ePlus(US:PLUS)2021-02-04 00:38Financial Data and Key Metrics Changes - Consolidated net sales for Q3 were $427.6 million, a decline of 0.3% year-over-year, primarily due to a tough comparison from the strong performance in the financing segment last year [22] - Consolidated net earnings grew 10.7% to $21.6 million, or $1.62 per diluted share, compared to $19.6 million, or $1.46 per diluted share, in the prior year [30] - Adjusted EBITDA increased 8% to $34.4 million, with non-GAAP diluted earnings per share rising 9.1% to $1.79 [31] Business Line Data and Key Metrics Changes - In the Technology segment, net sales increased 1.2% year-over-year to $415.6 million, with product revenues increasing 0.9% and service revenues increasing 3.3% [23] - The Financing segment revenue decreased 34.5% to $12 million, attributed to a tough comparison from the prior year which had several large transactions [24] - Service margin increased 230 basis points to 38.7% due to higher demand for managed services [28] Market Data and Key Metrics Changes - Telecom, Media and Entertainment and Technology were the two largest customer end markets, accounting for 23% and 18% of net sales, respectively [26] - The company noted that COVID-19 continues to impact the customer base, particularly in the lower mid-market customer category and the SLED and healthcare verticals [25] Company Strategy and Development Direction - The company is focusing on high-growth markets such as cloud, security, and collaboration, and is expanding its service offerings through selective acquisitions [13][38] - The acquisition of Systems Management Planning is expected to add between $85 million and $100 million in annual adjusted gross billings, enhancing the company's geographic footprint and service capabilities [35] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding future performance, acknowledging the uncertainty surrounding COVID-19 and its impact on business trends [46][48] - The company plans to continue investing in customer-facing positions to align with market demands and growth opportunities [49][50] Other Important Information - Consolidated operating expenses decreased 11% to $68.9 million due to prudent cost management and COVID-19 restrictions [29] - Inventory levels increased 61.7% to $81.3 million, reflecting ongoing projects [34] Q&A Session Summary Question: Will the acquired billings have a similar gross to net adjustment and be accretive in fiscal year 2022? - Management confirmed that the acquired billings will have a similar gross to net adjustment and will be accretive in fiscal year 2022 [45] Question: Is the company maintaining a similar level of cautiousness as before? - Management indicated that the same level of cautiousness remains due to ongoing uncertainties in the market [46][48] Question: What are the trends in operating expenses and how do they view them near-term versus long-term? - Management noted that operating expenses have decreased due to headcount realignment and expect to continue investing in customer-facing roles as the market normalizes [52][54] Question: What visibility does the company have into project cadence and revenue impact? - Management expressed good visibility in the enterprise space, with longer sales cycles for smaller customers due to COVID-19 [58] Question: What trends are being observed from a product perspective? - Management highlighted that security services and cloud-related offerings are in high demand, while commodity-related sales have been fulfilled [61][65]