PLUS - Earnings call transcript Q1 2020

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day, ladies and gentlemen, and 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 call, Mr. Kley Parkhurst, SVP. Sir, you may begin.

Kley Parkhurst

us joining for you today. Thank

is On Elaine CEO President; Marron, Chief the Financial Counsel. call Marion, General Officer; and Stoecker, Mark and Erica

the on may issued anticipated vary in Commission, Form detailed March and the be XX-K uncertainties take remind this and June to Actual we be the Exchange afternoon afternoon to and XX-Q and periodic release and moment and for risks ended deemed plans, quarter are statements including XX, with filings are our materially certain estimates the statements XX, XXXX, that projections. based ended that facts want our when earnings may this XXXX, current Form we due for future historical the I Securities year not results forward-looking our filed. to make management's a you to and

any no light undertakes to of responsibility information Company or new in The these events. future update forward-looking statements of

measures, to the during release, call, addition, at financial Investor our posted in financial which In included Information make is earnings our on we reference a www.eplus.com. of website reconciliation the GAAP non-GAAP and section may we've

I'd now Mark Mark? to call like the to over Marron. turn

Mark Marron

everyone, our Thank thank in And you, to discuss participating you, call first Kley. today's results. quarter for

the results In and supported Consolidated Our quarter, segments. impressive our margin remaining both basis an XX.X% off and services, adjusted up to grew our an to XX.X%. gross billings strong at by year-over-year, gross financing level, and and profit demonstrate first technology XXXX. technology gross XX.X%, quarter up we're points our was industry-leading XXX in a for demand product fiscal solutions strong were start

indicator our think a an view this to continue benchmark of growth good as to and we measurement investors progress. gross our performance, is We important for profit

net percentage third-party our recognized software success of reflective that services our of a maintenance increased in on selling sales this basis again and quarter, we've The subscriptions.

services initially model evolving should and of and comparisons it pressures is have operating ratable enhance subscription calls, top it although, profit expense predictability towards in quality and previous As gross the ratios, line overtime. the mentioned business I to additive earnings our and

towards positioned As revenues these net well are capture new teams. recognized a with annuity-type model the operational ensure a over to built go-to-market to well meeting as basis, needs. revenues continues we or we time being capturing to that we're on Also, analytics data and industry are evolve both opportunities as have capabilities customer where specialized

on infrastructure. areas What is and our focus cloud security, not changing of high-growth is digital

consultative advisory Within to with with grow these implementation a be broad with and focus to our continue managed enabling and and valuation work from them services, optimized service lead services, and such a areas, and solutions as customers to our end-to-end full provider support. analysis us

adjusted first as We gross see in our for for services strong products continue to XX.X% the grew security quarter, and solutions year-over-year. billings security demand

Security adjusted trailing a on is billings accounted significantly which from up in period over for XX% a a gross year high XX-month of us, new our same ago. XX.X% for the total basis,

growing a protecting be need leader continue expect thought be for and to critical our contributor a IT infrastructure evolve threats, cyber set security for we the against Given area. this solution us, in to we and

bolster the future This defenses help gives with mitigate us to our attacks. services outbreaks SaaS and assist visibility by broker continue opportunity our to environments. security customers consultants. high-touch with continue technology ransomware space the along help our providing to we from providing security, to access back control cloud business helping recover and prevent consulting services online and customers bring remediation, in for of challenges in opportunities the recovery with we that them businesses to CASB, In see Also, deal security them by malware, help their

in weaknesses a we will Service as remediate and them solutions customer of cybersecurity threats. we solution demands, like and our and launched evolving stay support help continue was Management Also, develop to in This Vulnerability needs solutions, identify, ahead of and response real to recently time. to most to prioritize customers

was and our services for add us professional, at managed revenue look acquisitions in up that lines to profile. year-over-year. our expertise XX.X% continue and margin staffing customers for we for of portfolio providing and service while Customers Our our to look can services, enhancing offerings overall

and opportunities these Each products. services and providing customers, provide substantial and close to of keeps consultative to to our cross-sell services services upsell further us additional

Our up we to infrastructure. investments even optimizing remain continue leader XX.X% right on our cost to the highly a customers quarter, while was operating as during to our making income be the focused

Also, portfolio we transaction significant long will have over are developing a term. annuity that services benefits the in

leverageable are especially add costs, committed that like revenue, marginal with lines our building operating business improving incremental scalable, can leverage. thereby services to managed We low

staffing headcount our of SLAIT were the of services. the from came a at acquisition, number While additional headcount is XX% their new employees year-to-year, up bulk the significant in where

less On the personnel flat. from looking important headcount differentiator is up is headcount marketplace. headcount an our additional The is ePlus was total and obvious a sales our our for technical basis, What year-to-year. that was sequential customer-facing at XX% in

and results closing, technology demand set education for customers. our In quarter diversified our demonstrate products, middle enterprise, of services from market, strong state, first solutions our and local

positioned anticipate We and multi-cloud create customer very and believe meet their in IT the Customers upgrade mix network and right and professional the are mix businesses, and to trends. infrastructure, security. are continuing managed platforms collaboration demand well of with and we product services market right to digitize their utilize invest

will strategic and continue evaluate resources we to with integration platform team. more acquisitions great than adequate Additionally, and experienced a

will over first who will I quarter Marion, Elaine? call our to that, results. our review turn Elaine CFO, With the

Elaine Marion

segment, to was our X% everyone, net driven the technology product sales million. fiscal you, Net line performance by where financing of contributing year-over-year, increased us top a and increase $XXX.X our in Also overall XX.X% financial first segment for of the sales higher in the XX.X% thank million, increased X.X% sales quarter and Mark, services. in today. to Net growth sales you, $XX.X were from Starting joining year. sales prior Thank XXXX. the with up

Looking our and markets, our and largest be technology XX% accounted other healthcare, segment SLED entertainment represent at XX% and for each media end net approximately net from XX% sales, the of for continue XX% markets several our end to segment sales, technology XX-month a Telecom, XX%. trailing customer basis, services of and remaining in on Financial respectively. technology types. client and accounting

a sales. in $XXX.X demand reflecting the gross to amounted higher a billings as ago, same million, and between strong well year XX.X% gross-to-net compared as Adjusted technology in to $XXX.X segment million period billings the a increase adjustment

third-party strong of software XXX fiscal from first ago sales of reflecting quarter, increase basis from in quarter XXXX, the supporting adjustment subscription-based the XX.X% a Additionally, this adjusted point to net maintenance. XX.X%, sales a security performance. The grew proportion gross and represented year higher of billings

profit million from increased to gross XX.X% $XX.X million. Consolidated $XX.X

These million, for consolidated gross stream. accretive Gross margin declined margins increased $XX.X of Our staffing margin The services. gross was related a to XXX expanded technology and lower basis are and our XX.X% favorable XX.X%. support, products gross the mix for Service professional due by expanded to than enhanced services. consistent of profit a the points XX.X% offer points XXX to quarter. decline segment margin basis overall services maintenance to to revenue while margin yield and XX.X% more services which to to larger proportion

million, gains. headcount to increase increase $XX.X additional the XX.X% in to contributor with or In due and as and in added million, primarily profit due This costs an expenses year-over-year the to SLAIT. costs $XX.X Operating acquisition XX.X% an was the financing XXX transactional variable XX% salaries, associated the it segment, XXX in employees, gross to to mainly to acquisition compensation, of increased increased operation healthcare the employees. primary X,XXX increase

to our margin of basis Consolidated adjusted to points X.X% operating income million. period the year. Adjusted $XX.X and million, expanded $XX.X by EBITDA increased increased from XX.X% same XX.X% last EBITDA year-over-year XX

to million Our diluted earnings X.X% $X.XX share, million $X.XX net or diluted and per compared $XX.X a amounted X% respectively. $XX.X or consolidated increase, per to share

first previous to fiscal year year's to compared XX.X% effective higher we quarter, in related the to tax a quarter ago rate benefit In stock the XX.X% vesting of quarter. a XXXX, due in the of tax had

diluted year-to-year. $X.XX, up XX.X% Non-GAAP were EPS

diluted Our approximately XXX,XXX of for as of we XXXX, first compared $XX.X at fiscal the the $XX.X end million shares shares. quarter repurchased million totaled outstanding the to quarter

million ended ago Moving financing cash million. the of from cash equivalents quarter cash was The and from in sheet. technology year We in XX.X% due portfolio to levels with increases $XX.X and to decrease the repurchases. capital to working in quarter share last the cash the equivalents the in $XX.X investments balance quarter. Inventory the increased of end segment, and

As said before, we projects customer depending underway. on specific levels inventory our vary have

at pleased which We XX the are cycle, conversion in first of days our cash the progress quarter. stood at the end with

from we're fiscal April for XX we lease the in quarter days XX adopted right from up fourth was standard. path, XXXX, down year on XXXX. quarter, the this sequentially the accounting of ago X, On the Although days

increase million, liabilities to and As of our to a lessee, assets recorded we $XX.X which estate real leases. related an

a related other we XX-Q. majority of regarding our activities, information in which of were be are investing receivables now our activities. classifying lessor, presented flows the As previously the to cash adopting More included Form changes, among within will operating financing impact this as standard

same, balancing capital remains our growth support and in growth. managing invest Going investments strategy to also future repurchase focus make business the in our and our on to continue allocation We'll acquisitions, to forward, initiatives shares costs.

now will call back your for to time you turn Thank over Mark. I the today.

Mark Marron

first our with performance. quarter pleased were We Elaine. Thanks,

Our remains with positive outlook business demand. customer strong

growth opportunities In gross market suite the strong, backlog over should cross-sell ePlus revenues, tremendous services benefit and roster to X,XXX and which serving our recurring services. of our enterprise profit to giving increasingly products profile. us middle broad addition in customers, of a our remained is

balanced service acquisitions, resources continue in strong organic with we the investment that acquisition balance share to that us and offerings. initiatives, candidates sheet evaluate repurchases the provides allocation right capital profile geographic and includes can our a product strategy enhance to maintain and Our

the now questions. like would I Operator, to call open for

Operator

Nolan Our instructions] William Blair. comes with Maggie from question first [Operator

Theodore King

This for Maggie. on is Ted

-- a you And know, feel a wanted that it consistency some point where that I Mark, the you've stream. ask annuity in like you of reached it's of Do revenue that's some quarter. So revenue this mentioned provides become about the subscription seen to and headwind? I the less

of So to the type is quarter forward? consistently, this going deliver more you expect able be that to

Mark Marron

-- software Ted. it thing, to so one As relates subscription

XXX% So for software software quarter, actually year-over-year. about third-party our the up subscriptions subscriptions, were

with works things software and we've our actually that. that customers actually practice a agreements like built enterprise around So

So time, evaluate at And to off. the it'll I continue for if to level least near see then future. would expect that we'll over

Theodore King

you. Got

of sense services. your so products And into changed at some demand to going expectations the for environment and all outlook the compares customers, your based your what's your year? on Has conversations then, with how today for

Mark Marron

both themselves, changed, from that moving What protect backlog. the they're hasn't our cloud, Still from pipeline, and their to to security, hearing business. it our about a things we're digitizing both the customers, Ted. purchase No, looking feel good our to

demand what seeing and spend from IT So we're changed. an hasn't still

Theodore King

real good. a questions And couple then Very I more quick. if can, here,

about large of So pipeline? terms I to you seeing in projects. ask What are wanted large the project

Mark Marron

Well, to we didn't as this it large relates any see quarter. projects

expand So and didn't our that if you're have any will. and projects land if land our this big you quarter about expand, talking numbers, affected

As some calls, on of accounts. we now, size more about, enterprise the bigger and looking based scale with Ted, previous enterprise-like opportunities into for with more always were being and were talked other we're customers, brought on that relationships our and customers

pursue then, customer base? expand, sell to within our and time, land that we'll try those more continue and and So to leverage over

Theodore King

if can. last And I question Definitely. here,

growth the on So did quarter? bit products And revenue I in how provide wanted dig SLAIT did much to they they acquisition, contribute little much to to this revenue quarter? services how this a

Mark Marron

third, Overall, for one about SLAIT the growth two for -- and about quarter. our Ted, the growth was third, was organic

Elaine Marion

billing. gross adjusted In

Mark Marron

you. billings, gross thank adjusted In

Operator

Matt with Our next from Stifel. Sheerin question comes

Matt Sheerin

weakness customers? So an OEMs hardware know a is a regarding addition you're you're pushouts, hardware products We're priorities about those a servers. question enterprise from where environment products. -- talk in of on you where and the hearing lot just networking Mark. seeing some I seeing particularly right side sell now, the you to in what demand growth Could and storage in that we're the question seeing, certain

Mark Marron

Okay.

uptick, it's the kind down, of is little our Matt, still is demand big So end. security storage that we're look I and on up If a on a the think bit seeing the but I uptick. at servers, and up

networking XX%, will, XX.X% which of you We're I it adjusted think our up comp think now earlier, some spend, overall. trailing XX% or is almost it for the XX was billings our was gross was noted year-over-year, about net months. seeing security I if

along So those the we're we're seeing be the the our customers. would services of areas providing in to with upticks, that some

our cloud, we've calls, made in in our we're security, starting of investment prior the of of see noted come a fruition through. we've as lot that to services So our and practices, some

Matt Sheerin

any to large you're being Or Is talked the reason, also not very are get And a that more pushed cautious? like deals that the about whatever you for fact out Yes. big issue? seeing deals. these question enterprise previous timing you seeing customers

Mark Marron

Yes.

Sorry, land-and-expand Matt, any just have large projects. some clarity We on didn't one. that

about of on perspective, We're If of you us deals, large a talked two, over well had hardware as bit from a that remember, year talked a were we we last enterprise compare. the portion that a the had kind from little both a seeing had a for or land-and-expand many hangover software none project about. but as

digital the will for we go base, I out growth seeing that in our forward. for enterprise our build and as space, and security that's customers in enterprise and look I us nice We continue are hopefully, And that part, some though. solutions, cloud as think, think mid-market we

Matt Sheerin

question whether seeing on from because tariffs, trigger macro I in you're cetera. any of hesitancy terms et pulling was my of guess, environment, the the projects customers

Mark Marron

Yes. No, we Matt. haven't seen anything,

In fact, affected haven't our business, negatively. positively or either tariffs

So haven't out. had forward deals or any pulled be we pushed

some a the, weeks, plays relates from in haven't to far quarter from to us. at level, kind through of anything hasn't QX, for few here. as last coming days, announcements With over I'd our I move mean, the as or it second the macro we customers far but have that of say So we'll so that over our QX out how see changed so teams it heard

Matt Sheerin

back then various of you gave the and to just services security you services numbers Could number to and you around the that XX% break give the at, think, services the of also I solutions And billings, number. components that do? again and down Okay. that

Mark Marron

of talked services, about things. Yes. if the break our different we At CAGR our at Well, our couple services. QX, at had of We of know, you end the over years. But it XX% of Matt, as had March, end down. look X don't you a a the prior we

growth year-over-year we what was our quarter, for was This almost had about talked our services. XX%

really services our building So of out lot capability, maintenance service building we've our staffing good. capabilities capabilities. managed of our actually is terms well enhanced in talked building we consultative working out annuity things services feel investing about A capabilities, capabilities, that and out as our as or

I'll were, surprised. So in fact, we pleasantly say,

our our because terms services nicely, it's our our numbers staffing lower bit revenues Our But consulting services and up GP positive affected was were professional which actually a of little margins a services. than overall. and a margins services little, it in year-on-year service

Matt Sheerin

Okay, fair enough.

and you're figure to selling and warranties your working services directly annuities. as your street, to what trying feet third-party where on third-party on Just feet customers street, own versus opposed percentage of actually selling and the with out warranties services services are

Mark Marron

XX% Matt, revenues, Yes. we're our when it services. quarter. services said revenues That's of our all we talking sales terms was of about in net for this our think our I

get the the SmartNet which say, that, like Cisco, XXX gross-to-net, you talk is stuff up and gross-to-net when maintenance. third-party third-party roughly into was points. basis not When we that's let's our So maintenance,

third-party subscription sales bucket. the gross-to-net along in falls that's So maintenance, that with that

Matt Sheerin

fall bucket, on then? What where if that in software bucket, it? it's Does not services, is the

Elaine Marion

services that's in statement statement. solely our line of sales products, income on in services directly clients. our line Matt, of provide our to we products income that on Sales the

Operator

Burns Greg with from Sidoti. Our comes next question

Greg Burns

that When gross change of driven in gross-to-net we maybe the look the in percent at services? the margin was what the of year-over-year, expansion growth versus by

Elaine Marion

smaller contributing the increase gross-to-net, our sales The from but to, component obviously the services, a line. entire gross in in it's was net increase of the the is Yes. of margin from the gross majority also profit

the our year-over-year contributing of net was well profit was it majority increase financing Also a they So yes. a segment component, sales had in if basis. gross large the as from

Greg Burns

your areas trying digital areas some in in of from growth And security to to growth type of they we at cloud your can feel a certainly, growth and you're whether the growth. your you've I'm invest investing relation when look Okay. infrastructure, maturity more room where you in, security do maybe cloud improvement how market? areas of other maybe talk other perspective? there's the practice, just see But practices, some compare nice and in and securities been practices, for showing digital also and infrastructure of the of for kind a get seeing you about

Mark Marron

Yes.

So we we on what just just business, -- think But out when effectively a which it's up grew datacenter about ePlus. as right now, breaking we're cloud, just, the is Greg, security. you

we're So company, networking, all or datacenter a just continued play a it's your and that. compute, providing on storage your

and around coming fits software-defined our the and and out with sweet goes networks everything So within it all that digitization of are things spot. mobility that

So to move that and kind we've that's enhance forward. continue up and things with, all we we of as expand grown

Gregory Burns

Okay.

more So of in growth additive terms you're security in has or maybe terms I mean, other similar areas Or you of areas market, fashion potentially security to I do in kind are services that been. see being of guess, the terms a leading perceive there still selling? that the you of in growth, comparable of

Mark Marron

a Well, put we you the think always are cloud -- break you even the out visibility you from out you matter -- a is that security on-prem, standpoint. still about from if some thing. have security, reason and a Greg, standpoint in need No applications it, if or both one from protection

of as in say infrastructures, -- security as we well that we ways we terms provide. together what product from really many building different both product integrated are we're digital those services when sell, cloud, out the X our and So in tied a

our we're services in building focusing where investments our teams, we're spaces. cloud, we're need and really in those solutions we're -- and and that where digital training where customers infrastructure and it's security making headcount out sales and where seeing So is services

Gregory Burns

just lastly. And then

services In what's wanted consultative just terms understand, not the that recurring, some would I say. services, to I in line of and of they're item, included necessarily

of first to maybe there off was here quarter it look there -- anything repeat building from strong, kind quarter. particularly So this in is that might is where how quarter was this at next it? of growing Or not

Mark Marron

there's No, repeat. not of I don't might in anything terms that think

where if them lot with consultative we'll on to we're and their them the helping it, and place is workshops, that customers, road your build of help internally sit So data, the services. to for example a to they protect then them, customer, do, step applications were it's reside, they usage cloud a both the we'll through map is what's actually risk have in -- a help working and where so I put with security what of externally, have which combination where products understand of and the to

I of would expect in the not those So in continue, digital cloud security only types but and also space things, space. the to

from annuity have bad, sell then As it the great how both that function term deal services, to the about, of and implementation, ratable that you is. services, products about talked of relates as PS, XX you overtime, that's we of installation annuity months, GP and on what's that kind I depending and an to a is And continue. we've services, months for XX annuity book to would good revenue in or the long expect relates then just what it

got have and piece and as backlog bit that of terms expense affect lines and should you to all build is processes in the that and your along upfront have The that headwind short you've So numbers, billings, grow term. upfront headcount, a little headcount as up the things put overtime. you a those revenue tools in of in that we GP

Operator

from from next Our comes question Knoblauch Capital. Brett Berenberg

Brett Knoblauch

SLAIT. for expectations me, your is months now of performing on is relative Just the a ones of which How that a first to we're that few couple just in.

Mark Marron

Yes.

table, and but We hear management performing. now us, expectations to things. security fit, we the see was group cultural bring even and ePlus, governance good risk few real to the up type what what really think with nice around feel how SLAIT good for their as really we we're other that's starting to staffing though team, services, SLAIT people, whether across Brett, didn't strong about they're brings compliance I a ePlus helpdesk acquisition. far synergies and table to and so services the performed a and A Sorry, the some question the in beginning, real of they're the SLAIT space,

SLAIT So acquisition. right pleased now, very, very with the

Brett Knoblauch

SG&A going speaking SG&A, we synergies, quarter how Then something at saw that I the of year-over-year this or think of Xth should we going should forecast where Xth a your Is forward? in spend. increase looking be kind is Okay. we forward? just

Mark Marron

good or those at us, now, would a this rate is Yes, SG&A that lines. anything for think for I happens run anything I and look, look precludes, along if if it exceptional quarter

at I an perspective. The variable is be other up go comp can't that good a I gross would then quarter of if just predict thing rate SG&A think this run the GP, up. this to from point, off significantly, profit, is But

Brett Knoblauch

Okay. sequential just we that incremental as should And then seen one think more services. sequentially? -- Should on sequentially? that increases, increases about How or

Mark Marron

at No, the have to make don't look I Services, I sequential I'd each quarter. don't want I growth to you'll up, just think don't but see so so. numbers, it think

quarter, time, SLAIT growth affect based meaning, end Now down from the consistent we could expect, things go there. whether with up on that. those see of to seen annuity kind bump get an along a the year, we'll like that it's acquisition services our we've would lines But start or and of over we

Brett Knoblauch

And much SLAIT of then how included? by that driven growth being securities was XX%

Mark Marron

-- then... gross organic the the about for adjusted XX two the billings. one growth I of well, no, much so and And that was third -- third How one was -- talked third SLAIT

Brett Knoblauch

growth year-over-year was services the segment. But you much of to -- growth are how or attributable... services yes, contributable basically, know they down How like actual that

Mark Marron

portion. say, would nice a I

portion their the a businesses that a few of they services. In nice up, was other terms staffing and of built

Operator

to showing to the call back any I'd our like further questions. over host. I'm not And turn

Mark Marron

and Take at quarter's We or with today. care. seeing All the right. day. Have you hearing next joining everyone, look quarter from the pleased you Thank performance a call. you. Thank were good for to us for forward our you,

Operator

conclude today's this and Ladies does presentation. gentlemen,

now may and You have a wonderful disconnect, day.

ePlus (PLUS) 10 Aug 192020 Q1 Earnings call transcript