PLUS - Earnings call transcript Q3 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; Company Erica these I is information you to filed. President periodic XX, Mark XX, Elaine detailed due President; and and release XXXX, want ended March on Form and of we be in management's vary materially earnings estimates the the projections. we Counsel. and this December Actual undertakes with General current any of and responsibility CEO our The to future this risks Exchange forward-looking facts Stoecker, make our a statements uncertainties results Darren forward-looking statements update statements that and are future that ePlus plans, events. new moment be for the light 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 no issued to are for year based filings XX-Q and

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

Mark Marron

XXXX for quarter call Thank results. and you, to discuss for Kley, third our fiscal everyone, today's thanks, joining

on security, importance have areas we environment. longer-term business offerings, service to our are collaboration model success business in and the the and that Our strength cloud, third related focus today's and diversified speaks our in quarter seeing strategic from increased relevance of financial and performance all resilience

to continues differentiator in segment unique provide drive sales. market technology and helping is a to Financing the Our

some results. you from our key give me Let takeaways third quarter

gross adjusted business a continues and Net perform environment. well sales billings business to remain in our challenging steady. First,

third margin earnings we highest of X.X% grew lower XX.X%. expense quarter net services with operating levels, and report growth business Our to able were

revenue performance factors. our Next, several benefited from

a mid-market broadly saw quarter, of security have last our of upper strength specific large and customers. And just XX% the increased third We to from in areas billings, coming XX% Within gross third customer over from areas enterprise focus, our key quarter over we diversified our year. of up base. adjusted

quality continue. been models, hybrid demand While long professional greater more of time limited ePlus, managed demand access area and has period services to the expect continue customer for COVID during is grow. security services a services, priority and for work for it been an Similarly, especially, annuity even staffing. of this This our trend impressive, to our given we on-site has challenges this even

driver. and security expect managed growth our environments. work-from-home the provide a And to and Our this services, we create were capabilities options advantage support remote to become longer-term customers with expected services taking more year ago. they to of a prevalent hybrid solutions Post-pandemic, be are than work to that, trend are we have reliable

growing management expertise, SLED and to $XXX S&P and collaboration late add to Upstate is footprint the and York acquired offerings Planning, between and New our service our our continue adjusted In our and grow solutions on adding $XX expanded base we staffing capabilities to million selective in million enterprise we footprint acquisitions. while of Third, annual gross remote billings. which and expected Northeast builds in geographic Management December, our customers. via Systems

synergistic our evaluate We to like add and footprint S&P continue professional geographic staff. to acquisitions offerings high-quality broaden in

payment trend a service in long are really today's business financing And unique X to comparison we segments. our appealing than The and markets segment of the playing environment. customer even offset in impact quarter-over-quarter structures a ePlus and have business financing that diversified as results technology our business in Finally, offered is more of as strengths highlight alternative the the segment. financing alternatives our payment difficult our third of quarter becoming performance the positive benefit model towards more technology in

our Now, results. let me In highlighting. speak worth bright were more several specifically there third about quarter spots Technology,

higher ability to First, higher remotely. with have professional year-over-year our to be more projects to grow part services become business services margin and enable continues sequentially, us comfortable These in both because tend customers staff provide achieve utilization. our and to

due segment, strong quarter transactions. XX.X% declined as Financing year, a XX.X% to the revenue comparative to growth compared our to very large Turning several had revenue prior which

that financial competitive business. segments. provide the cash financing and ability or financing customers and noted Financing in technology or we remain relevant, options and long to ability especially technology we to continue flexible with purchase our differentiator are business lumpy gives positive market. have synergies the build segment our can our financing in results, In two a today's budgets the even upgrade flow, and between to generates financing facilitate We about our business constrained is technology options environment,

the attributable and as quarter last realignment from expenses COVID-XX, of this some continue should lower travel and also reduced expense entertainment, realized a to of were XX% year, lower such facilities reduction while our period Third some which post-pandemic similar operating savings, we workforce. than systemic cost have is directly

benefit our we entertainment utilize lower as and we options, expenses will opportunities ongoing expense. travel that facilities believe should to and to be also from We virtual continue optimize

operating engineering ensure revenue now more quarter in-house as capabilities levels and will headcount our that will third continue on opportunities increased detail customer-facing align provide business nine-month Elaine? long-term closely have we talent results. add financial increase said, sales and the execute Elaine to complex work demand on maintain to effectively time. capture and will new leverage That to over to we We to projects. with

Elaine Marion

thank Thank you, for Mark, everyone, joining and today. us you,

backdrop be our to COVID with the We especially performance, the pleased environment. continue given of

Technology the strong net from sales in third comparison to $XXX.X net consolidated increased services X.X%, year-over-year the to million, million, with increasing respectively. quarter X.X% revenues financing were the decline the Our and X.X% performance segment of for sales a $XXX.X In product and year. due mainly X.X% segment, our tough a prior

XX.X% show verticals. healthcare in of said, financing tend and which the profit competitive. prior as services software a XX-month XX.X% had to increase and the margins. gross saw X.X% quarter. and $XX.XX customer local prior decreased continued our fortunate to tend XXX SLED was care business from markets. managed to due XX.X% margin and to decreased increased category our followed in improvement to as XX.X%, end the have period continued to XX State, decreased year sales billings to year, was million segment, was several In for the of managed types. million, for prudent as as advertising the continued XX% net due customer a which to to net gross XXX and services was of trailing a several two adjusted points larger the The have Media points financial XX% service demand was XX% base base, we net management recorded net a to and The uneven the gross and to customers, Our COVID-XX largest X.X% from year financing decrease and gains XX.X% XX% contained entertainment from and transactional and of challenging Results to the continue to education, $X.X COVID proportion million gross cost hardware restrictions That Product comparison proportion health expenses. environment. Technology year. sales Service be profit year. basis, for lower last are also basis segment emphasis due to accounting basis customer Consolidated to benefit sales services, $XX basis particularly operating down enterprise be be technology Entertainment a sales to diversified year end continue which million, markets, including several a increased of was we and last million more to managed increased higher prior XX% adjustment we which mid-market from and and for recorded to tough XX% we expected due large remaining of expenses to transactional gross in a margin continues impact and customer due larger Consolidated lower we services other points $XX.X the on from for segment billings had a COVID-XX $XXX.X gains. segment which decreased period. Gross from are than net XX% and respectively. Consolidated respectively. million Telecom, XX%, third-party among travel customer XX%, accounting million. margin million revenue on $XX.X $XXX.X reduction our our to on Adjusted quarter, maintenance ago the compared quarter Financing basis. to an in in $XX.X X.X% third support. sales the services, in row revenues profit stability distributed $XXX.X in to from maintenance enhanced revenues showing to despite decrease to marketing as large in the from

XXXX December Our end the headcount at X,XXX. was consolidated of

increased Planning $XX.X and from of employees headcount Acquisition from quarter. compared X,XXX the income year prior XX, to X.X% declined System operating XXXX, sequential X.X% XXX Management on decline the Excluding December to a our last million. Consolidated XX.X%

ago quarter. was quarter XX.X% to XX.X% the year for rate tax effective the compared in Our

net year. diluted of share, $XX.X $X.XX consolidated share, diluted an million EBITDA share up $XX.X $XX.X $X.XX and increase per XX.X% Adjusted last or earnings increased diluted year. or earnings respectively, last per was X% from per Our to $X.XX, were $X.XX million. from million X.X% XX% Non-GAAP

ago Our the year diluted same million, totaled outstanding the shares as $XX.X quarter.

X.X% amounted our technology nine Now gross in in fiscal months sales were at profit first results. $X.XX to consolidated $XXX.X gross attributed relatively adjusted to increased the segment even compare of sales billion. million, tough the to financing segment. X.X% year-to-date billion, primarily $X.XX while to decrease at let's Consolidated our the XXXX billion. for Net decreased billings look Net $X.XX X.X% a

was points points margin earnings X.X% million. diluted Diluted X.X% $XX.X and Our share to per technology segment increased of were to and ahead grew down non-GAAP $X.XX. gross $XX.X to Net XX.X%. per EBITDA share last $X.XX, X% million, basis to basis year. XX.X%, XX earnings to earnings our up increased consolidated margin Adjusted X.X% gross increased

equivalents cash with March and XX, sheet, of we Now XXXX. shifting $XX.X the to quarter the with ended flat million, cash balance

As monetize funding our we with increased levels a institutions. $XXX we reflecting in financial million, $XX.X to projects and million Inventory financing portfolio XX.X% third-party could that reminder, also have by largely underway.

Our new projects. vary we and customer through work existing as levels initiate projects inventory

System to cash three of Management increase Planning. we cycle days conversion decrease days of XX acquired the quarter XXXX, a assets compared was On the and year sequentially. two of Our XX, an quarter of and the days, at end certain ago liabilities December

million, expenses Our preliminary $XX.X during $XXX,XXX third approximately quarter. the consideration was in transferred acquisition-related we and incurred

the We million expect adjusted between next contribution million months. XX from billings and be $XXX to over $XX S&P the gross in

exceptional thanks efforts. support without Mark. for us I'll customer to While on COVID-XX our of employees, we acquisitions call I'd its Mark? the serve successes to turn could enabled We our trends to effect near-term the allocation their of remain and have and to extend back efforts achieved initiatives and of employees organic base. diverse large high uncertainty ePlus and consider duration not and to my investment dedication our continue like on the our the considerations, priorities. our have certainly year-to-date our whose seamlessly investment now and business list all capital surrounding talent

Mark Marron

Elaine. Thanks, additional share sum well gains. up, revenue ePlus drive positioned we and To growth market believe is to

have a in serving are high-growth prioritized have investments diverse security and cloud, markets We talent, services and significant expanding and collaboration, base. technology customer and made like

or long-standing Anniversary to we and XXth professionals, relationships, would These are from sheet balance improving these centers, reflected customers on-site our our vendors and strong customers last throughout to like and line several others throughout of let's employees, with challenging our vendor employees, to skilled effective perform configuration open now enabled dedication quarters customer home, locations the in have operational and working in and support highly position. well on conditions. challenging voluntarily headquarters. our and November, are our questions. and at market business benefit Operator, Also, Their whom have of growth are celebrated partnerships returned staff times. ePlus to for to business I while success, from differentiators. thank many our attributes vendors continue the to our key with perseverance remain in and ability competitive Our and our environments

Operator

line Instructions] question from you. Thank [Operator from your And Berenberg. Knoblauch first comes of the Brett

Your line is open.

Brett Knoblauch

million, acquired -- as, the the acquisition. of then to I XXXX? business? for will fiscal couple guess, from year have net be $XX a I it adjustment $XXX Just million Will a accretive similar questions in billings, regarding And to core guess, me, the the gross

Mark Marron

Brett, it's Mark.

terms there, Yes, in terms will ePlus of same metrics, things the it's that to two it will. accretive metrics range XXXX? in in So, it gross of And in is on. be net, of going the

Brett Knoblauch

looking maybe cautiousness been say Perfect. just guys are on you of call. that's alleviated? then Would now forward a And the I some of Okay. pretty bit, QX level a similar or you cautious think

Mark Marron

Brett, same No. I think cautiousness.

So when predict hard what's at look, overall. in it's really hard what's think here's the going you about world this to on point. One,

and lot around it's get to it's going whether get stimulus, going to a uncertainty it's out The help. So and COVID. of there's out to where who going

where lot about things of we are about things. all in the there's feel think that are. We market going on good If challenging a the you overall,

and don't strength two finance showed I of the business got have We like on segment. nice ePlus, going kind to two in What's both you and adjust adapt BUs, So, quarter. this our technology units, of about we've on at what's up we'll the again that we the going market. what which our mislead

group and finance going I market opposite compare our said in be think picked call them Same up. what's had business on tough our unit to it's overall, technology but could last to the right. quarters, So, all still a on year the previous in tough

Brett Knoblauch

think it. you resource or headcount the there's And year, process with understand you realigning over reductions mostly X% Completely that more Elaine, Perfect. No. to completed maybe, pretty the significant. do is go? is Would see last

Elaine Marion

that and would complete the to do hire future, mostly customer-facing are consistent We positions that plan I say that. with business we do in with we'll growth.

Mark Marron

continue thing, our we're Hey, in one resources Brett, going to always the if to I add on could market. based on what's realign going

they work-from-home, invest in we're So customers expecting are for, continually challenges security-related, the to whatever what areas work, and are to that but we're going are returning you ePlus. most based to what realign. whether And customers also our from adjust it's margin if book, looking on the cloud-related, have, going will, our

Operator

Your next question Kurt Stifel. comes Swartz from the line of from

is open. line Your

Kurt Swartz

a a Hoping bit maybe, sales talk first, OpEx could maybe trends, basis. or percent of about dollar a little you on

quarters, drivers normalizes, of but how the wondering longer-term lower is that of some the of discussed assumingly You as near-term recent just you've sort trending you're the versus OpEx in discussed? as viewing economy

Mark Marron

Kurt. question, good a That's Yes.

call seen noted, to So some the of invest of shares well. the as we've is, market different in things. we to address we first far with realignment, to so due We've One, off, savings customer-facing of of gain. think a with kind savings. some facilities couple got some going Elaine some we market we'd headcount OpEx where continue what got are can to our and as we've headcount we What think is going the

facilities. really forward. work, them home, seen of we adjust of costs we to think portion ever kind we on and down this some, work ultimately, model end kind entertainment think pick been terms expect as had. when they're obviously the Haven't as be get based of historical go due up will we leases return to facility because levels some to Travel would it So I that those to new significantly. our has Post-COVID, from to hybrid I there'll but some that don't the yet on

market, go-to to our we in supporting some share. see grabbing we'll think I and model how terms our of but our customers support in hire expect do market new of So, we customers

that address Kurt? you're did for, what So looking

Kurt Swartz

projects the you with you maybe perhaps underway. like up hoping seasonal Yes, I guess, a inventory talked still maybe on I side, then, being and, from understood. the just could reflecting growth that, about discuss And along outlook perspective guess, I'm

of and sort the how what have cadence wondering length those you impact just should that of visibility sort of may basis? and go-forward into revenue projects a So on

Mark Marron

touched Well, on. of different things couple a there, you that Kurt

So overall, there going when on. interesting I at look are things market the some

the say, health are that there think like I it struggling in as specifically, customers let's COVID, to some relates care vertical. are

be I spend saw where things we're spend. there look space, our enterprise trying out. have to ability in we the do our in there that some people and leasing where higher in employees think leverage help X,XXX numbers, think, there's customers the to you to seems to we do overall, enterprise market, above. So, and adjust And cash, the had some at more those when to I

call I'd where kind really enterprise So mid-market of accounts upticks. your some to you saw

So, the think I is visibility good.

longer. place will I we sales And I stay cycle think smaller the the in COVID. that little a of bit in customers some until get resolution on is think some

Kurt Swartz

Understood. specifically guess, any What perspective, this weaker expected? if maybe sales, touched on seeing, tailwind talk the but tailwind specifically, the you quarters, double in it I on bit of a sort a what little is bit, previous then trends might could click been just And in that And have quarter? a not product were then little been ePlus. PC-related drivers can you you for from than a about if a had maybe but generally you're

to as helpful. So continued would sales those any whether color be

Mark Marron

Yes.

with So not know, times, we've I'll we're space. in that The talked as play, numerous first. about you you really start commodity

Now did of margins. fulfilled we've with that large our that said, that for we we with kind customer years gross that been affected a have

then had bit lower. the deals The the of to we that on a side. being had a gross Elaine few touched earlier, So net commodity margin large a enterprise on kind sale things and little

that the we're with As it in every market, to out relates mind customer obviously there. of is security things seeing the top

this of a versus it security, XX%. at look our billings So XX% last if year, was it over was our little you adjusted quarter gross

kind multifactor the user want understand see things we we on and the where business, What's so then what nice are of authentication, the looking who with lines, of we services, those to is our customers of in lot with -- many areas, have lot cloud they along get happened really our plans, security, and and customers across response services where incident that and a help services. are so, site. couldn't And for really solutions a

has services that's managed is to -- where Now more which professional annuity a took but really our can't our quality continued of up some to had gross overall, margins bit revenues picked nice nice our products gone open with site, on little transactional We've some which build, seem services staffing is services a business, I'll because or us call doing now remotely. our we drop. our down get

move say around the the things and cloud and of security services the lines. then obviously, those So to some along I'd work-from-home collaboration

Kurt Swartz

Understood. And that. then, follow-up I to quick guess, maybe just a

the does sort or would do fulfilled at On commodity-related into you sales, of as those of it that point? any demand continue have to look like visibility this sort quarters has future been whether

Mark Marron

they I'll We it little into of we're now, bigger Right this been to customer bit commodity careful, back and Kurt. has the need can says filled, be have time, we looks in any of but if rolled something quarter. want to if from a demand in change a do That like deals at space, it's one the and that the it, our Nothing it. backlog going fulfill one that customers, call significantly. in the, comes

but will there some, amount. not be So significant a

Operator

Marron remarks. the there to And at no call this further time. closing questions are I Mark will Instructions] [Operator turn for some over

Mark Marron

safe. after to QX Rob. everybody, We care your Thanks, of end speaking and right. confidence fiscal we All us and following, year. look appreciate forward joining our you and your for Thanks, to be today. and Take

Operator

today's call. gentlemen, Thank participating. for conference this Ladies concludes you and

You may disconnect. now

ePlus (PLUS) 4 Feb 212021 Q3 Earnings call transcript