ePlus(US:PLUS)2022-02-04 01:12Financial Data and Key Metrics Changes - Adjusted gross billings increased 16.5% year-over-year to $685 million in Q3, with year-to-date growth exceeding 14% to nearly $2 billion [7][19] - Net sales grew by 15.7% year-over-year to $495 million, with year-to-date sales increasing 12.6% to $1.37 billion [8][24] - Diluted earnings per share rose 21% year-over-year, while non-GAAP earnings per share improved nearly 24% [8][24] - Consolidated gross profit increased 19.3% to $117.1 million, with gross margin widening 70 basis points to 23.7% [20][21] Business Line Data and Key Metrics Changes - Technology segment net sales increased 14.8% to $477 million, with product and service revenues rising by 14% and 20% respectively [19] - Services revenue was up 20% for both the quarter and year-to-date, contributing to higher gross margins of 39.4% in Q3 [9][21] - Financing segment revenue surged 48.4% to $17.9 million, reflecting higher post-contract sales [20] Market Data and Key Metrics Changes - Telecom media and entertainment remains the largest end market, accounting for 29% of net sales, followed by healthcare, SLED, technology, and financial services [26] - The company reported strong demand across all customer segments, indicating broad-based growth [6][19] Company Strategy and Development Direction - The company is focused on capturing market share in mid-market, enterprise, and public sector segments, with a strategy emphasizing consultant, advisory, and management services [6][7] - Continued investment in technology, partnerships, and strategic hires is planned to support future growth [15] - The company aims to leverage its financing capabilities to provide customers with flexible solutions amid tightening budgets [14] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing supply chain challenges but expressed confidence in the company's ability to navigate these issues [16] - The outlook remains positive with strong open orders and a growing services backlog, indicating robust demand [14][35] - Management noted that while labor availability is competitive, the company has managed to maintain staffing levels effectively [43] Other Important Information - The company ended the quarter with $105.6 million in cash and cash equivalents, down from $129.6 million due to share repurchases and increased working capital needs [27] - Inventory levels more than doubled to $147.7 million, attributed to ongoing customer projects and supply chain constraints [28][29] Q&A Session Summary Question: Can you provide details on the backlog and its current status? - Management reported that open orders are up about 106% year-over-year, with a significant increase in services backlog and a strong pipeline for Q4 [35] Question: What is the trend regarding services gross margin? - The increase in project-related services has contributed to higher margins, with service revenue growing as a percentage of total net sales [36][37] Question: What is the outlook for working capital and inventory? - Management expects supply chain issues to persist through the end of the calendar year, impacting inventory levels [42] Question: Are there challenges in labor availability and costs? - The labor market is competitive, with increased costs for new hires and replacements noted [43] Question: How does management view operating leverage in the current environment? - Management plans to continue investing in headcount while maintaining operating income growth, indicating room for operating leverage [46] Question: Were there any constraints on meeting demand in the quarter? - Management acknowledged some constraints due to supply chain issues but indicated that they have managed expectations effectively [50] Question: Is inflation impacting revenue growth? - While inflation has not yet significantly impacted revenue, management noted that price increases could be passed on in the future [51] Question: What are the expectations for the March quarter? - Seasonality is expected to affect demand, with a tough comparison for Q4 due to previous year sales [52]