ePlus inc (PLUS) 2013 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the ePlus earnings results conference call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will be given at that time.

(Operator Instructions)

As a reminder, today's call is being recorded. I'd now like to turn the conference over to your host for today, Mr. Kley Parkhurst, Senior Vice President. Please go ahead.

Thank you, Mary. And thank you everyone for joining us today. With me are Phil Norton, Chairman, President and CEO of ePlus; Elaine Marion, our Chief Financial Officer; and Erica Stoecker, our 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 in the earnings release we issued yesterday and our periodic filings with the Securities and Exchange Commission, including our Form 10-K for the ended year and March 31, 2012 and our Form 10-Q for the three-months ended September 30, 2012 call when filed. The Company undertakes no responsibility to update any of these forward-looking statements in light new information on future events.

I would now like to turn the call over to Phil Norton.

Thank you, Kley. We are very pleased with our financial results for the quarter. Revenues for the quarter increased 27.7% and a fully diluted earnings per share improved 49.4% on a year-over-year basis. Despite macro economic challenges, we experienced robust revenue growth, driven particularly by our largest customers. This growth reflects the fact that large enterprise customers are modernizing their infrastructures with technologies that ePlus is very well positioned to provide, such virtualization, security, and Bring Your Own Device solutions. Customers are choosing ePlus because we have the capability to provide integrated technology solutions for these critical projects, including architecture, design, project management, implementation and supply chain logistics. Our continuing financial strength and our alignment with top vendors such as Cisco, VMware, NetApp, HP and others make ePlus a trusted resource and a desirable partner for our customers' most crucial projects.

Our results are continuing to reflect the investments we have made to position ePlus as a systems integrator, able to provide the most in-demand advanced technology solutions, as well as acquisitions and expanded market presence in both new and existing markets, which align with our strategic plan. Accompanying the solid demand from our customers, our gross margin for the quarter remained steady at 18%, as compared to 18.1% the prior year. During the quarter we continued to add our engineering certifications and capabilities and rolled out new solutions. We announced virtualization, security and the cloud readiness assessment service, both designed to facilitate customers on boarding to the cloud. We also were awarded a healthcare specialization by VMware.

EPlus' success has been driven in part by our ongoing commitment to deliver the most advanced technology offerings. Looking ahead, our strategy remains committed to investing in our people, acquiring new technology capabilities, and expanding geographic locations, and improving our efficiency and delivery capabilities. Along with continuing customer adoption of cloud computing, we see numerous opportunities to continue growing the business and are well-positioned to best serve our customers.

With that, I would like to turn the call over to Elaine Marion, our CFO, who will discuss financial results.

Thank you, Bill. On a consolidated basis total revenue for the quarter increased to $56.4 million, or 27.7%, to $260.1 million, as compared to $203.7 million reported in the prior fiscal year second quarter. Net earnings increased 42% to $10 million, as compared to $7.1 million in the prior-year quarter. Fully diluted earnings per share increased 49.4% to $1.27 per share, from $0.85 per share in the prior year. In the technology sales business segment, total revenues increased 28.7% to $251.8 million, compared to $195.6 million in the quarter ended September 30, 2011. The increase in revenues was due to increases in customer demand, particularly from Fortune 100 companies and investments we have made over the last 12 months to improve our product and service offerings and expand our geographical footprint.

Gross margin on sales of products and services was 18% and 18.1% during the quarters ended September 30, 2012 and 2011, respectively. And 17% for the quarter ended June 30, 2012. The year-over-year change in gross margin was primarily affected by the amount of vendor incentives earned during the period. The sequential change in gross margin was primarily due to higher sales of third-party software assurance, maintenance, and services during the second quarter of fiscal year 2013, which are presented on a net basis. Total costs and expenses were $236.9 million, compared to $186.4 million in the same quarter of last year, an increase of 27%. The increase in costs and expenses was primarily driven by increases in cost of sales, products and services, which was consistent with the increase in sales of products and services. In addition, salaries and benefits increased as a result of our investment in sales and support personnel and strategic acquisitions. Segment earnings before tax increased $5.7 million to $14.9 million.

Moving to our financing segment, total revenues were $8.3 million, as compared to $8 million in the quarter ended September 30, 2011. Total costs and expenses increased 15.8% to $6.2 million due to increases in direct leads costs, bad debt expense and salary and benefits, which increased due to higher commission. Segment earnings before tax were $2 million, compared to $2.6 million for the same quarter in prior year. As of September 30, 2012 call the Company had $45.9 million of cash in short-term investments, as compared to $41.2 million on March 31, 2012. As of September 30, 2012, the Company had total shareholders equity of $238.7 million and 8.1 million shares outstanding, as compared to $219.6 million in shareholders equity and 8 million shares outstanding as of March 31, 2012.

That concludes our prepared remarks. Mary, would you please open the line for questions?

(Operator Instructions)

Gunnar Hansen, Sidoti.

Guys, how you doing? I have a few quick questions. In terms of some of the operating expenses, obviously you guys have made some investments on expanding your sales force and geographically as well. In terms of some of the salaries and benefits, should that continue to normalize on a per-dollar basis going forward, or how are you guys kind of investing in that -- what's the investment level now?

The salaries and benefits is consistent with the increase in gross margin dollars. As those dollars increase, obviously the commission expense increases. That's one of the driving factors, as well as the increase in headcount. The technologies segment increased in headcount by about 93 on a year-over-year basis. So, that also equates to the increase.

Okay. Got you. Are you guys looking to continue to add more people, or what's the outlook there?

Well, that kind of depends on the business and how fast it grows. The one thing that we are continuously looking for is high-level engineers because the business is changing dramatically to the requirement of that for most of our ongoing solutions. So, as those grow, we will be adding more engineers than any other set of people.

Okay. And then, generally speaking, how are things kind of been trending in this quarter? What are you guys been kind of hearing from your customers? How are things looking out there?

That's a little forward thinking to know what they're going to do. We think that there is going to be some ups and downs because of the Northeast, which we have a big presence. I think the hurricane is going to delay some of the orders that have been placed, and they may pick up before the end of the quarter -- we think they will, but we can't be sure of that.

And as far as our business, it kind of goes with the economy. As the economy starts to accelerate, we accelerate. As the economy slows down, our growth slows down a little bit.

All right. That will do it. Thank you.

Thanks, Gunnar.

(Operator Instructions)

I show no further questions, and would like to turn the conference back to Mr. Phil Norton for closing remarks.

I would like to thank you very much for taking the time for our conference call. If you have any questions, please contact Kley Parkhurst. Thank you very much.

Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program, and you may all disconnect at this time.