Q2 2024 ePlus inc Earnings Call
Speaker 1: Good day ladies and gentlemen. Welcome to the E plus earnings results conference call. As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Mr. Clay Parkers S.V.P. You may begin.
Good day, ladies and gentlemen, welcome to the E plus earnings results Conference call. As a reminder, this conference call is being recorded I would now like to introduce your host for today's conference. Mr. Kley Parkhurst SVP you may begin.
Speaker 2: Thank you for joining us today. On the call is Mark Marin, CEO and president, Darren Rae-U-L, CEO and president of E-Plus Technology, Elaine Marion, CFO and Erika St.
Thank you for joining us today on the call is Mark Marron, CEO and President Darren rather you will see a COO and president of the plus technology.
Elaine Marion CFO, and Erica Stoecker General counsel.
Speaker 2: I want to take a moment to remind you that the statements we make this afternoon that are not historical facts may be deemed to be forward looking statements and our based imaginance current plans, estimates and projections.
I want to take a moment to remind you that the statements. We make this afternoon that are not historical facts may be deemed to be forward looking statements and are based on management's current plans estimates and projections.
Speaker 2: Actual and anticipated future results may vary materially. You do certain risks and uncertainties detailed in the earnings release. We issued this afternoon and are periodic followings with the securities and change commission include our most recent annual report on form 10K.
Actual and anticipated future results may vary materially due to certain risks and uncertainties detailed in the earnings release, we issued this afternoon and our periodic filings with the Securities and Exchange Commission, including our most recent annual report on Form 10-K.
Speaker 2: Courtly reports on Form 10Q and another documents to be filed with the SEC, including the Form 8K we filed on October 6, 2023, recasting certain disclosures in our most recent annual report.
Quarterly reports on Form 10-Q, and in other documents, we file with the SEC, including the form 8-K, we filed on October six 2023, recasting certain disclosures in our most recent annual report.
Speaker 2: Any forward-looking statement speaks only as of the date of which the statement is made and the company undertakes no responsibility to update any of these forward-looking statements in light of new information, future events, or otherwise.
Any forward looking statement speaks only as of the date of which the statement is made and the company undertakes no responsibility to update any of these forward looking statements in light of new information future events or otherwise.
Speaker 2: In addition, we will be using certain non- GAAP measures during the call. We have included the GAAP financial reconciliation and our earnings release, which was posted.
In addition, we'll be using certain non-GAAP measures during the call. We've included a GAAP financial reconciliation in our earnings release, which was posted.
Speaker 2: On the investor information section of our website at www.epost.com. And now let's turn on the call over to Mark Maren. Mark.
On the Investor information section of our website at Www Dot <unk> Dot Com I would now like to turn the call over to Mark Marron Mark.
Speaker 3: Thank you, Clay, and thank you everyone for participating in today's call to discuss our second quarter fiscal 2024 result.
Clay and thank you everyone for participating in today's call to discuss our second quarter fiscal 2024 results.
Speaker 3: I will start with some key takeaways. E-plus generated solid results in our second quarter with consolidated net sales of 19%.
I will start with some key takeaways eplex generated solid results in our second quarter with consolidated net sales up 19%.
Speaker 3: This was driven by strong sales growth of 21% in our technology business, which included 9% revenue growth in our services business.
This was driven by strong sales growth of 21% and our technology business, which included 9% revenue growth in our services businesses.
Speaker 3: Deluted earnings per share, advance 14%. Slightly lower than sales growth due to a shift in product mix, a declining finance segment earnings, given uneven deal flow and a tough compared year over year, as well as increased operating expenses, which included investments in our key growth initiatives.
Diluted earnings per share advanced 14% slightly lower than sales growth due to a shift in product mix a decline in finance segment earnings given uneven deal flow and a tough compare year over year as well as increased operating expenses, which included investments in our key growth initiatives.
Speaker 3: Our second quarter performance benefited from continued market share gains and improved product availability that will enable us to deliver on orders from prior period.
Our second quarter performance benefited from continued market share gains and improved product availability that enabled us to deliver on orders from prior periods.
Speaker 3: Gross Billings improved for the third consecutive quarter, totaling approximately 856 million, representing a 7.4% gain over the same period last year, as we continue to drive organic and acquisition growth to capture market share.
Gross billings improved for the third consecutive quarter totaling approximately 856 million representing a seven 4% gain over the same period last year as we continued to drive organic and acquisition growth to capture market share.
Speaker 3: Our demonstrated ability to drive sales and earnings growth, even in an uncertain economic environment, underscores the strength of our strategic plan, our expertise across the broad technology stack, and diversification across customer types, and in more.
Our demonstrated ability to drive sales and earnings growth, even in an uncertain economic environment underscores the strength of our strategic plan, our expertise across the broad technology stack and diversification across customer types and markets.
Speaker 3: Through our comprehensive portfolio of innovative solutions and service offerings, E-plus enables successful and cost-effective outcomes that align with our customers' IT objectives.
Through our comprehensive portfolio of innovative solutions and service offerings, plus enabled successful and cost effective outcomes that align with our customers' objectives.
Speaker 3: I was particularly pleased with our sales growth as we experience increases across nearly all market verticals and customer sizes in the second quarter. Led by the strength of our networking, collaboration and managed services solution.
I was particularly pleased with our sales growth as we experienced increases across nearly all market verticals and customer sizes in the second quarter led by the strength of our networking collaboration and managed services solutions.
Speaker 3: Networking represented our best performing category as net sales grew approximately 62% year-over-year. This strong growth reflected three main factors. One, a contribution from our recently acquired network solutions group. Two, a continued improvement in product availability that enabled us to deliver on prior customer orders. And three, organic customer demand.
Networking represented our best performing category as net sales grew approximately 62% year over year.
This strong growth reflects a three main factors one a contribution from our recently acquired network solutions group to a continued improvement in product availability that enabled us to deliver on prior customer orders and three organic customer demand.
Speaker 3: The prevalence of hybrid work, distributed computing, and the emergence of AI or driving growth for advanced networking architectures. And we are capturing share in the space through our innovative solutions and partnerships with leading OEM.
The prevalence of hybrid work distributed computing and the emergence of AI are driving growth for advanced networking architectures, and we are capturing share in this space through our innovative solutions and partnerships with leading Oems continued customer investment in network modernization solutions is also contributing to our <unk>.
Speaker 3: Continued customer investment in network monetization solutions is also contributing to our growth in this space.
Growth in this space.
Speaker 3: This includes building out AI-enabled infrastructure solutions and supporting AI implementation with advisory services around data modeling and governance and risk best practice.
This includes building out AI enabled infrastructure solutions and supporting AI implementation with advisory services around data modeling.
In governance and risk best practices.
Speaker 3: Our workspace transformation or collaboration net sales grew 41% year over year and has created market wide recognition of our technology leadership in this space.
Our workspace transformation, nor collaboration net sales grew 41% year over year and has created market wide recognition of our technology leadership in this space. For example, we were recently recognized <unk> as re imagine work partner of the year for the Americas from Cisco.
Speaker 3: For example, we were recently recognized that it says, re-imagine work partner of the year for the Americas from SIFT.
Speaker 3: This award recognizes partners who are excelling at hybrid work, customer experience, leading innovation and empowering collaboration with WebAs.
This award recognizes partners, who are selling at hybrid work customer experience, leading innovation and empowering collaboration with Webex.
Speaker 3: We were also recognized for the release of our proprietary E-plus collaboration solution called Automated Virtual Assistant or A-
We were also recognized for the release of our proprietary E plus collaboration solution called automated virtual assistant or Eva.
He plus Eva as an in house developed managed service that Leverages automation and artificial intelligence to provide automated testing and reporting on the health of Cisco video devices conference rooms, and Workspaces to ensure effective operations.
Speaker 3: EPLASAVA is an in-house developed managed service that leverages automation and artificial intelligence to provide automated testing and reporting on the health of Cisco video devices, conference rooms, and workspaces to ensure effective operation.
Security was 18, 5% of our technology gross billings in the trailing 12 months security net sales increased 7% in the quarter customers look to <unk> to better mitigate the risk sophistication of cyber threats and want us to provide comprehensive risk management solutions in October we announced our holistic.
Speaker 3: Security was 18.5% of our technology gross buildings in the trailing 12 months.
Speaker 3: Security net sales increased 7% in the quarter. Customers look to E-plus to better mitigate the risk sophistication of cyber threats and want us to provide comprehensive risk management solution.
Speaker 3: In October , we announced our holistic program called Compromise Nothing. This comprehensive program includes strategic assessment and advisory services and our managed service offering.
Program called compromise nothing this comprehensive program includes strategic assessment and advisory services and our managed service offerings, our extensive capabilities distinguish E plus and the security solutions market and provide attractive opportunities for us to build and expand relationships with both existing and new.
Customers.
Speaker 3: Our services segments perform well with net revenue increasing 9% year-over-year, primarily due to strong growth in our managed services which grew 21%. Over the past year, we have focused on expanding our solutions and capabilities in managed services, which offer the advantage of recurring and predictable monthly revenue streams.
Our services segments performed well with net revenue, increasing 9% year over year, primarily due to strong growth in our managed services, which grew 21% over.
Over the past year, we are focused on expanding our solutions and capabilities and managed services, which offer the advantage of recurring and predictable monthly revenue streams.
Speaker 3: We continue to see our customers shift their IT spend towards SaaS-based solutions, given upfront cost advantages, ease of scalability, and simplified maintenance required.
We continue to see our customers shift their spend towards SaaS based solutions, given upfront cost advantages ease of scalability and simplified maintenance requirements.
Speaker 3: The continued growth of our SaaS offerings such as storage as a service, NAVA remains a key growth driver for E-plus within our managed services business, along with our other our new-ity services, and helps with visibility and predictability on future revenue streams and profitability.
The continued growth of our SaaS offerings, such as storage as a service remains.
It remains a key growth driver for <unk> within our managed services business along with our other our annuity services and helps with visibility and predictability on future revenue streams and profitability.
Speaker 3: Strong double-digit growth and managed service revenue coupled with greater operating efficiency drove a significant improvement in the profitability of this business with gross margins increasing 460 basis points.
Strong double digit growth in managed service revenue, coupled with greater operating efficiency drove a significant improvement in the profitability of this business with gross margins, increasing 460 basis points.
Speaker 3: Professional Services Revenue Edge Tire as Growth in Project Services Revenue was largely offset by a decrease in staff augmentation.
Professional services revenue edged higher as growth and project services revenue was largely offset by a decrease in staff augmentation.
Speaker 3: This performance is consistent with customer IT spending trends, which currently tend to favor shorter term projects that generate relatively fast return on invest.
This performance is consistent with customer spending trends, which currently tend to favor shorter term projects that generate relatively fast return on investments.
Speaker 3: Additionally, we believe the growing adoption of automation and AI will draw a more demand for cloud storage and analytics.
Additionally, we believe the growing adoption of automation and AI will drive more demand for cloud storage and analytics.
Speaker 3: To meet these needs, we are leveraging our capabilities in cloud and consulting, along with our partnership with AI leaders such as Nvidia, Lenovo, and Pure. They help our customers design and deploy AI infrastructure solutions that deliver significant value over time.
To meet these needs we are leveraging our capabilities in cloud and consulting along with our partnership with AI leaders, such as Nvidia Lenovo and pure to help our customers design and deploy AI infrastructure solutions that deliver significant value over time.
Speaker 3: Our financing segment delivered a solid quarter, consistent with our expectation, even as results declined on a year-over-year basis.
Our financing segment delivered a solid quarter consistent with our expectation even as results declined on a year over year basis.
Speaker 3: As I noted in last quarter's call, because this business benefited last year from specific financing deals, we anticipated that quarterly comparison this year would prove challenging and create a tough compare.
As I noted in last quarter's call because this business benefited last year from specific financing deals we anticipated that quarterly comparisons this year would prove challenging and create a tough compare while quarterly or even yearly results. In this segment can be variable our financing business provides flexibility for our customers while delivering.
Speaker 3: While quarterly or even yearly results in this segment can be variable, our financing business provides flexibility for our customers while delivering strong profitability.
Strong profitability.
Speaker 3: We remain committed to investing in our team and in our capabilities to capture future growth opportunities.
We remain committed to investing in our team and in our capabilities to capture future growth opportunities. We added a significant number of customer facing employees year over year with a particular emphasis on sales professional services and technical support personnel.
Speaker 3: We added a significant number of customer facing employees year-over-year with a particular emphasis on sales, professional services, and technical support personnel. We have continued to build out our solution and service offerings around managed services such as Ford as a service and Ava. Additionally, we've invested in the construction of our new state of the art customer innovation center, which will enable us to showcase our breadth of innovative offerings and expand our warehouse and logistics capabilities.
We have continued to build out our solution and service offerings around managed services such as storage as a service.
Additionally, we have invested in the construction of our new state of the art customer innovation center, which will enable us to showcase our breadth of innovative offerings and expand our warehouse and logistics capabilities. These investments higher acquisition related depreciation and amortization expense and lower financing.
Speaker 3: These investments, higher acquisition related depreciation and amortization expense, and lower financing segment operating income, moderated second quarter growth and consolidated operating income.
<unk> operating income moderated second quarter growth in consolidated operating income despite a tough economic environment. We are pleased that consolidated quarterly net earnings increased 14, 7% to $32 7 million and in our technology business segment operating income increased 12, 5%.
Speaker 3: Despite a tough economic environment, we are pleased that consolidated quarterly net earnings increased 14.7% to 32.7 million. And in our technology business segment, operating income increased 12.5% to 35.9 million. And adjusted EBITDA increased 17.1% to 45.5.
$35 9 million and adjusted EBITDA increased 17, 1% to $45 5 million.
Speaker 3: I'd like to express my thanks to the entire E-plus team for delivering another quarter of solid financial performance. I will now turn the call over to Elaine to discuss our financial results in more detail. After Elaine's remarks, I will provide our financial outlook for fiscal 2024. Elaine.
I'd like to express my thanks to the entire E plus team for delivering another quarter of solid financial performance I will now turn the call over to Elaine to discuss our financial results in more detail. After <unk> remarks, I will provide our financial outlook for fiscal 2024.
Speaker 4: Thank you, Mark, and good afternoon, everyone. I will provide additional details about our financial performance in the second quarter of fiscal 2024. Consolidated net sales increased 19% to 587.6 million. Technology business net sales grew 21.3% to 571.9 million. Aided by the fulfillment of open orders and the NSG acquisition.
You Mark and good afternoon, everyone I will provide additional details about our financial performance in the second quarter of fiscal 2020 for consolidated net sales increased 19% to $587 6 million technology business net sales grew 21, 3% to $571 9 million.
Aided by the fulfillment of open orders and the MSG acquisition service revenue increased 9%, reflecting continued strong growth in managed services, partially offset by modest growth in professional services.
Speaker 4: Service revenue increased 9%, reflecting continued strong growth in managed services, partially offset by modest growth in professional services.
Speaker 4: Sales remained broad-based across our customer verticals. On a trailing 12-month basis, our two largest verticals were telecom, media, and entertainment, and technology, representing 25% and 18% of our technology business net sales, respectively.
Sales remained broad based across our customer verticals on the trailing 12 month basis, our two largest verticals, where telecom media and entertainment and technology, representing 25% and 18% of our technology business net sales respectively.
Speaker 4: SLED healthcare and financial services accounted for 16, 13, and 10% of our technology business net sales respectively.
Sled healthcare and financial services accounted for 16, 13, and 10% of our technology business net sales respectively with the remaining 18% divided among other end markets our financing business segment faced a particularly challenging comparison this quarter and as such revenue.
Speaker 4: with the remaining 18% divided among other end markets.
Speaker 4: Our financing business segment faced a particularly challenging comparison this quarter. And as such, revenue declined to 15.7 million from the prior year period, primarily due to lower proceeds from sales of equipment, lower transactional gains, and lower month to month.
Climbed to $15 7 million from the prior year period, primarily due to lower proceeds from sales of equipment lower transactional gains and lower month to month rents consolidated gross profit increased eight 3% to $144 4 million, representing a consolidated gross margin of 24.
6% compared with gross margin in the same quarter last year at 27%. The decrease in gross margin from the same period last year, primarily was the result of product mix and lower financing business segment earnings.
Speaker 4: Within our technology business, gross profit increased 12.4% to $130.7 million.
Within our technology business gross profit increased 12, 4% to $130 7 million technology business gross margin was 22, 9% compared to 24, 7% in the year ago quarter. This decrease was mainly due to a lower proportion of third party maintenance and services sales, which are recorded on a net.
Speaker 4: Technology business growth margin was 22.9% compared to 24.7% in the year ago quarter. This decrease was mainly due to a lower proportion of third-party maintenance and services sales, which are recorded on the net base.
Basis.
Speaker 4: Services Gross Margin increased significantly with managed services Gross Margin improving 460 basis points to 31.1% and professional services Gross Margin expanding 270 basis points to 41.3%.
Services gross margin increased significantly with managed services gross margin, improving 460 basis points to 31, 1% and professional services gross margin expanding 270 basis points to 41, 3% the.
Speaker 4: The improvement in services profitability primarily reflected enhanced operating efficiency driven in part by increased scale of our managed services segment.
The improvement in services profitability, primarily reflected enhanced operating efficiency driven in part by increased scale of our managed services segment.
Speaker 4: Operating expenses increased 11.6% year-over-year to $99.5 million, reflecting higher salaries and benefits due to additional headcount, depreciation and amortization expense from the NSG acquisition, and increased spend on travel and entertainment and marketing.
Operating expenses increased 11, 6% year over year to $99 5 million, reflecting higher salaries and benefits due to additional head count depreciation and amortization expense from the MSG acquisition and increased spend on travel and entertainment and marketing.
Speaker 4: We ended the September quarter with headcount of 1877, an increase of 148 employees of which 118 were customer face.
We ended the September quarter with head count of 877, an increase of 148 employees of which 118 were customer facing it should be noted that we on boarded 83 employees with the acquisition of NFC.
Speaker 4: It should be noted that we onboarded 83 employees with the acquisition of NSG.
Technology business operating income Rose 12, 5% to $35 9 million, while financing business segment operating income declined 26, 4% to $9 million.
Speaker 4: Technology business operating income rose 12.5% to 35.9 million while financing business segment operating income to climb 26.4% to 9 million. On a consolidated basis, operating income grew 1.7% to 44.9 million.
On a consolidated basis operating income grew one 7% to $44 9 million, earning.
Speaker 4: Earnings before tax increased 11.8 percent to 45 million as the foreign currency losses from last year did not replicate in the current quarter. The effective tax rate was 27.4 percent in the second quarter of fiscal 2024 compared to 29.3 percent in the year ago quarter.
Earnings before tax increased 11, 8% to $45 million as the foreign currency losses from last year did not replicate in the current quarter.
<unk> tax rate was 27, 4% in the second quarter of fiscal 2024 compared to 29, 3% in the year ago quarter.
Speaker 4: Consolidated net earnings was $32.7 million or $1.22 per diluted share, reflecting increases of 14.7% and 14% respectively from the year-ago quarter.
<unk> net earnings was $32 7 million or $1 22 per diluted share, reflecting increases of 14, 7% and 14% respectively from the year ago quarter.
Speaker 4: Non-GAP diluted earnings per share were $1.40, up 8.5% year-over-year. Our diluted share count at the end of the quarter was 26.7 million unchanged from the second quarter of fiscal 2023.
non-GAAP diluted earnings per share were $1 40 up eight 5% year over year, our diluted share count at the end of the quarter was $26 7 million unchanged from the second quarter of fiscal 2023.
Speaker 4: adjusted EBITDA in the technology business rose 17.1%. But declined 26.2% in the financing business segment.
Adjusted EBITDA in the technology business Rose 17, 1%, but declined 26, 2% in the financing business segment.
Speaker 4: As a result, consolidated adjusted EVDA improved 6.5% to 53.6 million.
As a result consolidated adjusted EBITDA improved six 5% to $53 6 million that brings me to our year to date review consolidated net sales grew 22% to $1 6 billion for the first six months of fiscal 2024, primarily driven by 23, 6% net sales growth.
Speaker 4: That brings me to our year-to-date review. Consolidated net sales grew 22 percent to 1.16 billion for the first six months of fiscal 2024, primarily driven by 23.6 percent net sales growth in the technology business.
And the technology business.
Speaker 4: Technology business growth billings increased 12.2% to $1.7 billion.
Technology business gross billings increased 12, 2% to $1 7 billion.
Speaker 4: Consolidated growth profit increased 16.1% to $286.6 million.
Consolidated gross profit increased 16, 1% to $286 6 million.
Speaker 4: Consolidated growth margin was 24.7% compared to 25.9% a year ago, primarily due to the mix in the product segment.
Consolidated gross margin was 24, 7% compared to 25, 9% a year ago, primarily due to the mix in the product segment.
Speaker 4: Consolidated net earnings were $66.5 million or $2.49 per diluted share compared to $50.8 million or $1.91 per diluted share.
Consolidated net earnings were $66 5 million or $2 49 per diluted share compared to $50 8 million or $1 91 per diluted share adjusted.
Speaker 4: Adjusted EBITDA rose 21.3% to $107.4 million, and non-GAAP diluted earnings per share expanded by 23.2% to $2.81.
Adjusted EBITDA Rose 21, 3% to $107 4 million and non-GAAP diluted earnings per share expanded by 23, 2% to $2 81.
Shifting to the balance sheet cash and cash equivalents were $82 5 million at the end of the second quarter compared to $102 1 million at the end of fiscal 2023 at.
Speaker 4: Shifting to the balance sheet, cash and cash equivalents were $82.5 million at the end of the second quarter compared to $103.1 million at the end of fiscal 2023. As supply chain pressures continued to ease and product availability improved, we were able to deliver on prior customer orders and related services.
As supply chain pressures continued to ease and product availability improved we were able to deliver on prior customer orders and related services. As a result inventories declined to $222 1 million from $243 3 million at the end of March 2023.
Speaker 4: As a result, inventories declined to $222.1 million from $243.3 million at the end of March 2023.
Speaker 4: Inventory turns continue to improve to 29 days compared to 32 days in the preceding quarter and 38 days at the end of fiscal 2023. Our cash conversion cycle was 51 days compared to 52 days in the year ago quarter and 59 days at the end of fiscal 2023. Given this improvement, year-to-date operating cash flows were $10.3 million compared to $119.7 million of cash used in the same period last year.
Inventory turns continue to improve to 29 days compared to 32 days in the preceding quarter and 38 days at the end of fiscal 2023.
Our cash conversion cycle was 51 days compared to 52 days in the year ago quarter, and 59 days at the end of fiscal 2023 given.
Given this improvement year to date operating cash flows were $10 3 million compared to $119 7 million of cash used in the same period last year.
Speaker 4: While we expect our customers to be more conservative with their IT spending in the second half of fiscal 2024, as Mark mentioned, E-Plus remains well-positioned, given our strategic focus on higher growth and market
While we expect our customers to be more conservative with their spending in the second half of fiscal 2024, as Mark mentioned plus remains well positioned given our strategic focus on higher growth end markets as always I want to thank our talented employees for continuing to drive our solid financial performance.
Speaker 3: As always, I want to thank our talented E-Plus employees for continuing to drive our solid financial performance. With that, I will turn the call back over to Mark. Mark? Thank you, Elaine. Through the first half of our fiscal year, E-Plus has delivered strong financial performance. Our results highlight the continued success of our growth strategy and the advantages of our diversification and comprehensive capability.
With that I will turn the call back over to Marc Marc. Thank you Elaine through the first half of our fiscal year <unk> plus has delivered strong financial performance. Our results highlight the continued success of our growth strategy and the advantages of our diversification and comprehensive capabilities as we enter the second half of <unk>.
Speaker 3: As we enter the second half of our fiscal year, we're beginning to see sales cycle timelines extend as customers prioritize cost optimization initiatives and reallocate spending accordingly. In this environment, we anticipate customers will focus on projects that deliver relatively fast return on investments while continuing to deploy solutions that enhance cybersecurity.
Our fiscal year, we are beginning to see sales cycle timelines extend as customers prioritize cost optimization initiatives and reallocate spending accordingly in this environment, we anticipate customers will focus on projects that deliver relatively fast return on investments, while continuing to deploy solutions that enhance <unk>.
<unk> security.
Speaker 3: ePlus has successfully navigated through a similar period of economic uncertainty in the past, and we remain confident in our outlook given our market positioning and focus on key growth verticals.
He plus has successfully navigated through a similar period of economic uncertainty in the past and we remain confident in our outlook given our market positioning and focus on key growth verticals.
Speaker 3: As a result, we reaffirm our previously issued financial guidance for the current fiscal year. We continue to expect fiscal year 2024 net sales of approximately $2.23 billion to $2.33 billion and adjusted EBITDA of $200 million to $215 million, representing a margin of 9% to 9.2%.
As a result, we reaffirm our previously issued financial guidance for the current fiscal year. We continue to expect fiscal year 2024, net sales of approximately $2 $2 3 billion to $2 $3 3 billion and adjusted EBITDA of $200 million to $215 million, representing a margin of nine <unk>.
<unk> to nine 2%.
Speaker 3: Our guidance assumes, in part, a continued easing and supply chain constraints that enable us to complete previously delayed customer projects.
Our guidance assumes in part continued easing in supply chain constraints that enable us to complete previously delayed customer projects.
Speaker 3: In closing, ePlus remains focused on building long-term shareholder value through the execution of our growth strategy and the efficient allocation of capital. Operator, please open the call for
In closing <unk> remains focused on building long term shareholder value through the execution of our growth strategy and the efficient allocation of capital.
Operator, please open the call for questions. Thank you.
Speaker 1: At this time I would like to remind everyone if you would like to ask a question please press star
At this time I would like to remind everyone. If you would like to ask a question. Please press star one.
Speaker 1: Your first question comes from Maggie Nolan with William Blair. Please go ahead.
Your first question comes from Maggie Nolan with William Blair. Please go ahead.
Speaker 5: Hi, thank you. I was hoping you could give us a little color on the mix within revenue of SMBs versus large enterprises and any, you know, different spending trends or expectations that you have across the different client types.
Hi, Thank you I was there.
Hoping you could give us a little color on the mix within revenue of Smbs versus large enterprises and any.
Different spending trends or expectations that you have across the different client types.
Speaker 3: Sure. Hey, Maggie, how are you? So, as I think you know, we really don't focus on the S and SMB. So we're mainly a mid market to enterprise play.
Sure Hey, Maggie how are you. So as I think you know, we really don't focus on the SNF SMB. So we're mainly a mid market to enterprise play many of the solutions that we're rolling out across cloud security.
Speaker 3: Many of the solutions that we're rolling out across cloud, security, networking, collaboration, and now AI kind of fit in that mid-market, which is our sweet spot. With that said, from 500 employees and above, we were actually up and our enterprise sales were up, I want to say for the quarter, net sales were up like 7% or 8%.
Networking collaboration and now AI kind of fit in that mid market, which is our sweet spot with that said from 500 employees and above we were actually up and our enterprise sales were up I want to say for the quarter net sales were up like seven or 8%. So we actually had a really nice.
Speaker 3: So we actually had a really nice quarter related to our customer size segment.
Quarter related to our customer size segments.
Speaker 3: Our top five verticals were also up, both in net sales and gross billing.
Our top five verticals were also up both in net sales and gross billings so nice.
Speaker 3: So, nice execution by the sales team across the different customer size segments and vertical.
Nice execution by the sales team across the different customer size segments and verticals.
Speaker 5: That get what you needed, Maggie? Yes, it did. And then when we think about the full year guidance.
What you need today.
Yes, It did and then when we think about the full year guidance.
Speaker 5: You know, what does your visibility into the guidance look like right now when you initially built the guidance? Did you expect such a strong first half of the year, as well as some of the commentary that you gave on kind of weaker IT budgets in the back half of the year, or has that changed over the course of the year since you set guidance?
What is your visibility into the guidance look like right now when you. When you initially built the guidance could you expect such.
Such a strong first half of the year as well as some of the commentary that you gave on kind of weaker.
It budgets in the back half of the year or has that changed over the course of the year since you set guidance.
Speaker 3: yeah there's a couple things maggie so we're still very comfortable with our guidance and if you think about it
Yes, there is a couple of things Maggie so we're still very comfortable with our guidance and if you think about it.
Speaker 3: Our guidance as it relates to compared to last year on net sales is actually up 8% to 13%, you know, depending on where we fall within that range. So, that's a very strong uptick as compared to the market overall and as compared to our peers.
Our guidance as it relates to our compared to last year on net sales is actually up 8% to 13% depending on where we fall within that range. So that's a very strong uptick as compared to the market overall and as compared to our peers. A couple of things went into it. Yes. We did expect a stronger first half a couple of things that.
Speaker 6: A couple things went into it. Yeah, we did expect the stronger first half.
Speaker 7: A couple things to kind of call out at a very high level. One is Q3 this year, sorry, last year for tech.
And a call out at a very high level. One is Q3. This year sorry last year for tech is going to be a really tough compare for us. So we were our net sales were up over 28% last year and our Q3. So it is kind of a tough compare if you will and we are starting to see some sales cycles extend.
Speaker 8: is going to be a really tough compare for us. So we were, our net sales were up over 28% last year in our Q3. So it's kind of a tough compare, if you will. And we are starting to see some sales cycles extend and customers watching spend from a cost optimization. So there's a few things there that kind of factor in.
And customers watching spend from our cost optimization. So theres a few things there that kind of factor in.
Speaker 9: to our thought process, but still feel good with the guidance that we're given and did expect the first half to be a little bit higher. Got it. Thank you.
Two our thought process, but still feel good with the guidance that were given and did expect the first half two to be a little bit higher.
Got it thank you for the update and nice quarter.
Alright, Thanks Maggie.
Speaker 10: Your next question comes from Greg Burns with Sidoti and Company. Please go ahead. Good afternoon. We look at the technology segment sales.
Your next question comes from Greg Burns with Sidoti <unk> Company. Please go ahead.
Yes Arun.
When we look at the <unk>.
Technology segment sales.
How much of that was organic versus inorganic.
Speaker 11: Yeah, approximately 25% a little over that was acquisition related. The other 74% Greg or so was organic.
Yes, approximately 25% a little over that was acquisition related the other 74%, Greg or so was organic.
Speaker 12: What this sort of they are Greg in our numbers just high level you saw some supply chain easing specifically in the networking space Networking was up big. I think was up 62% if I remember correctly
Okay.
They are Greg in our numbers just high level you saw some supply chain easing specifically in the networking space networking was up big I think was up 62% if I remember correctly.
Speaker 13: collaboration was up nicely as well. So some of our workspace transformation, some of the things going on and networking
Collaborations was up nicely as well so some of our workspace transformation some of the things going on in networking.
Speaker 14: You know, we're starting to roll out nicely and the team did a nice job of executing there. But it was roughly three quarters organic, a quarter acquisition related.
We're starting to rollout nicely and the team did a nice job of.
Executing there, but it was.
Roughly three quarters organic quarter acquisition related.
Speaker 15: Okay, to that idea of the supply chain easing, how much of the networking or product revenue?
Okay.
That idea of the supply chain easing.
The networking.
Or product revenue as a whole was from.
Speaker 16: you're drawing down your backlog versus net new business.
You drawing down your backlog versus net new business.
Speaker 17: Yeah, hey Greg, that's hard. The only thing that I can tie it to are inventory levels. We're down about 22 million, but there was an awful lot of new deals, both booked and invoiced in the quarter. And it's a really tough one to figure out. What was open orders versus net new effect?
Yes, Hey, Greg that's hard the only thing that I can tie it to our inventory levels were down about $22 million.
But there was an awful lot of new deals both booked and invoiced in the quarter and it's a really tough one to figure out what was backlog what was open orders versus net new effectively.
Speaker 18: Okay, thanks. And then I guess just lastly, I know you drew down the inventory and were able to deliver on some of that backlog, but how does...
Okay.
Thanks, and then I guess, just lastly can you I know you drew down the inventory and we're able to deliver on some of that backlog, but how it is.
Speaker 19: That backlog look, I guess, relative to maybe historic levels is still elevated, and maybe...
That backlog look I guess relative to maybe historic levels is it still elevated and maybe.
Sure.
Okay.
Can you give us a sense of your pipeline.
Speaker 20: Pipeline is within where we would think it would be for this quarter. The one thing I would tell you, Greg, that I got a highlight again. Last year in Q3, we had a really strong tech quarter. Our net sales were up 28, over 28%.
Pipeline is.
Is within within where we would think it would be for this quarter. The one thing I would tell you Greg that I got a highlight again.
Last year in Q3, we had a really strong tech quarter, our net sales were up 28.
Over 28%.
Speaker 21: The adjusted gross buildings were up almost 30% in that quarter. So it's kind of a tough compare there, but with that said, as compared to traditional Q3 quarters, pipeline, backlog, all the things that we're tracking is in play. The only caveat I put on that is we are seeing some deals that are taking a little bit longer, as customers try to figure out what they want to spend from a priority standpoint, and they're trying to do some cost optimization to monetization across some of their cloud insecurity plays.
Adjusted gross billings were up almost 30% in that quarter. So its kind of a tough compare there, but with that said as compared to traditional Q3 quarters pipeline backlog all the things that we're tracking is in play the only caveat I'd put on that is we are seeing some deals that are taken a little bit longer as.
Customers try to figure out what they want to spend from a priority standpoint, and they're trying to do some cost optimization across some of their cloud and security plays.
Does that have any other.
Thanks.
Speaker 22: Some of it's ratable to Greg, which affects.
Some of it some of it's ratable too.
Which affects that.
Speaker 23: Okay. And the, the, the sales cycles, is that getting longer across customer segments? Or is it mainly in like the large enterprise? Like the, mainly enterprise, mainly enterprise, but higher bid market, but it varies by customer Greg. You, you'd be surprised, you know, with customers in terms of sometimes how long it takes to turn things around through their legal, through their procurement team. So it varies by customers, but normally the enterprise, the bigger deals are normally the ones that take a little bit longer. Okay.
Okay.
The sales cycles is that getting longer across customer segments or is it mainly in the large enterprise.
Mainly enterprise, mainly enterprise, but higher mid market, but it varies by customer Greg you'd be surprised.
With customers in terms of sometimes how long it takes to turn things around through the Lee go through their procurement team. So it varies by customers, but normally the enterprise the bigger deals are normally the ones that take a little bit longer.
Okay. Thank you.
No problem.
Speaker 24: Our next question comes from Matt Sheeran with Seafull. Please go ahead.
Our next question comes from Matt Sheerin with Stifel. Please go ahead.
Speaker 25: Yes, thanks. I just wanted to follow up on Greg's question regarding backlog. Could you tell us what the backlog levels look like now versus 60 days or a quarter ago and versus traditional or historic levels?
Yes. Thanks, I just wanted to follow up on Greg's question regarding backlog could you tell us what the backlog levels look like now versus <unk>.
60 days or a quarter ago.
And.
Versus traditional or historic levels.
Yeah.
Speaker 26: So sorry, hey, Matt, I missed that. What was the question regarding? I'm not looking for the back. What is the backlog?
So sorry, Matt I missed that what was what was the question, yes, I'm actually looking for the <unk> what is the backlog.
Speaker 27: Greg, I asked that question, but I'm not sure we got an answer. Because you've been talking for a few quarters about very elevated backlogs.
Greg had asked that question about I'm not sure if we got an answer.
<unk> been talking for a few quarters about very very elevated backlog because of the component shortage it looks like.
Speaker 28: because of the component shortage, it looks like the supplies coming nicely and you're shipping to backlog. So, a potential concern would be that backlog gets worked off and what happens to growth after that. So, I'm just hoping to get some. Yeah, I got you. Yeah, open orders are down, but they're still higher than traditional levels, if you will.
The supply is coming nicely and youre shipping to backlog so.
Concern would be that backlog gets worked off and what happens to growth after that so.
So I'm, just hoping to get some color.
Got you Yeah open orders are down, but they are still there.
No higher than traditional leather levels, if you will.
Speaker 29: So they did trend down. Backlog is actually up. Pipeline is actually in line with what we're expecting for the quarter.
So they did trend down.
Backlog is actually up pipeline is actually in line with what we're expecting for the quarter.
Speaker 30: So besides the tough compare, wouldn't see anything that would dramatically affect the numbers, if you will, whether it's related to open orders, backlog, end-or-pipeline, just yet. With that said, the caveat is, you know, Matt, as we mentioned previously, is the timelines are extending with some of the customers, so it gets tougher and tougher to kind of forecast.
So besides the tough compare.
I don't see anything that would dramatically affect the numbers. If you will whether it's related to open orders backlog into our pipeline just yet with that said the caveat is Matt as we mentioned previously.
Is there the timelines or are extending with some other customers. So it gets tougher and tougher to kind of forecast.
Speaker 31: Okay, I turn up and I know you're reiterating your revenue forecast.
Okay fair enough.
I know you're reiterating your revenue forecast for the year.
Speaker 32: for the year. As we think about the next couple of quarters, it looks like in terms of seasonality, you typically have sequential growth in the trim recorder and then down in the March quarter.
We think about the next couple of quarters. It looks like in terms of seasonality you typically have sequential growth in the December quarter, and then down in the March quarter.
I'm wondering if that's how we should think about modeling or things different just because of the backlog and and
I'm wondering if that is how we should think about modeling or things definitely just because of the backlog in.
and the way things are trending. So, should we think about that seasonality playing out again? Yeah, very, very much so, Matt. But once again, if I could just highlight.
And the way things are trending so is that should we think about that seasonality playing out again, yes.
Yes, very very much so Matt, but once again, if I could just highlight the tech quarter last year was from a compare was extreme where gross billings adjusted gross billings were up almost 30% so that would be the only caveat, but I think what you said is very fair and very realistic.
The tech quarter last year was from a compare, was extreme where gross billings, adjusted gross billings were up almost 30%. So that would be the only caveat, but I think what you said is very fair and very realist.
Okay, all right, thank you. And then, and just lastly, you talked about growth from that acquisition. How does the acquisition pipeline look like in terms of your emanating?
Okay, Alright, Thank you and then just lastly.
You talked about growth from that acquisition.
How does the acquisition pipeline look like in terms of your M&A.
M&A pipeline is really strong. There's a lot of opportunities out there, but like anything that we've got to continue to vet them out. Some of the pricing multiples are coming down a little bit, which is a positive. But in terms of that, there's still plenty of opportunity, both from a territory, a services perspective, as well as what I call product type, you know, services, indoor solutions, but still have to work through the process on those. But the pipeline's fairly robust. Okay, thank you, Mark.
M&A pipeline is really strong there is a lot of opportunities out there, but like anything that we've got to continue to vet them out.
Some of the pricing multiples are coming down a little bit which is a positive.
But in terms of that there is still plenty of opportunity both from a territory or services perspective, as well as what I would call product type services <unk> solutions.
But still have to work through the process on those but the pipeline is fairly robust.
Okay. Thank you Mark no.
No problem. Thanks, Matt.
Again, if you would like to ask a question, please press star one.
Again, if you would like to ask a question. Please press star one.
Seeing no further questions, I will now turn the call back to Mark Marin for any closing remarks.
Seeing no further questions I will now turn the call back to Mark Marron for any closing remarks.
Okay, thank you. Everybody, thank you for joining us for our Q2 call. And if I could, I'd like to wish everybody a happy Thanksgiving and a healthy and happy holiday season. And we'll talk to you in the February timeframe and have a happy new year as well. Take care. This concludes the-
Thank you everybody. Thank you for joining us for our Q2 call and if I could I'd like to wish everybody, a happy Thanksgiving and a healthy and happy holiday season, and we will talk to you in the February timeframe and have a happy new year as well take care.
This concludes today's conference call you may now disconnect.
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