Good day, ladies and gentlemen, and welcome to the ePlus Earnings Results Conference Call. As a reminder, this conference is being recorded. And 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; 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 on the earnings release we issued this afternoon and our periodic filings with the Securities and Exchange Commission, including our most recent annual report on Form 10-K, quarterly reports on Form 10-Q and in any other documents that we may file with the SEC. Any forward-looking statement speaks only as of the date of which the statement is made, and the Company undertakes no responsibility to update any of these forward-looking statements in light of new information, future events or otherwise. In addition, we will be using certain non-GAAP measures during the call. 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 thank you everyone for participating in today's call to discuss our fourth quarter and fiscal 2023 results. We were very pleased with our fourth quarter and year-end results. For fiscal 2023, net sales increased 13.5% to $2.1 billion, net income increased 13%, and diluted earnings per share grew 14%. We achieved this solid growth even as we made significant investments in our team to enhance our capabilities and capture future growth opportunities despite challenges in the IT supply chain. Our gross billings grew to $3.1 billion, a nearly 20% increase over the prior year. These financial achievements underscore the continued success of our growth strategy, innovation and execution where we capture incremental market share by focusing on opportunities in higher-value and higher-growth solution areas, such as workplace transformation, artificial intelligence and our core offerings of security, networking and cloud. Fourth quarter net sales increased 9% driven by contributions from both products and services. Improved margins, particularly in our services business, helped fuel strong fourth quarter net earnings growth of 35.5% and diluted earnings per share growth of nearly 35.2% as compared to the fourth quarter of fiscal 2022. Looking at our financial results in more detail. Technology segment product net sales rose at a double-digit rate for both the fourth quarter and for our fiscal 2023. These gains were driven primarily by networking and security solutions that enable workplace transformation. While the technology to support remote and hybrid work models has been widely adopted over the past few years, workplace transformation is a complex and multifaceted process that demands specialized knowledge and expertise. From design to implementation, ePlus serves as a trusted partner, enabling our customers to facilitate workplace collaboration, reduce cybersecurity risks and enhance network performance. Services net sales increased approximately 12% in the fourth quarter and 10% for the full year. Managed services represented a source of particular strength as customers increasingly opt to outsource their day-to-day IT requirements. By outsourcing these functions to ePlus, organizations enhance their ability to drive better operational decisions, mitigate risk and improve efficiency. Within managed services, we had a strong year both of bookings and also brought to market several new innovative solutions. Managed services create desirable annuity-like revenue streams while also differentiating us from our peers and providing high value and customer satisfaction. We continue to build out our managed service capabilities that provide the support and outcomes our customers need. This includes providing improved IT life cycle visibility through our asset management services and executive dashboards that provide real-time operational metrics for their devices under management. Our 24x7x365 monitoring and learning provides customers with regular updates on the performance and health of their IT environments. Through our expanded managed service capabilities, we have built a solid base of recurring revenue. This revenue stream not only contributes greater predictability to our financial performance, but also provides an opportunity to build and strengthen long-term relationships with our customers. Security remains a key growth driver of our overall business. As enterprises and organizations have shifted their operations towards the cloud, heightened cybersecurity risks have fueled demand for our comprehensive suite of security solutions. Over the past 12 months, our security product gross billings increased 36.5% and accounted for 22.3% of our product gross billings. We continue to maintain a positive outlook for our security business as our customized solutions are aligned with our customers' life cycle needs from strategic design to ongoing maintenance and support. As you'll recall, our financing segment generated exceptional results in fiscal 2022 largely due to certain outsized transactions, some of which were customer-driven and were not expected to recur this fiscal year. As we've stated over time, our financing business is a differentiator as compared to our technology peers, but has lumpy operating results because of the transactional nature of the business. Over the years, strategic acquisitions have played an important role to drive our strategy and growth. Through our disciplined M&A process, we look for companies with solid financials, strong customer bases and a talented team to drive growth. We are pleased to have found these qualities and more in the Network Solutions Group, a business unit of CCI Systems, which we acquired on April 30, 2023. We believe this is a great fit for ePlus, offering a unique and compelling opportunity to expand our presence in the telecom market by providing our enhanced array of products and services that we believe will drive improved performance, reliability and security for customers. Throughout fiscal year 2023, ePlus brought to market a number of internally developed and cost-effective solutions that were well received by our customers, for example, ePlus Storage-as-a-Service powered by Pure Storage; and AVA, an automated virtual assistant for collaboration. Additionally, we announced several cloud managed services powered by top vendors such as Microsoft, VMware and AWS. We were pleased to be named the first North American Cisco partner to be qualified in the Cisco Partner Lifecycle Services Support. We then brought to market our own branded solution, the ePlus Lifecycle Services Support, which centralizes and streamlines a customer's technical support experience by providing first call, multiproduct, multi-vendor architecture support for Cisco and adjacent technologies. In addition, we were named Cisco U.S. Partner of the Year and Cisco Global U.S. Marketing Partner of the Year. We were also recognized by many other vendors across multiple areas, such as Pure Storage Customer Advocate of the Year, Palo Alto's America's Social Impact Partner, along with Nutanix Americas and Global Reseller Partner of the Year. Looking forward, we believe we are well positioned in the IT market to provide solutions, which are recession-resilient, reflecting the fundamental strength of our business model and our market position. Given heightened economic uncertainty, we believe IT spending in our fiscal 2024 year is likely to be directed towards products that yield faster returns and improve efficiencies. With the proliferation of cyber threats, we anticipate that the strengthening of corporate cybersecurity programs is also likely to remain an IT priority. In this environment, we will continue to work closely with our customers, providing cost-effective and timely solutions that will enable them to address immediate needs and help advance their longer-term IT objectives. I would like to commend the entire ePlus team for their dedication and consistent execution in a challenging environment. Even as we faced persistent supply chain constraints throughout the year, our team was able to deliver the products and innovative solutions that met the needs of our more than 4,300 customers. I will now turn the call over to our CFO, Elaine Marion, to provide details on our fourth quarter and full fiscal year 2023 results. Elaine?

Thank you, Mark, and good afternoon, everyone. I am pleased to report a strong finish to fiscal year 2023. In the fourth quarter of fiscal 2023, we continued to benefit from our strategic focus on providing higher-value and higher-growth technology solutions. Consolidated net sales were up 9% year-over-year to $492.2 million, and technology segment net sales increased 15.2% to $483.2 million driven by 15.9% growth in product revenue and 11.5% growth in services revenue. Gross billings, a new operational metric that reflects the total dollar value of customer purchases of goods and services, including shipping charges during the period net of customer returns and credit memos, sales and other taxes, totaled $733.1 million, representing a 17.6% increase from the year-ago quarter. Due to fewer sales of leased equipment, our financing segment revenue totaled $9 million, below the exceptional $32.1 million reported in last year's fourth quarter. As previously noted, we did not expect last year's performance to be replicable. Consolidated gross profit increased 14.7% to $132.3 million, and gross margin of 26.9% expanded 140 basis points year-over-year. Within our technology segment, gross profit increased by 20.9% to $124.7 million, and our technology segment gross margin showed a 120 basis point improvement to 25.8% driven by higher margins on both product and services. More specifically, product gross margin expanded 100 basis points to 23.8% due to changes in mix, and services gross margin expanded 260 basis points to 37.9% due to an increase in gross profit from both professional and managed services. Financing segment gross profit amounted to $7.6 million compared to $12.2 million in the year-ago quarter due to lower profit from sales of leased equipment that was expected as last year's fourth quarter benefited from early lease buyouts that did not recur this year. To meet our customers' needs for the past several quarters, we have invested in customer-facing personnel that led to higher salaries and benefits, driving fourth quarter SG&A up 10.9% year-over-year. At quarter end, our head count totaled 1,754 compared to 1,577 in the prior year quarter. Interest expense was up year-over-year due to higher interest rates and increased borrowing on our credit facility. We managed expenses efficiently, leading to operating income improvement of 23% year-over-year to $42.4 million. The effective tax rate was 22.4% in the fourth quarter of fiscal 2023 compared to 29.6% in the year-ago quarter due to lower-than-forecasted non-deductible expenses, increased benefits from foreign sales, along with favorable state return to provision adjustments. Fourth quarter consolidated net earnings were $32.9 million or $1.23 per diluted share compared to $24.2 million or $0.91 per diluted share in the year-ago quarter. Non-GAAP diluted earnings per share were $1.36, a 34.7% increase from the year-ago quarter. Adjusted EBITDA was $48.7 million, 22.4% ahead of the comparable quarter in fiscal 2022. That brings me to our full fiscal year review. Fiscal 2023 net sales of $2.07 billion reflected a 13.5% year-over-year increase. Technology segment net sales grew 16.3% to $2.02 billion with service revenue growth of 9.9% to $264.4 million. And our financing segment net sales were $52.5 million compared to $88 million in the prior year. Our gross billings amounted to $3.1 billion, 19.8% ahead of fiscal 2022. Our two largest end markets, telecom, media and entertainment and technology, represented 26% and 20% of technology segment net sales, respectively. Health care, SLED and financial services accounted for 14%, 14% and 8%, respectively, with the remaining 18% from other end markets. Fiscal 2023 consolidated gross profit was $517.5 million, up 12.3% from 2022. Gross profit in the technology segment grew 16.3% to $474.5 million, and gross profit in the financing segment was $43 million compared to $52.8 million in the previous year. The consolidated gross margin was 25% compared to 25.3% in fiscal 2022. Technology gross margin remained constant at 23.6%. We are pleased with consolidated operating income growth of 12.8% to $166.2 million, even with operating expenses up 12% to $351.4 million, demonstrating the favorable operating leverage in our business model. Our effective tax rate for fiscal 2023 was 26.8% compared to 28.1% a year ago. Operating leverage also helped drive strong earnings growth as we saw net earnings of $119.4 million or $4.48 per diluted share, representing increases of 13% and 14%, respectively. Non-GAAP EPS grew 14.4% to $5.02. In terms of our balance sheet, cash and cash equivalents at the end of fiscal 2023 remain at healthy levels totaling $103.1 million. The decrease from $155.4 million at the end of fiscal 2022 is mainly attributable to share repurchases, the purchase of Future Com and increased working capital needs. Together with the expanded Wells Fargo credit facility of $500 million, we have ample liquidity and financial flexibility. Inventories were up 56.9%, ending the year at $243.3 million and sequentially flat with our third quarter. Similar to prior periods, this variance is driven by ongoing customer projects not yet completed partly due to continued supply chain constraints and large customer projects. Our cash conversion cycle was 59 days compared to 50 days in the year-ago quarter, also primarily the result of higher inventory levels that we have been experiencing in the past several quarters. Overall, 2023 was a good year for ePlus, and we are very proud of our team for delivering such strong results.

Thank you, Elaine. In closing, we are pleased with our strong fourth quarter results that concluded another successful year for ePlus. Our growth strategy is working, enabling us to capture share in higher-growth, resilient market segments where we provide the complex and innovative solutions our customers require to meet their IT objectives. We have continued to add to our capabilities both through investments in our team and through targeted acquisitions that help build long-term value for shareholders. Operator, please open the line for questions.

We'll take our first question from Maggie Nolan with William Blair.

This is Jesse Wilson on for Maggie Nolan. Congrats on a really nice quarter here. Mark, I wanted to circle back to your comments about the faster return. So how is the Company positioned to deliver on these types of projects? And how big of a role do you think the supply chain will play in delivering this work?

Sorry, Jesse, when you're saying faster return, what portion are you referring to?

I think you were talking about clients prioritizing projects that deliver faster returns for them?

Oh, okay. Yes, I got it. So here's what we saw this quarter. The supply chain did ease a little bit. Specifically in the networking space, we saw a nice uptick and a little bit of pull-through on some of our networking gear. It's still fluctuating by vendor, but we did see some of our open orders pull down as well. So, we saw a little bit of pull-through there, specifically in the networking space. And then we just think that the solutions that we have in play, some of our services and other things will play well in this type of environment.

Okay. And then on margins, what kind of helped you get back to the high 30s level in services? How sustainable is it? And can you just kind of talk about Q4 versus the rest of the year?

Yes. In our services segment, we experienced an increase due to a strong quarter in our managed services revenues, which provide us with good margins. Additionally, improvements in the supply chain allowed us to expand our professional services, which yield our highest margins. We also implemented some price increases that contributed positively to our margins.

Got it. I'll hop back in queue. Congrats again.

All right, Jesse, thanks.

We'll take our next question from Greg Burns with Sidoti.

Could you just talk about current demand trends, order patterns relative to maybe what you're able to still generate based on the backlog of business, so current demand versus leaning on the backlog? And what's your view is going forward into fiscal '24 given some of the macro headwinds that we're seeing? We could start there, I guess.

Yes, that's fine, Greg. I'm not sure what you mean by macro headwinds. I'm assuming you're referring to supply chain issues, price increases, rising interest rates, inflation, staffing shortages, and tech layoffs. However, we don't have anything we need to address as a result. Our open orders remain strong; they are down year-over-year but still significantly higher than our usual back orders. Our backlog remains robust for both products and services, and our pipeline is solid. We are observing some improvement in the supply chain, which should be beneficial. However, as you're aware, in this market, rising interest rates can sometimes diminish customers' purchasing power, leading to longer sales cycles. While we are cautiously optimistic, we do have concerns that this may affect some customers' willingness to spend as we move forward.

Okay. Given this situation, how do you plan your investments for next year? You significantly increased your workforce this year. Do you plan to reduce that growth next year or focus on leveraging the investments made this year in terms of headcount? Or will you continue to expand?

Yes. Greg, it's a good question. Right now, we do have open reqs. So, we do plan on continuing to hire. But with that said, like anything, not just in the economy we're in, but every quarter and every year, we watch it very closely based on our operating metrics, and we'll make the adjustments that we need to make in terms of whether adding head count or building out new solutions. But based on this year, we saw a nice uptick and both our revenues and our operating income margins were up by a decent amount as well. So, we're going to continue to invest in head count and build out the solutions. But be mindful that we will watch it very closely if things start to adjust or things go south from a recession standpoint.

Okay. And you've obviously built a strong security practice over the last couple of years. Where are you in terms of AI, your capabilities there? Is that an area where you can expand? And would that be like organic or inorganic?

Yes. Well, one, it would be organic. Two, I think we're in the beginning stages here. So we work with partners like NVIDIA and HP and a few others related to that. A lot of it is really just about automating and optimizing processes and things along those lines. I would think two of the biggest technology trends that are out there really are AI and automation going forward. So anything that streamlines processes or reduces human error, leverages data to drive your business, I think, will be a solid business for most folks going forward, Greg.

We'll take our next question from Matt Sheerin with Stifel.

Just a question on the strength of the gross margin that you saw in the quarter, Mark, it was up significantly from last quarter. You talked about product mix being one factor. Could you talk about exactly what we're talking about here in terms of product mix? And what are your expectations for gross margin as we get into next quarter?

Yes. So Matt, our margins were up for two reasons. One, our product margins were up year-over-year in the quarter. Also, as Jesse noted earlier, our service margins were up nicely in this quarter. So that's where the big uptick happened in our gross margins overall.

But specifically in terms of the product mix, is it because you did, like in the December quarter, more high-volume servers and there's a different mix of business with the price increases? I'm just trying to figure out. And as we get into the next quarter or two, are you expecting margins to be at these high levels, which would indicate up year-over-year?

Yes. So a couple of things here, Matt. First off, the increase in services is due to two factors. We continue to build our managed services annuity-quality revenues, which are a strong margin business for us and enhance our service margins. Our professional services also increased and provide nice high margins. Additionally, networking saw significant growth, contributing positively to our margins. These are the areas that impacted our overall margins. Looking ahead, we expect margins to remain consistent, understanding that they may vary from quarter to quarter due to seasonality. Another point I mentioned briefly is that we raised prices on our services, which further improved the margins.

Okay. And I noticed in terms of your revenue by end market, you had significant growth in fiscal '23 from technology and from media and really no growth in health care and a couple of other markets. So could you tell me you chose what drove that? And then also, what's your outlook for fiscal '24 for those markets?

Yes, Matt. In our technology segment, operating income increased by 43.8% this quarter and 28.5% for the year. We experienced a strong performance across the board in this segment regarding the solutions we provided to our customers by vertical. Our top five verticals saw growth this quarter and for the year in both net sales and gross billings, particularly driven by SLED in technology. I focus less on quarterly fluctuations in vertical performance unless they are significant as they can result from a few deals or market conditions. Additionally, our customer size segments grew for the quarter and the year in terms of net sales and gross billings, indicating our effective go-to-market strategy across all customer segments from mid-market to enterprise. Furthermore, our net sales by type increased this year across data center, cloud, networking, security, and cloud solutions. Overall, I believe the team performed exceptionally well across customer segments, solution types, and verticals. I hope that addresses your inquiry.

Yes. Yes. If I can just press a little bit in terms of the outlook, I mean there's concern, a lot of your suppliers, the hardware OEMs, have talked about, particularly enterprise-level customers, really digesting the spending that's been going on and pushing things out. It doesn't sound like you've got that backlog, you got that inventory that you're waiting to fill orders. So, it doesn't sound like you're seeing any really significant push outs or anything from customers.

Yes, we are experiencing delays in the sales cycle. I mentioned this earlier, and we are concerned about the potential impact. We pay attention to what vendors and competitors are facing. While we may not be completely recession-proof, we might be somewhat resilient depending on our offerings. However, like many others, we are noticing longer sales cycles. Nevertheless, the team performed very well during the quarter and the year overall.

Okay. Great. And just lastly, on that acquisition that you just did, could you tell us what the expected revenue contribution on an annual basis would be?

Matt, we don't disclose that. They had about 88 employees, just to give you a feel for size, and it's immaterial in terms of to our overall numbers. But what we think is they've got a solid customer base. They're in the service provider space, and they've got some master specialization accreditations from Cisco that we think we can leverage across the rest of ePlus in the service provider space. And also, we think what ePlus brings to them with security and finance and collaboration and all the other solutions we have, we're going to be able to go back into their customer base and upsell and cross-sell. So, we're kind of excited. We think it's a talented team and will make a difference for ePlus as we go forward.

And that does conclude the question-and-answer session. I would like to turn the call back over to Mark Marron for additional or closing remarks.

Okay. Thanks, operator. Thanks, everybody, for joining us today. I wish everybody a happy and long Memorial Day weekend to enjoy with your family and friends. And we look forward to speaking with you on the next call. Take care.

And that concludes today's presentation. Thank you for your participation and you may now disconnect.