ePlus inc.

Ladies and gentlemen, welcome to the E-Plus 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. Clay Parkhurst, SVP. Sir, you may begin.

Thank you for joining us today. On the call is Mark Maron, CEO and President, Elaine Marion, CFO, Darren Raguel, COO and President of E-Plus Technology, and Erica Stoker, General Counsel. 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. Actual and anticipated future results may vary materially due to certain risks and uncertainties. Detail on the earnings release we issued this afternoon and our periodic filings with the Securities Exchange Commission, including our Form 10-K for the year ended March 31, 2021, when filed. The company undertakes no responsibility to update any of these forward-looking statements in light of new information or future events. In addition, during the call, we may make reference to certain non-GAAP financial measures, and we've included a GAAP financial reconciliation earnings release, which is posted on the Investor Information section of our website at www.eplus.com. And I'd like to turn the call over to Mark Merritt. Mark?

Thank you, Clay, and thank you, everyone, for participating in today's call to discuss our fourth quarter and fiscal 2021 results. Fiscal 2021 was a very successful and productive year for E-plus as we advanced our growth strategy and broadened our capabilities while increasing our margins, earnings, and adjusted EBITDA. I'm especially pleased with the gains we saw in our gross profit and gross margin, which demonstrate that our strategy of delivering high-value solutions and services is working and resonating with our customers. I'm extremely proud of the entire Eplus team, which moved quickly to solve the challenges our customers face as they transition to remote and hybrid work environments, requiring advanced collaboration, networking, cloud, and security solutions. Our successful execution in this environment speaks to our continued strategic focus on these areas and to the commitment and dedication of our people who supported our clients with innovative solutions in what was one of the most difficult operating environments in recent memory. Although net sales were down slightly in the fourth quarter, we achieved significant growth in our profitability as fourth quarter gross profit increased 6.6% and gross margin expanded by 270 basis points to 27.8%. the highest showing in our history. The solid gross profit and margin performance helped drive 31.9% year-over-year growth in our fourth quarter operating income on a consolidated basis. Our tech segment performed especially well with a 49.3% increase in operating income. We also achieved a 25.7% increase in fourth quarter adjusted EBITDA to 29.6 million. Software subscription sales have become an increasingly significant component of our revenue and profits. For our customers, software subscriptions provide several advantages, including real-time updates and technical support. For E+, the trend towards subscription sales provides greater revenue visibility and predictability and strengthens our margin profile over the long term. Services was another bright spot that helped drive our financial performance in the fourth quarter and in fiscal 2021. Services revenue increased from 12.2% in fiscal 2020 to 12.9% of net revenues in fiscal 2021, and in the fourth quarter grew 8.2%. The continued growth in our higher margin services business is a direct result of the investments we have made over the years in our people and our offerings, including cloud, security, digital infrastructure, and collaboration. as well as our successful efforts to strengthen our customer partnerships and provide the critical technology solutions and services that enable our customers to navigate the evolving IT landscape. In addition to the margin improvement from the growth in our services business, we also benefited from our efforts to efficiently manage our costs. Operating expenses declined 2.9% year-over-year in fiscal 2021, driven by lower discretionary spend on travel, entertainment, and marketing costs due to COVID-19, and a focused effort on realigning our workforce and reducing facility costs. Now I'd like to highlight three areas in which our investments helped drive our financial performance both in the fourth quarter and in fiscal 2021, and where we continue to see robust customer demand. First, security solutions are especially relevant for our customers now as digital transformation extends the data center to the cloud and heightens the need for greater cloud security and cost optimization plans. To meet this need, we have continued to expand our capabilities and services in security and data protection. As a result, security accounted for 20.8% of our adjusted gross billings for the year, up from 19.3% of adjusted gross billings in the prior year period. As we enter fiscal 2022, security is closing in on nearly half a billion dollars in adjusted gross billings. Second, we are seeing continued solid growth in our services, which provide recurring annuity-type revenue. While the pandemic limited our ability to provide conventional onsite services, we work closely with our customers to expand provisioning of remote services. As I noted in last quarter's call, remote managed services will remain a long-term growth driver for our business, even in a post-pandemic environment, as our off-site security and support solutions enable reliable and secure hybrid work environments for our customers. Finally, our financing business continued to perform well, generating 57% year-over-year net sales growth in the fourth quarter and 3.6% growth for the full fiscal year. While results may be somewhat uneven on a quarterly basis, the long-term outlook for this business continues to be strong. Financing provides E-plus with the key point of differentiation relative to our competitors as our flexible financing options enable our customers to pursue their technology investments in ways that fit their IT budgets and capital spending plans. Technology collaboration is as vital as ever, and I'm proud of what we accomplished last year. To highlight one example, ePLUS worked closely with Cisco and Rowan University to design and implement a cloud-based call center solution. The solution for managing the administration of early vaccine distribution at its medical school included the ability to accommodate anticipated call volume, scheduling, tracking, and appointment setting. Turning now to our capital allocation plans, our strong balance sheets provides us the opportunity to execute on strong M&A opportunities, as well as invest in organic solutions that can further enhance our growth and our technology solutions offerings. Most recently, we acquired system management planning, strengthening our geographic presence in upstate New York and in the Northeast, and adding to our capabilities in cloud, data center, AI, and collaboration. Supported by a healthy market for M&A, we see additional opportunities for strategic bolt-on acquisitions in fiscal 2022. As we look forward to fiscal 2022, we are confident that the investments we have made in our targeted high-growth markets position us well for continued growth. I am encouraged by our order backlog, which points to solid demand for our technology solutions, including software and annuity services, across a broad range of markets. Increasing customer focus on data center monetization, journey to the cloud, security and collaboration, particularly in today's remote work environment, are key IT market trends that we expect to help drive our growth in the coming year. As the economy continues to recover and our customers return to a more normalized work environment, we believe the pace of IT spending will gain momentum, in part reflecting the resumption of investments delayed during the pandemic. Additionally, we expect continued healthy growth in our annuity quality services offerings. In the near term, component shortages in the electronic supply chain are likely to act as a headwind that we believe could delay some revenue. However, we are confident we can navigate through this challenge, as we have in the past, and will continue to provide value-added solutions, support, and services to our customers. I will now turn the call over to our CFO, Elaine Marion, to provide details on our fourth quarter and full year 2021 results.