strategy culture. base our remains allocation on active our the and that growth to expand we markets of benefits of in be believe

Operator, to mid-market for and expanding questions. be of in well-positioned with choice solutions to of now would call the provider continue and to like the I today's We enterprise an clients they help roster dynamic marketplace. remain the open require for

Operator

William comes line Blair. Instructions] first Thank from Nolan of Our [Operator question you, Maggie sir. the of

please. Your question

Maggie Nolan

bit little a traction underlying there there profitable know margins Good more any quarters? particular into is or wanted for quarter this this be or a you was trend service mix, dig I that from benefit was product anything detail. a in strong product quarter. getting there I more gross coming said may to that

Mark Marron

Mark. it's for Maggie, Hey Thanks the question.

of lines the couple both things. in sort infrastructure of product multiple as as Yes, security well space. So, cross different we

strong what both affected our to services gross that continue a services I'd and margins then as to quarter well gross margins with we also services and our, add conservative annuity net margins. Our to continue call, had

Maggie Nolan

check in I some that Okay kind How any relationships. then understood. that those that some there? are these expand in developing on is there to may large of clients, opportunities develop about the some of going? relationships wanted talked you your Are And seeing approach we've And you have past? competitively bid on customer and previously any opportunity land pursuit or with of

Mark Marron

Thanks. Yes, Maggie, we're definitely there. seeing opportunity

then aggressive on just and in and project that benefit seeing we'll And a where with be nice to the of winning we'll customers. everyone's show opportunity in opportunity, try can we that Atlantic mid-market a or is solutions we'll large yes a terms time, well not on customers as also the a to go as that those are U.S., some work the We're that go land lot over it's and competitively some for expand and So, we're the progress new start services starting customers provide as to we in whether them value-added to higher to projects, we're across so enterprise see we only but expand forth. of footprint of bigger little. able in and with with once the our bid the

Maggie Nolan

Okay, in And one great. could Thanks if I Mark. add just more there.

there leadership the And Just the there's health build on the relationship relationships, said with missed Cisco percentage new know out over there. related have Cisco I might quarter? just then don't it, the to you to in it, changes efforts I some if Thanks.

Mark Marron

changes team very folks its made the what and in continue do it's there of at Based all on also quarter Well there's was it we've teams, with range in able to as been Cisco still the XX%. get relationships those lot relationships. where but they've revenue based had management prior the our the on a been don't team. we're the management approximately Okay. percentages amount easy front with both that I in And with their for settings, have ePlus us to has new of XX%. me management Maggie, of work individual their And seen Cisco together but their on to XX%, leverage settings we across Cisco lines, continue product right open, to Cisco of fairly general in end. it we've that

there. issues no So,

Maggie Nolan

good. guys. Very Thanks

Mark Marron

soon. right All you See Maggie.

Elaine Marion

Maggie. Thanks

Operator

Thank you.

it question Company. queue We'll in lost take Greg looks next of Sidoti Knoblauch from of like that we've Berenberg. next from of Burns comes question the Our Brett Actually line. the & line

is Your open. line

Brett Knoblauch

Hi guys.

impact question this we project there is Just impact got I is the a QX? large guess, final any the off, on executive into should topline going Or expect? really

Mark Marron

final we've the it about large that that's project that Yes to as relates talked Brett.

a a bit little the on So see won't were for quarter. but project. tough or in deal this you to that Still related us, that if quarters the provide will subsequent compare for of in we tail QX end

Brett Knoblauch

you how acquisition, the think Do terms they company? on, I on And really more based that recognized was as sell like then would it then business guys -- And mentioned finding next you your of guess, you going some And detail the forward? in that deal? great. solutions pipeline a do compared your follow-up to whole be actual like then guess, I this And over could couple to positive a margins long a the impact I little like closing SLAIT's quarters, previously? in provide product And expect have bit would guess dilutive the amount to just but of the be Okay. a a greater on that actually mix. if of you gross

Mark Marron

Sure.

competed aware we've now against well-run ePlus part SLAIT company, been team. they strong Very believe we've for management So years. that's management a have of the team

As it acquisition, a relates you that went -- making them, we we've of through this the gone was with the due-diligence there something the build sure fit. was which in months that make to normal is relationships, you

I was CEO we really Casey, brought thought Tidewater there former our They for really cultural them teams area. expand us? both and least in what the of and think together. the a that's nice our as do reach they at What and myself of our fit, Richmond footprint

great emerging some got can can we a emerging we business. security staffing got got entire services that -- that from vendors leverage. be for they've could strong at So with does us that over things upside an ePlus. and leverage. in can have They've done with from mid-Atlantic services big vendors They've terms size time. that leverage that They've -- of we relationships help that desk in a provide that they've scale that the got what They they

I Cisco can the in think can capabilities. time side, customer have we leasing go think SLED base, and contracts that customers They appropriate reverse in. the deeper And leverage they capabilities it. would we On be also our that and our over some wider

it just and expands the is the organizations. mid-Atlantic, fit it our our really think there in between what it does, we and just really nice a believe base expands I upsell reaching cross-sell we capabilities -- two that customer can

Brett Knoblauch

you expect you whether -- through guess Do synergies rationalizations guys have any it it's guess you? what or can through I I quantify

Mark Marron

you? talking are about or talking you just about you're are Well, what expense -- savings,

Brett Knoblauch

guess I terms capture and your obviously, relationships terms using better over much your you're using expense larger scale a and vendor to -- savings company, also transferring SLAIT? in your in of that pricing you to of

Mark Marron

Yes. really point. good That's a

yes, financial So, our believe scale vendors. and what relationships the benefit we will from do capabilities a as SLAIT we is, and as have well both from with size discounts that

talking have that multiple believe there. we do we bigger and about there. discounts where more synergies earlier and is, some identified local and we've can some relationships, either So the I have already space and we was they higher-ed state better that the What bigger in of do vendors have leverage relationships leverage get that we can we contracts

capabilities I Cisco the our makes it customers sense, and leverage leasing think where and with our leverage capabilities. right they can financing can they

first tough, on beginning all our there's they one thing the but understand are we like many acclimated as in acquisition the comfortable, months couple the the side. players to is, want be get So it's careful different any ePlus get synergies, into normally believe I

time to do acclimate doing is they what and them into then ePlus we were we'll what them SLAIT doing the fold. want over fully normally, continue So at

Brett Knoblauch

All Mark Thanks, right. Great.

Mark Marron

see right. soon. All Thanks. you We'll

Operator

closing this Sir? At for remarks. I'd to the you. like call over Mr. Marron back any Thank turn to time,

Mark Marron

gross And where term. adding both your to to the we Okay. thanks soon. positive for a-fifth call. it's a you time highest long industries. about the growth speak that, the the our to our Take we of profit are business us, continued good the see gross terms for which and With We short Thanks, is quarter then taking margins, in of growth in for think, ePlus security or time care. thanks acquisition to SLAIT feel Latif. our Everyone, and the listen we'll business. our in term The fold, the real

Operator

Mr. This a for does wonderful participation you, gentlemen. thank and conclude Thank ladies you you, and conference. Thank Marron, and have your day. today's

You may time. disconnect this your lines at

ePlus (PLUS) 6 Feb 192019 Q3 Earnings call transcript