Good day, ladies and gentlemen. Welcome to the ePlus Earnings Results Conference Call. As a reminder, this conference call is being recorded. I'd 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, 2021, and our Form 10-K for the year ended March 31, 2022, when 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. I'd now like to turn the call over to Mark Marron. Mark?

Thank you, Kley, and thank you, everyone, for participating in today's call to discuss our fourth quarter and fiscal 2022 results. This was a remarkable quarter and fiscal year for ePlus, marked by continued strong financial performance and significant progress in advancing our growth objectives. Once again, our dedicated team delivered exceptional results and effectively supported our customers in an evolving and dynamic market. Our success speaks to the strength of our differentiated business model that couples the advantages and flexibility of providing both technology services and financing as well as our strategic focus on capturing emerging high-growth opportunities in fast-moving markets. In short, our strategy is working and ePlus is gaining market share as evidenced by our results in the fourth quarter and for our fiscal year. Fourth quarter net sales increased 28% to $451.5 million with solid contributions from both segments, reflecting broad-based strength across our customer base and end markets. Fourth quarter adjusted gross billings increased approximately 21% year-over-year to $638.5 million with increases in every vertical market sector. The growth in fourth quarter adjusted gross billings helped drive our fiscal 2022 adjusted gross billings to over $2.6 billion, representing approximately 16% growth from fiscal 2021. We continue to see nice growth in collaboration and networking as hybrid work models have become the de facto operating model for most of our customers. Another highlight of the quarter was further expansion of our annuity quality revenues as we experienced broad gains in managed services, help desk services and staffing driven in part by the shortage of IT professionals as well as customer optimization of their IT spend through utilization of outsourced services to manage day-to-day IT operations. We believe we have the right mix of best-in-class services to capitalize on this favorable long-term trend. In the fourth quarter, we generated robust growth in operating income, adjusted EBITDA and earnings per share, demonstrating the substantial operating leverage in our model as revenue scales. It is worth noting that our technology segment had a particularly strong fourth quarter with operating income up 88%. Our full year performance also featured solid operating leverage as net sales growth of 16% helped drive a year-over-year gain of more than 38% in operating income and a more than 41% improvement in diluted earnings per share. Over the past several years, we have focused on investing in our teams and in our capabilities to capitalize on long-term trends that are driving IT spending in key high-growth markets. Whether it's private, public, or hybrid cloud, data center, cybersecurity, or managed services, our expanded breadth of integrated services and solutions is resonating with our customers who increasingly seek to partner with a skilled IT service partner to achieve their business objectives and maximize their return on investment. Customers continue to rely on ePlus to provide the guidance and solutions that enable them to meet the IT challenges they face today and for the future. We continue to experience strong growth trends in our services business, which includes a wide range of professional and managed services, staffing, logistics, and help desk services and remains an important competitive differentiator for ePlus. In fiscal 2022, for example, our services business generated sales growth of 19%. Our service mix is trending towards recurring long-term services, such as managed help desk and staffing as compared to project-driven services. This is a positive trend as annuity quality services tend to have higher margins and more predictable financial performance. The strong growth in our service business is also reflective of our expanded capabilities encompassing critical IT functions, such as cloud-hosted services, security, and network monitoring that are often too complex and costly to manage internally. As organizations and enterprises increasingly outsource these and other IT functions, it will favorably impact our financial results by enhancing both our top line growth and our profitability given the higher margins associated with these services. In terms of capital allocation priorities, we continue to evaluate a range of potential acquisition targets to enhance our growth and expand our geographic presence. Our focus remains primarily on bolt-on acquisition opportunities in high-growth market segments. Our strong balance sheet supports our ongoing M&A efforts, and our newly expanded credit facility provides additional liquidity and flexibility that we can draw on as needed. Last year, at this time, we said that as the economy continues to recover and our customers return to a more normalized work environment, we expected to see the pace of IT spending gain momentum. This is exactly what happened in fiscal 2022, and we expect this trend to continue into this year as well, spurred by our customers' digital transformation initiatives and growing need to support more adaptable business models. I am encouraged by the strength of our open orders and backlog, which reflect the continued high level of demand for our products, services, and solutions that will drive growth in fiscal 2023. Against this favorable backdrop, we are seeing lead times extend as supply chains remain tight and product availability has become more limited. As a result, while we anticipate solid top line growth in fiscal 2023, we expect that timelines for IT project implementations will be extended, creating revenue headwinds as we move throughout the year. Our team has done a very effective job of navigating supply chain issues over the past year, working closely with our channel partners and distributors to minimize the impact on our customers, and we will continue to draw on the strength of our resources and relationships to deliver for our customers in fiscal 2023 and beyond. Turning to our financing segment; this segment's performance for fiscal 2022 was particularly strong as adjusted EBITDA of $39 million increased 25% from the prior year and benefited in particular from an outsized transaction in the second quarter. As we look forward into fiscal 2023 based on our current visibility, we anticipate financing segment results will revert to a more normalized level as we saw in fiscal 2020 and fiscal 2021.

Thank you, Mark, and good afternoon, everyone. I appreciate you joining us today, and I'm pleased to share the details of our fourth quarter results with double-digit growth across key metrics, marking a strong finish to our fiscal 2022. In the fourth quarter, consolidated net sales totaled $451.5 million, up 28.1% from $352.6 million reported in the comparable quarter of fiscal 2021. Net sales in the technology segment reflected broad-based growth, increasing 26.4% to $419.4 million. Product revenue increased 28.3% to $357.8 million, while services revenue was up 16.6% to $61.6 million. Adjusted gross billings grew 20.8% to $638.5 million compared to $528.6 million in the same period a year ago. Our robust growth suggests market share gains and underscores the successful execution of our strategy. The adjusted gross billings to net sales adjustment was 34.3% compared to 37.2% in the fourth quarter of 2021. Our financing segment also delivered robust revenue growth, up 54.4% to $32.1 million compared to $20.8 million in the last year's fourth quarter, mainly as a result of higher proceeds from sales of off-lease equipment. Consolidated gross profit increased 17.8% to $115.4 million compared to $97.9 million last year. However, consolidated gross margin declined 230 basis points to 25.5%, primarily as a result of a lower proportion of sales recorded on a net basis, lower gross margin in our financing segment due to a change in mix and lower service margins. For our technology segment, gross profit increased 23% to $103.2 million. Looking more closely, product gross margin increased 20 basis points to 22.8%, while service gross margin decreased 390 basis points to 35.3%, reflecting lower professional service margins due to higher costs. Consolidated SG&A was up 10.7% to $77 million, while consolidated operating expense increased 8.9% to $80.9 million given higher variable compensation as a result of our strong gross profit growth. Total headcount at the end of March 2022 was 1,577 compared to 1,560 in the prior year. Operating income for the quarter of $34.5 million was up 46.1%. Our effective tax rate was 29.6% compared to 32.6% in the year ago quarter due to higher non-deductible compensation expense in the prior year. Consolidated net earnings of $24.2 million or $0.91 per diluted share increased 55.9% and 56.9%, respectively, from $15.6 million or $0.58 per diluted share in last year's fourth quarter. Non-GAAP diluted earnings per share were $1.01, an increase of 42.3% adjusting for the two-for-one stock split on December 13, 2021. Adjusted EBITDA grew 34.4% to $39.8 million year-over-year. Our diluted share count at the end of fiscal 2022 was 26.7 million, flat after adjusting for the stock split. To sum up our strong performance in fiscal 2022, consolidated net sales of $1.82 billion reflected a 16.1% year-over-year increase. Technology segment net sales grew 14.9% to $1.73 billion, and our financing segment net sales increased 45.7% to $88 million as a result of higher proceeds from leased equipment sales. Importantly, adjusted gross billings for the year were our highest in history at $2.6 billion, up 15.8% from fiscal 2021. As we review top line numbers by end markets in our technology segment for fiscal 2022, Telecom, Media & Entertainment and health care were our largest markets, representing 29% and 16% of segment net sales respectively. Technology, SLED and financial services make up 14%, 14% and 9%, respectively. The remaining 18% is a combination of all other customers. In fiscal 2022, consolidated gross profit was up 17.1% to $461 million. Gross profit in the technology segment increased 17.9% to $408.2 million, and gross profit in the financing segment was up 11.6% to $52.8 million, partly due to the outsized transactions we previously called out in our second quarter. The consolidated gross margin widened by 20 basis points to 25.3% from fiscal 2021, while the technology gross margin expanded 60 basis points to 23.6%. Consolidated operating income improved 38.5% and totaled $147.3 million, while operating expenses rose only 9.2% to $313.7 million, demonstrating the favorable operating leverage in our business model. Our effective tax rate for fiscal 2022 was 28.1% compared to 30.4% a year ago. Positive operating leverage helped drive strong earnings growth as we saw net earnings of $105.6 million or $3.93 per diluted share, representing an increase of 41.9% for both metrics. Non-GAAP EPS grew 37.6% to $4.39. As we continue to expand our business, our strong balance sheet supports our growth initiatives as cash and cash equivalents at the end of fiscal 2022 were $155.4 million, up 19.9% compared to $129.6 million. Additionally, we have approximately $126 million in our financing portfolio, a portion of which could be monetized if we have a need for additional capital as well as the availability on our recently expanded Wells Fargo credit facility of $375 million. Inventories were up 121.6%, ending the year at $155.1 million with the year-over-year increase reflective of ongoing customer projects not yet completed partly due to the continued supply chain constraints. Our cash conversion cycle was 48 days compared to 37 days in the year ago quarter but similar to 47 days in the previous quarter, reflecting the same trend we spoke about last quarter, namely higher inventory levels and an increase in sales to customers with greater than 30-day terms. Our robust results, combined with a favorable outlook for IT spending, underpin our confidence in our ability to continue to outpace industry growth. I want to express my gratitude to all of our talented ePlus employees for the strong results we continue to deliver together. With that, I will now turn the call back over to Mark.

Thank you, Elaine. Just to sum up, we are pleased with our strong fourth quarter results that capped off another great year for ePlus. Our diversified portfolio of products and services spanning the entire IT life cycle remains a key competitive differentiator, positioning us for continued growth as we provide both the solutions and flexibilities our customers require to realize their most critical business objectives. We appreciate your participation today and your interest and look forward to speaking with you on our first quarter conference call in August. Operator, we are ready to open the line for questions.

Our first question comes from Maggie Nolan with William Blair.

Hi. Thank you for taking my question. Can you provide some insight into what your clients are saying about the timeline for IT projects and how they are considering the factors that influence their budgets and spending with ePlus?

Sure. Hey Maggie, how are you? So first off, demand still continues to outpace supply. Our customers, when we're working with them on solutions, are asking us if we know the lead times based on the different solutions that we're suggesting or providing. I think our team, the ePlus team, has done a really nice job of setting expectations with those customers and then working with the different OEMs to get the products and solutions where services are included out the door in a timely fashion. From a demand standpoint, still solid, hasn't changed. Supply lead times, I think this is going to go through at least the end of this year, if not longer, Maggie. So customers are, I guess, I don't want to say aware of it and dealing with it, but that's probably the best way to say it at this point.

Okay. Understood. And then on the services side of things, can you talk a little bit about the impact of the difficult talent environment on your service offerings in particular and the demand for those?

Sure. The demand for our services has increased. Our services grew by 16.6% for the quarter and 19% for the year. Our team has done an excellent job enhancing our portfolio of consultative and advisory services, especially in the current market, and our annuity services revenues are also expanding. We're also experiencing positive staffing opportunities, placing multiple individuals in long-term projects with our clients. Demand remains strong, and while the talent shortage has impacted us, our margins dipped slightly this quarter due to adjustments in our bill rates. I view this as a short-term issue, and the demand continues to be strong.

Okay. Thanks Mark.

No problem. See you soon, Maggie.

Our next question comes from Greg Burns with Sidoti & Company. Your line is open.

Hi. Good afternoon. Is there any way you could quantify the growth in your open order book and backlog maybe against last year this time?

It's big. How does that sound, Greg? It's actually over 100% up over last year. So when I talked a little bit earlier with Maggie, the demand is definitely outpacing supply for sure. So we're starting to see that continue to build up both in our open orders, our backlog, deferred revenue, and things along those lines. So it's a positive sign. And I think over time, as supply chain starts to ease up and get better, it will be a positive sign for the future.

So that plus 100% was on backlog or open orders or both?

Open orders. Open orders.

With the inventory continuing to grow, it seems that this reflects the level of open orders you still have. Do you have any idea when that might start to decrease and allow you to reduce working capital?

Yes, Greg, to be honest, that's a challenging situation. It is constantly evolving. We are collaborating closely with the original equipment manufacturers. Lead times are fluctuating, improving in some areas while worsening in others depending on the vendor and technology type. This remains a difficult issue. Overall, we are committed to monitoring the situation closely and working with both vendors and customers to ensure timely deliveries.

Okay. And then we've seen some guidance from some other large technology vendors that have not been so strong or disappointing. Why do you think your outlook is maybe a little bit stronger than that or continues to be positive? Is it just the markets you're playing in? Is there anything specific that you're doing? Maybe you're gaining share, but could you just maybe help us understand the strength you're seeing in your business versus maybe what we've seen from some other large technology vendors recently?

One of the key advantages we have is the ability to sell multiple OEM solutions, unlike OEMs that only offer their own technology. Additionally, we operate in two segments, which allows us to adapt to market changes. For instance, as interest rates rise, our finance business can provide financing programs for technology purchases that some OEMs may overlook. I believe we are gaining market share. Industry analysts project IT spending growth between 5% and 6%, but for our quarter, we experienced a 28% increase and a 16% increase for the year. We are confident in our strategy, positioning ourselves in critical IT areas and investing in people, solutions, and services for future growth. We're also seeing success across our customer base and various verticals, as we've effectively aligned with their specific business objectives.

Great. Thank you.

No problem. Thanks Greg.

Our next question comes from Matt Sheerin with Stifel. Your line is open.

Yes. Thank you. Good afternoon, everyone. Just wanted to drill down a little bit more on the supply-demand environment and it sounds like a little bit more cautious tone from you, Mark, regarding the supply side. You're just coming off of 28% growth, 20%-plus product growth. So you were able to meet demand and obviously beat expectations. So what's happened in the last couple of months of things to have gotten worse? And could you maybe drill down within the different product areas, networking, storage, etcetera, give us an idea of what may be better or worse in terms of the constraints?

Yes. Okay. So starting with the last piece. So I'd say networking, wireless, and security appliances are some of the things with longer lead times. Storage and servers, for the most part, okay. Darren, I don't know if you have any insight there. You want to...

Yes. Big iron networking has the longest lead time for us. Following that, all categories have extended times, but wireless has been particularly delayed for several months or even longer in some instances. Security appliances are now taking more than a few weeks in many cases. However, servers and storage haven't experienced significant delays. Overall, the situation isn't worsening; it's mostly stable, neither improving nor declining, but there is a lot of activity in terms of movement in and out.

Yes. To address your first question, I'll be honest with you. We believe we had a strong quarter and a solid year, and the team did an excellent job collaborating with customers. Some of this can be attributed to pent-up demand, as customers return to work in hybrid models and require networking, connectivity, and security solutions. There is a certain hesitancy regarding the supply chain that is felt across the industry, with many OEMs and peers expressing concerns that the situation hasn't improved. The ongoing Ukraine-Russia conflict and China's lockdown add layers of uncertainty, creating many variables beyond our control.

Got it. Okay. Looking at the June quarter, I understand you don't provide forward guidance, but since you're more than halfway through the quarter, it seems you likely have insight into your shipping expectations for at least the next few weeks. Are you still anticipating double-digit year-over-year growth like you have in the past couple of quarters?

Yes, you're pushing me here, aren't you, Matt? As you know, we don't provide guidance. However, I can share that we do have visibility into the open orders we expect to ship. Since we're already two months into the quarter, we have a good sense of where we think we'll end up. There are variables each quarter, such as a large deal that might either slip or come into a quarter, which can always affect the numbers. Do we feel confident that we'll continue to surpass the IT spending market? Yes. An article you published not long ago mentioned that IDC anticipates a 5% to 6% increase in IT spending, and we truly believe we will exceed that.

Okay. All right. Thank you. And then on the leasing segment, as you said, it certainly has been well above normal trends in the last few quarters, but you're expecting it to moderate. So in terms of kind of a revenue run rate or EBITDA, when are we expecting it to get back to where it was a couple of years ago? Or is it just hard to tell because it's so lumpy?

Yes, it's a difficult situation because with rising interest rates, there might be an opportunity. However, last year in Q2, we identified a significant transaction that we do not expect to see again this year. Therefore, we anticipate that EBITDA will return to more normalized levels similar to what we experienced in the last couple of years.

Okay. And just lastly on M&A. And obviously, you've done a very steady and strong job in terms of identifying good candidates, integrating them. Is there still a pipeline that you're looking at here in terms of opportunities over the next few quarters?

Yes, Matt. There is a very strong pipeline available both in terms of territory and from a technical or services perspective across multiple markets. We see a lot of opportunities to explore and consider in the M&A space with favorable multiples.

Okay. Thanks a lot.

Thanks Matt. We'll talk to you soon.

We have reached the end of the question-and-answer session. I'll turn the call back over to Mark Marron, CEO, for closing remarks.

Okay. Hey, I just want to thank everybody for joining us on the call. We thought we had a nice quarter and nice year. Also I want to wish everybody a happy holiday for Memorial Day weekend. Enjoy yourselves, be safe, and see you on the next call. Take care.

This concludes today's conference call. You may now disconnect.