Welcome to the ePlus Earnings Results Conference Call. As a reminder, this conference call is being recorded. I would now like to introduce your host for today's program, Mr. Kley Parkhurst, SVP. 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, 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, 2017, and our Form 10-Q for the quarter ended December 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. Reclassifications of prior period amounts related to numbers of shares and per share amounts have been made to conform to the current period presentation due to the March 31, 2017, stock split. The effect of the stock split was recognized retroactively in the stockholders' 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 3-month periods ended December 31, 2017 and 2016. I'd now like to turn the call over to Mark Marron. Mark?

Thanks, Kley, and thank you, everyone, for joining us today. Our third fiscal quarter net sales increased 4.9% year-on-year and adjusted gross billings of products and services were up 7.3%. Year-to-date, our net sales increased 8.4% and our adjusted gross billings of products and services increased 10%. We have continued to execute well on our strategic plan to position ePlus in high-growth segments of the IT market, significantly expanding our cloud, security and digital infrastructure solutions. This strategy has enabled us to grow our revenues at a faster pace than overall IT spending, expand our customer base and drive a favorable mix of products and services. Going hand in hand with our broadened cloud capabilities and increased security offerings is the expansion of our consultative and annuity services capabilities, which enable us to build out long-term recurring or annuity revenue streams. Revenues from security products and services grew at a double-digit rate year-to-date and reached 17.6% of our adjusted gross billings on a year-to-date basis, up from 16.7% in the same period last year. We expect security to remain an important growth driver for our business as it touches almost every solution offering we sell. Our acquisitions of OneCloud and IDS have not only expanded our cloud-enablement capabilities, but also broadened our geographic presence in the Midwest. ePlus has supported our customers' data center needs for years. As cloud services drive innovation and transformation in the data center to support continuous innovation, we have invested in these acquisitions, along with organic hires and training. ePlus recent acquisitions solidify our cloud strategy and strengthen our ability to engage with customers in all stages of their journey to the cloud as a business model for agility and innovation. The OneCloud acquisition allowed us to quickly differentiate ourselves with our customers and strategic…

Thank you, Mark, and thank you, everyone, for joining our call. Our top line adjusted gross billings and gross profit showed positive year-over-year comparisons in the third quarter of fiscal 2018 and year-to-date. In light of the recently enacted reduction in U.S. federal tax, we recognized a onetime tax benefit of $5.7 million from the provisional adjustment of our deferred tax balance for the new corporate tax rate as well as the adjustment of our tax provision from the beginning of our fiscal year to the new blended rate. These adjustments had a positive impact on our net earnings that I'll discuss in more detail in a moment. In the third quarter of fiscal 2018, our consolidated net sales of $342.6 million increased 4.9% from last year's third quarter. Our gross profit increased 3.9% to $76.7 million. The consolidated gross margin decreased by 20 basis points year-over-year to 22.4%. This resulted from several factors, including our land and expand strategy, which led to lower-margin on some large competitively bid projects, partially offset by increases in higher-margin sales of services and a higher proportion of sales of third-party software assurance, maintenance and services, which we record on a net basis. Our operating expenses increased 14.9% to $60.3 million, reflecting higher salaries and benefits due to personnel additions. The increase in salaries and benefits was also attributable to higher variable compensation as a result of higher gross profit. Our total headcount grew by 10.3% to 1,284 from 1,164 a year ago as we added 120 total positions, the majority of which are from the acquisition of IDS in September and OneCloud in May of 2017. General and administrative expenses increased 28.3% due to higher expenses for travel, advertising and marketing as well as the incremental expenses from recent acquisitions, including adjustments to…

Thanks, Elaine. To sum up, fiscal 2018 is shaping up to be another year of solid progress for ePlus. We have an expanded roster of enterprise and middle-market clients, well balanced by industry and geography. We are recognized provider of leading-edge solutions in the fastest-growing sectors of IT, and we are progressively developing a portfolio of services capabilities that differentiates ePlus in the marketplace. Importantly, we have made the investments in people and technology to take us to the next level and deliver superior results for our customers. Operator, I would now like to open the call for questions.

[Operator Instructions]. Our first question comes from the line of Maggie Nolan from William Blair.

It's actually Arjun Bhatia in for Maggie. As we were looking at the SG&A line, can you give us a sense of how much of the increase there is due to sales force expansion versus the acquisition costs this quarter? And what are your expectations on that over the next couple quarters?

Arjun, it's Mark here. So as it relates to the SG&A, our headcount was up 10.3% year-over-year, which was approximately -- or no, exactly 120 employees. I would say 90% of those are customer-facing. So as part of our long-term strategy of building out our solutions in cloud, security, digital infrastructure and services, we're adding headcount in those spaces to be able to go out and touch more accounts with our customers. Over the long-term, I think we'll start to see operating leverage from those investments, some being from the M&A side and some being from the organic side.

Okay. And as we're just looking at your end markets, can you talk about how you're seeing the impact of the recently enacted tax cuts playing out? Is there any particular segment you're getting traction from or anything you've seen so far or expect to see going forward?

Well, a couple different things. One, I think it's a little early on the tax break to tie it to different verticals. So what I can tell you, one, we're excited as a company. With our net earnings being up 23.5%, it allows us to do certain things, whether it be M&A, organic hires, look to invest in some of our infrastructure to build out some of our efficiencies as we address folks internally as well as externally and then potentially continue forward with our stock buyback. As it relates to the market, there's a couple different things, one being too early to tell. But there are some indicators as it relates to some of the job increases out there in the market that I think are good indicators for potential spend as it as the market moves forward. I think the other things that you look at, some of the customers that I've visited with over the last month or so have talked about going from cost-cutting to making money for the business in different areas, whether it be in the digitization space or a couple different areas. So I think it's a little early to tell as it relates to the tax breaks, but we're optimistic on what it holds.

Okay, that's fair. And then if we're looking at your just revenue mix top line, do you have a sense of how much of that mix is services-related versus on the product side or how much you would classify as recurring?

Well, here's a couple of different things, Arjun. We don't break that out. But what I can tell is you we had our strongest annuity services quarter to date. So from that end, we've talked about it on prior calls that part of our strategy going forward was building up both our consultative services as well as our annuity services, and I talked a little bit about our EMS portal and EMS offerings that we built for our customers. So we're starting to see more and more customers looking to offload certain tasks so they can focus on their core business, and we built up those capabilities, which have built up our annuity revenues. So from a long-term visibility and profitability, I think that's good news for us. But we don't break out the product and services piece.

And this does conclude the question-and-answer session of today's program. I'd like to hand the program back to Mark Marron, CEO.

All right. Thanks, Jonathan. Everyone, I'd just like to thank you for taking the time to join us today. We believe that we had a solid quarter, both in terms of revenue. We've continued to keep our margins stable. We've invested in our business and would hope to see operating leverage over time. With that, have a nice day, and we'll speak to you soon.