Good day, ladies and gentlemen. Welcome to the ePlus Earnings Results Conference Call. As a reminder, this conference call is being recorded. I'd to introduce your host for today's conference, Mr. Kley Parkhurst, Senior Vice President. 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 Securities and Exchange Commission, including our Form 10-K for the year ended March 31, 2022, and our Form 10-Q for the quarter ended June 30, 2022, 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 first quarter of fiscal 2023. We had a solid start to our fiscal year generating double-digit year-over-year growth in both net sales and adjusted gross billings. Demand in the quarter was broad based with nearly every one of our vertical markets and customer size segments experiencing gains. First quarter consolidated net sales increased 10% driven by continued solid performance in our technology segment where net sales grew 12.1% over the same period last year. Despite ongoing supply chain issues that limited the availability of certain technologies. Our team continue to execute well, managing vendors and meeting the needs of customers. Growth was driven primarily by our hybrid cloud and security offerings, reflecting continued strong customer investment in these critical IT areas. First quarter adjusted gross billings increased 10.9% to nearly $702 million. Over the past 12 months, adjusted gross billings has expanded to nearly $2.7 billion, a 14.4% increase from the prior period. In particular, I am pleased with the steady growth in our security business, which accounted for 22.1% of adjusted gross billings in the first quarter, up from 19.4% in the same period last year. Security continues to play a critical role for our customers and our recent acquisition of Future Com, a security focused solution provider in Dallas, Texas, further bolsters our security presence in the market. Technology services remain one of the key engines advancing our strategy and driving our long-term growth. First quarter services revenue totaled $63.1 million, increasing 13.5% from the same period last year on rising customer demand for consulting and suite of managed services. As we noted last quarter, our services mix is trending towards recurring long-term revenue as opposed to project driven services,…

Thank you, Mark and good afternoon, everyone. Adding to Mark's comments, ePlus team executed effectively in the first quarter of fiscal 2023, laying the foundation for continued momentum throughout the remainder of the year. As Mark noted, fiscal 2023 started off with a 10% year-over-year net sales increase to $458.4 million, driven by strong performance in the technology segment where net sales were up 12.1%, totaling $448.8 million. These positive comparisons reflect broad based demand and double-digit growth in both product and service. Specifically, product and service revenues increased 11.9% and 13.5% to $385.7 million and $63.1 million, respectively. We reported strong adjusted gross billings of $701.9 million, 10.9% above the $633 million reported in the first quarter of fiscal 2022, highlighting market share gains and our focus on higher growth areas. The adjusted gross billings to net sales adjustment was 36.1% compared to 36.8% in the first quarter of fiscal 2022. Sales trends by end market in our technology segment on a trailing 12-month basis were consistent with prior quarters with telecom, media and entertainment and health care our largest markets, accounting for 29% and 16% of segment net sales, respectively. Technology, SLED and financial services represented 14%, 14% and 9%, respectively, with the remaining 18% being a combination of several other customer types. First quarter 2023 financing segment revenue was $9.6 million compared to $16.3 million in the last year's first quarter resulting from the reduction of sales of leased equipment, portfolio earnings and transactional gains, reflecting the variability of this business. We reported a 7.6% increase in consolidated gross profit to $113.5 million compared to $105.5 million last year. However, consolidated gross margin declined 50 basis points to 24.8%. We saw the same dynamic in the Technology segment as gross profit was $105.7 million, up 10.7% relative…

Thank you, Elaine. In summary, we're off to a solid start to the year delivering double-digit growth in net sales and adjusted gross billings, while advancing our strategy with a terrific acquisition that expands our capabilities in the growing enterprise security market. We remain focused on providing superior services and solutions for our more than 3,500 customers, leveraging our broad capabilities across the technology stack to drive growth and build long-term shareholder value. Operator, please open the line for questions now.

[Operator Instructions] And your first question comes from the line of Maggie Nolan with William Blair. Your line is open.

Hi. Thank you. Elaine, I wanted to ask what the impact was of the change in reserve for credit losses and your updated thoughts on credit risk from here?

Hey, Maggie. Can you hear me? It was about a $1 million in the quarter. And what was the second part of the question? I missed it.

Your updated thoughts on credit risk.

Oh, our portfolio hasn't changed. Our customer base has not changed. So, we -- there's no change in our methodology from a credit perspective. It was just a matter of the change and reserves on a quarter-over-quarter basis.

Okay, great. And then on the services gross margin, that's been running a little bit lower than what you've done in the last several years. So can you talk through some of the puts and takes that we should consider on services margins for the remainder of the year?

Yes. Hey, Maggie, it's Mark. How are you? I think we're fine on surfaces margins. I think what you're seeing is some of the trends going on in the market related to supply chain, some of the increases in compensation to some of our employees and third parties. I don't see it as a major trend that will continue long-term. I think you'll start to see them trend back up over coming quarters.

Okay, great. Thanks, Mark. And then last one for me. Can you just be a little bit more explicit about how Future Com has enhanced your security solutions and maybe what incremental offerings they've brought to ePlus?

What's nice Maggie is they've got some great cloud security offerings, network monitoring offerings. From what we're seeing short-term through our due diligence, some really strong security resources, both on the sales and on the services side. And the upside that we didn't really talk about, it gives us additional size and scale in the Texas and touching regions that we think we can leverage with our existing Texas team. So builds out our security portfolio, builds out some of the solutions that we sell in that space. And I think there'll be some really nice synergies between our existing ePlus team and the Future Com team.

Very good. Thank you both.

All right, Maggie. Thanks. We'll see you soon.

Your next question comes from the line of Greg Burns with Sidoti & Company. Your line is open.

Good afternoon. Just following up on Future Com, how much -- what was the trailing 12-month revenues?

We didn't disclose it.

We didn't -- hey, Greg, we didn't disclose it. So here's what I tell you similar to what I would -- just mentioned to Maggie, being they're a security company predominantly, a lot of that is security, software subscriptions, third-party maintenance. So a lot of it is netted down from a gross to net perspective. What they give us is some new solutions that we can take to market and some new talent that we can leverage in the, I'll call it TOLA region, if you will, in the kind of the South Central Region.

Okay. Okay. And the continued growth in your headcount, what are you seeing that gives you confidence to continue to expand the way you are? There's been a lot of headlines from some of the major tech companies, pulling back on spending. I mean, hiring. So I just wanted to get your sense of the overall market and kind of in relation to those types of headlines and what you're seeing.

Yes, hey, Greg, good question. What we're seeing is we believe we can actually grab some market share. So if you look at two different points, if you will. Last fiscal, our sales were up 16%. This quarter net sales were up 10%. But on the tech side, they were actually up 12.1%, and net sales that's all organic. So we believe that if we continue to add resources, mainly in the services side, so I think Elaine, as she had mentioned, of the headcount that we added just short of 90% of it was customer facing, and the majority of that was in the services space. So our services this quarter grew 13.5%. And we continue to see customers looking to leverage both our annuity services and our consultative services, specifically in the security and the cloud space. And that's where we're looking at both sales and technical talent. And by the way, both our security which I think I noted, was a little over 22% of our adjusted gross billings this quarter, and our data center/cloud/hybrid cloud, we saw some really nice growth in that space as well.

Okay, great. Thank you.

All right. Thanks, Greg.

[Operator Instructions] There are no further questions at this time. I will now turn the call back over to the presenters.

All right. Thank you. Thanks, everyone, for joining us today on our Q1 earnings call. We look forward to speaking to you on the Q2 earnings call. Take care and have a good day. Thanks, operator.

Thank you. This concludes today's conference call. You may now disconnect.