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. Kleyton Parkhurst. Sir, 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 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. It 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 good afternoon, everyone. Thank you for joining us to discuss our fiscal year 2025 first quarter results. I will recap our first quarter highlights and provide an update on our business, then Elaine will discuss our financial results in more detail. I will conclude our prepared remarks with a discussion of our outlook. After that, we'll open the call to your questions. We continue to execute on our strategic initiatives around AI, cloud security, and the related advisory and annuity services. Coming into the quarter, we had a tough comparison to last year, which resulted in a net sales decline of 5.2% for the first quarter of fiscal year 2025 compared to last year. Last year's quarter had 25% net sales growth, including a nearly 30% increase in product sales in our technology business. Our gross billings and gross margins held essentially flat when compared to the prior year's quarter. We believe our gross billings are stabilizing now that supply chains are normalizing. A portion of the net sales decline this quarter reflects an increase in the netting of sales from gross to net, partially offset by increases in professional and managed services revenues. We believe our product revenues are down due to some customers implementing technology orders that were previously supply chain constrained over the last year. Both quarters were affected by the supply chain last year, by an abrupt easing of the supply chain in this quarter as customers digested their prior purchases. Despite these timing differences, we believe we are focused on the necessary IT areas, which make us more resilient, reflected in our annual guidance. Our service revenues sustained solid growth with overall service revenues up 15.8%. Managed Services continue to build and were up 28% year-over-year. We also continued to see strong growth in our managed services bookings, which were up approximately 70% year-over-year. This bodes well for ePlus as these are recurring revenue streams that give us predictability and more consistent profitability in future years. Security was an area of strength for us, which continues to be over 20% of our gross billings in the trailing 12 months and was up over 9% quarter-over-quarter. Our Finance Segment performed well with revenue up 6.4% due to an increase in our portfolio earnings, resulting in a 24.3% increase in adjusted EBITDA for this segment. We continue to see strong customer interest for our AI Ignite program and discovery assessments. We have also rolled out a new storage as a service offering and an Azure recovery program. We believe these will continue to support the rapidly evolving needs of our customer base, both now and into the future. Many of our customers are in the formative phase of their AI journeys, contemplating how best to leverage AI. In many cases, customers do not have well-defined use cases, have too many data silos, a lack of data cleanliness, and immature or non-existing AI policies. We believe we are well positioned to help our customers capitalize on this opportunity through our AI Ignite program. We are seeing interest across various verticals, which presents a significant opportunity for us within our customer base and for new customers. As a certified NVIDIA DGX managed service partner, we have had some wins with our AI support services in managing AI optimized infrastructure stacks. In the quarter, we experienced higher SG&A expenses primarily relating to headcount from both organic hires to support our new solution areas and the Peak acquisition. We will continue to invest in customer-facing personnel in sales and engineering professionals with skills in the highest demand areas such as AI, security, and services. In the quarter, we had some lag between the higher cost of these onboarded personnel and revenue generation. Although the first quarter of 2025 experienced some revenue headwinds on a sequential basis, we were disciplined with our SG&A costs. Sequentially, this discipline and gross margin expansion of 120 basis points contributed to our operating income, which increased more than 20%, and our operating margin was up 130 basis points. Over time, we believe we will continue to benefit from operating leverage as we move forward with the investments we have made. Turning to our balance sheet. With the supply chain easing, we've been able to deliver many delayed projects, which resulted in accelerating our cash conversion cycle and a cash balance of $350 million. With this capital, we have the funds to execute on strategic initiatives, judiciously invest in headcount, and support our share repurchase program. During the quarter, we repurchased 162,319 shares. This most recent share repurchase program further demonstrates our commitment to returning value to shareholders and our confidence in long-term growth potential. We will continue to evaluate opportunities to repurchase shares based on investment opportunities to drive growth, our financial position, and market conditions. On the growth front, we continue to identify both near-term and long-term organic and inorganic opportunities, and we have a healthy pipeline. Our balance sheet provides financial flexibility to support future growth initiatives. The underlying strategic focus of our business is solid, and we believe we are well positioned to drive top line sales and profitable growth. I will now turn the call over to Elaine to discuss our financial results in more detail. Elaine?

Thank you, Mark, and thank you, everyone, for joining us today. I will provide additional details about our financial performance in the first quarter of fiscal 2025. First quarter consolidated net sales totaled $544.5 million, down from $574.2 million in last year's first quarter due to lower product sales in the technology business. As Mark noted, we faced a difficult year-over-year comparison as net sales were up 25% in the first quarter of fiscal 2024 due to easing supply chains, which allowed us to complete several previously delayed customer projects. Product revenue decreased 8.2% year-over-year, primarily due to lower sales of cloud and networking products, as the inventory flush in last year's first quarter primarily benefited from a 71.9% increase in sales of networking products. Our services business posted another quarter of double-digit top line growth with net sales up 15.8% to $78.2 million, as ongoing demand for EMS, Cloud, and Service Desk services drove 28% net sales growth in managed services. We also saw continued growth in professional services with net sales rising 4.8% year-over-year, primarily due to an increase in staff augmentation services. Sales within our technology business were broad-based. Our two largest verticals are telecom, media and entertainment, and technology, representing 24% and 19%, respectively, of our technology business net sales on a trailing 12-month basis. SLED, health care, and financial services accounted for 15%, 12%, and 11%, respectively, with the remaining 19% divided among other end markets. Moving to our financing segment, net sales totaled $9 million, a 6.4% increase from $8.5 million in the prior year, primarily due to higher portfolio earnings. Although consolidated gross profit declined to $134.5 million from $142.3 million in last year's first quarter, gross margin declined only 10 basis points to 24.7%. The gross margin decline was primarily due to a 90 basis point decline in product margin in the Technology business, which was the result of a shift in customer mix. Partially offsetting this decline in gross margin was a 70 basis point expansion in managed services gross margin. Our managed services offerings continue to benefit from scale as we expand our offerings. Professional services gross margin rose 10 basis points to 41.5%. Sequentially, while net sales were down 1.8%, gross profit increased 3.2%, mainly driven by an increase in product gross margin to 21.5% versus 19.3% in the prior quarter. Consolidated operating expenses grew 3.2% year-over-year, primarily due to higher salaries and benefits from additional headcount. At the end of the quarter, our headcount was 1,907, up 54% from a year ago, including 29 employees from the Peak acquisition in January 2024. We remain focused on driving efficiencies across the business through disciplined expense management. These efforts yielded positive results in the quarter, as operating expenses declined 2.3% sequentially, mainly driven by lower variable compensation and G&A. First quarter operating income was $35.5 million and earnings before taxes were $37.5 million, down from $46.3 million and $46.5 million, respectively, in the prior year due to lower gross profit in the technology business and a year-over-year increase in operating expenses. During the quarter, we had other income of $2.1 million, primarily driven by an increase in interest income of $2.6 million. The effective tax rate remained unchanged from last year's first quarter at 27.2%. Moving to the bottom line. Consolidated net earnings amounted to $27.3 million or $1.02 per diluted share in the first quarter, down from $33.8 million or $1.27 per diluted share reported in the year-ago period. Non-GAAP diluted earnings per share were $1.13 versus $1.41 in the prior year. Our diluted share count at the end of the quarter was 26.8 million, modestly above the 26.6 million a year ago. On a sequential basis, both consolidated net earnings and diluted earnings per share increased 24.4%. Consolidated adjusted EBITDA totaled $43.1 million compared to $53.9 million in the first quarter of fiscal 2024. Shifting to our balance sheet. We ended the quarter with cash and cash equivalents of $350 million, up from $253 million at March 31, 2024. The increase was primarily due to improvements in working capital. The significant growth in our cash position was aided by a 36% sequential decline in inventories as supply chains have continued to normalize. We ended the quarter with $89.1 million in inventory, which is a 3-year low. Further, inventory turns continue to improve, totaling 14 days, down from 23 days in the prior sequential quarter and 32 days in the prior year. Our cash conversion cycle was 37 days compared to 48 days in the prior year. During the quarter, we repurchased 162,319 shares, costing $11.9 million, 19,869 shares were from our share repurchase program announced in May 2024. Overall, we remain focused on investing in organic growth, seeking out accretive acquisitions to expand our geographic footprint and service offerings, and returning value to the shareholders through share repurchases. With that, I will turn the call back over to Mark.

Thank you, Elaine. With our diverse portfolio and focus on providing the strategic IT solutions in demand by our customers, we are well positioned in the marketplace. For the year, we expect positive comparisons for sales and earnings and are reiterating our full year financial outlook. Specifically, we are maintaining our fiscal 2025 guidance for net sales growth over the prior fiscal year of between 3% and 6% and adjusted EBITDA range of $200 million to $215 million. While we continue to review and prioritize our capital needs, we remain committed to making the required investments in our company to position us for long-term success. In addition to providing value to our shareholders through share repurchase programs, our strong balance sheet allows us to continue to invest in our business while maintaining flexibility to take advantage of attractive and accretive opportunities. Operator, let's open the line for questions.

Our first question will come from Maggie Nolan with William Blair. Please go ahead.

Hi, thank you. So, I wanted to ask about the upcoming fiscal second quarter. Obviously, you have another tough year-over-year compare in the fiscal second quarter. But what can you share with us about how it's progressed so far, how you're thinking about it on a sequential basis and your confidence in that building in the second quarter to help you get to that full year guidance you laid out?

Maggie, it's Mark. Great question. So right now, Q2 is in line with the expectations. Let me frame it a little bit too based on Q1 because Q2 is similar to Q1 in terms of being a tough compare. So, in Q1, net sales, as you know, was up 25%. Our product sales were up almost 30%. Our networking product sales were up over 70%. Now Q2, we have a similar compare where our net sales were up about 19%. But preliminary through the first 1.5 months of the quarter, pipeline back line, it's in line with expectations. We still strongly believe in our guidance that we're in line, but the first half were challenged just based on the IT environment and the tough comparison that we have through the first half.

Okay, thanks, Mark. And then you mentioned expecting to benefit from operating leverage over time, maybe to you or Elaine, how do you expect that to manifest over the next year or so?

We have made some progress in several areas. Looking at our performance from Q4 to Q1, our operating income increased by 20%. The changes in our operating expenses reflect some of the topics we've discussed in earlier quarters. We're currently in a phase where we anticipate gaining more operating leverage. We are being strategic and selective with our hiring, but new hires require time to become productive. Our investments in AI and our services currently result in more expenses than revenue, especially on the AI side. However, we are optimistic because last fiscal year, we acquired 300 new customers. As we bring on additional sales representatives and service staff, and develop our solutions for these new customers, we expect this to drive our revenue growth. We anticipate our operating expenses will remain consistent, allowing us to achieve operating leverage.

Okay, thanks, Mark. And one quick housekeeping, if you have it, the organic growth in the quarter and embedded in the full year guide.

Yes, the material amount of the change in year-over-year was from the organic business.

Did you say material or immaterial, Elaine, I didn't quite hear you?

The majority of the change from quarter-over-quarter was from the organic business.

Okay. Thank you all.

Our next question will come from the line of Greg Burns with Sidoti & Company. Please go ahead.

Thanks. In regards to the customer product backlog that you mentioned may be impacting some sales this quarter. Where do you think the channel is or the customer base is in terms of digesting that backlog? Do you feel like it's been worked through and you get back to a more normal cadence of order flow going forward?

Yes, I believe it's already normalized, Greg. When we examine our gross billings, we see that in this quarter, even though our net sales decreased by 5.2%, our gross billings only declined by 1%, which is essentially flat. As we've discussed, I don't want to dwell too much on the challenging comparisons from last year for this quarter. We do think our gross billings have started to normalize, and the supply chain has stabilized. Therefore, I believe we are now on a more normal run rate where we can expect to see the seasonal patterns we typically observe in Q2 and Q3, and then we'll see how things develop from there.

Okay. And then is there anything you could share in terms of your AI business, whether it be growth pipeline opportunity, anything quantitative or qualitative, you could add to give us a little bit better understanding of the opportunity there for you?

Yes, certainly. Greg, I want to revisit what we discussed about the technology consumption among our customers. There's been significant progress in that area. Our services segment experienced a 15.8% increase, indicating that the technology is being utilized and integrated into our professional and advisory services. I'm not sure if I fully addressed your initial question, but I hope this provides clarity. Regarding AI, it's fascinating. Every customer we engage with is open to meeting and discussing our AI Ignite program. All customers are dealing with similar challenges, such as data silos both on-premises and in the cloud, along with data security and privacy issues. Many lack AI governance, especially those that are still in the exploratory phase. Their infrastructure often isn't equipped, particularly concerning power and cooling, and there's a noticeable skills gap. Identifying use cases is another major challenge we're observing. We have initiated several envisioning sessions and data copilot readiness programs, and we're starting to see growing interest and pipeline development in this area. As I mentioned earlier to Maggie, we have invested in programs, tools, training for our team, and additional headcount. While this represents a higher expense at the moment, it is beginning to gain momentum. We're enthusiastic about AI's potential because it intersects with everything ePlus has been doing over the years—spanning compute, networking, storage, and security, which is a significant focus for many. It's still early in this process, but we are receiving increased interest from customers and have completed valuable service work. The pipeline is expanding, and as we progress through the quarters, we will see how this translates into revenue.

Okay. Great. And then lastly, just any negatives or benefits from the CrowdStrike issue?

No negatives, to be honest, Greg. We did have a benefit. We had one customer that had some real problems with CrowdStrike that we got involved with early, and they were able to open up pretty much on time. And after that, they extended their service agreement with us for three years. So, we did see some benefit, but I don't want to overplay it. It was not too much in terms of, I'd say, revenue benefit; more I'd say customer set with how we helped our customers than I could point to revenue. That's the only deal I've at least been notified that came out of some of the work that we did around CrowdStrike for our customers.

Great. Thank you.

Your next question will come from Matt Sheerin with Stifel. Please go ahead.

Yes. Hey, good afternoon, everyone. I wanted to go back to Maggie's question about the outlook for Q2. You said in line with expectations and seasonal, but I'm not sure exactly what that meant because you talked about the backlog being down, is seasonal sort of flattish sequentially because, obviously, the last three years, there have been a lot of seasonality in your business with backlog. And so, are we to assume that this is going to be down year-over-year again and that growth that you're guiding to 3% to 6% is all going to come in the back half?

Yes. I'd say, Matt, that's a fair statement. I think it will be in the back half. Once again, just to remind you, right, if you look at it, first quarter, we were up 25%. Second quarter, we were 19%. So those are some pretty tough compares. But we do feel positive about our strategy and our growth plans. I'd say it will be more second half back-ended, if you will. Q2 is still a positive quarter, way to say it.

A positive quarter, meaning, I'm not sure what that meant?

I mean, in line with last year.

So, it's flat year-over-year. I understand that you'll be at five. You mentioned adding resources to professional services, but you also believe you'll achieve leverage on operating expenses as volumes increase. Is using around the low 90s for operating expenses over the next few quarters accurate, or should I expect something different?

I would say, yes, Matt. That's probably a fair assumption in terms of from a run rate, but realize what you've got that. But if I were looking at, I'll call it, the SNS G&A salaries, I think that would stay within line with where it is. I think what I'm also alluding to is Q4 to Q1, our operating income jumped 20%. Now that's just a quarter, so it's not a trend yet. But there are some things that we've done both from an expense standpoint and also from a training standpoint that we'd expect to get some improvements from our account executives and service reps as well as some expense savings that we've made. So, I'd expect operating leverage throughout the year. It's not going to jump, as you know, from quarter to quarter, but will grow throughout the year and into the following year.

Okay. Thank you.

No problem. Anything else, Matt, or?

No, that's it. Thanks.

Okay. All right.

And that will conclude our question-and-answer session. I will now turn the call back over to Mark Marron for any closing remarks.

Okay. Thank you. I just want to thank everybody for joining us for our first quarter earnings call and wish you a happy and safe day and a long holiday for the Labor Day weekend even though I'm jumping the gun a little bit there. Take care, and have a good day.

That will conclude today’s call. Thank you all for joining, you may now disconnect.