Good day, ladies and gentlemen. Welcome to the ePlus Fourth Quarter and Full Year 2025 Earnings Results Conference Call. As a reminder, this conference call is being recorded. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question during that time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. And I would now like to introduce your host for today's conference, Mr. Kleyton 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, and Erika Stoker, 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 most recent annual report on Form 10-K, quarterly reports on Form 10-Q, and other documents we may file with the SEC. Any forward-looking statement speaks only as of the date on which the statement is made, and the company undertakes no responsibility to update any of these forward-looking statements in light of new information, future events, or otherwise. In addition, we will be using certain non-GAAP measures during the call, and we have included a GAAP financial reconciliation in our earnings release, which is posted on the investor information section of our website at www.eplus.com. And now, I would like to turn the call over to Mark. Mark?

Thank you, Kleyton. Good afternoon, everyone, and thank you for joining our fourth quarter and fiscal year 2025 earnings call. Our financial results continue to reflect the ongoing impacts of how we recognize product revenue. In fiscal year 2025, we delivered higher gross profitability and margin expansion on lower net sales and gross billings. In our fourth quarter, operating metrics were strong with a double-digit increase in gross profit, operating income, adjusted EBITDA, and diluted earnings per share. We also saw continued improvement in our gross margin, which increased 270 basis points since fiscal year 2024. During the quarter, we believe sales were slightly impacted by business uncertainty surrounding the tariffs and government spending. With our strong focus on services-led solutions, continuing to build out our security and AI capabilities that are in high demand by our customers, and holding the line on expenses, we believe we are well-positioned for future growth. Q4 net sales declined 10.2% year-over-year, driven primarily by a reduction in product sales due in part to economic uncertainty as well as a tough comparison to the prior year when Q4 last year benefited from supply chain easing of networking product orders. Despite an increased gross-to-net adjustment caused by the industry-wide shift towards ratable and subscription-based revenue models, we saw strength in several areas. Gross profit rose by nearly 12%, and gross margin expanded 580 basis points year-over-year to 29.3% in the fourth quarter, due to a more profitable business mix between product and services, and a higher proportion of netted down revenue. Gross profit increased and margin expanded in the full year for the same reasons. Our services revenue continued its rapid growth, increasing 33% in the quarter and 37% for the year. This is a key component of our trusted adviser status to our customers,…

Thank you, Mark, and thank you everyone for joining us today. I will provide additional details about our financial performance in the fourth quarter of fiscal 2025 and review our full fiscal year results, which ended March 31, 2025. Consolidated net sales in the fiscal 2025 fourth quarter were $498.1 million, down from $554.5 million in the fourth quarter of fiscal 2024. Our consolidated adjusted EBITDA was $43.8 million, up from $36.8 million in the prior year, which exceeded our expectations as we captured increased gross profit from the sales of products. Technology business net sales declined 10.4% year-over-year to $487.2 million, reflecting lower product sales, which continue to be impacted by the industry-wide shift towards ratable and subscription-based services, resulting in more netted down revenues. Product sales also faced a tough year-over-year comparison as the fourth quarter of fiscal 2024 benefited from elevated deliveries of networking products. Partially offsetting the decline in product sales was strong demand for our services offerings, which we have strategically positioned. ePlus' services-led approach is evident in our results as our service revenues increased 33% year-over-year. Professional services revenues were up 48% as the segment continues to benefit from the Bailiwick acquisition, while revenues for our managed services rose 17%, led by sustained growth in enhanced maintenance support or EMS, and cloud-managed services. Managed services bookings remain strong, underscoring our confidence in the segment. Technology business gross billings declined 5.4% in the quarter due to softer demand from enterprise customers as well as a challenging comparable in the prior period. Telecom, media, and entertainment, and SLED were our two largest customer end markets, accounting for 23% and 17% of technology business net sales on a trailing twelve-month basis. Technology, healthcare, and financial services accounted for 15%, 14%, and 9%, respectively, with the remaining 22%…

Operating income was $141.4 million versus $158.3 million a year ago. The decline was primarily a function of lower product sales and increased operating expenses, which rose 9% year-over-year due to the Bailiwick and Peak acquisitions, as well as continued investments in technology and customer-facing headcount. Our effective tax rate for the full year was 27.5%, below the 28.1% reported in the prior year due to lower state taxes. Consolidated net earnings were $108 million, or $4.05 per diluted share in fiscal 2025. This compares to $115.8 million, or $4.33 per diluted share in the year-ago period. Non-GAAP diluted EPS amounted to $4.67 per share, down from $4.92. Fiscal 2025 adjusted EBITDA decreased 6.4% to $178.2 million. Our balance sheet remains solid with assets over $1.8 billion, highlighted by our cash position of $389.4 million at the end of fiscal 2025, well above $253 million at the end of fiscal 2024, reflecting strong operating cash flows of $302.1 million compared to $248.4 million in fiscal 2024. As of March 31, 2025, our inventories were $120.4 million. While inventories were higher sequentially, they were below the $139.7 million reported at the end of fiscal 2024.

The stockholders' equity was $977.6 million compared to $901.8 million at the end of fiscal 2024. During fiscal 2025, we repurchased more than 557,000 shares under our repurchase program, leaving 26.5 million shares outstanding at March 31, 2025. Our cash conversion cycle was 29 days, compared to 46 days a year ago, as inventory days outstanding declined from 23 days in fiscal 2024 to 14 days at the end of March 2025, highlighting a more normalized supply chain. Our strategy of focusing on high-growth areas and anticipating our customers' needs continues to position us well for the future. We remain focused on strategic capital allocation with an eye toward organic and inorganic investments in an effort to add geographies and increase our service offerings. With that, I will turn the call back over to Mark. Mark?

Thank you, Elaine. Our core business is solid, and our team is executing well. This is reflected in our financial results with solid gross profit growth and margin expansion. We continue to review our portfolio of products and services, identifying new sources of growth in our core markets. Our strong balance sheet provides us the opportunity to invest organically and make acquisitions when the right opportunity comes along. As always, we will continue to take a balanced and disciplined approach to building our company and evolving our business model for the future. Moving next to a comment about guidance. We are cautiously optimistic as we head into fiscal year 2026 but want to be prudent when considering the entire year and the trends we are experiencing with regard to ratable and netted down revenue. Today, we are initiating fiscal year 2026 guidance for net sales growth of low single digits, while we expect gross profit and adjusted EBITDA to grow at mid-single digits over the prior fiscal year. This guidance assumes some level of impact from economic uncertainty but does not factor in recessionary conditions or other unexpected developments. To sum up, our strategic pivot towards services, subscriptions, and high-growth technology areas is gaining traction. We believe these foundations, combined with our financial strength and customer-first approach, position us well to support our customers' evolving and growing business needs. We believe we are well-positioned for the opportunities ahead and remain committed to delivering value for all of our shareholders. Operator, please open the call for questions. Thank you.

And we will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star one. If you would like to withdraw your question, simply press star one a second time. If you are called upon to ask your question and are listening via speakerphone on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Again, it is star one if you would like to join the queue. The first question comes from the line of Greg Burns with Sidoti and Company. Your line is open.

Morning or afternoon. Where is the demand environment currently? Did you see any improvement throughout the quarter? Are you still seeing soft demand on the product side of the business? Can you just maybe give us an update on what you saw during the quarter, how it evolved, and where we are currently? Thank you.

Yeah. Hey, Greg. Good morning and good afternoon. A couple of different things we are seeing in the market. We are seeing a pickup in the data center, cloud, and security space. That is not surprising when you think about some of the AI initiatives that are going on. Some of the things that folks have to think through are security in terms of governance and risk, data readiness, and things along those lines. They also make a lot of times the simple choices to move to the cloud. So we saw some nice pickup there. We did not see a pickup in networking year-over-year. So networking was down pretty big still for us. And then if I look at net sales just overall generically, what we kinda saw was, as we looked over the last couple of years, a few things. This quarter, it was a big gross to net that affected our net sales. We had a tough compare. No excuses. We were up 12% last year, so that was another factor. We had a few customers that are digesting some of the supply chain specifically in the networking space. We think they will start to come back into play in the coming quarters. So overall, data center, cloud, security, nice pickup. Networking still needs to improve.

Okay. And then when you look at the AI opportunity, most of the investment has been going into the hyperscaler data center environment. Where does enterprise AI adoption, enterprise investment stand? And do you think that in your guidance for next year, does that contemplate any kind of acceleration in AI demand?

Yeah. Not yet, Greg. Maybe towards the end of the year, beginning of next year. So you are right. Most of the spend with NVIDIA and the bigger players is going towards the hyperscalers. What we are seeing is customers are taking advantage of some of our workshops, envisioning sessions. We have got a hosted proof of concept, basically, a private Gen AI chatbot that gives customers the ability to test and play around with their data to come up with use cases. So we think a lot of that will be on the services side, which will drive for us, which is a good thing. It is our most profitable business. And then we think the infrastructure stuff will start to pick up. We have made investments with the training of our sales teams. We also just got the NVIDIA SuperPOD specialization, which is their high-end computing. So over time, we think that infrastructure spend will pick up, but it will take a little bit of time.

Okay. Thank you.

No problem. See you soon.

And there are no further questions. So I will now turn the conference back over to Mr. Mark Marron for closing remarks.

Okay. Thanks, Abby. Thank you everyone for attending our Q4 and full year earnings call. I hope everybody gets to enjoy the long Memorial Day holiday, and we look forward to speaking with you again on our next earnings call. Take care and be safe.

And ladies and gentlemen, this concludes today's call, and we thank you for your participation. You may now disconnect.