PLUS - Earnings call 3 2024

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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, Ms. Erica Stoecker, General Counsel. begin. may you Ma'am,

Erica Stoecker

joining for us you today. Thank

most to results call due and Raiguel, statements Chief the and the on Marion, I statements management's is you based this to certain of facts, not be projections. and Mark uncertainties the Darren President; Elaine historical want Officer. Actual Financial that and are we CEO detailed Chief may materially and a Operating deemed issued earnings that and Technology; to may anticipated moment remind and risks Marron, ePlus On take release, afternoon future Officer are make plans, to President this be estimates vary our forward-looking in current afternoon we and most on on XX-K, we X, file Form recent periodic certain no filings responsibility with filed XX-Q statement the the these Form and otherwise. with information, undertakes the October company Securities documents our in future date of speaks the light annual quarterly statement update the Form recent is events disclosures any which and in that reports X-K in the of annual on forward-looking to including of of our Exchange other new as made and including we recasting SEC, report only forward-looking statements XXXX, or Commission, report. Any

during call. the will measures In non-GAAP we certain addition, using be

posted on the Marron. now Information Mark a financial I'd call earnings Investor GAAP which reconciliation the included to have is of our Mark? over We turn at our in section to like www.eplus.com. website release,

Mark Marron

results. our to participating for in third you, call you, Thank thank Erica, quarter XXXX fiscal and discuss everyone, today's

fluctuations, ability has well Customers' X%, performance ship than equipment. customer affected to mostly years, security due line net AI in with Our to industry our supply to year-to-date top as IT as transformation variable more technologies, our of prior been which digital and been chain both of growth performance strong. Quarter-to-quarter remains outpacing behavior, support adoption infrastructure has the solutions and sales solid, peers.

in advance safeguard projects. Over large the past need, to years, few expected mission-critical of ordered equipment in well order enterprise customers their

a helping growth As the And equipment, strong the built we supply ship to XX% backlog backlog orders. booked of the were result, fiscal drive as able first this half sales chain we in to year. of eased, a

Following that orders pause saw delivered products. they QX, these shipments, of wave we some new customers deployed in as

another As net quarter, our gross which gross the a profit sales only our down we to were revenues, our important deployed factor result, XX.X%, third stable was but X.X%. more service to was note held XX%, up were contributing it's and down that in profit A as double-digit our services had both projects our Services quarter for we increased profit XXX year-over-year, Professional our basis gross customers up up Managed in points and driven XX% and and by revenue Services Managed gross profit was our services. Overall, gross margin with XX%. gains strong

additional needs. The mission-critical and strong product opportunities product basis increase Services we the contribution sales, also for Managed gross profit points. only the by that evolving solid consolidated of consolidated acquisition-related X% segment, year-to-date income by margins by note XX.X% with we business along from Managed lower declined and our personnel quarter expenses streams. Financing our important X.X% and but Net increased provide, of an earnings sales. Net margin gross were net helped this for noted Services characterized nature offers X% not increased costs. higher amortization to our in our XXX higher also affected that revenue increased year-to-date. Service with provide existing predictable It's on their Given revenue enhances above visibility and offerings growth address new as This growth, customers IT financial is recurring

confidence solutions in invest We and our in resources, prospects. optimized and growth sales underscores AI our our AI strategically consultative which out building to lab continue capabilities,

While quarter. sales as noting that remains not lengthened It and trend, annual somewhat, we gross guidance again billings intact our in quarterly last and issue quarter's is decline cycles unchanged. between fundamental believe this variability do view this XX% year, compare a a have parameters our in on and worth the faced sales we remain how We consider demand sales primarily up as tough year with a quarters. deals when fell almost timing this

in our growth enabling quarter, guidance lower of our sales the fourth end expect range. achieve us to We

both long-term promising While still Product generative its represents business. in AI for Services our and early evolution, growth a opportunity

We world, is and AI set a ePlus. have deep AI the credentials for in in new solution

with a vendors for deep an partner XXXX, recognized NVIDIA, AIRI, March and strategizing Elite architected infrastructure and partner learning were Pure engineering AI-ready capabilities. been expertise top building of for named for early distribution and we Storage which the years. In have by NVIDIA. also vision integration our aligning as We Level, We're

AI. with possible recently It and what are drive we and show adopt will savings. and help help ensure the help program, We excited will is about our is and their applications, for their announced business efficiencies customers explore, scale, AI, possibilities cost strategy AI optimize and that and data aligned Ignite

our capabilities, AI that complex AI cost-effective, Managed architectures to Consulting, Services Our are including scalable and customers and Training, enable secure. implement

our better scanning AI We working a on just autonomous to help to plans. projects, or physical infrastructure customers experience recognition learning embark closely and machine their work patient initiatives, images customers. driving provide our continue develop That can artificial innovative intelligence to AI voice on with partners for optimized include

earnings. reported quarter by high results, and Financing transactional fueled portfolio primarily solid gains Our third segment

EBITDA. competitive for During large the XX. more segment our evaluate in resulting in our geographical we by for the an of potential differentiator our also strategy, flexibility remain challenging accompanied that We quarter, volume adjusted periods. Acquisitions growth offerings, year-on-year quarter important in contracts, key element growth ePlus, particularly several and economic presence. on higher remains growth, offering enhance we strong continuously Financing capabilities West executed customers, enterprise and West, the corporate portfolio our a third a is expand January our would Resources which parallels opportunities of Mountain and were even in strengthen that believe This example growth to incremental of to help culture a a geographic a to another future. deploy provides is should on solution our for drive base, solutions and can Mountain Denver PEAK out in region. We PEAK strategic pleased customers that complete customer with own. provider acquisition the platform their the broader acquisition we build our the us

the will accretive. would over quarter the like fiscal acquisitions to opportunistically Elaine operating level the Our us continued discuss strong our ending will call of for ePlus that to more quarters third now pursue turn financially and highest our both flexibility provides thank strategic align past including I our balance sheet, million, $XXX the in team with are a cash with X to the I Elaine's their challenging results After financial to in for XXXX. dedication I financial outlook provide remarks, in environment. detail. objectives

Elaine Marion

respectively. everyone. business, details broad-based compared net in to grew million On sales, availability as Service lower in respectively, XX% of was $XX.X verticals fiscal growth Technology sales half $XXX.X million, Mark, about performance Technology and year business due end customer media year's to our XX-month business I net XX%, sales our Services. Within XX.X% to of product to continue last and in with our and million business markets. Net entertainment verticals. projects. third quarter. afternoon, in due the sales, year prior enabled and to Services prior Managed net segment sales for in down will were among financial The revenue you, earnings. the XX% our the to $XXX.X the and million, net were technology basis, complete $XX.X good provide double-digit in and first $XX.X fiscal led from higher XX% quarter clients were telecom, $XXX.X of our sales the Consolidated up product to representing divided year Financial X transactional million of million, SLED, the accounted quarter. Technology third million, trailing XXXX. across in additional Thank gains our amounted remaining Technology from a be largest $XXX.X XX% improved decline and portfolio Financing delayed sales XX% by other previously reported Healthcare

Although to larger the on gross segments recorded proportion our year-to-year are due of net improvement Services which to basis a scaled services. XXX and profit gross quarter, $XXX.X current XXX mainly million, the to third-party margin XX.X%, a in in basis expanded showed gross to points to maintenance margin to gross XX.X%, to gaining gross with Product growth services consolidated basis these Technology points basis. Managed point consolidated XX.X%. sold by of X in due XXX a margin decreased contributed improvement X.X% margin All

benefits and depreciation Services reflecting well additional increased margin expenses. to mix While XXX of as operating the and benefiting expenses to XX.X%, higher-margin amortization Consolidated in million services. points a acquisition-related in year-over-year, basis count, head X.X% from in increases gross increases by salary $XX.X Professional shift as grew from

million. The a effective of in class year, earnings currency action up was April which year count earnings Our in additional respectively. year's total $XX.X million rate were completed tax employees, quarter. last decrease were $XX.X $X.XX On share net at share, X,XXX, due Network was well diluted XXXX, reported to from added XXX last share year's period. the in XX.X% The in XXXX in diluted operating head or of ago to XXX Non-GAAP to million quarter. year quarter from as a XX% foreign $X.X the ago was roles. the down payment, a income benefit customer-facing which third employees. the ago, Earnings in Group $XX.X third as XX per year end taxes of acquisition $X.XX $X.XX or third $XX and totaled before the XXXX, to to compared quarter XXX Solutions fiscal compared per of the million, Consolidated consolidated net $X.XX in to earnings Of sales partially basis, together diluted $XX.X from the million last lower due compared from per declined were $XX.X million. were gains December million,

the of Our adjusted million count due was from primarily the the diluted decreased year, fiscal million quarter business. the third $XX.X adjusted million, EBITDA share to quarter Technology a XX.X XX.X% decline Consolidated in prior $XX.X in EBITDA XXXX. unchanged end to at the versus of

billings margins gross $X.X diluted earnings X.X% for Moving December basis X.X% improved consolidated results due $XXX.X profit net per Services. Consolidated to growth were the the and consolidated year to $XX.X were share $XXX.X and per million diluted Adjusted respectively. and X.X% XX.X%, margin points representing X.X% $X.XX share, million million XX expanded increases of to to $X.XX. grew Gross by to billion, rose for period. the $X.XX billion, both X.X%, X% or Product EBITDA business. prior Technology Technology our non-GAAP improvement to by expanded business earnings led and sales net versus grew X% gross months X.X% ended XXXX, Consolidated of XX, an the X in in to sales net

continue to to XX We million, inventory ended from balance enabling Turning with quarter Stockholders' fiscal $XXX.X further support days time. Further, days $XXX.X and the prior sheet. of level of representing X XXXX. million us increased third end the equity of and as the continue and the highest March related X inventories XX.X% customer nearly XXXX. turns cash $XXX.X fulfill the to pressures from XXXX, XXXX. We've fiscal compared at complete preceding to million, quarter the end seen fiscal XX $XXX orders declined of Conversely, improve the days, years. compared end of the inventory end at should equivalents to supply to reduction to million ease, to the XX over million, to cash in $XXX.X lowest years, at in which in services, chain

Our XXXX. was fiscal end to XX the cash year days, in ago the at days cycle and compared quarter days of XX XX conversion

Given in improvement, were $XXX million, cash cash this the operating same last year-to-date of year. compared used to period $XXX.X flows million

first in fiscal While to remains in our of financial focus be With solid conservative as will range. guidance Mark. ePlus mentioned, and XXXX. thank ePlus XXXX, that, in to the low we our spending for the on more our remain their the months we Mark I continuing I talented expect IT confident strategic markets, given market, our the well higher of with growth fiscal Mark? X for call to drive positioned end employees performance of customers turn our remainder the back achieving to end want

Mark Marron

cloud, targeting and fiscal strong segments performance networking, financial Thank by market like months strategy our collaboration first you, X of the has through ePlus Elaine. Driven generated security, year. our higher-growth

sales net EBITDA on earnings has the up consolidated are is fiscal and ongoing Specifically, economic X%. spending. X%, Adjusted diluted increased share year-to-date IT per uncertainty up despite associated X% and impact

sentiment customer improve will quarter, Looking results quarter from as forward, we the third positive. fourth is expect sequentially our

As a range result, we in our in continued by with the of growth guidance the re-acceleration business a Technology and expectation an driven lower will XXXX financial maintain of our end momentum we that Services. positive achieve

environment confident our cost Operator, effectively remains to future. growth innovative, industry in call we solutions scalable as address of questions. Even Thank and IT offers the let's position the strength remain We challenging, our marketing spending the overall customers' that shareholders. many in strategy. our partners, for our the remain needs With for long-term growth you. driving and and today our profitable value open for building now ePlus committed

Operator

Nolan comes [Operator And with question from Maggie Instructions] William Blair. our line first the of

Margaret Nolan

close those Or Mark, those this by influenced quarter how some of part you coming far you about months? Have seen in closed timing in was are feeling mentioned you to deals. the January? of performance of the ability deals so

Mark Marron

So, We've give you? activity of And just deals recap quick a some you yes, seen Maggie. those seen quarter, how are in Hey already we've pick to the on QX. up close. Maggie,

issue. off, was a So first it volume

Our pause Enterprise XX.X%, with with was our an our had margins, in Services we our our Project but Services. net gross sales strong customers, profit a to uptick. We our down uptick had a was saw of also X.X%. only do that but lot down And

there So quarters. is between seeing, down the was is and But well. we Maggie there what issues the to came quarter offset timing kind as it a what really, had nice we're Finance of then

of and What this out enterprise So pause to solid QX the about our adjusted bit compare a the XX% with all a in first hit quarter. ranges easing, and low that, gross our supply customers, gross some you fiscal year it was guidance billing in deliver we were of bigger little had this -- up the tough billings back we pointed where sorry, a almost be last our of saw plus, the we we if But expect of growth up you we with with XX%, remember, if end think half. chain and kind were quarter, normal year to range.

Margaret Nolan

so other and lengthening indicative value market? were one Enterprise some out be of but That's piece that of there really yet. may giving felt like then you that trend you're talked Mark. sales you commentary had some And maybe you seeing necessarily there trend that in not what cycles a why you of on a wasn't that the maybe elaborate the Can helpful, about that's was was and

Mark Marron

budget we Yes, the picked Maggie, since all we've pick in orders, saw of But What that you know was the we not calendar beginning it's end the pipeline, seen nicely. fourth QX year-end, funny. up has in our flush the normal quarter, January see. year-end up,

Enterprise moved QX So have into deals actually some some closed. of the the that QX from have of deals push

their the with little improved or some it's of it's of cycle. from one cycle, sales to as to And relates to, lines, time interesting pre-COVID I'll chain. out, terms whether not the it seem the but issue started to budgeting forward sales Still levels, to thing an a not too, move QX. Maggie, just other a people quicker have will, point time you back call in it, supply if definitely bit

So what we at of happened a with half, we believe first customers in QX. had were this us the delivered deploying especially is technology, least in that that we lot

that deploying starting security the supply those in really along it or between it's timing AI a -- whether chain, it's technology lines? with the quarters invest, to customers then things issue So is and or

Operator

question line Matt with the Sheerin And comes your next of Stifel. from

Matthew Sheerin

like didn't your on you I that it outlook. sequentially here. been years, back Maggie's you going does seasonal the X I'm model sound my March down follow question at you've trends up see quarter. typically just Mark, And every expect. to looking regarding And wanted

tangible question than the or a other guess that can pickup I there evidence some in So you've other here? of this that to any point seen here rebound you backlog Is January. sort

Mark Marron

Yes. Matt, good question.

bit that discussed seasonal to QX, it pushed we've I changed got is normal what have And with So this not And this of a different just timing. as admit, QX. into than I the some Matt, Maggie really a demand relates. is -- to that we of QX our the seen little is lot parameters from QX deals

as of is think the thing you through XX%, mind half. were look up The I'd kind in are half, sales other our your year-to-date sales it keep first was ask I X% you net if our our profit net you at to gross up X%. models, in first the go And and up

thinking and were line of the customers reasons. out it in to deals and related it's we it whatever issues, is came quarter. timing what A with lot pushing to from just supply lot down for QX a So, for chain QX of

Matthew Sheerin

But would it. that supply are because about be got has an Cisco saying chain it everyone that. wouldn't seem I available. talked is right, that readily issue, products

were XX% sales networking Your year-over-year. down

figure So being chain I'm customers supply is trying it out to or just more cautious?

Mark Marron

the about first if think Matt, up What XX%. things of our you half, in were saying X I'm supply we is that lot it. customers a chain about

our installing, technology, bigger as customers buying compared of we're deploying technology. actually Some that implementing, new to

of some you wherewithal had the and to order know, as in capabilities those So customers, bigger the advance.

on what that's then if in on and seeing at year, X% you we're for our the gross So up look net it we're profit. the the sales still X% quarter. And

up other at XX.X%, So, if margin play gross a from comes and our Services, into a is you revenue our both from factor standpoint. up and Services were that they the look Project were nicely,

technology. as I'm the compared talking deployed, about of buying some projects to with So, new to that ties being what

in and QX The to bit of second is had pushed or a Enterprise what related into sales some pipeline, our to backlog and deals, part think QX. earlier for the are Maggie, And parameters that these an hearing we've of what their these little from changing, early seen some terms we teams I of that our forecast we're our said both demand customers is deals of pickup. don't

Matthew Sheerin

it. Got

remind quarter in Okay. revenue you much of acquisition me could the And from that the just you from an -- completed? the that have impact? contribution this Does

Mark Marron

It X% was was net tops maybe -- sales, to net to Matt, of X% sales. immaterial it

the So quarter. it immaterial was for

Matthew Sheerin

but -- have the quarter mean can You for the I So of March closed you quarter? a full revenue? just right? acquisition,

Mark Marron

small Matt. kind does XX, in platform What to bring skill Mountain we the brings sorry, it then XX the got a security us, upon that's that gives a things ePlus cloud data us they've for too, acquisition, for space the that build And a yes, table. can and That's it employees. all West. of immaterial Also, sets other roughly center the

So we nice it's it's build immaterial platform to a but QX. on, think for

Matthew Sheerin

double Okay. Fair would enough. despite just that going or revenue quarter end, low operating your would profit the be the your because be is at for would that year-over-year, revenue growth be a down EBITDA for up And guidance the imply digits operating relative to March year-over-year. year to EBITDA growth margin your

happening beneath what's So why -- there? down? what's is that And

Mark Marron

at you think the Matt, we're future. things for the Well, investing probably I if look it's that of about, we it, talk some

believe So growth a we we're company.

yet, resources, as to investments touch big optimized AI it lab, So, innovation center. a a relates on didn't built but we customer some we've made AI solutions out, we

to on count think head customer-facing. it employees. touched about say XXX was XXX Elaine up, XXX our I'd So I were was

and based operating still in the sales the our we leverage. salaries to see there. see we'll adjusted low investments net benefits end range still the you'll And believe then So, the But over we on about. time, you'll on EBITDA on start making the be think talked that I and we're up

Operator

comes with line Sidoti. question Greg final the your of Burns And from

Gregory Burns

little there? this longer longer a of this next it on seem to work was quarter. I know a a you saw the that to to duration like understand a the you're just that's be gives of of sales, on follow-up in been you there -- but like particular, you bit through going seems it you implied bit in a quarters product of them of couple bottleneck was out market. touched I bit, this and little to headwind some going to in help product that it a bottleneck the for Cisco think little you was but here shipped, feel Kind it Cisco, rebound going be a pretty guess product quickly what quarter. that's confidence through that work Can to us maybe

Mark Marron

so a things. Yes. different couple Greg, of

the, has. Cisco have So I say, issues that don't supply think I'll we chain

But I but pre-COVID normalized, I Now down at a what go we've a continue it our say think But at know open closer. to Overall, won't that more are obviously, orders -- a levels it's they're they don't I portion open so more of regular little seen are orders think. do. basis. on levels. natural is some if we we of getting

easing first think on us. but we've the open So think really companies order/backlog. The supply got our to if sales. up out up first don't too a in being lot there chain eased for about on there can't good I XX%, Cisco, half, a speak it the up were net for half handle I us, in you many XX%

activity the So easing. and for supply seen security, got really areas forecast sales all demand the modernization, the predicting. pick parameters we're network team. we're And from that right the chain other services the haven't value-added in you We've our And is with feel cloud changed had the thing up. us. we've for AI the We then quarter

behind reason the be would that it. So

Gregory Burns

that hardware with that that part need practice, Is Okay. AI And that? like like a something Ignite. your mainly to do service opportunity? of And Is expertise business? you grow add have AI professional capabilities business? your inorganic that the maybe there then to Or you services that you with is to feel a opportunity, grow associated in-house

Mark Marron

Yes.

companies operate, One, innings, I future. a Greg, the to in it's change forward they things there. different So as go if in it's it. early about of you the think going think how But couple

it The in our fits wheelhouse. kind of right thing, other

is AI the that networking, about all storage things you the hyperconverged, think if same terms optimized our So in of strength. thing to of converged or and kind compute, infrastructure infrastructure plays

Services and just the it's and the center. have But I we we invested resources, in that, mentioned of additional play. customer lab a lot not a had resources, but So, innovation have

where AI. for actually -- got all are it's we means, it data part Services is this you've really, strategy of data. help of exponentially, the the you first workshops, that of explore, It's adopt expanding envisioning kind a optimize first it's that's the kind And AI, them and will. about So they if data is ready

got and through you've your optimized governance which to AI decided then the the gets big on is AI the play honest, I'd think risk. to hardware you've or market. Greg, be Once opportunity it's And strategy, into -- in the it infrastructure, what a then So play. call it's a big

good So I Product the kind think with say a AI. I'm early would else it's us. to heritage but and Product And related of saying for our what anybody It's innings, in Services both we're the fits the what play care. and play And you We for joining report. good everybody, Greg, time and have night. right. quarterly history our thank a that appreciate earnings us thank for today took you. you our at. All Take

Operator

that joining. gentlemen, for you call. today's Thank and all Ladies concludes

disconnect. now may You

ePlus (PLUS) 6 Feb 242024 Q3 Earnings call transcript