Safe Harbor Statement

• we offer a comprehensive set of solutions—the bundling of our direct IT sales, professional services and financing with our proprietary software, and may encounter some of the challenges, risks, difficulties and uncertainties frequently faced by similar companies, such as:
  • managing a diverse product set of solutions in highly competitive markets;
  • increasing the total number of customers utilizing bundled solutions by up-selling within our customer base and gaining new customers
  • adapting to meet changes in markets and competitive developments
  • maintaining and increasing advanced professional services by retaining highly skilled personnel and vendor certifications
  • integrating with external IT systems, including those of our customers and vendors; and continuing to enhance our proprietary software and update our technology infrastructure to remain competitive in the marketplace.
• our ability to hire and retain sufficient qualified personnel;
• a decrease in the capital spending budgets of our customers or purchases from us;
• our ability to protect our intellectual property;
• the creditworthiness of our customers and our ability to reserve adequately for credit losses;
• the possibility of goodwill impairment charges in the future;
• uncertainty and volatility in the global economy and financial markets;
• changes in the IT industry;
• our ability to raise capital, maintain or increase as needed our line of credit or floor planning facilities, or obtain non-recourse financing for our transactions;
• our ability to realize our investment in leased equipment;
• significant adverse changes in, reductions in, or losses of relationships with major customers or vendors;
• Our ability to successfully integrate acquired businesses;
• Our ability to maintain effective disclosure controls and procedures and internal control over financial reporting;
• reduction of manufacturer incentive programs; and 
• significant changes in accounting guidance related to the financial reporting of leases; which could impact the demand for our leasing services.

We cannot be certain that our business strategy will be successful or that we will successfully address these and other challenges, risks and uncertainties. For a further list and description of various risks, relevant factors and uncertainties that could cause future results or events to differ materially from those expressed or implied in our forward-looking statements, see the Item 1A, “Risk Factors” and Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections in the Form 10-K for the year ended March 31, 2012, as well as other reports that we file with the SEC.

Prepared Remarks

Good day, ladies and gentlemen, and welcome to the ePlus Earnings Call for the three months ended September 30, 2012, which is the company’s second quarter of its fiscal year 2013. At this time, all participants are in a listen-only mode. Later, we'll conduct a question-and-answer session and instructions will follow at that time. As a reminder, this conference call is being recorded. I would now like to introduce our host for today's conference Kley Parkhurst, Senior Vice President.

Kleyton Parkhurst, ePlus inc -SVP

Thank you Mary, and thank you everyone for joining us today. With me today are Phil Norton, Chairman, President and CEO of ePlus; Elaine Marion, our Chief Financial Officer; and Erica Stoecker, our 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 yesterday and our periodic filings with the Securities & Exchange Commission including our form 10-K for the year ended March 31, 2012, and our Form 10-Q for the three months ended September 30, 2012, when filed. The Company undertakes no responsibility to update any of these forward-looking statements in light of new information or future events.

I’d now like to turn the call over to Phil Norton. Phil?

Phil Norton, ePlus inc - President, CEO, Chairman

Thank you, Kley. We are very pleased with our financial results for the quarter. Revenues for the quarter increased 27.7% and fully diluted earnings-per-share improved 49.4% on a year-over-year basis.

Despite macroeconomic challenges, we experienced robust revenue growth driven particularly by our largest customers. This growth reflects the fact that large enterprise customers are modernizing their infrastructures with technologies that ePlus is very well positioned to provide, such as virtualization, security and Bring Your Own Device solutions. Customers are choosing ePlus because we have the capability to provide integrated technology solutions for these critical projects, including architecture, design, project management, implementation, and supply chain logistics. Our continuing financial strength and alignment with top vendors such as Cisco, VMWare, NetApp, HP, and others makes ePlus a trusted resource and a desirable partner for our customers’ most critical projects.

Our results are continuing to reflect the investments we’ve made to position ePlus as a systems integrator, able to provide the most in-demand advanced technology solutions, as well as acquisitions and expanded market presence in both new and existing markets which align with our strategic plan.

Accompanying the solid demand from our customers, our gross margin for the quarter remained steady at 18%, as compared to 18.1% the prior year.

During the quarter, we continued to add to our engineering certifications and capabilities, and rolled out new solutions. We announced Virtualization Security and a Cloud Readiness Assessment Service, both designed to facilitate customer’s onboarding to the cloud. We also were awarded a Healthcare Specialization by VMWare

ePlus’ success has been driven in part by our ongoing commitment to deliver the most advanced technology offerings. Looking ahead, our strategy remains committed to investing in our people, acquiring new technology capabilities and expanding geographic locations, and improving our efficiency and delivery capabilities. Along with continuing customer adoption of cloud computing, we see numerous opportunities to continue growing the business and are well positioned to best serve our customers.

With that, I would like to turn the call over to Elaine Marion, our CFO, who will discuss financial results.

Elaine D. Marion, Chief Financial Officer

Thank you, Phil.

On a consolidated basis, total revenues for the quarter increased $56.4 million, or 27.7%, to $260.1 million, as compared to $203.7 million recorded in the prior fiscal year’s second quarter. Net earnings increased 42.0% to $10.0 million, as compared to $7.1 million in the prior year’s quarter. Fully diluted earnings per share increased 49.4% to $1.27 per share from $0.85 per share in the prior year.

Total costs and expenses were $236.9 million compared to $186.4 million in the same quarter last year, an increase of 27.1%. The increase in costs and expenses was primarily driven by increases in cost of sales, products and services, which was consistent with the increase in sales of products and services. In addition, salaries and benefits increased as a result of our investment in sales and support personnel and strategic acquisitions. Segment earnings before tax increased $5.7 million to $14.9 million.

Moving to our financing business segment, total revenues were $8.3 million, as compared to $8.0 million in the quarter ended September 30, 2011. Total costs and expenses increased 15.8% to $6.2 million, due to increases in direct lease costs, bad debt expense and salaries and benefits, which increased due to higher commissions. Segment earnings before tax were $2.0 million compared to $2.6 million for the same quarter in the prior year.

As of September 30, 2012, the Company had $45.9 million of cash and short term investments, as compared to $41.2 million on March 31, 2012. As of September 30, 2012, the Company had total shareholders’ equity of $238.7 million and 8.1 million shares outstanding, as compared to $219.6 million in shareholders’ equity and 8.0 million shares outstanding, as of March 31, 2012.

QUESTION AND ANSWER SECTION

Operator: We'd like to open the call to questions.At this time I'm showing no questions. And I'd like to turn over to our speakers for any closing remarks.

Operator:We have a question from Gunnar Hansen from Sidoti. Your line is open.

<Q – Gunnar Hansen – Sidoti & Co. LLC>: Hi, guys. How are you doing? I just have a -- just a few quick questions. I guess just in terms of some of the operating expenses, obviously you guys have made some investments on expanding your sales force and geographically as well. I guess just in terms of some of the salaries and benefits, I mean, should that just kind of continue to normalize on a per-dollar basis going forward, or how are you guys kind of investing in that? What’s the investment level now?

<A – Elaine Marion – ePlus, Inc.>:The salaries and benefits is consistent with the increase in gross margin dollars. The dollars increased -- obviously the commission expense increase is that one of the driving factors as well as the increase in head count. The Technology segment increased in head count by about 93 on a year-over-year basis. So that also equates to the increase.

<Q – Gunnar Hansen – Sidoti & Co. LLC>:Okay. Got you. And then I guess -- I mean, are you guys looking to continue to add more people or what’s kind of the outlook there?

<A – Phil Norton – ePlus, Inc.>:Well, that’s going to depend on the business and how fast it grows, and the one thing that we are continuously looking for is high-level engineers because the business is changing dramatically to the requirement of that for most of our ongoing solutions. So, as those grow, we’ll be adding more engineers and many other set of people.

<Q – Gunnar Hansen – Sidoti & Co. LLC>:Okay. And then just generally speaking, how have things kind of been trending I guess in this quarter? What have you guys been kind of hearing from your customers? How are things looking out there?

<A – Phil Norton – ePlus, Inc.>:Well, that’s a little forward thinking, you know, what they’re going to do. We think that there’s going to be some ups and downs because of the Northeast, which we have a big presence. I think the hurricane is going to delay some of the orders that have been placed, and they may pick up before the end of the quarter, most likely. We think they will, but we can’t be sure of that. And as far as our business, it kind of goes with the economy. As the economy starts to accelerate, we accelerate. As the economy slows down, then our growth slows down a little bit.

<Q – Gunnar Hansen – Sidoti & Co. LLC>: Perfect. All right, guys. That’ll do it. Thank you.

<A – Elaine Marion – ePlus, Inc.>:Thanks, Gunnar.

<A – Phil Norton – ePlus, Inc.>:Thanks, Gunnar.

Operator: Thank you. I show no further questions and would like to turn the conference back to Mr. Phil Norton for closing remarks.

Phillip G. Norton, Chairman, President & Chief Executive Officer

We’d like to thank you very much for taking the time for our conference call. If you have any questions, please contact Kley Parkhurst. Thank you very much.

Operator: Ladies and gentlemen, thank you for your participation in today’s conference. This does conclude the program, and you may all disconnect at this time.