PLUS - Earnings call transcript Q1 2021

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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

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

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

Mark Marron

business environment. fiscal Thank in dynamic performed first ePlus you, today's quarter well participating in call to Kley. thank XXXX discuss our for And you, everyone, a results.

cloud, center security. customers' Our support needs solutions collaboration, portfolio areas, our to including and positioned in data software, is critical

We and gain and on quality, bolster midsize has enterprise ePlus. continued to with a our consistent revenue customers XX-plus hospitality like we to experience for and knowledge downturns. market type believe through leasing and years revenues provided exposure more our strategy credit recurring believe to annuity of baseline travel. at-risk good of has Our industry management focused share financing profitability provides and to economic and the navigate We most have risk verticals segment providing successfully to retail, minimal with us through we

fully have for health pandemic, values. to shifting of showing safety pulling mandates our of and and business precautions work-from-home accommodate of to during appropriate and much our remained take its together We entire and to the want company our employees. the team ePlus operational for tremendous dedication all commend I

in XX.X%, larger a services and very in consolidated quarter, serve and and component favorable of subscription a As support a measure revenue a result, expeditiously profit we of was business increased strong A gross of a X.X% third-party mix the by Services in their increase key to our margin able the success effectively our X.X%. maintenance customers IT quarter needs. driven were sales. including critical gross

peers. we gross While quarter future not consistent to be look compared quarter's is our do as industry-leading level achieving margins closer this with in replicated results. quarters, history expect of uncharacteristically our Taking first will at high-margin a it

conversion $XXX.X assurance million. increase significant on hundred to billings demand adjusted million, the declined $XXX our held third-party in segment Technology While X.X% maintenance, for stable based quarter. subscriptions a rate, higher net points at This was usual, sales software first in gross than basis several and

and has partners. us, to secure facilitates customers' which our is our been benefit financing the importance of our think to grew lease question alternative, agreements. while business the we no business. as their financing Revenue IT some our X% There will ability great last continue customers extended of as a post-contract to upgrade term earnings leasing upfront over to Turning cash year, reflecting is activities increase COVID-XX minimizing infrastructure, and requirements. We that challenging

showcasing by has with collaboration it projects relationships secure being enablement to However, also workforce of a their home. to remote manner. accessed capabilities, data access customers solidified nimbly providing trying customers many in improve Many execute complex are our while our timely from ability remote with for

with influx they dealing for In issues of leverage capacity center They're of data costs, the also full pandemic. due looking looking allocated to workers. the due now to the budget for remote contain while have they the benefits are ways Some cases, some the to cloud. to solutions no need

the environment. you the One not Let to improve able that to were flexible expense the fashion. was our an their their and were customer's We to by the needed, by move technology This and how our security of employees and be capacity timely remote ePlus leverage to and their infrastructure a our could their business this navigate needed the they has examples solved few finance of done me support protocols customer's purchase provided they to with the constraint, installment to workload from the able They segments a by business network give services generated X assisted customers upgrade needs. postures providing work. needed budget address team. unbudgeted critical had current working for home. in along new power needed This get agreement technology they

all communications had Another a solution. under and systems customer to running disparate platforms in multiple wanted parallel, single consolidate

This like our part allowing win-win, and us our to IT this these save better of seamlessly to services, XX% their work uncertainty, experience, summary, enterprise us required are They solution. solution driver, access team and accessibility manage giving wanted In we needs fewer important choose platform and an all allowed additional cost-effective. be often and internal periods do significant staffing ePlus. plans, been accelerating as offerings collaboration leverage this is be their to cost for to during which resiliency on-premise employees accounting solution while the home. our in to cloud, proposition yielding from additional commitment provided COVID-XX an that growth visibility a managed our goal the a collaboration resources, our outsourced security Also, to helping also economic their of multiyear and nearly to enhanced users adjusted their and value can billings. while capacity an offering user company. customers solution cloud-based solutions incremental sell ability challenges with time customers more This maintaining created be teams gross the continues emerging flexibility of the of remotely more cloud-based given margins the providing network and across level control long-term line. and services. on an and a not of Security for While positions allowed customers' had It gross of us on-site, to while

overall see security remains and at our a We for it demand increasingly this importance. ePlus differentiator to continue for strong is when offering solutions, a an key time

are given first I well our Marion, the acquisitions. will to CFO, think environment who solution use footprint opportunities seek successfully we turn over this quarter positioned sheet to continue our review will make execute economic offerings. will to we to Elaine that of results. build provide now acquisitions our balance challenging and historical call and strategic of our experience organic We investments strong may Elaine? Finally, detailed our geographic out integrating to a present

Elaine Marion

first today. first And quarter, increase Thank in consolidated last basis. of an sales software and recorded XXXX, everyone, Starting million $XXX.X to financial net due year's reported net quarter $XXX in below maintenance, million, subscriptions, the you, in for of overall us which a Mark. mainly the amounted with joining fiscal thank services to X.X% sales you, performance, our are third-party on

same decline basis. The in a For X.X% increased year's $XXX.X net our X.X% to was due year's The primarily in adjustment modestly technology gross XX.X% first an increase to revenues on adjusted managed an billings gross for Service million. million net was to segment, revenue Adjusted last first than to to last $XXX.X $XXX.X sales compared services. was quarter in of million reason $XXX.X to net demand sales quarter. decreased. for million million, $XX.X due XXXX, to sales compared increased recorded XX.X% billings the amounted the lower

to increased of Our extensions post-contract $XX.X increase of million earnings certain from in X.X%, revenue mainly schedules. due an segment lease financing term

of higher in reflecting Gross a be first The points to and services increase year's points tied margin basis can gross to of to and gross net. financing sales due to was our by increases margin quarter and in health Offsetting gross to costs segments. results XX XXX expenses from due which this widened to gross reminder, both X.X% care and variable higher We were our technology last of X.X%, mainly subscription slightly improvements fees. increased increased million growth entertainment revenue margins driven these predict. ahead XX.X%, reported points difficult $XX.X gross managed growth. of basis primarily a Consolidated increased uneven the due for to XX.X%, which $XX.X and segment million consolidated points. million. profit gross an in benefits, a profit profit history, As increased professional third-party for highpoint services. X.X% basis from increased and increased XX.X% XX.X%, $XX.X Technology XXX increase business recorded Operating an and from lower maintenance, in and replacement compensation Services XXX primarily margin $XX.X segment's turnover. to margin are basis X.X% increased travel million, expenses, licenses, to salaries product to profit

flat with at XXXX X,XXX, of end essentially Our total June headcount the to year. amounted last

$XX.X operating income last increased improved to the million million of result to year. a profit, X.X% As compared gross $XX

effective due rate federal an quarter to of tax XX.X%, the to taxes. state Our adjustment primarily for increased higher year than from the to XX.X%, last benefit

we XX%. to For expect year, our approximately be rate the tax

per per Our $X.XX X.X% year consolidated $X.XX per earnings share share, $X.XX to diluted year-over-year. diluted share increased $XX.X per to net share diluted diluted million respectively. compared compared earnings and last X.X% a diluted per Non-GAAP X.X% to $X.XX or share increase, $XX.X amounted to million or

$XX.X XXXX. quarter $XX.X diluted first the count Our of quarter totaled the fiscal million compared million for share for to

with customer Now markets Technology and entertainment XX-month looking XX% our care accounted continued segment coming variety end and accounting of XX%, technology from client technology XX% financial SLED, at and media our be XX%, to a largest respectively. segment. remaining on telecom, basis, and types. for net in XX% trailing X sales, for a of other and XX% our markets services health respectively, end the

the equity an end million. We ended $XX and million needs capital the Our strong be of technology working in than due March, in up shareholders' and $XXX in debt. increase to more million, from $XXX.X nonrecourse our with with quarter a sheet of equivalents primarily cash decrease segment balance of to cash continues

institutions. our may approximately levels financing in financial also million. portion We have which of million by third-party funding Inventory increased portfolio, monetized $XXX with transactions a $XX.X to be

on As underway. we've levels past, inventory customer specific projects depending in our the vary discussed

period. March XX conversion but last by was the first inventory in an down our up cash primarily from decline The offset ago at to XX increase quarter from year days a quarter days, XX change in quarter, cycle due outstanding, Our was of days days days outstanding. the in from the end the in sales

on we business monitor of allocation, effect capital our the continue for As of cash. to and COVID-XX use

However, repurchases. We to share we customer fiscal including to in investments, XXXX. organically continue demand believe effect COVID-XX first small evaluate opportunities year for align downward demand, quarter on in with our a the and of solutions acquisitions will had

will As it demand how pandemic we unprecedented, this fiscal is in are XXXX. as to uncertain affect

thank you innovative commercial Most certain for configuration our all in medium we'll focus our higher as began, from pandemic pandemic's be proud their of and recently locations. and who our on-site returned on solutions those which am monitor large As certain accomplished And resilience. aware, employees to accept since to well are as our of and are the headquarters. continued home, we adjust voluntarily and them our businesses would on roles, working continue have I business. employees and education reopened to customer state, impact centers have at to for have the customers, and local and dedication like for what

vendor to partners the with have diligently work to call Mark. In addition, assisting who I now in supporting will our back us our customers. to turn Mark? continued thanks over

Mark Marron

Elaine. Thanks,

navigate has quarter importantly, and demonstrate a business and focus a supporting by rapidly ePlus. ahead, through collaborative limited environment those the which the important first industries and difficult strong landscape. that hardest the base, most first changing our challenges in defines hit to quarter business as ePlus of financial effectively are managed key diversified our pandemic, meet exposure our large thanks the plays they We the in customers prepared results role a Our culture to fiscal to relevance position, that and customer XXXX

our All this long-term for of in would confidence to open gives now growth Operator, potential. us the like I questions. call

Operator

Nolan question Instructions] [Operator Our William Blair. first from is Maggie with

is line open. Your

Ted Starck-King

for Maggie. products and the well? the Has for demand talk on progressed Ted as services it's environment here July quarter and Can into Elaine, about Mark, Hi, you August as the And think? a do quarter? same demand the trough, growth during for products we the for level continuation is kind first of to of the services reasonable expect saw at it you

Mark Marron

all, So of how we on And her tell Ted, okay? first said daughter, you? Maggie, congrats the of are birth

Ted Starck-King

will Yes, do.

Mark Marron

All right.

So a things. couple of different

about was April quarter, when last had kind line. of about we in we talked think I that talked

bit I'll through quarter So try September about I'll meaning quarter, little and you this a going this quarter, July talk for to then give us. into

was So a of expectations. quarter wound way little slowdown end kind at up of had April line we it quarter. of thought Overall, bit kind of in to the with the the would. the We

get projects on-site down, slowed Some some the couldn't of services. with the of

saw on couldn't growth a had won't say We're we The of on right areas. though there our different different focus I that little X.X% than in the – than get even we some So services was demand overall, were that opportunities site. normal. we

security to was access lot users collaboration, of enablement. as have believe looking are center quickly to and companies secure around they at from data in their enablement, of of didn't were really it people access that with. home, all That A cloud. the everything lot companies terms capacity, dealing for solutions lot data communication. So workforce moving of remote workforce A of or remote trying a were were of folks kind not, includes

QX. of was It So expectations, for in slow quarter. for with the into going a line the little quarter, be it of kind would end the

line. same For QX, the along of kind it's

to have reasons: on So speak still different was a site. I overall. July, pipeline little for only we kind a Services one, line where expected. good of visibility it of into We our couple getting in challenging of can is

little schools, the pickups areas have example; and with seen the get of annuity services a to staffing. But of customers that bit at with looking we've slowed staffing, not in down some services. on Some being folks consultative on on able services said, site, our our other for

So be at that high a it would level.

Ted Starck-King

the those Okay. budget about and Great. That's going end given market of helpful. everything you state talk what Can just from seeing on and education you're And markets? a there? local standpoint, within that's really higher just kind the exposure

Mark Marron

Yes, not a problem.

the different start state So if and I at verticals, local I'll but look and education. with

state So local flat us. actually for was and

the really space, For – the Ted, we quarter, our the and down, don't K-XX play in in was that's actually K-XX. commodity

chromebooks, our the of laptops, lot really a So that's not space.

infrastructure more the, play. call I'll it's of the higher-margin So it,

So that down a but was bit, higher was Ed little up.

So SLED, net-net, and our local overall state, education, year-over-year. was up

us one of with overall to Higher say care with us. through and help year-over-year, the – overall Quite think went honestly, for down a of to that's But this was get K-XX I customers trying And would elective down, were that's health we kind were our anything surgeries. terms pandemic Ed won't realize no that dealing it local was think for SLED was up. everybody way dealing what things kind of up was flat, think of the could. and we obvious, to patients, we as just relates lot just I could I I do any healthcare in due state they

Ted Starck-King

of and peak seeing from increasing think we mix I hit the of Great. of environment? I of And the about bit the professional towards of particular. staffing services ask mix, this within that mix about Have mix wanted mix – to talk I Can the services you percentage the the of of in you kind quarter. little services? standpoint, margin staffing a just revenue? – trend a picked type the kind up had know and been a hit of staffing this in as

Mark Marron

peak, the No, I think Ted. hit don't we've

you of whatever what a down going lot workers now folks their trying remote I on on job in terms think are is. of right do focusing double enable to is what to need have their to they

lot short-term they're are trying financing leverage the some capabilities, cloud. in, that and get so they've are the data and leverage to network unexpected So projects communication relief. customers budgets, collaboration said, investing as to some security, our trying I trying A like tools, had tools, capacity center of to

it services services, cloud bit. picking I'm the can in and to is consultative need, Staffing center we're as up hoping that security relates down very related, know. we don't though little to side it's a as But COVID, you tell the I related. whether you customers solutions is really what move it and even risk providing by individual But as our future, I believe as that's think pieces, customers As we break out lessen, I – I and data of starts think as uncertain. for forward, hopefully,

comes a about there's earlier pressure on see in on our for the I mainly to may think able mentioned you that I little pickup professional site. get And a that services, as staffing back. being reason

Ted Starck-King

I and Very you. could question slip here. if was growth last What so in this good the Thank organic the quarter?

Mark Marron

of I – the you know You what do your know head… top

Elaine Marion

It organic. there was from acquisition. Yes, little the contribution was primarily

Mark Marron

go. you There

Ted Starck-King

you. All right, thank

Elaine Marion

Yes.

Mark Marron

right. Take care, All Ted.

Operator

with question Sidoti & Greg is next Our Burns Company. from

Your line open. is

Greg Burns

afternoon. Good

Mark Marron

Hi, Greg.

Elaine Marion

Hi, Greg.

Greg Burns

support last I businesses your Just a kind of assume of on view current follow sustainability rush questions. set, of up to get the the an was initial things. trend? Because working to there kind to remote and I other up the maybe on wanted would

just longer-term trends. to a you initial this felt and fall-off? this had like maybe see see wanted you just then push if is Or So maybe I maybe we accelerating

your and view in So it's that the how sustainable. environment? more reacting current is of market the what's on But kind

Mark Marron

only us unfortunately. one crystal the one, a With reason. all of have Yes. none a ball, Greg, COVID, for that's tough uncertainty with

were tougher to talking So expect be spend what spikes school, of up some industry experts, cloud predict. of be to the going kids out But by to I amount. go with and and a think I they're longer decent I you would if staying to about, the the tougher think it's

You'd by to security be expect a spend decent amount. up

systems think of to place probably I multiple have want of going kind communication kind a that to of of kind and customers solution. they're lot one into collaboration in convert

to I whether cloud be cloud. see it's with gone us folks So they've X And there'll there'll think they're think think for happen you'll they're as to risk I data capacity may get have for consultative and will shock. be optimization, they're there opportunities lot There's of going a issues, think to us And bill think I some sticker the customers, point, I address, one, there. two, rapidly is, cost I I to the some going to that the that have moving that help quickly, spend, think be it's is at a little taking that things – center going opportunities to whether security

Greg Burns

Okay.

kind it mix where about it we it Okay. in a I going And level historically be quarter. you it somewhere was of forward? or and this forward? of And about should margin should terms know – gross Has to model quarter? up But then think was where record Or going this should margin, we maybe and to another going the mentioned, how by the like the Or kind tier and structurally in where this of think forward? heavily stepped it's of is mix. the another gross between driven going business we how

Mark Marron

quarter? A Yes. that, say of record One, I Greg. we don't remember couple things. did

it. tough a a that There's So it, that high so incremental of for perspective. of this did, you went customers okay? gross did, very year to renewing budget but really an sure from I had We just a be a at to I'm were When will couple were maybe one replicate. maintenance look into lot there net, not we things

subscription which a had on We uptick net also sales, basis. are taken a in big

in uptick services an our had also margins. We

XX I think points. was it basis

than And something significantly X it, think to don't is this norm. this new believe is contributed I those the that's but So I our traditional higher norm.

we're about said, pretty calls. where excited that been with our has margins prior as we've talked about Now going in

quarter. it to the norm. on services, build, happened if trend consultative not more services this time, an over I annuity this up is would what So exception This to expect our and over but continue time, is our based

Greg Burns

kind mentioned have lastly, looking the that but and or Then just over levels, can years it you business. have at seems and transactional at I very consistently these X.X financing always pretty these continued. transactions so it lumpy be Okay. of to know the base, last

are why a that's and related that of this and new Like sustainable? this So investing you've – growing the debt like Is business last in recourse maybe of tied of terms on And you are – And it's where you actually to? kind grown has than incremental for business? has again, a been was higher that in business? more normal is, where the taken quarter. kind level has operating it then to up I nonrecourse, the at your it debt think leasing focal What's historically the structurally?

Mark Marron

the transactions you good to – what's look nice Greg, deal large quarter-over-quarter, believe just let that level, or high pretty not to recourse? that's in made year-over-year, job. leasing There's a to we've on I'll in a team We some portion at going investments deals we've our with happen, a years. lumpy. Okay. be want come But it's over the But some don't. change, done going many really got

think So that continue. I will

into lines. now think the and would not we're And that we things retail also, that the with may we into The funding play banks the from took, through have past, of in let's maybe take. along things credit to deals comes tight that market other thing like those in have there's in, now when space some a you say, that credit get

numbers think, So – that it's QX that. leasing there's financing last a But And year just team stable. compared numbers. going got we're honestly, on where lumpy continue. would path I ever our a tough in compare we've or to go variables to think with finance lot It's a be quite as I our with we don't of yet into I

Elaine Marion

debt, in Greg, the nonrecourse related to it's increase address And the really to the portfolio. Yes.

So it correlates to that.

– as to X/XX. that X/XX, we'd actually that and on had the In carry Wells terms of Fargo line nonrecourse outstanding of through related as We the that $XX is million increase, of facility.

repaid have outstanding as of it We X/XX. that, but since was

Greg Burns

you. Thank great. Okay,

Elaine Marion

Sure.

Mark Marron

Greg. Thanks,

Operator

from question next Our is your Kurt, name. also company if Swartz. you Kurt could provide

open. line Your is

Kurt Swartz

How This from yes. Swartz are is on all? today. Kurt you Matt Hi, Sheerin for Stifel. I'm

Mark Marron

Hi, Kurt.

Elaine Marion

Kurt. Hi,

Kurt Swartz

I'm any a we And how of the COVID-related included during quarter. hoping in as about numbers maybe color more costs current forward-looking as OpEx on well should of OpEx can there levels a sort the whether basis. So you bit little think provide some dynamics the are those on

Mark Marron

Okay.

couple quarter, a of I terms OpEx, run had things. a work rate things higher past at a of GP. modeling So different One, One, different from happen this think we probably in in it's good perspective. quarter. A couple of the

flat. our it as services utilization to and effectively think was increased anything So it were a fell to the a to of salaries in relates SG&A solutions and with things variable investments versus higher headcount benefits, was of higher that We salaries COGS. even I'd services else few GP. Trying in think call, rates what else? terms from that well, though talent as commission some relates as There end, our a in I made what

Elaine Marion

costs was the pretty else did nothing salaries question, folks immaterial But yes, COVID the but to were at we and additional it – benefits. COVID. it home, relates Probably that equipment cost, immaterial. had from some as We to buy related for to address

that in things that, PPE costs, would the material nothing quarter? you Some like but notice

Mark Marron

lower just travel we One other as entertainment overall, had quick thing, well. Yes, and Kurt.

about million, sequentially, was our GP, And gross overall, profit, our of at our about look our that the $X.X up down about SG&A, So $X.X was million. if kind what it you and was numbers affected quarter. sequentially, nice

trend. So in think of. trending, is terms was one a nice nice of this But I quarter, model that to would a

Kurt Swartz

were during quarter? chain had that Understood. And guess supply to supply sticking of speak sort you with any to any COVID of Or other constraints I then of the sort navigate? issues there theme, the

Mark Marron

nothing few numbers, anything a There material. at kind I things wouldn't shipping it's affected are say No, but end our much. that the of

the bit or that little material, were but nothing longer, call I of Kurt. cycles dramatic Some a would

Kurt Swartz

you spending on looking months. overall, year you're I discussed it. how you're next basis? months? then in Have currently for looking of guess, guess, forward as maybe assumptions the the or a the Got maybe guess, next internally And at XX environment XXXX – exactly Or at I I any XX IT just maybe sort over fiscal spending

Mark Marron

Kurt, to that's a look hard at. one

COVID by As I going makes predict what's to track by things project different tougher, think, of the of uncertainty continues, happen. functional everybody kind and area. to vertical, We customer, it kind by

nice have some and If verticals, in also, regions not kind about you if verticals retail that gas months, the harder to of exposed even were those there of is factor oil not some we're think that they're the think that you or thing about like and and the hit trailing different But year-over-year customers selling the verticals. it's XX the just It's up we to of in. hospitality.

of going a go. income, in of we metrics tough terms the tough contributions very But where to future, us. all rest tell gets market. liked really the We on profitability It of going for margin, be of very our EPS gross the the things year will both it all So positive good in quarter the in GP, what's going in operating are predict were predicting with was to from I solid segments. kind you, feel pretty about quarter. this

Kurt Swartz

Understood. could. if then one I maybe And more,

whatnot. the You but that of based a in the said projects the on it and touched in bit inventories sort prepared were pipeline during levels I little elevated remarks, quarter. the fluctuates know bit on a And you

can you color any there, provide be So if helpful. additional maybe that'd

Elaine Marion

quarters. should customers. next were couple but really working that a to couple Yes. that million the was different it had many million we to relieved the here had quarter, of There so. of at get the multiple The $XX about or And were $XX end customers of projects related larger on, increased inventory underway that over

Kurt Swartz

Understood. Thank you so much.

Elaine Marion

You’re welcome.

Mark Marron

Take care, Kurt.

Operator

gentlemen, any does I'll to [Operator now period. back Marron Instructions] for this Q&A closing turn And conclude Mark ladies remarks. things and over our

Mark Marron

today. look hopefully, at everyone, Take investor on if call you, time be for earnings. next quarterly not, the future, We forward Thank QX care the our listen Okay. say. to to shows in you and then you seeing road to safe. speak taking should to I And

Operator

you may and call. now conference your today's participation concludes Thank disconnect. This you for

ePlus (PLUS) 8 Aug 202021 Q1 Earnings call transcript