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 follow at that time. [Operator Instructions]. As a reminder, this conference call is being recorded. I would now like to turn the call over to Kley Parkhurst, SVP. You may begin.

Thank you, Latoya. And thank you, everyone, for joining us today. With me are Phil Norton, Chairman, President and CEO of ePlus; Mark Marron, Chief Operating Officer; Elaine Marion, 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 exchange release we issued this afternoon and our periodic filings with the Securities and Exchange Commission, including our Form 10-K for the year-ended March 31, 2015, and our 10-K for the quarter and year-ended March 31, 2016, 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 non-GAAP financial measures. So we have posted the GAAP financial reconciliation on the Shareholder Information section of our website at www.eplus.com. I’d now like to turn the call over to Phil Norton. Phil?

Thank you, Kley. And thank you, everyone, for joining our fourth quarter earnings call this afternoon. We are pleased with ePlus performance for the full fiscal year 2016 and are particularly pleased with our execution. Many of our financial metrics including revenue growth, gross margin, net income, non-GAAP EPS were solid, and underscore our view that our go-to-market strategy continues to achieve our objectives. We believe we are capturing market share through organic growth as evidenced by our full year net sales, which increased 5.3% and adjusted gross billings of products and services growth of 8.5%. We made further strides in expanding our transformative technology solution set and posted solid performance with our existing client base while also continuing to bring on new logos. We are satisfied with the investments we have made in our service-led model, our advanced security solutions, and steady but disciplined M&A strategy. In addition, we remain very pleased with the customer activity we’re seeing in high margin annuity based solutions and third party maintenance contracts. We believe we remain on the right path. Our full-year gross profit, adjusted EBITDA, and non-GAAP EPS all grew well ahead of our net sales, demonstrating the increased value we are making for customers. Our results for the fourth quarter were particularly strong. For the quarter, net sales increased 12%, while adjusted gross billings of products and services increased 17.4%. Gross profit rose 14%, adjusted EBITDA increased 11.8%, and non-GAAP EPS grew 15%. The overall IT landscape remained very dynamic and our customers are taking multiple strategies to address their ongoing technology needs. We continue to see disruptive new technologies gaining tractions in markets such as cloud, security, and hyper-converged infrastructures. We believe we are addressing the opportunities generated by these transformative technologies and are well positioned to capitalize on those trends in the market. With that, I will turn the call over to Mark.

Thank you, Phil. As Phil outlined, fiscal 2016 was a year of solid achievement for ePlus. Our results for the year showed solid revenue growth, margin expansion, and growth through both acquisition and organic expansion. We work to build our services capability, expanded our expertise and security, and grown our footprint both nationally and in the UK. All of these efforts contributed to a successful fiscal 2016. We have been investing in capabilities in professional and managed services for several years, and as our scale grows, we are able to win larger and more sophisticated contracts. These clients then look to ePlus for incremental support and staffing as well as enhanced maintenance services. One notable success in recent months was a contract we won with a multi-billion dollar media company to manage a new datacenter. We won a multi-year contract for datacenter services and in the weeks following we added several additional team members from our staffing services team. This kind of success helped drive year-over-year growth of 31.9% in services gross profit for the fiscal year compared with 14.8% in fiscal 2015. As the services business scales, top line growth rates will naturally slow. Still we are confident that the services business will make further contributions to the business in fiscal 2017 and beyond. As we look at the industry trends for fiscal 2017, we see a mixed environment that could lead to slower growth and longer sales cycles industry-wide. Clients are continuing to assess their options in storage and cloud computing, which can extend sales cycles, lead to solutions that could carry fewer opportunities for add-on services as well. In addition, the market has shown an overall slowdown in IT spending with Gartner estimating growth of 1.3% this calendar year as compared to 2.9% in 2015. Despite these…

Thank you, Mark. As Phil and Mark outlined, our results for the fourth quarter and full year 2016 show we are moving ahead of industry growth rates and scaling the business while growing margins. Fourth quarter results were particularly strong with double-digit growth across key metrics. In the fourth quarter fiscal 2016, consolidated revenue grew by 12% to $299.4 million boosted in part by certain orders that were in transit at the close of the third quarter. Gross profit rose 14% to 66.9 million yielding a consolidated gross margin of 22.4% from 22% in the year ago quarter. This margin expansion reflects a changing sales mix in our technology business which I will discuss a little later in the call. Adjusted EBITDA rose 11.8% to 18.2 million as higher operating expenses offset some of the increase in gross profits. Diluted earnings per share for the quarter were $1.36, up 11.5% from a $1.22 a year ago. This quarter we are introducing non-GAAP diluted earnings per share to give the market a clear understanding of our operating performance. The non-GAAP figure excludes acquisition-related amortization expenses and other income. On this basis, fourth quarter non-GAAP diluted earnings per share were up 15% to $1.46. Turning now to the quarterly results from our technology segment, which accounted for 97% of total net sales, adjusted gross billings of product and services increased 17.4% to 399.1 million, reflecting a strong growth in demand for IT solutions. Net sales rose 12.9% to 292.2 million. Adjusted gross billings, our sales of product and services adjusted to exclude the cost incurred in the sale of the applicable third party software assurance, maintenance, and services. Gross margin on products and services was 20.6%, a 60 basis point increase from the fourth quarter of fiscal 2015. This increase was driven…

Thank you, Mark and Elaine. In closing I would like to reiterate that ePlus remains committed to our long-term strategy of investing in the business to help ensure that we can continue to take market share. We are well positioned to grow faster than the market. The acquisition of IGX in the third quarter increased share buybacks in the fourth quarter and steady investment tempo in customer base and headcount to further drive organic growth all underscore our long-term strategy to increase shareholder value. We maintained a solid balance sheet which allows us to make strategic acquisitions, invest to grow the business, and further enhance shareholder value. We would like to thank our employees, customers, and shareholders for their support and confidence which enables us to grow, invest, and make a better company. We believe our culture of excellence and focus on providing the best customer experience truly differentiates us from the competition. ePlus is where technology means more. I would now like to open the call for questions. Thank you.

Thank you. [Operator Instructions]. The first question is from Anil Doradla of William Blair. Your line is open.

Hey guys, congrats on the results.

Hi Anil.

I had a couple of questions, Mark you talked about extended sales, clients taking a little longer for their purchases and you eluded to some macro overhang in terms of the demand environment. Can you build up a little bit more on that, what are you seeing more particularly -- is it in any particular geography end-markets or and more importantly how do you think this plays out and I had a couple of follow ups?

Okay, not a problem Anil. Hey, so a couple of different things, so if you look at it by vertical, our five top verticals are still the same top verticals, so our SLED technology, finance, and healthcare all had pretty good quarters in years. We saw a little slowdown in the telecom, media and service provider space, but nothing significant. When I talked about some of the deals, what we’re seeing is in some of the deals there in terms of the size and what we are dealing with from a solution standpoint are taking a little bit longer. The thing, the main thing I was trying to highlight there is that we’re still very cautious about the overall growth only because a lot of the major OEMs that we play with have posted flat to modest growth. The IT industry analysts are projecting small growth, but we still believe in our strategy and we’re going to continue to invest in resources and offerings that our customers are looking for.

So Mark you talked about the telecom, media, and entertainment, is this tied to large service providers or is it across the board on that front?

It’s actually across the board Anil.

Okay, very good. And then you talked about outgrowing obviously the overall market. What are you looking at in your projections, the overall market for 2017, do you have some idea how you are looking at it?

Well meaning, one as you know, Anil we don’t give forward-looking guidance in terms of growth. If you look at Gartner I had mentioned in my piece in terms of what the Gartner growth was for the year, that they were estimating 1.3%. The reason we feel that we’ll continue to modestly outgrow the IT market is a couple of different things. We’ve got diversification across different verticals, we have got diverse solutions, we have got teams that are looking at not only solutions that our customers need now but emerging technologies, we have got teams that are building relationships with those OEMs both existing as well as these emerging technology vendors. So, we are going to provide solutions that our customers our looking for both in today's market and in the future market. The other thing is we still believe in our strategy around cloud and security and infrastructure management. All kind of overlaid with services, so we are going to continue to invest in both resource and offerings that kind of build out our capabilities and our footprint both nationally and potentially beyond.

Very good and you eluded to security here. I mean Cisco on its results kind of talked about an okay quarter, but if there was a highlight, clearly security was a highlight that they brought out. Obviously, you guys are plugged in, Cisco is a big customer. So how are you looking at kind of security in general, can you give some color as to how much your security products grew during the quarter and given that assuming the Gartner's estimates are kind of what the industry is flattish, how should we be looking at the security product line for you guys, I mean would that outgrow the overall company group by twice or thrice, any color would be great.

Yes, not a problem Anil. So security if you think about it, I think we mentioned in one of the releases, security for us is approximately 16% of our gross product and services. It is one of our major focus areas. If you think about security at a very broad brush, I mean security is really a boardroom topic. I mean it is something that is top of mind for not only the board but any public company or any company for that matter. If you look at some of the public companies that have had some issues, they’ve damaged their reputation and cost a lot of money to fix the problems that those security breaches caused. A couple of different facts that will give you a feel that security is not only here today but for the future is, I think what Symantec said that there was 19.2 million new malware variants just in February 2016. So when I kind of hear that kind of stuff is, what we try to pitch to our sales team is hey, what's working today may not work tomorrow. So security is top of mind not only internally within our company buts its top of mind with all of our customers. So, we have a very focused security sales management team that’s responsible for driving both the vision and the solutions that we’re selling, and we have everything from assessments and vCISO strategies that we roll out to our customers that they are looking for from ePlus.

Great, and final question, Elaine I think there was $7 million of push outs that’s what you talked about I think on last quarter, did it actually turn out to be 7 million or was it larger than that?

The incremental change in our trends in shipments in transit last quarter was 7 million and those were all recognized in the quarter on the Q4.

Okay, so it wasn’t large, it was pretty much at that level.

No, as I reported in Q3.

Okay, very good. Thank you very much guys.

Thank you.

Thanks Anil.

Thank you. The next question is from Matt Sheerin of Stifel. Your line is open.

Yes, thanks and good afternoon to everyone. Just a few questions for me, just to get back Mark to your comments regarding a more cautious outlook, you guys are obviously growing and your strategy is working. Are you seeing anything sort of near term, your six weeks or more, actually almost two months into the June quarter, have you seen anything near term that makes you more cautious in terms of your outlook or is that sort of -- have been your tone for a while now?

Yes Matt, nothing from what I'd say customer spend. So we are not hearing anything from customers in terms of slowdown or budgets being pulled back at this point. The reason for being cautious is just some of the stuff that we’re seeing and hearing in the market. So, without naming names, if you look at some of the major OEMs that are out there that are posting their results, they are modest to flat to down. You have got the IT, Gartner that’s lowered their estimates for IT spending for the year. But once again we believe pretty strongly in our strategy. So we’re not tied to any particular vertical, we’re not tied to any vendor or any particular solution. And what we believe our consultative-led approach, we will be able to sit with clients, understand what they’re looking to accomplish from a business outcome, and attach the appropriate either product, service, and/or solution.

And because you are taking that sort of -- that approach offering, hardware services solutions, etc are you seeing the deal size bigger, penetration within your customers figure and therefore it could be fairly lumpier going forward as a result?

Well, that’s kind of tough to predict Matt. If you look at our quarters this year they were fairly lumpy. So I think it is safe to say that, that would probably carry forward. When I look at it, if you look at our overall year in terms of numbers and percentages that’s probably the best way to look at our business. To look at it one quarter, we have a tendency whether based on seasonality or a major vendors in the fiscal year that the numbers may jump up a little bit. But if you look at in on an annual basis I think you have a better feel for what we think we’re doing as we go forward.

Okay and could you tell us the percentage of revenue from maintenance sales and services?

Matt we don’t break that out but what I can tell you is maintenance is -- I don’t want to call it the golden cash cow but that’s where you are providing the kind of the first line support to your customers. So that’s where you have the ability to build customer stickiness and loyalty. We’ve built a team that does nothing but focus on renewals and first level support and we’re actually looking to expand that with some of our managed services and enhanced maintenance service offering. So it is a key focus but it is not something we breakout.

Matt, you may have been asking about the total reclassification from growth to net and that factor for the quarter was 27% of growth billings as compared to I guess, the same quarter last quarter which was 24%. And on annual basis the reclassification was 25% of growth billings versus the previous year in fiscal 2015 was 23%.

But that include software as well right?

Its software maintenance and third party services anything that requires reclassifying.

Okay I was just getting at the maintenance and software because that sounds like that’s the key driver of your margin expansion.

Well no Matt, I would not say that. If you think of some of the things we’ve talked on previous calls we continue to build, we continue to invest in services both headcount offerings and our capabilities. So it is not just the maintenance that nets the gross if you will. Its building out our service capabilities which traditionally are bigger margins than product margins.

Well exactly. Well that was including services, that’s what I was trying to get at and figuring out the growth in services and maybe a better metric to look at for you guys is the personnel or the headcount related to your services business as a way to measure the growth there? Whatever way you can provide to us so we can have a little bit of better visibility going forward?

Right, you can do that, you can look obviously at the way our headcount structure is setup but also Mark, I think in his comments said that the services gross profit did grow just over 30% on a year-over-year basis versus I think it was 14.8% last year.

Yeah, that's it, that is helpful. Okay, that is very helpful and then could you tell us what the contribution from IGX in the quarter was, the acquisition?

Well, we don’t -- hey, Matt we don’t break out IGX specifically but when we acquired IGX in the early December timeframe of 2015 on a trailing 12 months, they were at net sales of 51 million.

51 million, okay.

51 million at that point. Now, one quick thing to note there, as we have talked about in previous calls part of our strategy is to expand our national footprint and now with this case, with IGX what it gives is besides giving us some really good people in accounts we picked up some security expertise that fits with one of our core focus areas. And also picked up a UK presence that potentially over time we can invest in and get them up to speed like we are in the U.S. and leverage accounts from the U.S. to the UK and UK back to the U.S. if you will. But that is something that will take time and investment for that to happen.

Okay, and could you tell me what percentage of revenue came from Cisco, either for the quarter or the year?

It is always around 48% Matt, so I don’t have the exact, we are trying to find it real quick but we are normally in that 48% to 49% give or take.

Okay, and…

And we are just looking to get to the exact percentage.

Okay, and the other 10% suppliers, okay, and just lastly and I appreciate you taking all these questions, just concerning the growth in the technology end market, is that -- because I know Mark you have made some key acquisitions in West Coast in the last couple of years and is that part of the reason why you are seeing good cross selling opportunities or is that just a market that's making an accelerated move to secure to cloud and next generation technologies?

Hey Matt, what I will tell you, yeah I would think that has it contributed to our growth, yes. I would still consider that organic. What as we have talked about on other call in our acquisition strategy it's can we expand our footprint, regionally or nationally and now potentially internationally, right. Can we pick up the technical expertise or enhance what we maybe have and then if accounts and people, so in that case the ones that you are talking about on the West Coast we believe has it contributed sure, because you have cross sell opportunities. We cross train and try to up sell both our existing reps, the existing tech -- ePlus tech reps on what we picked up from the acquired company and then vice versa.

Okay, that's it from me, thanks a lot.

Alright Matt, take care, we will see you soon.

Thank you. There are no further questions in queue at this time. I will turn the call back over to Phil Norton for closing remarks.

Thank you for your time and interest today. We look forward to speaking with you again next quarter.

Thank you.