Good day, ladies and gentlemen, and welcome to the ePlus Earnings Conference Call. At this time, all participants are in a listen only mode. [Operator Instructions]. I would now like to introduce your host for today’s conference Mr. Kley Parkhurst. Sir, you may begin.

Thank you for joining us today. On the call is Mark Marron, CEO and President; Elaine Marion, 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 this afternoon and our periodic filings with the Securities and Exchange Commission, including our Form 10-K for the year ended March 31, 2016, and our 10-K for the year ended March 31, 2017, 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 and we have posted a GAAP financial reconciliation on the Shareholder Information section of our website at www.eplus.com. Please note reclassifications of prior period amounts related to numbers of shares and per share amounts have been made to conform the current period presentation due to the March 31, 2017 stock split. The effect of the stock split was recognized retroactively in the shareholders' equity and in all share data. The financial statements include the effect of the stock split on per share amounts and weighted average common shares outstanding for each of the three-month periods and fiscal years ended March 31, 2017 and 2016. I’d now like to turn the call over to Mark Marron. Mark?

Thanks, Kley, and thank you for participating in today's call with our fourth quarter and full fiscal year 2017 results. As we noted in today's earnings release, the fourth quarter represented a solid finish to the year for ePlus. We achieved double digit growth in sales and EPS in both periods with operating income increasing faster than revenue. Elaine will review our financial results in depth later during this call. So I will direct my remarks to what we consider the key takeaways from our fourth quarter and full year performance and the trends we are seeing on the horizon. First, sales growth in both the fourth quarter and full year of 11.1% and 10.4% respectively, demonstrate that ePlus is well positioned in the higher growth areas of IT spending like security, cloud, digital infrastructure and managed and professional services. Our investments in security paid off again in fiscal 2017, with sales of security products and services accounting for 16.1% of the company's adjusted gross product and services billings. Second, organic growth accounted for most of the year-on-year sales increases, reflecting our ability to provide complex solutions to mid market and enterprise clients, as well as the success of our land and expand program designed to gain a foothold with larger enterprise clients. Third, we have a large and diversified client base of over 3200 mid market enterprise, sled and healthcare clients, which gives us the ability to increase sales of products and services to our existing client base as well as to leverage our presence in new geographies. ePlus' complex technology solution offerings are well positioned for mid market clients and also scale to the largest of enterprise clients. We believe that this balance, along with our vendor and geographic diversification provides us with growth opportunities. And four, we…

Thank you, Mark and thank you everyone for joining our call. The fourth quarter marked another solid period and year for ePlus due to strong revenue and earnings growth. In addition, our consolidated gross margin improved for the quarter and full year as well. The full year results illustrate successful execution of our plan to grow revenue ahead of the market and do it profitably. The forecast for the overall IT spending growth remains in the low single digits, but we continue to outpace the general market, given our emphasis on higher growth segments and services such as cloud and security. We also continue to look for acquisitions as a way to boost our growth further, by expanding our footprint and customer base and enhancing our solutions and technical capabilities. Shifting to our results, in the fourth quarter of fiscal 2017 our net sales grew 11.1% to $332.8 million year-over-year. Our gross profit increased at a faster pace of 14.1% to $76.4 million. Our gross margin of 23% was up 60 basis points. The upside was primarily the result of an increase in sales of financing transactions in our financing segment, and stable margin trends in our technology segment. Our operating expenses increased 14% to $57.6 million. The increase was due to higher salaries and benefits relating to the increased headcount as well as increased variable compensation due to the improved gross profit showing in both business segments. Our headcount was up 9% to 1,173 from 1,074 of fiscal 2016 yearend. As a reminder, the acquisition of the IT equipment and services business of Consolidated Communications in December 2016 added 48 employees, accounting for nearly half of the headcount growth. In addition, the fourth quarter produced the first whole quarter of SG&A from this acquisition. The bulk of the total…

Thanks Elaine. Looking ahead into our fiscal 2018, we are confident that ePlus is positioned to continue to achieve revenue growth that outpaces overall IT spending, thanks to our focus on the higher growth markets of security cloud and digital infrastructure, and building out our services offerings and capabilities to support our clients. The favorable gross margin associated with our business model and our ongoing focus on cost discipline should enable us to continue to achieve operating leverage, while maintaining our strategy of investing in technology and people that will support future growth. Operator, I would now like to open the call to questions.

[Operator Instructions]. Our first question comes from the line of Anil Doradla with William Blair. Your line is now open.

Hi guys, this is Maggie Nolan in for Anil Doradla. You had really strong growth this quarter and I was wondering if you could give us a sense between the breakout of organic and inorganic growth on a year-over-year basis.

Hey Maggie how is everything?

Good thanks, how are you?

Not bad. So as you know, part of our strategy, overall strategy is expanding our footprint, both nationally and on an international perspective. For Q4, our organic growth was approximately 70% of adjusted gross billings and for the year it was approximately 90% of adjusted gross billings.

Okay, great. and then along that same thought process, I know you plan to outperform the IT spend. What portion of that outperformance is going to be organic versus inorganic? Thanks.

Maggie, it's a tougher on that, only because we're talking about the future. So as we've discussed on previous calls, one of the things we look at is both the organic as well as acquisitions that can kind complement what we're doing as a company in our go-to-market, both from a coverage as well as from a technical expertise, a little tough to kind a predict what will happen next year. The intent as we always talked about is we're going to continue to evolve our solution portfolio to provide what our customers are looking for, both now and in the future and would hope to continue to see organic growth, but it's hard to give you a percentage without knowing what M&A may or may not pop in during the year.

Okay, that's fair. And then finally, you have been pretty acquisitive over the past year. Have you seen any changes to the competitive environment in terms of M&A or any changes to the deal pipeline, and do you intend to continue that acquisitive strategy going forward? Thanks guys.

Thanks Maggie. So, in terms of -- we'll continue to look at opportunities. The one thing that's nice is as I know as we're financially stable, we've got an unlevered balance sheet if you will. So we'll continue to look at M&A that can build out, whether it would be a territory coverage, whether it gives us some technical expertise like we gained with the OneCloud acquisition that's going to expand what we're doing in that space. The market is still ripe for acquisitions. I think as the market continues to evolve, you are seeing some of the smaller potential resellers that are out there looking to be acquired or they're going to have to make investments to kind of grow their business. So the pipeline is still same as it's always been and we'll continue to look at what's right for ePlus both from a coverage, technical expertise and from a people perspective.

Thanks a lot.

Alright, Maggie. We'll see you soon. Tell Anil we said hello.

I will, thanks.

[Operator Instructions]. Our next question comes from the line of Matt Sheerin with Stifel. Your line is now open.

Yes thanks and hello everyone. So just a few questions from me. On the technology segment, on the gross margin, it looks like that was as you pointed out -- that was -- it seemed like the first quarter in several quarters where you didn't see year-over-year growth, and given the continued adjustment on a netted down basis in gross billings, and then also it sounds like services and security continuing to increase, it was a little surprising that it was down. You also explained that part of that was due to large volumes with larger customers and I know that you are penetrating both mid-market but also with your scale, your larger enterprise customers. So as we -- maybe just explain that but as we look forward, how should we think or you think about gross profit margin versus gross profit dollars as you shift and try to penetrate these larger customers?

Well Matt, a couple of different things there. One, it was relatively flat for the quarter, but for the year our gross margins are actually up. So at least for myself, is I never look at a quarter as a trend. It takes multiple quarters before you get to a trend. The other thing that we have seen is at least from what we can see from the other public companies out there is our gross margins are at the higher levels if you will. We're going to continue to build out our service offerings. As we discussed on previous calls, they tend to have higher margins and a lot of customers are looking for those types of services, optimized services that we're providing; and over time we hope that will help as it relates to gross margins. As it relates to the quarter, there is always a couple of maybe large deals or two that maybe are at lower margins that could affect that. We have talked about our land and expand program, which is basically where we will go into some of the bigger enterprise accounts, we'll let them know about our capabilities, and based on what they are looking for will -- it may be that we take the first deal at a lower margin and then over time we'll hopefully look to expand those margins out.

On the leasing business, which obviously, that’s where you got the upside and really strong results there. And I know you have talked about that being lumpy. But is that -- are you starting to see a trend where that’s a better option for customers in terms of leasing versus buying or any kind of trends there that we should think about as we head into next quarter, or do you think that’s going to be down sequentially?

Yes, so in terms of whether down or not Matt, its always because our finance business tends to be lumpy. We had a nice -- a few transactions that contributed to that this quarter. We are seeing some things in the government financing space and some other areas. We do see that as the market shifts somewhat to a software versus a hardware market, that there is opportunity there for our financing team. So feel good about what they did for the year and what they did for the quarter, but it tends to be lumpy.

And on that OneCloud acquisition that you made, you talked about the opportunities there in the consulting side. You've worked with them. Could you give us an idea of the revenue contribution, and what you paid for that?

This one is more -- a little outside of what we normally do. This is more of a transformational acquisition for us. So this was a pure, what I'd call almost a consulting slash technology play for us. What it does is it enhances and expands what we're doing in the cloud. So they bring consulting professional services, software development. They've also got a training curriculum that seems very well received by a lot of our both partners as well as customers. The purchase price was approximately $13.3 million, $13.5 million.

Which includes an earnout.

Which includes an earnout, and then, with that, what that really brings to us is -- its going to help -- it continue to help us help our customers on their journey both to and from the cloud. It's going to help with dev ops enablement. It's going to help with infrastructure automation and orchestration. If you think about the software defined like for example SDN, software defined networking, it's going to help us to expand our capabilities in that space and then the training that I mentioned. So this one is more of a transformational play and leveraging what they have on top of what we've already had at ePlus to provide more to customers. What we've seen, which is the nice, since we've worked with them over the years now is for example, we've done a deal and I think we've talked a little bit about it last quarter, where we went in and did a envisioning session, a cloud envisioning session, that then lead to about $90,000 worth of services almost kind of a proof of concept, that then lead to $2 million opportunity at very good margins. And it looks like there is more opportunities to go as it relates to that customer. So we're very much aware of their capabilities. We've worked with them over the years and feel pretty good about what they add to our capabilities going forward.

Okay. So in other words, not a really big revenue contributor, but certainly something that you can build on and use as a marketing and consulting tool, is that how we should think about it.

Hey Matt. what I'd look at it is, it's an ad on to stuff that we're already doing. Their software developing capacities really add to what we're offering to our customers. So we think we have the ability to go back to our existing base as well as bring on net new customers, both with their training capabilities. And in fact, some of their training curriculum we think we can go back to our 32,000 plus customers, with what they do there as a foot in the door to potentially do more. They are mainly a services play as I mentioned upfront right now. So we bring the -- I guess the product knowledge side of it and they're adding some consultative services and software development on top of some of the services we bring to the table.

Okay, thanks so much. And just last quick question, just regarding your biggest vendor, Cisco. Could you tell us what percentage of revenue was for the quarter and for the fiscal year?

For the fiscal year we ended at 47% of net sales for Cisco. I don't have the core handy with me unfortunately. It may have been a percent more for the quarter.

Okay, alright. Thanks so much guys. Appreciate it.

Thank you.

All right, Matt. See you soon.

Thank you. And our next question comes from the line of Matthew Galinko with Citi. Your line is now open.

Matt?

Matt?

Hey, can you hear me now?

Yes, we can hear you.

All right. So just one question. Regarding the daily side of expense for full lifecycle of your services, I'm wondering how competitively they are contested, what's the kind of time to get something like that closed is? Are they more readily closed with less competition or are they refining them pretty how [ph] and we test it.

Well in this scenario, it wasn't hotly contested. I'd love to tell you it was a two-day sale Matt, but unfortunately that's not the case. The big thing we're trying to highlight with that deal was it involved the full lifecycle of all of our services that we bring to the table. So, it started off with assessments across, from a compute, storage, security, networking and cloud readiness. So, we did the assessments for the customers and got a real detailed information on their environment. The next step to that was we have what we call an executive services portfolio. And this is basically where we have CIO like capabilities that will go in and work with the customer to kind a build out a roadmap of the things that they have to think through. The second thing we did for them was being vendor agnostic if you will. We did a detailed analysis of all the compute, storage and networking vendors, just the top ones if you will and kind of mapped what they were looking for to the ideal solution. And then the last piece that was nice and included our staging facility services, our project management, our professional services our enhanced maintenance services support that we provide for customers, and we think there is more add on sales as we go forward with managed services and other things. So, it was a real nice -- what I'd call consultative sale, where we understood what the customer was looking for, we understood their environment, we send in the consultants that could actually help them build a solution that addressed what they were looking for and then helped them across one reducing their number of vendors. We standardized their IT footprint. I think there was operational cost savings. So, there are multiple things that went into it that made it to win-win for both us as well as that customer.

I guess just follow up is how reproducible is that -- is there a fair number of those in the pipeline at any given time? Or there is it something like you are getting better at identifying and sourcing the opportunity and bringing into fruition?

That’s a hard one Matt. Here's a couple of different factors that may answer your question. One, a lot of people are doing what I call data center redesigns, trying to figure out how to automate and orchestrate their existing legacy systems or potentially move to the cloud. As we've talked about in previous calls, we've really gone to an assessment led selling model as much as possible. What was nice about this was this was five assessments that were done up front, where once you get that information and you put the right people in front of the customer, you should be able to figure out what the solution is. So I think the big take away is here is one, these sales take some time. Two, I do believe there is more than a few out there where customers are looking for this type of help from an ePlus like company. And then three, there is real upside in savings for those customers as we go forward.

Thank you. And I'm showing no further questions at this time. I would like to return the call to Mr. Mark Marron.

Okay, thank you operator, and thank you everyone for joining us today. We look forward to speaking with you on future calls and roadshows. Have a good day, and thanks for your time. Take care.

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude the program, and you may all disconnect. Everyone have a great day.