PLUS - Earnings call transcript Q4 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, Mr. Kley Parkhurst, General Counsel. Sir, you may begin.

Kley Parkhurst

us joining for you today. Thank

Counsel. I future is On are forward-looking plans, issued results Exchange that risks filings Darren CFO; the based SEC. that CEO a documents anticipated not General President; are statements Form vary and be and materially in annual certain with we afternoon facts and Marron, COO estimates file the Securities Commission, we and projections. to and that you periodic Stoecker, to may Marion, historical call to and recent Raiguel, on Elaine President most and Technology; XX-Q the may report statements due Actual current and and our take our the the with deemed this Mark earnings this on and other of remind to detailed management's want make on including reports uncertainties Erica moment XX-K, ePlus release, be we afternoon quarterly

speaks any is update made, future otherwise. Any forward-looking company new statement which statements light to the responsibility of only of date statement or in no information, undertakes these and the forward-looking of events the of as

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

included is GAAP earnings website our have Investor in Information of release, reconciliation posted our We a financial which section the on at www.eplus.com.

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

Mark Marron

XX.X%. net discuss our fourth quarter sales with line gross good Kley, the and increased gross top by fourth afternoon, everyone. today Thank up fiscal and you, XX.X% and double to joining full Thank results. our billings for year you and up quarter, In XXXX digits, billings us

are we has were income While demand strong overall our a the business expectations, and how year with our gross had environment. pleased challenging margin a performed in below operating and

to services, in expand with customer-facing areas over the solutions cash and such as strategic to with provides which us networking year on especially and the our the investing personnel in million and hand, AI, continue cloud, $XXX resources make ended We acquisitions, fast-growing security.

our in driven business in had deliveries networking particularly During a the sales, partially of strong equipment XX.X%. We Technology increased by sales quarter, fourth quarter and inventory. product product

to Additionally, strategy, positive the new our enterprise from significant existing and quarter. expand land winning in business and customers continue we from see results

our growth. the base, we share While it's impacted for quarter, customer well capturing and long-term market in positions margins are our us which growing

services in the our quarter XX.X% increased In XX% which by led services, both year. quarter for revenue XX.X% full the for managed and and the business, year, increased

improved margins addition, In across professional managed services. and both

of complex customers' part strategy fast-changing our needs is and customers meet and relationships enhancing a with as services long-term our on both to partners. focus in increasingly Our IT marketplace our

With for an predictability. important enhanced consistent maintenance our service which revenue profitability services us. offerings customers building which and increasingly mind, a as well Service we expanded recurring as in ePlus been Managed our Storage business for both drivers operationally creates important plays new for role base, as a solid that have and

XX% We are of is line annuity streams. our future and sight annuity approximately giving revenue service up pleased that backlog to service us

quarter. the in Our well Financing segment performed

offerings to customers enable value-added our partners a have our provide and flexible service finance Our well. to options as vendor payment

rents. quarter, transactional earnings, a by increased portfolio driven partially During the and in offset segment fourth Financing gains decline XX.X%, by month-to-month revenue

the adjusted EBITDA For year, declining flat. prior in remained despite tough year, revenues the against the X.X% compare

higher customers due enterprise sales primarily Consolidated net percentage from to and product income declined to in a product mix. of lower margins the quarter,

amortization and to headcount and engineering experienced In a customer-facing as higher increased expenses. personnel invest such we fast-growing areas meet of engineers, sales addition, in result continue as to as primarily we demand expenses, AI operating acquisition-related higher for

by we with growth. that is this customer It important most employees base continue up grew year. was headcount to our to note XXX for Our customer-facing XXX as invest customers over

cross-sell to focused our their roll well us Ignite helping journey. accounts on new as is AI AI such customers position and investments program, out as which incremental we upsell our in solutions into Our

We expand believe to revenue solution investments necessary meet are and our market continue demand. customer to set additional our momentum, positive capture share

a expected operating for than economic remains operating challenging manage quarter we with environment, time. margins continue cost up, it structure expenses our While over lower and leverage and will attain to the

forward, levels return year to we Looking normalized fiscal expect more gross to margins in 'XX.

AI which relates customers seeing and we envisioning sessions to are IT measure. AI outcomes, or customers end program, stages consultative AI, our can user of around we use Ignite the to approach helps As a workshops, that efficiency strong business offer productivity their in interest engagements. formative in identify cases it With

of data the helps cross-functional services benefit it around Ignite IT versus AI but AI that journey, innings cost. as in involvement AI with some of wheelhouse It customers many dialogue believe the We early driver be open and is ecosystem customer for infrastructure, business modernization and the their lengthened network fits its implement required these security, for an to evaluate will leaders. solutions. with AI and our has ePlus, decisions understand growth as it AI in to governance a

maintained and acquisitions includes to a for have on investing a balanced and growth focus We returns. approach capital which improving allocation, shareholder

remains sheet balance Our cash and generation strong.

growth gives us of our buyback at a approved along our with ePlus plans over million fact, our plan shares. also billion year-end, X.XX cash flexibility In $X.XX to is initiatives. Board share M&A up new with which

Although positioned thank their not a tough and the of our up up X.X% proud our year, have this want gross being had the what to by year we as sales overall I'm and being they believe with done for solid I well profit in expected, for a are work our time QX X.X% net environment. evidenced and was we strategy do year. we efforts this take teammates to

in Elaine discuss the more I will turn results now detail. call over Elaine? to our financial to

Elaine Marion

the fiscal increased by million to a our results. increase million, everyone. Mark, you, provide in year-over-year we'll reported I XXXX technology for year primarily of afternoon, business of net and about quarter. details in financial driven full performance quarter sales XX.X% Thank the additional will $XXX.X XXXX, our sales good the and Consolidated which fourth fiscal review net XX.X% $XXX.X

was Technology a in both to equipment while result service renewal grew increase customers. revenue. increased and products for service sales and Product business double-digit healthy growth million, growth and strong revenue due cloud million product demand revenue service The $XXX.X XX.X% activity from in networking XX.X% managed reflecting to of $XX.X net to

respectively, and Within services markets. and accounted XX%, among sales our XX-month divided X media the of XX% remaining and on Technology largest for to telecom, XX% net business, XX%, trailing XX%, other XX% and representing continue Technology verticals Technology financial health our our business respectively, care end a be SLED, basis. entertainment with and

XX.X% this in netted significantly, sales of portfolio of of and $X much Financing last the was higher resulted the the revenues million, mix prior quarter, from less Consolidated both of our in million in increased Net view $XXX.X year up with gains and segment in the as million quarter. $XX.X $XXX.X margin our changed gross Volume year's contribution which to margin enterprise gross so profit fourth of gross from million transactional earnings. were margin margins, profit customers decline gross was down XX.X% quarter-specific. XX.X% we and gross to there due from compared in lower and

XX increases margin growth by partially XX.X%, the gross scale, basis revenue margin increases due expanded to gross margin business, to to to XX%, Managed grew points services XXX consulting amortization shift while decline $XXX.X XXX expenses. driven mix benefits attributable additional saw basis and services which primarily product in XX.X% in services XX.X%. point acquisition-related to higher-margin grew in by basis million, professional services. Consolidated margin a as and headcount from was points to in The gross and well expenses a project offset towards improvement as operating salaries

PEAK the and X,XXX, from up end including roles. ago, employees additions in was but XXXX of May at acquired X XXXX, the March employees XXX Network all a were XX from Resources in acquired XXXX headcount January total of year in customer-facing total Solutions Group XX from Our

On The taxes from primarily and decrease lower million, to $XX in before from from $XX.X were profit investments expenses to was reported higher last Earnings acquisition-related million in declined expenses. related year's sales from million. million operating a and consolidated quarter. fourth product $XX.X basis, down $XX.X gross income headcount

of of quarter, gains the losses $XXX,XXX million foreign income compared including year currency million, to interest had and quarter. transaction of transaction $X.X currency other prior foreign income During we the of $X.X in $XXX,XXX

nondeductible XX.X% was rate The expenses, lower lower to than tax of due fiscal benefits along foreign to increased XX.X% rate taxes. the sales lower effective fourth was compared state XXXX from forecasted year-ago the in tax last year The with quarter than quarter. in average

in $X.XX $XX share year diluted share were per earnings or to million were last or million compares earnings $XX.X Non-GAAP net This net diluted per share. period. ago earnings $X.XX compared $X.XX $X.XX per to diluted of year. Consolidated the

compared quarter Our million the a XX.X to end million diluted ago. was of share year at count the XX.X

million to the I adjusted Consolidated year, EBITDA business the EBITDA $XX.X Technology mentioned. primarily due for in in adjusted compared to a to decline XX.X% reasons the decreased $XX.X million prior

Turning to revenue revenue reflecting to in $XXX.X in million. billion, growth a by X.X% XXXX sales aided $X.XX our results. growth year-over-year year a business reported and full of Technology XX.X% service fiscal to net ePlus X% increase, $X.XX the billion

in margin slightly mix X.X% were ahead Technology XXXX Consolidated year. product year prior business. million. profit below sales grew due billings for $XX.X of the technology in was fiscal gross to totaled XX% X.X% Gross XXXX. net year full segment the Financing $XXX.X and $X.X fiscal compared our the Our reported the billion, million to amounted million Consolidated in in business gross XX.X%, to the $XX.X

million throughout customer-facing to $XXX.X segment in $XXX.X below operating XX.X% million sales our year. increase grew $XX.X million, Financing Gross million profit in operating expenses. Consolidated business and was $XXX.X income force gross million in engineering to in the resulting year, in continued the profit was as talent X.X% the the invest previous we an to $XX the Technology while reported in compared

per effective fiscal respectively. to XXXX. Net million Our diluted million earnings diluted XX.X% share, $X.XX XX.X% tax fiscal for $XXX.X were $X.XX compared compared for or per XXXX $XXX.X or to was share rate

in compared prior year. share $XXX.X Non-GAAP $X.XX to diluted Adjusted earnings with in the prior was year. was EBITDA per $X.XX million, line

of to sheet cash year. end working end to is in balance equivalents improvements remains as quarters, of $XX million supply XXXX, compares the the was the in which cash we at a million inventories. prior favorably and fiscal in Our sequential Inventories at have for $XXX.X and to availability, totaled of million XXXX. a improvements decrease to due at $XXX.X our increase see end fiscal product continued $XXX and recent primarily chains This million with Consistent ePlus were leading capital. the which high strong

XXXX. believe normalized. XX to compared fiscal days Inventory and days fiscal Compared in to we the have XXXX, prior end $XXX.X XX XX turns down inventories days the million, the to were quarter of now end and at improved of

was days cycle conversion XX ago quarter easing chain reflecting days cash XX normalization. compared the Our supply to and year in

As $XXX.X cash cash a million result, operating was used flow year. million compared the last of year full $XX.X for to

the Stockholders' of $XXX.X $XXX.X compared end XXXX. with equity million million was at fiscal

Given May to begin week. $X.XX balance, strong to replaces flow approved announce billion prior to next repurchase a share our authorization XXXX. which Board our cash is we are expire authorization, cash pleased and that our new on XX, This set

focusing product growth would fiscal given some margin margins of peers by in evidenced growth continues sales high-growth guidance for demand we fourth provide will strategy quarter-specific on on Our enterprise in than areas to challenging to our ahead quarter lesser but in we XXXX, as see fruit fiscal the sales in resulting I to environment. overall expect impact lower a want saw mix. Mark note, XXXX a of our bear

turn With that, Mark. over back the Mark? I will to call

Mark Marron

for of customers. over demand year X%, between is growth demand momentum the you, of ePlus $XXX performance Thank year million. EBITDA the Elaine. can solid in believe prior range the guidance as and delivered with solutions, industry-wide a most fiscal fiscal its we $XXX are in we very the IT in environment, we ePlus Despite million initiating focused in adjusted by fiscal X% providing on challenging strategic sales 'XX and year XXXX. continue We pleased XXXX are our net to

both growth, organic are on through acquisition. shareholder driving and We via focused value

enhancing seek XXXX continually market to as and beyond. continue opportunities capture broadening to We aligned investments in existing as broaden to And share, offerings that relationship customers. with our transitions and and we positioning well our our expansion and out are service enhance product market will

are progress we the successfully foundational we business and on strategic growth. important to as to continue pleased investments In the make expand priorities drive our summary, with

Thank questions. for line the open let's Operator, you.

Operator

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

Margaret Nolan

quarter exclude quarter, compare when fiscal to the you Last referenced quarter? materialize pushouts XQ those, you revenue. some And quarter? Did going impacted XQ fiscal in into the into did from your how fourth the those that expectations

Mark Marron

Okay. Good question, Maggie.

So quarters. tale it's a actually X of

about a we had think in margins. quarter you had last strong issue, volume QX, we if but So

up the sales were XX.X%. our XX.X% volume in gross strong where QX. In So up We points our were was margins it had XXX opposite. QX, billings up basis and were

So that's that some deals over. moved of those

mainly with of flush that's So when for things. the our that it's of and they're timing now predict the that's out we with kind expectations really enterprise a tough of the One, the some some enterprise when due get customers' a of and different the to we're dealing quarters, on customers couple it ready and issue deals of based of the product. to size some between

expand net expected when a tale looked little really Overall, mainly it's quarters, quarter, gross kind margins to you margin what that's try on a land were it's low, and we're we back of will. due though, and accounts time. at it of of where at we the our to X lower out. then So kind played up in But how strategy of larger it sales, if of some some over build these

Margaret Nolan

And through and the fiscal more between your said confidence the in that some be X variations commentary? prepared last 'XX. you talk level of normalized the an you then that more levels you factors would you of that year, margins, normalized expectation -- in Can remarks, it. mentioned give there Got of obviously, in kind there's the so quarters

Mark Marron

Maggie. Sure, Yes.

some quarter, basis larger the down our margins So it to enterprise if our due it significantly you mainly margins look XXX for deals. points. were up of at that service Overall, was this were product

also gross was down We basis XXX had net a to points.

So for kind affected the the that's of what margins quarter.

actually our If consolidated year, in you margins look flat, gross at range. were that it the XX% so for

So we expect that to normalize.

inventory where And gross then to more if the done get as space. our through will, margins, move I if the we've and potential as XX% our we driven. uptick if you year you by to the in to an think see the use mainly in you think is with as more way, it we average, services subsided, of we're is kind which, which or we industry-leading historical range. levels, So has a will, normalized XX%, think with slight going that XX% That's

Operator

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

Matthew Sheerin

growth, some for fiscal in of very top and came questions terms of a revenue the with A I just for of roughly couple Mark, strong of X% me. off 'XX quarters. outlook some quarters line know you year weaker

that seasonal. So lot than really March not a of better seasonality, and also quarter know the I was

the of So get how and seasonality how you think how number? that out should we about X% the plays of terms to year cadence in

Mark Marron

as I to Yes, more, be said, Matt, it's going you think a seasonality. from

will bigger QX levels. be and just QX the like So historical

to going So I out. think that's it's how play

year. we little bit But this to will. So if of expect kind a be play out it'll back-ended, you how that's it

Matthew Sheerin

big talked volume about? those March you June would after So down be that expect deals strong one-off to with the sequentially then quarter like you

Mark Marron

QX And timing other it would it things I'd which and the expect our you local This inventory been in a is with year-end. both terms with trend then of has traditionally And then down. of similar and to strongest QX, in the Matt. year-end at different just and year quarter few look when deals. expect fiscal the Cisco's and would QX to the range, then be state due business, normally I

time, see, bit they're being normally The which of a kind interesting Matt, they're some we're a -- on margins. over because other based take margin and deals, those scale, little to you But size then expand longer. thing into bigger brought Originally, starting tighter. we're little bit is our they

revenue some we see normalized forward. more as I So you'll and move expenses think

Matthew Sheerin

when about that you and what strategy grow land table, get competitive win so right, expand, -- talking and if really that the pricing about the at And seat aggressively to you're been? competitors? Is talk Okay. then other basically business. you're Is the has a will, and against you you

Mark Marron

customer exactly, Matt, interesting in market the grew the of actually by in end high base kind -- enterprise it, mid year, that's was And space. our XXX that's mainly Yes, this high What fact. customers. in

from end, those into like enterprise to continue of services So And products we're going time, say, solution aggressive, go then to try over set be that more, done I'll get margins. with our and we've back to and to And try full accounts. years. that for grow

been we've our So fairly margins. history successful you at look with if our

This aberration, to it an that So will, you as would be relates intent. quarter of little a bit was margins. the past if

Matthew Sheerin

it. Got

then us run you And that Is more were normal. the for for And side quarter. to that on more because telling also except -- at capabilities? EBITDA of from growing will you're you these Okay. as your that next implies out you're expense back growth get expenses, just last operating margins some below rate guidance year gross were and there's but modest where the

Mark Marron

Yes, very much so, Matt.

up EBITDA, And strategy relates on enterprise AI we made to adjusted And backlog decision which I'll So over then capabilities, made a made our actually a forward. investments, it's investments it the and monetize, the there. from time, saying made guidance. but we're an -- We've to have out say, we've then our grow standpoint our start early we've and and in to services as based going our X% go to both innings is from we've OpEx, XX% to as sales growing. is we're hoping, some sales leadership it's some build because side, with continued what space initiatives, to be some services our growth on investments

get time, over new on believe based fit that you'd market, customers the to we and will in in get. operating leverage the hope think and XXX to we'll where off we that what So start pay we

Matthew Sheerin

is that customers how have? percentage? What What What's that a active as you many XXX? do --

Mark Marron

X,XXX little now. It's about a X,XXX, over

Matthew Sheerin

Okay.

lastly, which inventory your and at point, demand that impressive just of flow your this Does is like on is is like? was much pretty work a mean cash And really customer -- visibility backlog Great. elevated and work really the was kind it's down Okay. just that strong. the now no down, what very backlog there's looking

Mark Marron

in Yes. inventory. going I lead of new I things things this But play. The that's AI from normal Matt, to is a from a that There's due normal do figure And business times usual. other say are few to interest the lot in I almost it'd some that there, a will. to play AI. and would of new some with that run need infrastructure as try the models, the out decide -- decisions kind that's AI, it's believe these here they is customers and is interesting you one There's really try want in few if this to forward. customers. still analyze to what still think on they delayed the probably actually place as be they our

actually on of other us to I think But delayed kind we're it's gives which flexibility. it, good And then kind touched relates as some think it we're thing a yes, because it inventory. lot I of decisions. you feeling of -- the

cash over Our billion. is over $XXX million or $X.XX

gives So increased M&A. stock our from end, that it flexibility We from an us buyback.

able the So as that might we some year. things move we to there's throughout do be

Matthew Sheerin

brought customers or phase you are where processes that in the AI consultative Ignite lastly, Okay. you're implementations the still AI, since early And and that about, that you just just AI -- actually really actually converting or program of more is in sort that just for stages? talking just up doing

Mark Marron

if an eye to think will, Matt. customers and you with What's going us for actually with have team are stages, session we did our internally, opening, it Early through. was to interesting, envisioning

of strategy into have is them sure sessions, through over repository They out to we They've workshops lot to figure walk we're or the all a lake. -- they have data there's that these to sessions with think make ePlus. And as envisioning really people thing a data got AI then that we X -- a and the have at it meaning meeting came out got what because they've seeing good -- place. use monetize decide So at and to put big internally where we governance can the best many have different case, is so we they place. of in areas use out they came could for data what our

So innings. it's early

but the You're starting it's not se, sales yet, to per seeing of any infrastructure build. just

Operator

from Company. Your next line of with the & question comes Burns Greg Sidoti

Gregory Burns

-- customers years that year, year? how XXX other many typically do in customers this add does a to compare you The how

Mark Marron

was I almost when don't numbers did, it's but double year-over-year. went Greg, pleasantly hand know don't I XXX what right we the in but the now. analysis did to If the normally it's high. we when had the I we at I number, guess and range, through know saw surprised I truly have it,

Gregory Burns

Okay.

like maybe other impacted that maybe some vendors, customers the some of get dynamic product unscaled kind the is, waiting been networking on like larger seems discuss Can talking OEMs And to sitting this so outperform compared patterns. up? talked of view think And cleaned market in your been vendors what Cisco you their you've why about at able deployed, order relatively forward significantly? the of have you to that like the that's about. bottleneck just going getting It it's of why you've have market to been the

Mark Marron

quite and Yes. a honestly. Greg, hard Great question, one,

of to backlog. it's some think due I

an it's think I honestly, quite is, interesting market. Second

Cisco HP If traditionally traditionally, think almost Juniper, you in of kind about a XX%. have how has of was past bit the with it little throw Cisco. like This been quarter, our some of we've acquisition as business. and But of the that you XX% flux versus I solutions going know, our they think that's background, to --

network is so they with do Cisco. So need enough about closely are if pretty wide the a do to the all with going modernization think to you for people of pipes AI, with those lot And to work what's AI. have happen to that we models analysis

-- customers could and done front the a of with nice the stayed of solutions we've close we with Cisco we've that, that other in services and ahead of on network provide. getting the vendors. think really team I job getting So has stayed And

just due in was backlog it to of the that had we inventory. some And

there's I right. don't questions. more Okay. All believe any

to taking from we take and seeing So listen at everybody end, care. our you, X that time in or you to I hearing you want earnings quarter forward call. for the to look thank quarterly and from Thank today,

Operator

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

You may now disconnect.

ePlus (PLUS) 22 May 242024 Q4 Earnings call transcript