Good day, ladies and gentlemen. Welcome to the ePlus Earnings Results Conference Call. As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Mr. Kley Parkhurst, SVP. You may begin.

Thank you for joining us today. On the call is Mark Marron, CEO and President; Darren Raiguel, COO and President of ePlus Technology; 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 in 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 other documents that we file with the SEC, including the Form 8-K we filed on October 6, 2023, recasting certain disclosures in our most recent annual report. 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 have included the 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 second quarter fiscal 2024 results. I will start with some key takeaways. ePlus generated solid results in our second quarter with consolidated net sales up 19%. This was driven by strong sales growth of 21% in our Technology business, which included 9% revenue growth in our services businesses. Diluted earnings per share advanced 14%, slightly lower than sales growth due to a shift in product mix, a decline in finance segment earnings given uneven deal flow and a tough compare year-over-year, as well as increased operating expenses which included investments in our key growth initiatives. Our second quarter performance benefited from continued market share gains and improved product availability that enabled us to deliver on orders from prior periods. Gross billings improved for the third consecutive quarter, totaling approximately $856 million, representing a 7.4% gain over the same period last year as we continued to drive organic and acquisition growth to capture market share. Our demonstrated ability to drive sales and earnings growth even in an uncertain economic environment underscores the strength of our strategic plan, our expertise across the broad technology stack and diversification across customer types and end markets. Through our comprehensive portfolio of innovative solutions and service offerings, ePlus enables successful and cost-effective outcomes that align with our customers' IT objectives. I was particularly pleased with our sales growth as we experienced increases across nearly all market verticals and customer sizes in the second quarter, led by the strength of our networking, collaboration and managed services solutions. Networking represented our best performing category as net sales grew approximately 62% year-over-year. This strong growth reflected three main factors: one, a contribution from our recently acquired Network Solutions Group; two, a continued improvement in product availability that enabled us to deliver on prior customer orders; and three, organic customer demand. The prevalence of hybrid work, distributed computing and the emergence of AI are driving growth for advanced networking architectures, and we are capturing share in this space through our innovative solutions and partnerships with leading OEMs. Continued customer investment in network monetization solutions is also contributing to our growth in this space. This includes building out AI-enabled infrastructure solutions and supporting AI implementation with advisory services around data modeling and governance and risk best practices. Our workspace transformation or collaboration net sales grew 41% year-over-year and has created market-wide recognition of our technology leadership in this space. For example, we were recently recognized as Reimagine Work Partner of the Year for the Americas from Cisco. This award recognizes partners who are excelling at hybrid work, customer experience, leading innovation and empowering collaboration with WebEx. We were also recognized for the release of our proprietary ePlus collaboration solution called Automated Virtual Assistant, or AVA. ePlus AVA is an in-house developed managed service that leverages automation and artificial intelligence to provide automated testing and reporting on the health of Cisco video devices, conference rooms and workspaces to ensure effective operations. Security was 18.5% of our technology gross billings in the trailing 12 months. Security net sales increased 7% in the quarter. Customers look to ePlus to better mitigate the risk, sophistication of cyber threats and want us to provide comprehensive risk management solutions. In October, we announced our holistic program called Compromise Nothing. This comprehensive program includes strategic assessment and advisory services and our managed service offerings. Our extensive capabilities distinguish ePlus in the security solutions market and provide attractive opportunities for us to build and expand relationships with both existing and new customers. Our services segments performed well with net revenue increasing 9% year-over-year primarily due to strong growth in our managed services, which grew 21%. Over the past year, we have focused on expanding our solutions and capabilities in managed services, which offer the advantage of recurring and predictable monthly revenue streams. We continue to see our customers shift their IT spend towards SaaS-based solutions given upfront cost advantages, ease of scalability and simplified maintenance requirements. The continued growth of our SaaS offerings such as Storage-as-a-Service and AVA remains a key growth driver for ePlus within our Managed Services business, along with our other annuity services and helps with visibility and predictability of future revenue streams and profitability. Strong double-digit growth in managed service revenue coupled with greater operating efficiency drove a significant improvement in the profitability of this business with gross margins increasing 460 basis points. Professional services revenue edged higher as growth in Project Services revenue was largely offset by a decrease in staff augmentation. This performance is consistent with customer IT spending trends, which currently tend to favor shorter-term projects that generate relatively fast return on investments. Additionally, we believe the growing adoption of automation and AI will drive more demand for cloud storage and analytics. To meet these needs, we are leveraging our capabilities in cloud and consulting, along with our partnership with AI leaders such as NVIDIA, Lenovo and Pure to help our customers design and deploy AI infrastructure solutions that deliver significant value over time. Our financing segment delivered a solid quarter, consistent with our expectation even as results declined on a year-over-year basis. As I noted in last quarter's call, because this business benefited last year from specific financing deals, we anticipated that quarterly comparisons this year would prove challenging and create a tough compare. While quarterly or even yearly results in this segment can be variable, our financing business provides flexibility for our customers while delivering strong profitability. We remain committed to investing in our team and in our capabilities to capture future growth opportunities. We added a significant number of customer-facing employees year-over-year, with a particular emphasis on sales, professional services and technical support personnel. We have continued to build out our solution and service offerings around managed services such as Storage as-a-Service and AVA. Additionally, we've invested in the construction of our new state-of-the-art customer innovation center, which will enable us to showcase our breadth of innovative offerings and expand our warehouse and logistics capabilities. These investments, higher acquisition-related depreciation and amortization expense and lower financing segment operating income moderated second quarter growth and consolidated operating income. Despite a tough economic environment, we are pleased that consolidated quarterly net earnings increased 14.7% to $32.7 million. And in our Technology Business segment, operating income increased 12.5% to $35.9 million and adjusted EBITDA increased 17.1% to $45.5 million. I'd like to express my thanks to the entire ePlus team for delivering another quarter of solid financial performance. I will now turn the call over to Elaine to discuss our financial results in more detail. After Elaine's remarks, I will provide our financial outlook for fiscal 2024. Elaine?

Thank you, Mark, and good afternoon, everyone. I will provide additional details about our financial performance in the second quarter of fiscal 2024. Consolidated net sales increased 19% to $587.6 million. Technology business net sales grew 21.3% to $571.9 million, aided by the fulfillment of open orders and the NSG acquisition. Service revenue increased 9%, reflecting continued strong growth in managed services, partially offset by modest growth in professional services. Sales remained broad-based across our customer verticals. On the trailing 12-months basis, our two largest verticals were telecom, media and entertainment and technology, representing 25% and 18% of our technology business net sales, respectively. SLED, health care and financial services accounted for 16%, 13% and 10% of our technology business net sales, respectively, with the remaining 18% divided among other end markets. Our financing business segment faced a particularly challenging comparison this quarter, and as such, revenue declined to $15.7 million from the prior year period primarily due to lower proceeds from sales of equipment, lower transactional gains and lower month-to-month rents. Consolidated gross profit increased 8.3% to $144.4 million, representing a consolidated gross margin of 24.6% compared with gross margin in the same quarter last year of 27%. The decrease in gross margin from the same period last year primarily was the result of product mix and lower financing business segment earnings. Within our Technology business, gross profit increased 12.4% to $130.7 million. Technology business gross margin was 22.9% compared to 24.7% in the year ago quarter. This decrease was mainly due to a lower proportion of third-party maintenance and services sales, which are recorded on a net basis. Services gross margin increased significantly with managed services gross margin improving 460 basis points to 31.1% and professional services gross margin expanding 270 basis points to 41.3%. The improvement in services profitability primarily reflected enhanced operating efficiency, driven in part by increased scale of our Managed Services segment. Operating expenses increased 11.6% year-over-year to $99.5 million, reflecting higher salaries and benefits due to additional headcount, depreciation and amortization expense from the NSG acquisition and increased spend on travel and entertainment and marketing. We ended the September quarter with headcount of 1,877, an increase of 148 employees, of which 118 were customer-facing. It should be noted that we onboarded 83 employees with the acquisition of NSG. Technology business operating income rose 12.5% to $35.9 million, while financing business segment operating income declined 26.4% to $9 million. On a consolidated basis, operating income grew 1.7% to $44.9 million. Earnings before tax increased 11.8% to $45 million as the foreign currency losses from last year did not replicate in the current quarter. The effective tax rate was 27.4% in the second quarter of fiscal 2024 compared to 29.3% in the year ago quarter. Consolidated net earnings were $32.7 million or $1.22 per diluted share, reflecting increases of 14.7% and 14%, respectively, from the year ago quarter. Non-GAAP diluted earnings per share were $1.40, up 8.5% year-over-year. Our diluted share count at the end of the quarter was 26.7 million, unchanged from the second quarter of fiscal 2023. Adjusted EBITDA in the technology business rose 17.1% but declined 26.2% in the financing business segment. As a result, consolidated adjusted EBITDA improved 6.5% to $53.6 million. That brings me to our year-to-date review. Consolidated net sales grew 22% to $1.16 billion for the first six months of fiscal 2024, primarily driven by 23.6% net sales growth in the technology business. Technology business gross billings increased 12.2% to $1.7 billion. Consolidated gross profit increased 16.1% to $286.6 million. Consolidated gross margin was 24.7% compared to 25.9% a year ago, primarily due to the mix in the product segment. Consolidated net earnings were $66.5 million or $2.49 per diluted share compared to $50.8 million or $1.91 per diluted share. Adjusted EBITDA rose 21.3% to $107.4 million and non-GAAP diluted earnings per share expanded by 23.2% to $2.81. Shifting to the balance sheet. Cash and cash equivalents were $82.5 million at the end of the second quarter compared to $103.1 million at the end of fiscal 2023. As supply chain pressures continue to ease and product availability improved, we were able to deliver on prior customer orders and related services. As a result, inventories declined to $222.1 million from $243.3 million at the end of March 2023. Inventory turns continued to improve to 29 days compared to 32 days in the preceding quarter and 38 days at the end of fiscal 2023. Our cash conversion cycle was 51 days compared to 52 days in the year ago quarter and 59 days at the end of fiscal 2023. Given this improvement, year-to-date operating cash flows were $10.3 million compared to $119.7 million of cash used in the same period last year. While we expect our customers to be more conservative with their IT spending in the second half of fiscal 2024, as Mark mentioned, ePlus remains well positioned given our strategic focus on higher growth end markets. As always, I want to thank our talented ePlus employees for continuing to drive our solid financial performance. With that, I will turn the call back over to Mark.

Thank you, Elaine. Through the first half of our fiscal year, ePlus has delivered strong financial performance. Our results highlight the continued success of our growth strategy and the advantages of our diversification and comprehensive capabilities. As we enter the second half of our fiscal year, we are beginning to see sales cycle timelines extend as customers prioritize cost optimization initiatives and reallocate spending accordingly. In this environment, we anticipate customers will focus on projects that deliver relatively fast returns on investments while continuing to deploy solutions that enhance cybersecurity. ePlus has successfully navigated through a similar period of economic uncertainty in the past, and we remain confident in our outlook given our market positioning and focus on key growth verticals. As a result, we reaffirm our previously issued financial guidance for the current fiscal year. We continue to expect fiscal year 2024 net sales of approximately $2.23 billion to $2.33 billion and adjusted EBITDA of $200 million to $215 million, representing a margin of 9% to 9.2%. Our guidance assumes in part a continued easing in supply chain constraints that enable us to complete previously delayed customer projects. In closing, ePlus remains focused on building long-term shareholder value through the execution of our growth strategy and the efficient allocation of capital. Operator, please open the call for questions. Thank you.

Your first question comes from Maggie Nolan with William Blair. Please go ahead.

Hi, thank you. I was hoping you could give us a little color on the mix within revenue of SMBs versus large enterprises and any different spending trends or expectations that you have across the different client types?

Sure, hey Maggie. How are you? So as I think you know, we really don't focus on the S in SMB. So we're mainly a mid-market to enterprise play. Many of the solutions that we're rolling out across cloud, security, networking collaboration and now AI kind of fit in that mid-market, which is our sweet spot. With that said, from 500 employees and above, we were actually up, and our enterprise sales were up. I want to say for the quarter, net sales were up like 7% or 8%. So we actually had a really nice quarter related to our customer size segments. Our top 5 verticals were also up both in net sales and gross billings. So nice execution by the sales team across the different customer size segments and verticals. Did that get what you needed, Maggie?

Yes, it did. And then when we think about the full-year guidance, what is your visibility into the guidance look like right now? When you initially built the guidance, did you expect such a strong first half of the year as well as some of the commentary that you gave on kind of weaker IT budgets in the back half of the year, or has that changed over the course of the year since you set guidance?

Yes, there are a couple of things to address, Maggie. We remain confident in our guidance. Our forecast for net sales compared to last year indicates an increase of 8% to 13%, depending on where we land within that range. This represents a significant improvement relative to the overall market and our competitors. There are a few factors to consider. We anticipated a stronger first half of the year, but we face a challenging comparison for Q3, as our net sales were up over 28% last year during the same period. Additionally, we are observing extended sales cycles and customers being cautious with spending due to cost optimization. These aspects influence our perspective, but we are still optimistic about the guidance we provided and had expected the first half to perform a bit better.

Got it, thank you for the update and nice quarter.

All right. Thanks, Maggie.

Your next question comes from Greg Burns with Sidoti & Company. Please go ahead.

Yes, when we look at the Technology segment sales, how much of that was organic versus inorganic?

Yes, approximately 25%, a little over that was acquisition related. The other 74%, Greg, or so was organic. What you saw there, Greg, in our numbers, just at a high level. You saw some supply chain easing specifically in the networking space. Networking was up big. I think it was up 62%, if I remember correctly. Collaboration was up nicely as well. So some of our workspace transformation, some of the things going on in networking are starting to roll out nicely, and the team did a nice job of executing there. But it was roughly three quarters organic, a quarter acquisition related.

Okay. To that idea of the supply chain easing, how much of the networking or product revenue as a whole was from you drawing down your backlog versus net new business?

Yes. Hey Greg, that's hard. The only thing that I can tie it to is our inventory levels were down about $22 million, but there was an awful lot of new deals, both booked and invoiced in the quarter, and it's a really tough one to figure out what was backlog and what was open orders versus net new effectively.

Thanks. Lastly, can you provide an update on the backlog? I know you reduced inventory and fulfilled some of that backlog, but how does the current backlog compare to historical levels? Is it still high, and could you give us an overview of your pipeline?

Pipeline is within where we would think it would be for this quarter. The one thing I would tell you, Greg, that I got to highlight again. Last year, in Q3, we had a really strong tech quarter. Our net sales were up over 28%. The adjusted gross billings were up almost 30% in that quarter. So it's kind of a tough compare there. But with that said, as compared to traditional Q3 quarters, pipeline, backlog, all the things that we're tracking is in play. The only caveat I'd put on that is we are seeing some deals that are taking a little bit longer as customers try to figure out what they want to spend from a priority standpoint. And they're trying to do some cost optimization across some of their cloud and security plays. And the other thing too, some of it's ratable, too, Greg, which affects that.

Okay. And the sales cycles, is that getting longer across customer segments, or is it mainly in the large enterprise?

Mainly enterprise but higher mid-market, but it varies by customer, Greg. You'd be surprised with customers in terms of sometimes how long it takes to turn things around through their legal and procurement teams. So it varies by customers. But normally, the enterprise, the bigger deals are normally the ones that take a little bit longer.

Okay, thank you.

No problem.

Our next question comes from Matt Sheerin with Stifel. Please go ahead.

Yes, thanks. I just wanted to follow up on Greg's question regarding backlog. Could you tell us what the backlog levels look like now versus 60 days or a quarter ago, and versus traditional or historic levels?

So sorry, Matt, I missed that. What was the question regarding backlog?

Yes, I was just looking for the backlog. Greg had asked that question, but I'm not sure we got an answer because you've been talking for a few quarters about very elevated backlog because of the component shortage. It looks like the supply is coming nicely and you're shipping to backlog. So a potential concern would be that backlog gets worked off and what happens to growth after that. So I'm just hoping to get some color on that.

Yes, I got you. Yes, open orders are down but they're still higher than traditional levels, if you will. So they did trend down. Backlog is actually up. Pipeline is actually in line with what we're expecting for the quarter. So besides the tough compare, we wouldn't see anything that would dramatically affect the numbers, if you will, whether it's related to open orders, backlog and/or pipeline just yet. With that said, the caveat is, Matt, as we mentioned previously, is the timelines are extending with some of the customers, so it gets tougher and tougher to forecast.

Okay. I understand you're confirming your revenue forecast for the year. As we look ahead to the next few quarters, it seems that historically you experience growth in the December quarter followed by a decline in the March quarter. Should we expect to model it this way again, or are circumstances different due to the backlog and current trends? Should we anticipate that seasonality repeating or not?

Yes, absolutely, Matt. However, I want to emphasize that the tech quarter last year had an extreme comparison, where gross billings — adjusted gross billings increased by nearly 30%. That would be the only point to consider. Nonetheless, I believe your perspective is very reasonable and realistic.

Okay, thank you. Lastly, can you provide an update on the acquisition pipeline regarding your mergers and acquisitions?

M&A pipeline is really strong. There's a lot of opportunities out there. But like anything, Matt, we've got to continue to vet them out. Some of the pricing multiples are coming down a little bit, which is a positive. But in terms of that, there's still plenty of opportunity, both from a territory services perspective as well as what I'd call product-type services, and indoor solutions, but still have to work through the process on those. But the pipeline is fairly robust.

Okay, thank you, Mark.

No problem. Thanks, Matt.

Seeing no further questions, I will now turn the call back to Mark Marron for any closing remarks.

Okay, thank you. Everybody, thank you for joining us for our Q2 call. And if I could, I'd like to wish everybody a Happy Thanksgiving and a healthy and happy holiday season, and we'll talk to you in the February timeframe. And have a Happy New Year as well. Take care.

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