ePlus inc. (PLUS) Q1 2013 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the ePlus Earnings Results Conference Call. [Operator Instructions] As a reminder, today's conference call is being recorded. I'd now like to turn the conference over to your host, Mr. Kley Parkhurst, Senior Vice President. Please go ahead.

Thank you, Ellie. 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, 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 & Exchange Commission including our Form 10-K for the year ended March 31, 2012, and our Form 10-Q for the 3 months ended June 30, 2012, when filed. The company undertakes no responsibility to update any of these forward-looking statements in light of new information or future events. I’d now like to turn the call over to Phil Norton. Phil?

Thank you, Kley. We are pleased with our financial results for the quarter. Revenues increased 36.8% and fully diluted earnings-per-share improved 131.8%. Our significant first quarter revenue and earnings growth, despite macroeconomic challenges, resulted from our commitment over the past year to invest in advanced technology solutions that are high in demand from customers. Our solution set and engineering delivery capabilities continue to differentiate ePlus from the competition as we capture the growing demand for IT equipment and services within our customer base and for new organic and acquired customers. In particular, our focus on cloud, data center, collaboration and solutions is resonating in the marketplace and resulted in attracting new customers, penetrating existing customers and increasing market share. Accompanying the solid demand from our customers, our gross margin slightly improved as compared to the prior year. And we expanded our staff by 81 people, part of our strategy to capture market opportunities in key advanced technology solutions areas and to increase our geographic footprint. We have invested in highly skilled technical personnel, which allows us to engage customers at an architectural level. As a result, we can further fulfill our customers' needs for collaboration, audio visual, security and staff augmentation, and can provide a full array of managed services, including a security operations center. As compared to many of our peers, we offer a full range of services, including logistics and supply chain software. And our strong balance sheet is another competitive differentiator as customers assess the strengths and weaknesses of their trading partners, a significant factor in today's challenging economic environment. We believe that is one of the reasons that our customer base includes a number of Fortune 100 companies. Furthermore, our strong financial position allows us to take advantage of shareholder-enhancing opportunities, such as the stock buyback. For the June quarter, we repurchased approximately 19,400 shares at an average cost of $29.46 per share, for a total purchase price of $572,000. During the quarter, we continued to add to our numerous awards, engineering certifications and capabilities, as we achieved the FlexPod Premium Partner standing, recognizing ePlus for advanced competencies and certification in implementing virtualized data center solutions, based on a Cisco UCS server, the Cisco network switches and NetApp unified storage systems. Furthermore, we introduced the ePlus Advantage Portable Video Conferencing offering, a modular, low-cost alternative based on Cisco solutions for whole-room video conferencing as compared to fixed installations. Finally, we commenced our eCloud Readiness Consultation service, where we identified the best cloud adoption strategy and create a prioritized roadmap tailored to the customer's unique requirements. EPlus' success has been driven 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 geographic locations and improving our efficiency and delivery capabilities. Along with continuing customer adoption of cloud computing, we see the 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 the financial results.

Thank you, Phil. On a consolidated basis, total revenues for the quarter increased $65.8 million, or 36.8%, to $244.7 million as compared to $178.9 million recorded in the prior fiscal year's first quarter. Net earnings increased 117.7% to $8.1 million as compared to $3.7 million in the prior year's quarter. Fully diluted earnings per share increased 131.8% to $1.02 per share from $0.44 per share. In the Technology Business segment, total revenues increased 38% to $236.3 million, compared to $171.2 million in the quarter ended June 30, 2011. The increase in revenues was due to increases in customer demand, particularly from Fortune 100 companies and investments we've made over the last 12 months to improve our product and services offerings and expand our geographical footprint. Gross margin on sales of products and services was 17% and 16.9% during the quarters ended June 30, 2012 and 2011, respectively. The increase in gross margin was affected by an increase in the amount of vendor incentives earned and product mix during the period. Total costs and expenses were $225.4 million, compared to $167.2 million in the same quarter last year, an increase of 34.8%. 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 $6.8 million to $10.8 million for the quarter. Moving to our Financing Business segment. Total revenues increased 10.1% to $8.4 million, as compared to $7.7 million in the quarter ended June 30, 2011, primarily due to an increase in the net gain on sales of financial assets. Total costs and expenses increased 5.5% to $5.7 million due to increases in direct lease costs and professional and other fees. Segment earnings before tax were $2.7 million, compared to $2.3 million for the same quarter in the prior year. As of June 30, 2012, the company had $51.9 million of cash and cash equivalents and short-term investments, as compared to $41.2 million on March 31, 2012. During the quarter, the company increased the sales of certain financial assets as part of its working capital and portfolio management process, which generated additional cash and cash equivalents. As of June 30, 2012, the company had total shareholders' equity of $227.4 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. Operator, could you please open the line for questions?

[Operator Instructions] I'm showing no questions at this time. I would like to turn the conference back over to Mr. Phil Norton for any closing remarks.

We'd like to thank you very much for taking the time for our conference call. If you have any questions, you can contact Kley Parkhurst. Thank you very much.

Ladies and gentlemen, this does conclude today's conference. You may now disconnect, and have a wonderful day.