ePlus inc (PLUS) 2003 Q1 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the ePlus Inc. quarterly earnings release conference call. At this time, all participants are in a listen-only mode, and the floor will be open for your questions and comments following today's presentation.

It is now my pleasure to introduce your host, Mr. Kley Parkhurst.

Thank you, operator. Good morning. This is Kley Parkhurst, Senior Vice President of ePlus, and I would like to welcome you to our conference call to discuss our June 30th, 2003, first quarter of fiscal 2004 financial results. The conference call this morning will include prepared remarks, followed by a question-and-answer period. Joining me on the call today is Phil Norton, the Chairman, Chief Executive Officer and President of ePlus, and Steve Mencarini, Senior Vice President and Chief Financial Officer.

Before we begin the prepared presentation, I need to read our Safe Harbor statement. The statements made during this call which are not historical facts may be deemed to contain forward-looking statements under the Private Securities Litigation Reform Act of 1995. Actual results may vary, due to general economic conditions and other risks and uncertainties, including those risks and uncertainties detailed in our Securities and Exchange Commission filings. We refer you to the disclosure contained in our annual report on Form 10-K for the year ended March 31st, 2003, under the headings Risk Factors and Factors That May Affect Future Operating Results, and in our quarterly report on Form 10-Q for the quarter ending June 30, 2003, which was filed yesterday under the heading Factors That May Affect Future Operating Results, for a description of these risks and uncertainties. A live Webcast of this call, playback and audio playback are Available. Please refer to our press release, or e-mail info@ePlus.com for more information, or go to our Website, www.ePlus.com.

It is now my pleasure to introduce Phil Norton.

Thank you very much for joining us this morning. For the first quarter of our 2004 fiscal year, which ended June 30, 2003, we are pleased to announce our 27th consecutive quarter of profitability, with an 11 percent increase in revenues over the same quarter of last year and a 26 percent increase in earnings per share. The increase in revenues was driven by a 12.4 million or 23.4 increase in sales of products, which resulted from new customers acquired since Q1 '03, and organic growth from our existing customer base.

With an expanding customer base, we have more opportunities to cross-sell Enterprise Cost Management software and services. We believe that our customers are choosing to buy from us specifically because of our ECM services and software. With ECM, the customers can automate their purchases from a single source, ePlus, and lower their headcount, improve visibility into their supply chain, improve transaction velocity and transparency, and reduce both the cost of the product as well as the cost of administering the acquisition and payment process. We have a number of customers today who purchased from ePlus specifically because we provide unique or better services that increase productivity and improve efficiency.

One part of our strategy to provide automated services in this space is our new, internally-focused strategic sourcing initiative which commenced during the quarter. This initiative is designed to bring the best-of-class practices which we provide to our customers to our own internal supply chain. As we have previously announced, we have consolidated our three technology sales companies into a single operating unit. This has allowed us to consolidate our purchasing power into a centralized purchasing unit.

We are beginning to benefit from the same strategic sourcing initiative that we sell to our customers, leveraging purchasing power, better visibility and transparency into our own internal supply chain, better financial controls and contract compliance. In the end, we believe that we will be able to effectively lower our cost of products, and thereby improve our margins, while at the same time reducing our customers' costs by improving their processes.

Our technology sales consolidation and internal strategic sourcing initiative is allowing us to reduce headcount, with the goal of lowering the Company's overhead rate substantially over time. In the last year, we have reduced the headcount by about 25 people. We will continue to engineer our operational systems to optimize efficiencies using our own software to automate processes and reduce costs.

For the quarter, our net earnings increased 17 percent, to 2.3 million from 2 million the prior year. EPS grew 26 percent to 24 cents as compared to 19 cents on a fully-diluted basis. The earnings power of our business model continues to produce very good results, with diverse sources of revenues and gross margin and the ability to invest for the future.

Regarding procurement and content software, we achieved the results we had expected. During the quarter, we completed a content creation project for a Fortune 50 retailer, announced Hearst as a new Procure+ customer, completed an upgrade for a longtime Procure+ user and signed an eProcurement content deal for a national distributor. As we have focused more on the Fortune 500, the sales evaluation and especially the contract closing cycle have lengthened due to the many levels of managerial review of our customers.

Today we have the most robust backlog of opportunities in both of these areas, and we continue to be very enthusiastic about this line of business and the opportunities these software opportunities bring to our ECM marketing plan. On June 9th, we announced a new version of Manage+, our asset management software solution, version 4.0 -- includes our Software License Management module, which has been in planning and development for over a year. With this module, customers will be able to track, manage and assure compliance on all of their software licenses, regardless of the type, enterprise-wide.

With integrated document management, contract management and electronic payment functionality, Manage+ is delivering value to customers every day, including the ability to comply with certain informational requirements of the Sarbanes-Oxley Act, an important requirement for every public company. Our first customer saved over $300,000 in several months.

During the quarter, we announced that we have been awarded a U.S. patent for electronic cross-catalog searching capabilities we developed for our Content+ and Procure+ products. This is the third patent we have received on our intellectual property, and it may be the most significant to date. In sum, we now have a patent on the process that allows users of our electronic procurement and content management products to search multiple catalogs from different suppliers simultaneously, check inventory availability and transfer information on desired products directly into the system their organization uses to generate purchase orders.

The patent raises our profile by sending the message that ePlus is a technology leader in our market space. To the best of our knowledge, it may also give us a clear differentiator from the competition, because no one else can offer patented cross-catalog searching. We expect to be able to capitalize on this distinction every time we present these products to new customers.

Last month, we announced in a press release that we renewed our credit facility and increased the amount which can be borrowed to 45 million from the current $35 million maximum. We also added a new bank to the lending syndicate, the Bank of America, which has been handling the cash management and accounts for our technology sales unit for the past decade. The new three-year multi-bank facility will allow ePlus to accommodate growth in its leasing and fulfillment businesses, and provides the security of an extended three-year term.

ePlus' positive financial performance has made it possible to expand the asset base which can be pledged as collateral, providing more flexibility and increasing the ability of the Company to fund all of its business units under the facility. ePlus's ability to early renew and increase our credit facility affirms our strong financial performance, and solidifies a competitive advantage in the marketplace.

Our fundamental strategy is to supply our customers, improve our sales force, continue to invest in our software and open new sales locations. We are focused on holding the line on cost, but we have made the strategic decision to continue to invest in creating our ECM platform and building the best sales organization for these products. Many of our e-commerce competitors have failed because they couldn't reach the customer, and relied on indirect channels to sell their products. We believe in direct customer relationships, and if you look at our roster of clients, you can see that we have a terrific opportunity to scale our business.

We are continuing to build ePlus into a world-class enterprise-level organization serving the needs of our customers. Our software and services are gaining traction in multiple industries and diverse locations, and among leading companies throughout the United States. We have the financial resources and vision to continually invest in developing new solutions to meet our product needs.

Steve Mencarini, our CFO, and I will be pleased to take any questions.

Molly Sandusky, Friedman Billings.

I was wondering if you could talk a little bit more about the top-line growth and where it was coming from. Was it a particular industry? Was it new customers or existing customers? Just give us a little bit more color on that.

In general, the top-line growth came from our technology sales group, and it was pretty much horizontal across all of our customers, and from almost every location, the sales were up, which is an indication that we're starting to see more spend for capital equipment and for computers in the marketplace.

Can you also talk a little bit more about your backlog, and if there is any way you might be able to quantify the increase you're seeing there?

Well, I think I mentioned before -- in January, we had 10 opportunities in the software and services business, and in June, we had approximately 59 opportunities. So we have seen a dramatic increase in the number of opportunities that are out there, and the only thing that is still happening is the timeframe for these decisions run from 90 days to nine months. So we think that we're seeing a significant amount of traction in that area. The opportunities have increased, and it's just a question of trying to get the sales cycle reduced to getting decisions made in a shorter period of time.

Can you just give us an update on your buyback, and if you were active at all in the buyback this quarter?

This quarter -- we did not buy any shares back this quarter. We are pretty much totally consumed with producing our financial statements, and executing on our contract. The stock performed reasonably well during the last 90 days, and we still have a certain amount of money to use for the buyback. But we have not made any decisions on that yet.

There are no further questions at this time. I will turn the floor back over to you for any further remarks.

I would like to thank everybody for joining us. We look forward to hearing from you soon. Bye.

Thank you. This does conclude today's teleconference. You may disconnect your lines at this time, and have a wonderful day.