ePlus(US:PLUS)2019-11-11 03:46Financial Data and Key Metrics Changes - Net sales for Q2 2020 were $411.6 million, a 19.3% increase from the prior year [10] - Consolidated gross profit increased by 20.5% to $103 million, with a gross margin of 25%, up 20 basis points year-over-year [13] - Operating income rose by 15.5% to $28.4 million, with GAAP EPS and non-GAAP EPS increasing by 13.5% and 18.3%, respectively [8][14] Business Line Data and Key Metrics Changes - Technology segment net sales increased by 18.8% to $397.7 million, driven by a 35.1% increase in service revenue [10] - Services business grew by 35% for the second consecutive quarter, contributing significantly to overall growth [6] - Financing segment revenue increased by 34.8% year-over-year to $13.8 million, mainly due to gains from large transactions [10] Market Data and Key Metrics Changes - Technology and SLED markets accounted for 22% and 17% of customer end markets, respectively, with Telecom, Media & Entertainment at 16% [11] - Adjusted gross billings in the technology segment increased by 19.2% to $579.1 million, reflecting strong demand from larger customers [11] Company Strategy and Development Direction - The company focuses on higher growth IT solutions, including cloud, security, and digital infrastructure [4] - ePlus aims to provide end-to-end solutions and flexible consumption models, enhancing customer engagement and revenue predictability [5] - The acquisition of ABS Technology is part of a broader strategy to expand market share in the state, local, and education verticals [8] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in continued growth due to strong demand for differentiated solutions across various customer segments [18] - The company anticipates ongoing investments in talent and technology to meet customer needs and drive long-term growth [18] - Management noted that the current operating environment remains positive, with no significant delays in deal closures reported [43] Other Important Information - ePlus was recognized as Cisco's global transformation and innovation partner of the year, highlighting its commitment to innovation [9] - The company ended the quarter with cash and cash equivalents of $55.8 million, down from $79.8 million at the end of the previous fiscal year [16] Q&A Session Summary Question: Can you provide more granularity on the strengths in the quarter? - Management noted strong performance across various areas, with services up 35% and growth in enterprise customers [21] Question: Was the positive environment broad-based? - Yes, growth was observed across multiple verticals, including telecom, finance, healthcare, and SLED [22] Question: How much of the revenue growth was inorganic? - Approximately 75% of adjusted gross billings growth was organic [26] Question: What is the outlook for operating expenses? - Current operating expenses are seen as a good run rate, with expectations for continued investment in growth [32] Question: Are there any regions where ePlus lacks a footprint? - Potential expansion opportunities exist in the Great Lakes area and the Southeast [37] Question: What is the expected contribution from ABS Technology? - ABS Technology is viewed as a good acquisition, expected to enhance capabilities over time [41] Question: Is there any impact from deal timing issues? - No significant deal push-outs have been observed, with a solid quarter reported [43] Question: What is the reason for the increase in the effective tax rate? - The increase is attributed to benefits received in the prior year and some permanent differences [47]