Good day, ladies and gentlemen. Welcome to the ePlus Earnings Results Conference Call. As a reminder, this conference call is being recorded. I would like to introduce your host for today's conference, Mr. Kley Parkhurst, SVP. 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, 2020, and our Form 10-Q for the period ended December 31, 2021, 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 thanks, everyone, for joining for today's call to discuss our fiscal 2021 third quarter results. Our third quarter financial performance speaks to the strength and resilience of our diversified business model and the success we are seeing from our longer-term strategic focus on cloud, security, collaboration, and related service offerings, all areas that have increased in importance and relevance in today's business environment. Our Financing segment continues to provide a unique differentiator in the market and is helping to drive technology sales. Let me give you some key takeaways from our third quarter results. First, our business continues to perform well in a challenging business environment. Net sales and adjusted gross billings remain steady. Our highest margin services business grew 3.3%, and with lower operating expense levels, we were able to report third quarter net earnings growth of 10.7%. Next, our revenue performance benefited from several factors. We have a broadly diversified customer base. And in the third quarter, we saw specific areas of strength coming from our large enterprise and upper mid-market customers. Within our key areas of focus, security increased to over 23% of our third quarter adjusted gross billings, up from just over 20% last year. While security has been a long-time priority area for ePlus, it has been in even greater demand during this period of hybrid work models, and we expect this trend to continue. Similarly, demand for our services, especially annuity quality managed services, continues to grow. This is even more impressive given the COVID challenges of limited on-site customer access for our professional services and staffing. Our customers are taking advantage of our remote managed services, and we have the capabilities to provide security services and support solutions to create reliable hybrid work environments. Post-pandemic, work-from-home options are expected to be more prevalent than they were a year ago. And with that, we expect this trend to become a longer-term growth driver. Third, we continue to grow our footprint and service offerings via selective acquisitions. In late December, we acquired Systems Management Planning, which expanded our geographic footprint in Upstate New York and the Northeast and is expected to add between $85 million and $100 million in annual adjusted gross billings. S&P builds on our collaboration expertise, staffing solutions, and our remote management capabilities while adding to our growing base of enterprise and SLED customers. We continue to evaluate synergistic acquisitions like S&P to broaden our geographic footprint and add offerings in high-quality professional staff. Finally, third quarter results highlight the benefit of ePlus diversified business model in our technology and financing segments. The positive performance of our technology segment more than offset the impact of a difficult quarter-over-quarter comparison in our financing segment. And the market's trend towards X as a service and alternative payment structures is really playing to our strengths in the financing business as we have long offered unique customer payment alternatives that are becoming even more appealing in today's business environment. Now, let me speak more specifically about our third quarter results. In Technology, there were several bright spots worth highlighting. First, our services business continues to grow both year-over-year and sequentially, in part because customers have become more comfortable with our ability to provide professional services remotely. These projects tend to be higher margin and enable us to achieve higher staff utilization. Turning to our Financing segment, revenue declined 34.5% compared to a very strong comparative quarter the prior year, which had 67.7% revenue growth due to several large transactions. We have long noted that our financing segment generates lumpy financial results, and we remain positive about the financing business. In today's business and technology environment, financing options are especially relevant, and we continue to build synergies between our two segments. Financing gives customers the ability to purchase or upgrade technology even with constrained budgets or cash flow, and our ability to provide flexible financing options can facilitate our technology business and is a competitive differentiator in the market. Third quarter operating expenses were 11% lower than the similar period last year, while some of this expense reduction is directly attributable to COVID-19, such as reduced travel and entertainment; we have also realized some systemic savings, which should continue post-pandemic from lower facilities costs and a realignment of our workforce. We also believe that travel and entertainment expenses will continue to be lower as we utilize virtual options, and we should benefit from ongoing opportunities to optimize our facilities expense. We will continue to add customer-facing sales and engineering talent as demand levels increase to ensure that we have the capabilities in-house to capture new business and execute effectively on complex projects. That said, we will work to closely align increased headcount with long-term revenue opportunities to maintain operating leverage over time. Elaine will now provide more detail on our third quarter and nine-month financial results. Elaine?

Thank you, Mark, and thank you, everyone, for joining us today. We continue to be pleased with our performance, especially given the backdrop of the COVID environment. Our consolidated net sales for the third quarter were $427.6 million, a decline of 0.3%, mainly due to a tough comparison from the strong performance in our financing segment the prior year. In the Technology segment, net sales increased 1.2% year-over-year to $415.6 million, with product and services revenues increasing 0.9% and 3.3% respectively. Our service revenues have continued to show improvement for the third quarter in a row due to our continued emphasis on managed services, including enhanced maintenance support. Adjusted gross billings increased 0.3% to $587.8 million from $586.3 million in the year-ago quarter, showing stability despite the continued challenging COVID business environment. The adjustment from adjusted gross billings to net sales was $29.03 compared to 30% last year due to a larger proportion of hardware sales than software maintenance and third-party services, which are recorded on a net basis. Financing segment revenue decreased 34.5% to $12 million, which was expected as we had a tough comparison from the prior year, which contained several large transactional gains. Results from our financing segment tend to be uneven from period to period. COVID-19 continues to impact our customer base, particularly in the lower mid-market customer category and the SLED and healthcare verticals. That said, we are fortunate to have a diversified base of customer end markets. Telecom, Media, and Entertainment and Technology continue to be our two largest customer end markets, accounting for 23% and 18% of net sales on a trailing 12-month basis, respectively. State, local, and education, healthcare, and financial services followed accounting for 15%, 14%, and 13%, respectively. The remaining 16% was distributed among several other customer types. Consolidated gross profit decreased 5.3% to $98.2 million from $103.7 million in the prior year quarter. Consolidated gross margin of 23% was down 120 basis points from 24.2% last year. Gross profit for the technology segment increased 0.9% to $88.3 million. Product margin was 18.8%, a decrease of 40 basis points due to the reduction in revenues recorded as net and also a larger proportion of sales to enterprise customers, which tend to be more competitive. Service margin increased 230 basis points to 38.7% as we saw an increase in demand for managed services and higher managed services margins. In the financing segment, gross profit decreased 39.1% to $9.8 million, which was due to the decrease in net sales as we had several large transactional gains in the prior year. Consolidated operating expenses decreased 11% to $68.9 million due to prudent cost management and COVID-19 restrictions as we continue to benefit from lower travel and entertainment and advertising and marketing expenses. Our consolidated headcount at the end of December 2020 was 1,586. Excluding 102 employees from the System Management Planning Acquisition on December 31, 2020, our headcount declined 7.4% compared to 1,602 last year and a decline of 0.9% from the prior sequential quarter. Consolidated operating income increased 11.4% to $29.3 million. Our effective tax rate for the quarter was 28.1% compared to 28.3% in the year-ago quarter. Our consolidated net earnings was $21.6 million or $1.62 per diluted share, up 10.7% and 11% from $19.6 million or $1.46 per diluted share, respectively, last year. Non-GAAP diluted earnings per share were $1.79, an increase of 9.1% from $1.64 last year. Adjusted EBITDA increased 8% to $34.4 million. Our diluted shares outstanding totaled $13.4 million, the same as the year-ago quarter. Now let's look at our consolidated year-to-date results. Net sales for the first nine months of fiscal 2021 decreased 0.5% to $1.22 billion. Net sales in the technology segment were relatively even at $1.18 billion, while adjusted gross billings increased 1.3% to $1.74 billion. Consolidated gross profit amounted to $295.7 million, a 1.2% decrease primarily attributed to the tough compare in our financing segment. Our consolidated gross margin was down 20 basis points to 24.3%, and our technology segment gross margin increased basis points to 22.3%. Net earnings grew 5.4% to $58.8 million. Diluted earnings per share were $4.39, up 5.5% ahead of last year. Adjusted EBITDA increased 3% to $98.7 million, and non-GAAP diluted earnings per share increased 1.6% to $4.97. Now shifting to the balance sheet, we ended the quarter with cash and cash equivalents of $86.5 million, flat with March 31, 2020. As a reminder, we also have $146 million in our financing portfolio that we could largely monetize by funding with third-party financial institutions. Inventory levels increased 61.7% to $81.3 million, reflecting projects underway. Our inventory levels vary as we work through existing projects and initiate new customer projects. Our cash conversion cycle at the end of the quarter was 24 days, a decrease of two days compared to the year ago quarter and an increase of three days sequentially. On December 31, 2020, we acquired certain assets and liabilities of System Management Planning. Our preliminary consideration transferred was $27.1 million, and we incurred approximately $233,000 in acquisition-related expenses during the third quarter. We expect the contribution from S&P to be between $85 million and $100 million in adjusted gross billings over the next 12 months. While we continue to consider the effect of COVID-19 and the uncertainty surrounding its duration on our near-term business trends and our investment considerations, acquisitions and organic investment initiatives remain high on our list of capital allocation priorities. We certainly could not have achieved our year-to-date successes without the exceptional efforts and support of our employees, whose talent and dedication have enabled us to seamlessly serve our large and diverse customer base. I'd like to extend my thanks to all ePlus employees for their efforts. I'll now turn the call back to Mark.

Thanks, Elaine. To sum up, we believe ePlus is well positioned to drive additional revenue growth and market share gains. We have made significant investments in technology and talent, have prioritized high-growth markets like cloud, collaboration, security, and services, and are serving a diverse and expanding customer base. Our staff of highly skilled professionals, long-standing vendor relationships, and strong balance sheet are key competitive differentiators. These attributes support our ability to continue to perform well in challenging business environments and to benefit from improving business conditions. Also, in November, we celebrated our 30th Anniversary with our employees, customers, and vendors and reflected on our success, growth, and market position. I would like to thank our employees, many of whom are working from home, while others are in our configuration centers, on-site at customer locations, or voluntarily have returned to our headquarters. Their dedication and perseverance throughout the last several quarters and our partnerships with customers and vendors have enabled ePlus to remain operational and effective throughout these challenging times. Operator, let's now open the line for questions.

Thank you. And your first question comes from Brett Knoblauch from Berenberg. Your line is open.

Just a couple of questions from me regarding the acquisition. Will the acquired billings, the $85 million to $100 million, have a similar gross to net adjustment as the core business? And then will it be accretive for fiscal year 2022?

Brett, it's Mark. So, two things there; will it be accretive in 2022? Yes, it will. And in terms of metrics, in terms of gross to net, it's in the same range as the metrics that ePlus is going on.

Okay. Perfect. And then maybe just looking forward a bit, I think you guys were pretty cautious on the Q2 call. Would you say there is a similar level of cautiousness now or has some of that been alleviated?

No. Brett, I think the same cautiousness. Look, here's what's hard when you think about what's going on in the world overall. One, it's really hard to predict at this point. So there's a lot of uncertainty around COVID. The stimulus, whether it's going to get out and where it's going to get out and who it's going to help. If you think about all the things that are going on in the market overall, there's a lot of challenging things. We feel good about where we are. So, I don't want to mislead you; we will adapt and adjust to what's going on in the market. We like the strength of our two business units, which kind of showed up again this quarter. What's nice about what we have going on at ePlus is that we've got both the technology and finance segment. Our finance group had a tough comparison to last year, and our technology business unit picked them up. The same could be said about the opposite in previous quarters, but I still think it's tough to call what's going on in the market overall.

No. Perfect. Completely understand it. And maybe, Elaine, with the headcount reductions over the last year, 7% is pretty significant. Would you see that process as mostly completed, or do you think there's more resource realigning to go?

I would say that we are mostly complete with that. We do plan to hire customer-facing positions in the future, and we'll do that consistent with business growth.

Hey, Brett, if I could add one thing, we're always going to continue to realign our resources based on what's going on in the market. So depending on what our customers are looking for, whatever challenges they have — whether it's work-from-home, returning to work, cloud-related, or security-related — we're going to continually adjust and realign. And we're going to invest in the areas that are the most margin attractive, if you will, but also what our customers are expecting from ePlus.

Your next question comes from the line of Kurt Swartz from Stifel. Your line is open.

Hoping maybe, first, you could talk a little bit about OpEx trends, maybe on a dollar or a percent of sales basis. You discussed some of the drivers of the lower OpEx in recent quarters, but just wondering how you're viewing that is trending near-term versus longer-term as the economy sort of normalizes, as you've discussed?

Yes. That's a good question, Kurt. So first off, a couple of different things. One, as Elaine kind of noted, we are going to continue to invest in what we'd call customer-facing headcount to address where we think the market is going and some of the market shares we think we can gain. What we've seen with OpEx so far is, due to some of the headcount realignment, we've got some savings. We've got some savings with our facilities as well. So as we kind of adjust to this new hybrid model of work-from-home with some portion returning to work, we think there will be some facility costs as we go forward. Haven't really seen them yet because they're obviously due to the terms on when our leases end based on those facilities. Travel and entertainment have been down significantly. Post-COVID, I would expect that to pick up some, but I don't think it will ever get to the historical levels that we had. So, I think we'll see some new model of how we support our customers in our go-to-market, but we do expect to hire in terms of supporting our customers and capturing market share. So did that address what you're looking for, Kurt?

Yes, understood. And then, I guess, maybe just on the growth side, I'm hoping maybe you could discuss the outlook from perhaps like a seasonal perspective and, I guess, along with that, you talked about inventory still being up reflecting projects underway. So just wondering what sort of visibility you may have into the cadence and length of those projects and how that should sort of impact revenue on a go-forward basis?

Well, a couple of different things there, Kurt, that you touched on. So when I look at the market overall, there are some interesting things going on. I think there are some customers that are struggling as it relates to COVID, specifically, let's say, in the health care vertical. So, there are some things we're trying to do to adjust there to leverage our leasing and help those customers out. I do think, overall, when you look at the market, I think in the enterprise space, there seems to be more cash, where people have the ability to spend. And we saw that in our numbers, where we had some higher enterprise spend among those with 1,000 employees and above. So I'd call really kind of your mid-market to enterprise accounts where you saw some upticks. So, I think the visibility is good. I think the sales cycle in some of the smaller customers is a little bit longer. And I think that will stay in place until we get some resolution on COVID.

Understood. And then I guess, you touched on this a little bit, but if you can maybe just sort of elaborate on any trends you're seeing, specifically from a product perspective, what the drivers were in the quarter? What might have been a little bit weaker than expected? And then maybe specifically, if you could talk about PC-related sales; that had been a tailwind in previous quarters, but it's generally not a tailwind for ePlus. So any color as to whether those sales continued would be helpful.

Yes. So I'll start with you first. The commodity play, as you know, we've talked about numerous times, we're really not in that space. Now, with that said, we did have a large customer that we've been with for years that we fulfilled, and that kind of affected our gross margins. So we had a few things on the margin side. The enterprise deals that Elaine had touched on earlier, a large commodity sale, and then the gross to net being a little bit lower. As it relates to the things that we're seeing in the market, security is obviously top of mind with every customer out there. So, if you look at our security, it was 23% of our adjusted gross billings this quarter versus last year, it was a little over 20%. And so, we see a lot of customers that are really looking for help with incident response plans, multifactor authentication, so really wanting to understand who the user is and where they are and things along those lines, cloud security, and then services. What's kind of nice about our business is that we have the solutions and services across many areas. In services, a lot of our customers we couldn't get on site. Now some seem more open to us doing, or I'll call it, transactional professional services remotely. We've had some staffing that's gone down because we can't get on site, but our annuity quality revenues with our managed services have continued to build, which is nice. Our services are really a nice business, which picked up our gross margins overall, where our products took a little bit of a drop. So I'd say security services obviously, the move to the cloud, and then some of the work-from-home around collaboration and things along those lines.

Understood. And then I guess, maybe just a quick follow-up to that. On the sort of commodity-related sales, do you have any visibility as to whether those would continue into future quarters or does it look like that demand has sort of been fulfilled at this point?

Right now, it looks like the demand has been filled, but we want to be careful, Kurt. That can change at any time, if a customer comes back and says they need something in that commodity space, and if it's one of our bigger customers, we're going to fulfill it. Nothing in the, I'll call it, in the backlog significantly. We do have a little bit from one of the deals that rolled into this quarter. So there will be some, but not a significant amount.

And there are no further questions at this time. I will turn the call over to Mark Marron for some closing remarks.

All right. Thanks, Rob. Thanks, everybody, for joining us today. We appreciate your confidence, and we look forward to speaking to you after our Q4 and end of fiscal year. Take care and be safe.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.