Good day, ladies and gentlemen. Welcome to the ePlus Earnings Results Conference Call. As a reminder, this conference call is being recorded. I would like to introduce your host for today's conference. 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, CFO, Darren Raiguel, COO and President of ePlus Technology, 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 Security Exchange Commission, including our Form 10-K for the year ended March 31, 2021, and subsequently filed quarterly reports, including our Form 10-Q for the quarter ended December 31, 2021, 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've included a GAAP financial reconciliation in our earnings release, which is posted on the investor information section of our website at www.eplus.com. I'd now like to turn the call over to Mark Marron. Mark.

Thank you, Kley. And thank you, everyone, for participating in today's call to discuss our results for the third quarter of fiscal 2022. ePlus delivered strong financial results in our third quarter. Our performance highlights resilient IT spend in the marketplace and the successful execution of our growth strategy to capture share in our focused end markets, including the mid-market, enterprise, and public sector. Notably, customer demand was broad-based in third quarter, with growth across all customer size segments and nearly all end markets. Our higher-than-market growth rates, despite continuing supply chain challenges, demonstrate that our strategy to drive consultant, advisory and management services, security, and hybrid cloud solutions is delivering what our customers demand today. We are confident that ePlus remains well-positioned for the future with a strong Balance Sheet, deep engineering expertise, and unique value-added financing alternatives. Our adjusted gross billings increased 16.5% year-over-year to $685 million in the third quarter and on a year-to-date basis increased by more than 14% to nearly $2 billion. Net sales in the quarter grew by 15.7% year-over-year to $495 million, and year-to-date sales increased 12.6% to $1.37 billion. Given strong top-line growth and the positive operating leverage inherent in our business model, earnings per share, again, significantly outpaced sales growth. In the third quarter, diluted earnings per share increased 21% and non-GAAP earnings per share improved nearly 24% from the prior year period. I'd like to highlight a few areas that continue to contribute to our strong gross margins and profitability. Our services revenue was up 20% for both the quarter and year-to-date reflecting not only increased project-based professional services, but a continuing increase in managed services annuity type bookings, which creates value added and sticking customer relationships, strengthening the ties we have with our customers, as well as driving more…

Good afternoon, everyone. And thank you, Mark. I'm happy to share more insight about our strong financial performance in the third quarter of fiscal 2022, where we delivered double-digit top-line and net earnings growth. The strong demand for ePlus ' products and services that Mark discussed is evident in our third quarter fiscal year 2022 consolidated net sales growth up 15.7% to $494.8 million. Performance was strong across-the-board in both our technology and financing segments. Our business strategy and continued focus on our growth areas supported the technology segment, net sales increase of 14.8% to $477 million compared to $415.6 million in last year's third quarter. Product and service revenues increased 14% and 20%, respectively, evidencing market share gains. We're particularly pleased with our continued streak of service revenue growth. This was our sixth consecutive quarter of strong performance driven by a broad demand for our managed and professional service offerings. These same trends supported the adjusted gross billings increase of 16.5% to $685 million compared to $587.8 million in the third quarter of fiscal 2021. The adjusted gross billings and net sales adjustment was 30.4% compared to 29.3% in the last year's third quarter, as we had very strong growth in this quarter for sales of third party maintenance, staff, and subscription. For the financing segment's fiscal 2022, third quarter revenue increased 48.4% to $17.9 million, reflecting higher post contract sales from several early buy-outs of assets under lease. Fiscal year 2022, third-quarter consolidated gross profit amounted to $117.1 million up 19.3% from $98.2 million year-on-year. Consolidated gross margin widened 70 basis points to 23.7% compared to 23% in the year-ago quarter. Technology segment, gross profit was $104.5 million, up 18.3% year-over-year. And gross margin expanded 60 basis points to 21.9%, primarily reflecting expanding margins for products and services.…

Thank you, Elaine. Before we open the call to questions, I would like to take a moment to thank our global team for their continued strong execution despite the challenges that the rapidly change in COVID environment and supply chain constraints. Their hard work and dedication allowed us to support our customers key business initiatives while delivering solid operating metrics. We believe we are well-positioned and have the flexibility and expertise to meet our customers ever evolving needs. I would like to open the call for questions. Operator?

At this time, I would like to remind everyone [Operator Instructions] Your first question comes from the line of Maggie Nolan with William Blair. Your line is open.

Thank you, nice performance.

Thanks, Maggie (ph).

Mark (ph), I'm hoping you could maybe give us a little bit more detail on the backlog and where it stands. I think you had record levels last quarter. What does it look like as you're looking out from here and any color on maybe products versus services within that as well would be helpful?

So Maggie, our open orders continue to grow. In fact, they are up about a 106% over last year. Our services backlog is up as well pretty significantly. And our pipeline of opportunities for Q4 beyond are both visible and strong at this point, so as it relates to, I'll call it backlog, open orders, visibility into the pipeline. We're seeing pretty strong demand across all customers surge right now.

Okay, thanks, Mark. And then on the services gross margin. Elaine, I think you alluded to maybe that was a little bit of mix within services. But there does seem to be a kind of pattern of a couple of quarters here of a pretty strong gross margin in services. So is that mix shift becoming a bit of a trend or are there any trends in pricing that we should be taking note of?

Yeah. This quarter, it was really related to an increase in project related services and those come with a higher margin compared to last year where we had COVID; we couldn't get onsite as much, so I think project services wasn't quite as high as it was this year. In terms of trending, our service is just growing as a percentage of our total net sales. And project-based staff augmentation as well as managed services; they are all up across the board.

I think, Maggie, if I could add to Elaine's piece, what we're seeing in the market is a lot of companies are short on staffing. So what we're seeing is they have need for both staffing resources, on-demand resources to go out and install routers, and switches, and things along those lines. We also see with everything going on with Log4j and all the other types of security threats that are out there that they're looking for security services. So we've seen some nice upticks across the board on services. And as Elaine alluded to, if you look at our services, what's nice is, it's up 20% for the quarter, but it's up 19.9% for the year. And the gross margins are actually increasing. So that's a nice mix for us right now.

Thank you for taking my questions.

Thanks, Maggie.

Your next question comes from the line of Greg Burns with SIDOTI and Company. Your line is open.

In regards to the rise in working capital, the rise in inventory, what's the timing on the complexion of the projects tied to that? When do you expect them to be delivered and do you -- at what point do you start to think that the working capitals starts to decline going forward?

Hey, Greg. As it relates to the inventory, I think this is going to go on for a little bit. I think with the supply chain issues that are in place, I think you're going to see them through the end of the year, of this calendar year based on everything we're seeing and hearing, so I think that's going to continue for a period of time. We're lucky enough it really didn't affect us in the quarter too much as it relates to some of the supply chain things, similar to previous quarters as it relates to the supply chain. So I think this will continue for the near future and then over time it'll start to wind down as we move forward, related to inventory.

Okay, thanks. And then in terms of labor availability, are you seeing any issues there in terms of being able to hire as well as maybe the cost of labor going up. How do you feel about that going forward?

I think it's a competitive market to be honest, Greg, we've been lucky. From an attrition standpoint, it's up a little bit compared to previous years. I think it is a competitive market both for new hires as well as people that potentially leave and with labor costs being up, I do think it's a little more expensive with replacements on. I'll say either terms or new hires. So it is a little bit challenging at this point.

Okay. And then I guess with that in mind, how do you feel about continuing to be able to drive operating leverage to the business? I mean, is it going to be more of a -- I know historically you are investing in for chasing sales and technological headcount. And more recently we started to see some leverage in the business. So going forward, how do you feel about balancing that in this current environment?

I think a couple of things there, Greg, that you touched on. One, we are going to continue to invest. We think we're in a pretty good spot with the solutions and services we have, so it's really about getting more feet on the street to touch more customers. So we think we'll continue to invest in headcount, so that'll drive up some of the, I'll call it the S in SG&A, if you will, from an OpEx perspective. But if you look at this year, we've been able to drive our operating income. Consolidated income is up 36% year-over-year. And actually, the operating income margin is up 140 basis points. So I think we have some room within that model still to get operating leverage and continue to grow both top-line managed through some of the -- I'll say salary increases for lack of calling it anything else to still have a nice bottom line from an operating perspective.

Great. Thank you.

Thanks, Greg. We'll see you.

Your next question is from the line of Matt Sheerin with Stifel. Your line is open.

Yes. Thank you. A couple questions for me. Mark, just to start, you talked about the strength and the strong demand in the quarter. Were you able to meet all of that demand or did you have a product constraining set that pushed out orders? Was there revenue left on the table, in other words, that you missed?

Well, we tried not to leave revenue on the table, Matt, but there's definitely things. With the -- look, with the supply chain, it's an interesting dynamic. I think demand is obviously outpacing supply. I think there's obviously constraints. Lead times are changing and extending all the time, Matt. But we've been lucky enough -- the team has done a really nice job of working with both our vendor partners and our customers on setting expectation. So I think there may be some that leaks over from Q3 into Q4 and then Q4 to Q1. But I don't think it's anything material or it hasn't been material at this point, and I'm not expect it to be material in Q4 at this point.

Are you seeing price increases and just passing them along? Is that inflation contributing to your revenue growth?

Not yet, but it could. With the price increases, it could potentially, as we go forward. We have been able to pass it on at this point, but a lot of the pricing changes have just come into play recently. So there were some things in place honoring old pricing and some of the new pricing just came into play January 1st, so just starting in this quarter, so haven't seen it where it would affect revenues yet, but as each of the vendors increase their pricing, and if we're able to pass it on, you should see some uptick there.

Okay. And I appreciate that you don't give forward guidance and haven't given outlook for the March quarter. But typically you're down seasonally. Down -- last year were down double-digits sequentially. Is that the expectations of more seasonal demand trends because of the product constraints or anything different than that?

Yes -- no, I think seasonality still comes into play, Matt. It always does every year for us in the March quarter versus the December calendar year-end so, I think seasonality is in play. I also think on our group side, our financing side, we have a tough compare for Q4 to last year. I think there were some sales of leased equipment and a few other things that jumped up that number last year so we got a little tough compare there. Those would be the two things. But once again, as I mentioned earlier, the pipeline, the backlog, and all the other things that we're seeing are still strong.

Okay. Thanks for that. And Elaine, I have a modeling question regarding OpEx. You talked about an acquisition contributing to OpEx or SG&A. Could you give us an idea of what we should expect for the March quarter?

I think if you follow what this quarter looks like, it should be running in the same lines except variable comp will obviously vacillate based on the gross profit in the quarter.

Okay, so flattish, give or take.

Yes.

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

Alright. Matt. See you. Thank you, Matt.

There are no further questions at this time. I will turn the call back over to Mr. Mark Marron, CEO.

Alright. Thank you, everyone. Thanks for joining us today. We look forward to everybody being safe and sound during some of the storms that are coming through the U.S. and abroad, if you will. And then we'll speak to you at the end of Q4 for both our Q4 and year-end results, take care.

Ladies and gentlemen, thank you for your participation. This concludes today's conference call. You may now disconnect.