ePlus inc.

Today, 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, Darren Reguil, COO and President of E-Plus Technology, Elaine Marion, CFO, 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. Detailed on 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, quarterly reports on Form 10-Q, and in other documents through the file with the SEC. 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. In addition, we'll be using certain non-GAAP measures during the call. We've included a GAAP financial reconciliation and earnings release, which is posted on the investor information section of our website at www.epos.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 results for the third quarter of fiscal 2023. This was a strong financial and operational quarter for E+. We continue to successfully execute on our growth strategy to deliver IT solutions focused on digital transformation, hybrid workforce plans, security, and cloud. With broad-based growth across all customer size segments and vertical markets, we believe we are gaining market share aided by the breadth of our solutions across the technology stack. The strength of our third quarter results also reflected fulfillment of several enterprise customers' large projects due in part to some relief in the supply chain. The investments we have made in our teams and in our capabilities are driving growth and delivering value to our customers. Consolidated net sales increased 26%, and our adjusted gross billings increased 29.7%, with particularly strong growth in our technology segment. We are continuing to generate operating leverage driven by strong top-line growth and balanced SG&A management, which has supported our expanded solution offerings. Our net earnings increased 35.1% to $35.7 million, and diluted EPS increased 36.7%, both above our revenue growth rate as our focus on operational efficiency continues. As our customers continue to invest in upgrading their IT systems to accommodate remote and hybrid work, Eplus is well positioned to provide integrated and flexible workplace transformational systems. Our offerings include multi-vendor architecture support, vendor lifecycle management, and on-premises data center infrastructure provided in an as-a-service model such as our storage as-a-service solution. With our customers transitioning more of these processes and workloads to the cloud, they increasingly look to ePlus to develop more strategic security roadmaps and build more sophisticated and more comprehensive security solutions to protect these new virtual workplace environments. As a result, our security business has grown to more than 22% of our adjusted gross billings over the trailing 12 months as compared to almost 20% last year. Our services revenues comprised of professional and managed services increased 7.9% in the quarter and more than 9% fiscal year to date. While we don't expect services growth rates to be aligned with top line revenue, As a significant portion are from recurring managed services recognized ratably over the term of the contract, our expanded service capabilities are fundamental to providing comprehensive solutions for our customers. Service margins, while down year over year, have stabilized sequentially. We continue to see some pressure in services margins due to project delays and services mix, supply chain constraints, and some larger land and expand deals at lower margins. Managed services are a key driver of financial growth and a differentiated value-added solution for customers. These offerings generate higher margin annuity quality revenue and create sticky long-term relationships with customers who value the reduced IT complexity and cost savings that we deliver. Our managed services business also serves to broaden our available market opportunity as we leverage our capabilities to provide specialized IT expertise in adjacent areas such as cloud and security advisory services. Moving on to our financing segment, third quarter sales were 11.7 million compared to 17.9 million in the same period last year, primarily due to lower proceeds from sales of leased equipment. As we have frequently noted, our financing segment produces variable results quarter to quarter due to the timing of large transactions. That said, its unique offerings remain an important competitive differentiator, providing our customers with flexibility in how they acquire and optimize their IT investments. As we look ahead to 2023, global IT spending is expected to grow at a low single-digit rate this calendar year, according to Gartner, reflecting an uncertain economic outlook. Despite the potential for an economic slowdown this year, we believe that spending in our areas of focus, including security, cloud and networking, remains a necessity for many organizations as they support a hybrid workforce and execute on their digital transformation plans. At the same time, the tight labor market for tech workers continues to drive corporate spending on outsourced IT services. Our ability to hire and retain skilled professionals in this tight labor market is a competitive differentiator and a valued service to our customers. We continue to monitor the market and will make adjustments as necessary to optimize solutions delivery and staffing levels. In closing, I'm very pleased with our financial results and the progress we have made in broadening our capabilities and strengthening our position to capture future growth opportunities. As a reminder, our fiscal third quarter is seasonally strong as it marks the end of the budget year for many of our customers. Backed by the strength of our balance sheet, we continue to have the financial flexibility to pursue attractive acquisition opportunities that expand our geographic footprint and are aligned with our growth strategy. I will now turn the call over to Elaine Marion to provide details on our third quarter financial results.