ePlus inc. (NASDAQ:PLUS) Q3 2019 Earnings Conference Call Transcript

Feb 06, 2019 • 04:30 pm ET

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ePlus inc. (NASDAQ:PLUS) Q3 2019 Earnings Conference Call Transcript

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Presentation
Operator
Operator

Good day, ladies and gentlemen. Welcome to the ePlus Earnings Results Conference Call. As a reminder, this conference call is being recorded.

I would like to introduce your host for today's conference, Mr. Kley Parkhurst, SVP. Sir, you may begin.

Executive
Kleyton Parkhurst

Thank you, and thank you for joining us today. On the call is; Mark Marron, CEO and President; Elaine Marion, Chief Financial Officer; 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 31st, 2018 and our Form 10-Q for the quarter ended December 31st, 2018, 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 references to non-GAAP financial measures and we have 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?

Executive
Mark Marron

Thanks, Kley and thank you all for participating in today's call to discuss our third quarter fiscal 2019 results. This was a strong quarter for ePlus in a number of key areas. We reported substantial increases in gross profit and gross margin, two metrics that we believe reflect the success of our business model.

Adjusted gross billings increased nearly 3% year-over-year. We continue to see positive operating leverage due in part to our continuing efforts to hold the line on costs and focusing on solutions which have strong customer demand. I'm also pleased to announce that just after quarter end, we acquired SLAIT Consulting. We are very excited about this acquisition as it broadens our security solutions and services offerings and strengthens our geographic presence in the mid-Atlantic.

Our 8.1% increase in gross profit is due in part to a favorable business mix of increased product margins and services revenue. We also experienced higher margins in many of our product lines. For the quarter, our consolidated gross margin expanded a 170 basis points to 24% amongst the highest in our industry. These drove significant positive operating leverage results in the third quarter. Our gross profit grew 8.1% while our operating expenses grew only 4.3%. We will continue to focus on cost optimization while still ensuring that we have the optimal number and properly experienced customer-facing professionals to support our consistent migration to a services-led approach to customer engagement.

ePlus has a good track record of striking a balance between controlling costs and investing in our business. An example of this is that our headcount declined 1.5% on a