Safe Harbor Statement

This transcript of an earnings call contains certain statements that are, or may be deemed to be, “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, or “Exchange Act,” and are made in reliance upon the protections provided by such acts for forward-looking statements. Such statements are not based on historical fact, but are based upon numerous assumptions about future conditions that may not occur. Forward-looking statements are generally identifiable by use of forward-looking words such as “may,” “should,” “intend,” “estimate,” “will,” “potential,” “could,” “believe,” “expect,” “anticipate,” “project,” and similar expressions. Readers are cautioned not to place undue reliance on any forward-looking statements made by us or on our behalf. Forward-looking statements are made based upon information that is currently available or management’s current expectations and beliefs concerning future developments and their potential effects upon us, speak only as of the date hereof, and are subject to certain risks and uncertainties. We do not undertake any obligation to publicly update or correct any forward-looking statements to reflect events or circumstances that subsequently occur, or of which we hereafter become aware. Actual events, transactions and results may materially differ from the anticipated events, transactions or results described in such statements. Our ability to consummate such transactions and achieve such events or results is subject to certain risks and uncertainties. Such risks and uncertainties include, but are not limited to, the matters set forth below:

• we offer a comprehensive set of solutions—integrating information technology (IT) product sales, third-party software assurance and maintenance; advanced professional and managed services; proprietary software and financing 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 with a key set of vendors;
  • increasing the total number of customers utilizing integrated 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
  • increasing the total number of customers who utilize our managed services and continuing to enhance our managed services offerings to remain competitive in the marketplace;
  • continuing to enhance our proprietary software and update our technology infrastructure to remain competitive in the marketplace; and
  • Reliance on third parties to perform some of our service obligations.
• our dependence on key personnel, and our ability to hire and retain sufficient qualified personnel;
• our ability to implement comprehensive plans for the integration of sales forces, cost containment, asset rationalization, systems integration and other key strategies;
• a possible decrease in the capital spending budgets of our customers or purchases from us;
• our ability to protect our intellectual property rights and successfully defend any challenges to the validity of our patents, and, when appropriate, license required technology;
• our professional and liability insurance policies coverage may be insufficient to cover a customer claim;
• 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 and/or rapid changes in product offerings including the proliferation of the cloud, infrastructure as a service and software as a service;
• the ability to gain customer acceptance of our professional and managed service offerings;
• our ability to secure our and our customers’ electronic and other confidential information;
• our ability to raise capital, maintain or increase as needed our lines of credit with vendors or floor planning facility, or obtain debt for our financing transactions or the effect of those changes on our common stock or its holders;
• future growth rates in our core businesses;
• our ability to realize our investment in leased equipment;
• significant adverse changes in, reductions in, or losses of relationships with several of our larger customers or vendors;
• our ability to successfully integrate acquired businesses;
• reduction of vendor incentives provided to us;
• exposure to changes in, interpretations of, or enforcement trends related to tax rules and other regulations;
• changes to or loss of members of our senior management team and/or failure to successfully implement succession plans; and
• significant changes in accounting standards including changes to the financial reporting of leases which could impact the demand for our leasing services, or misclassification of products and services we sell resulting in the misapplication of revenue recognition policies.

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, 2014, as well as other reports that we file with the SEC.

Prepared Remarks

Operator

Operator: Good day, ladies and gentlemen, and welcome to the ePlus Earnings Results Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session, and instructions will be given at that time. [Operator Instructions] As a reminder, this conference call is being recorded.

I would now like to turn the call over to Kley Parkhurst, Senior Vice President. Sir, you may begin.

Kley Parkhurst, Senior Vice President

Thank you Destinee, and thank you everyone for joining us today. With me today are Phil Norton, Chairman, President and CEO of ePlus; Mark Marron, Chief Operating Officer and President of ePlus Technology, 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 & Exchange Commission including our form 10-K for the year ended March 31, 2014 and our 10-Q for the quarter ended June 30, 2014, 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, Chairman, Chief Executive Officer and President

Thank you Kley, and good afternoon everyone. Thank you for participating in our call to review first quarter fiscal 2015 results and discuss our views on business trends.

This was another successful quarter for ePlus as we executed on our strategy to continue to achieve profitable, sustainable growth. This included:

• Providing increasingly complex IT solutions by leveraging our expertise in the high end segments of the market such as mobility, cloud ,storage and security;
• Increasing our services business, which goes hand in hand with these more complex solutions;
• Expanding our industry-leading technical staff and sales team who both drive and support our continued growth; and
• Maintaining and building upon the strong relationships we have with both our traditional vendor partners and leading players in emerging technologies.

First quarter revenues increased 5% on a year-over-year basis, led by a 6% increase in products and services revenues from our technology segment, which accounted for 97% of our business this quarter. This more than offset the year-over-year decline in revenues from our financing segment, where quarterly revenue trends tend to be uneven.

The percentage increase in operating income was twice that of sales in the first quarter primarily reflecting an improved sales mix and our focus on higher margin products. This was driven by an 80 basis point expansion in the technology segment’s gross margin on products and services to 18.5% and a 40 basis point increase in companywide gross margin to 20.7%. These are both industry leading numbers that speak to ePlus’ transition to an IT solutions company.

And, we continued to add to our technical services and sales teams to support this transition and to expand our platform for future growth –ending the first quarter with a total of 957 employees, of which 72% represent sales, marketing, and engineering personnel.

Reported diluted eps for the first quarter was $1.25, 29% ahead on a year-over-year basis. Excluding a special gain, first quarter non-GAAP diluted eps increased 17.5% to $1.14, benefitting from the solid operating and financial performance of the quarter as well as an 5.3% reduction in the weighted average shares outstanding, thanks to our stock buyback program.

While one quarter does not make a trend, we are encouraged by the solid demand we are seeing across our expanded customer base, and I would like to ask our Chief Operating Officer, Mark Marron, to give you more insight into our market position and business plans. Mark…

Mark Marron, Chief Operating Officer.

Thank you Phil.

The strategy that Phil outlined in his remarks is addressing the needs that we are seeing every day in the marketplace, particularly with reference to the cloud and security. Along with the value added services and support customers expect.

Our customers are facing the challenges of selecting, and in some cases building, the appropriate cloud that will provide a long-term home for their business’ data. The next hurdle is moving huge quantities of data from legacy data centers on to the cloud.

Add to this the increasingly more complicated security environment and the multiple point solutions available, and you can easily see why CIOs need a partner for their IT needs, rather than simply a vendor. One of the ways we are trying to help is through value added assessments and our Executive services portfolio of offerings. One offering that we provide to customers is a “Virtual Chief Security Officer” or what we call V-CISO engagement that helps them to build a 3-5 year roadmap to secure and protect their IT environment. It is a great service for midsize customers who are struggling to create a comprehensive, long term, and integrated security plan, made especially difficult given the myriad of point-solutions available and the fast moving pace of technology amid ever-changing security threats. Mid size customers cannot always afford the on-staff expertise to do this in-house, and are relying on V-CISO services from ePlus.

And to put the impact of security on our overall business in perspective , our security pipeline has grown in the last 12 months through June 30, 2014 by more than 50%.

In regards to services, our integrated, consultative approach enables us to partner with our customers to understand their current environment, build and support their infrastructure, and then provide managed and other services such as supplemental staffing to support their business needs going forward. We then utilize our PBSO services model -- which stands for Plan, Build, Support and Optimize -- to help our customers match their business needs and IT concerns. Part of the success of this model can be seen in the 80 basis point improvement in our gross margin on products and services that we achieved in the first quarter.

Our service offerings are an essential part of our business model. Our professional services business was the fastest-growing portion of our technology business. In our Managed Services business, we continue to invest in the resources, tools and facilities to expand our capabilities in order to meet customer demand, and provide additional value-added, higher margin, services.

Another value added service we are focused on is Enhanced Maintenance Services (EMS), a one-stop bundled solution that combines our managed services with vendor maintenance and warranty services. This provides customers with a one-stop solution through ePlus to maximize efficiency and optimize services for the maintenance and support of their IT infrastructure.

In the first quarter of fiscal year 2015, we continued to hire top-tier talent in customer-facing positions. The technology segment grew its headcount by 5.2%, and almost one-half of the new hires were in services. This has obviously increased expenses in the technology segment, but with our transition to higher-margin products and services, this is a cost we are more than able to absorb.

Turning to our customer base, we now have over 2,800 customers, an increase of 20% during our last fiscal year. In addition to our focus of adding net new customers throughout our platform in diverse industries and geographies, we are also keenly focused on steadily growing our wallet share with existing customers. This gives us the ability to go wider and deeper with our customers across hardware, software, services, and financing solutions.

Our financing business segment continues to be well positioned for growth as well, in that customers are focused on consumption-based, monthly-payment-type structures that fit into the CIO’s operating budget, with payments spread over multiple years, rather than an upfront payment coming out of the capital budget. In that sense, financing is moving towards an “as-a-service” model, just like software and infrastructure. We believe that we can leverage our twenty-plus years of expertise in this area to benefit both customers and vendors.

We also continue to achieve important recognition from key partners. We received multiple recognitions at the Cisco Partner Summit, including Cloud Builder of the Year, Commercial Partner of the Year, Americas and SLED Partner of the Year for US/ Canada West. We were also recognized by HP as Top Growth Partner for HP Storage.

To sum up, we see opportunities to add new customers and expand our business with existing customers, and our range of products and services continues to grow in traditional and emerging technologies.

I would now like to turn over the call to our CFO, Elaine Marion, for a financial review of the quarter’s results.

Elaine Marion, Chief Financial Officer

Thanks Mark. As Phil said earlier, our first quarter results demonstrated solid revenue growth and significant gross margin expansion.

Consolidated revenues were up 5%, led by 6% growth in the technology segment, which more than offset the decline in the financing segment, caused primarily by a gain on a sale in the first quarter of fiscal year 2014.

Gross margin for the quarter was 20.7%, up from 20.3% in the first quarter of fiscal 2014, led by an 80 basis point improvement in the margin for products and services. Operating income increased 10.4% to $14.7 million, after absorbing a 6% increase in operating expenses resulting primarily from a 4.1% increase in headcount and higher compensation related to our growth in gross profit. Most of our salesforce cost is commission based and thus costs vary with gross profit. Our reported net income this quarter included a non-operating gain of $1.4 million in the financing segment related to the repurchase of a financing arrangement, which had been accounted previously for as secured borrowing.

Our earnings per diluted share were $1.25, up 29% from $0.97, on a 5.3% decrease in weighted average shares outstanding to 7.6 million from 8.0 million. Excluding the one-time net gain of $1.4 million, our non-GAAP earnings per diluted share were $1.14, an increase of 17.5% from last year.

Drilling down to our segment results, technology revenue was up 6% to $263.4 million, with strong demand especially from our large and middle market commercial customers. Similar to previous quarters, we saw revenue growth in services outpacing the growth in products. Gross margin of products and services in the technology segment expanded 80 basis points to 18.5%, driven by higher product margins, a higher proportion of revenue coming from services, and also higher sales of third party software assurance which are reported on a net basis.

Technology segment earnings were $12.4 million, an increase of 30% from last year’s first quarter. This strong performance was achieved despite a 6.9% increase in operating expenses, resulting primarily from salary and G&A increases of 10% and 20%, respectively. These increases reflect a 5.2% increase in headcount, in line with our strategy of adding to staff in the professional services and sales areas, higher compensation and also various G&A expenses such as software licenses & maintenance and advertising. These additional operating costs were offset, in part, by a year-on-year reduction in legal expenses of approximately $1 million primarily from our patent litigation case.

In our Financing segment, revenue was $8.9 million, down from $10.8 million a year earlier. Revenue in this segment tends to be uneven from quarter to quarter, with results fluctuating due to the timing of post-contract transactions and sales of transactions. In the first quarter of the prior fiscal year, we had gains on sales of transactions of $4.3 million, while in first quarter of fiscal 2015, these sales totaled $2.1 million. That delta largely accounts for the lower year-on-year revenue.

On a GAAP basis, which included the non-recurring $1.4 million gain on the retirement of a liability I mentioned earlier, segment earnings were $3.7 million, essentially flat from a year earlier. Excluding that gain, non-GAAP segment earnings were $2.3 million.

Looking quickly at the balance sheet, our cash position was $67 million, from $80 million on June 30, 2014. The main contributing factor was share repurchases of $27.2 million, which included the 400,000 shares repurchased for $19 million as part of the secondary offering. The balance sheet remains very strong with total shareholders’ equity of $249 million, up from $246 million a year earlier. Yesterday, we announced that we have amended our credit facility with GE Capital Commercial Distribution Finance to increase our credit limit by $50 million to $225 million. This expansion strengthens our ability to support customers with advanced technology solutions and enhances our financial flexibility as we continue to grow the business.

I would now like to turn the call back to Phil for his closing comments.

Phil Norton, Chairman, Chief Executive Officer and President

Thanks Elaine.

To sum up, first quarter results represented a strong start to fiscal 2015. ePlus continued to gain market share by providing customers with sophisticated solutions to complex IT issues and supporting them with a full suite of IT services.

As Mark mentioned, we are addressing a larger and more diversified customer base today than we had one year ago, providing significant cross sell opportunities and the vertical expertise that helps bring in new customers. At the same time, we plan to continue to be a consolidator in our industry, by considering accretive acquisitions that expand our geographical reach, add software that enhance our customized solutions and/or deepen our services offerings.

We have sufficient resources to support organic growth as well as investments in acquisitions to enable us to grow faster than the industry average.

Operator, I would now like to open the call to questions.

QUESTION AND ANSWER SECTION

Operator

Thank you. [Operator Instructions] Our first question comes from Matt Sheerin of Stifel. You line is open.

<Q – Matt Sheerin – Stifel, Nicolaus & Co., Inc.>: Yes, thanks and good afternoon, everyone. A question for Mark, could you give us a little bit more color, Mark, in terms of the strength that you saw in terms of the verticals? And also give us an idea maybe rough percentage of your breakdown of end markets in the technology segment by vertical?

<A – Mark Marron – ePlus inc.>: Okay. So – hey, Matt, first of all, thanks for joining. First thing is that verticals as a percentage of our overall business really hasn’t changed quarter-over-quarter. As we mentioned on the last call, we are vertical independent, if you will, so we’re not tied to any one vertical. So they’re all in – anywhere from 10% to 12% to maybe 20% range that you’re looking at across some of the bigger verticals, which would be technology, telecommunications, financial services, media and entertainment, and SLED, just to give you a few.

As it relates to – sorry, your first piece was little more color, as it relates to...

<Q – Matt Sheerin – Stifel, Nicolaus & Co., Inc.>: Yeah, just in terms of – like where – I mean, it sounds like – I mean, you’re saying that the demand you saw across your customer base, was there anyone stronger, or where you saw you have more market share opportunities, for instance, in one area versus the other?

<A – Mark Marron – ePlus inc.>: Yeah, Matt, maybe to put that in perspective, really where we’re seeing that is really from the large enterprise through to the mid-market. As I’ve mentioned in my piece is that this previous fiscal year or the year before, we’ve actually added over 20% net new customers up to over 2,800 customers and most of those are in the mid-market or enterprise space.

So we’re still seeing significant interest from those size customers across all of our offerings, whether they be cloud related, security related and all the associated services that go with it.

<Q – Matt Sheerin – Stifel, Nicolaus & Co., Inc.>: Okay. And then a bigger picture, I know, Phil, I appreciate that you don’t give specific guidance and you don’t have a ton of visibility going forward, but if you look at the growth rates that you were growing basically high single-digits, low double-digit in technology in the last two quarters of last year or your last fiscal year and slowed a little bit, still mid single-digit growth, and which is probably closer to end market. Do you feel particularly given that you’re adding your services capability and your head count that you should be able to grow at a faster rate than kind of mid single digits?

<A – Phil Norton – ePlus inc.>: Basically, I don’t think we would add head count if we didn’t believe that we would continue to grow at a faster pace. We have a lot of opportunities that are out there and our pipeline appears very good, and we think that we need the additional people in place and investing in them. And unless we believe that we will do better, then we would not be hiring those people.

<A – Mark Marron – ePlus inc.>: And if you don’t mind, if I could jump in, Matt, one thing that we feel pretty – we believe IDC is stating that the IT spend is expected to increase by 4% this year. We believe we’ll continue to exceed that expectation, the market expectations.

<Q – Matt Sheerin – Stifel, Nicolaus & Co., Inc.>: Okay. And just last for me, just regarding the finance segment, which has been trending down in revenue, it sounds like though you think that there is another cycle coming where your customers may shift to more of a leasing model. Do you have any visibility into when do you think that’s going to pick up?

<A – Mark Marron – ePlus inc.>: I don’t know if we have any visibility, Matt. What I think we’re starting to see from a lot of our customers, they’re continuing to look at the different type of OpEx or consumption models that are out there. Specifically in the software space, they’re looking to – instead of a capital, take it as an OpEx. And we’re seeing some of our larger customers coming to us looking to see what we can do with our leasing capabilities and our resale, from a technology standpoint putting solutions together to take advantage of that.

<Q – Matt Sheerin – Stifel, Nicolaus & Co., Inc.>: Okay. All right. Thanks a lot, Mark.

<A – Mark Marron – ePlus inc.>: No problem, Matt. See you soon.

Operator: Thank you. Our next question comes from Prabh Gowrisankaran of Canaccord. Your line is open.

<Q – Prabh Gowrisankaran – Canaccord Genuity, Inc.>: Hi. Thanks for taking my question. Just piggybacking on Matt’s questions. In the technology segment, you talked about cloud and security. Is there anything specific in security or specific vendor that you saw strengthen or in terms of these new large enterprise and mid-market customers?

<A – Mark Marron – ePlus inc.>: Yeah. I don’t – hey, Prabh, its Mark here. I don’t think there was any one particular vendor. So, we’re really kind of focused on if you think of what’s going on in the market, everybody is trying to secure their perimeter kind of keep the bad guys out. And then making sure that they don’t have – securing the data, they don’t have data loss prevention. So we’ve got most of our focus as it relates to both the vendors and the solutions in those space. And then what we’re doing on top of it is providing the services that our customers are looking for which is a combination of assessments, where we’ll go in and do all the types of assessment to let them know where their existing infrastructure stand and the potential hold that they have.

We’ll also do, as I mentioned in earlier, we’ve got a vCISO capability where we’re actually help build three-year to five-year roadmap for our customers, and that’s just not your quick fix, where here’s a point solution that solves an initial problem. It’s something that building a roadmap to make sure that as we continue to go with all the hackers and cyber security initiatives that are going on, we’re building the long-term footprint that they’ll be successful and hopefully not have any breaches or data loss, if you will.

And as I think you know, in the market lot of regulation and authorities out there are looking to have more, I’ll call it tightness around the security space as it relates to companies understanding if they’ve been attacked, if they’ve had any incidences that they should be aware of. And I think customers are becoming more and more cognizant of having those tools in place.

<Q – Prabh Gowrisankaran – Canaccord Genuity, Inc.>: Okay, great. And the other question I had was on the gross margin. You saw nice pick up. Is that more because you’re selling higher end security in the routers and stuff? Is this margin level sustainable in terms of product margins?

<A – Mark Marron – ePlus inc.>: Well, Prabh, I think what you see is over time we’ve continued to evolve as a company and what we’re really focused on is you have more margin rich solutions, which are normally is not product fulfillment like solutions, if you will. There have got to be services. So if you listen to a lot of what we’ve talked about with the head count that we’re adding, it’s all customer facing, over 50% of it was in the services space, so those are your pre-sales and post-sales resources that clients need in order to bring together these complex integrated solutions. So yes, that’s why the margins are going up, and we believe that we’re very well-positioned as we go forward.

<Q – Prabh Gowrisankaran – Canaccord Genuity, Inc.>: Okay. And the last question I had was on the financing segment, you talked about the consumption model. Is that leasing across mainly like cloud buildout? Do see it in specific areas that is new leasing model is taking hold, or is it just existing customer base trying to add on more infrastructure?

<A – Mark Marron – ePlus inc.>: Well, what it is, Prabh, really we’re not limited if you think about it. So as the world move, it is – this OpEx and consumption models, you’ve got infrastructure as a service, you’ve got software as a service, you’ve got video as a service, you have disaster recovery and backup as a service.

What we’re seeing from our customers is the need – instead of having big upfront capital expense, they’re looking to do the monthly payments kind of OpEx play, if you will. And we’re leveraging our leasing capabilities to provide the solution to customers’ need now with the payment term over three-year or five-year period.

<A – Phil Norton – ePlus inc.>: This is Phil Norton. I think also it’s very important to understand the vendors are looking for that same type of structure, so that they are able to meet the customers’ needs, so it could broaden our reach into several other vendors than we’re dealing with today, and I think it’s very positive for the leasing company.

<Q – Prabh Gowrisankaran – Canaccord Genuity, Inc.>: Great. Thanks for taking my questions.

<A – Mark Marron – ePlus inc.>: Thanks, Prabh.

<A – Elaine Marion – ePlus inc.>: Thanks, Prabh.

Operator: Thank you. And our next question comes from Bhavan Suri, William Blair. Your line is open.

<Q – Bhavan Suri – William Blair & Co. LLC>: Hey, guys, can you hear me?

<A – Mark Marron – ePlus inc.>: Hey, Bhavan. We can hear you.

<Q – Bhavan Suri – William Blair & Co. LLC>: Great. So, I apologized. There’s been a bunch of earnings calls, so I might be asking questions that may have been asked. But one of the things I wanted to focus on was was there any areas where you’re seeing clients specifically interested in, but you think are sort of a little immature and that you need to sort of go out and invest in to build, or do you feel that in terms of what the clients are looking for you’ve got pretty good coverage from a technology perspective?

<A – Mark Marron – ePlus inc.>: Okay. All right, Bhavan, I believe that we’re –there’s two things, let me take step back so you know how we look at technology. So, we obviously work very closely with our key vendors to understand where they’re going with their technology. We also have been advanced technology group and an emerging technology group within ePlus that are chartered with understanding where the market is going and what are the right solutions.

So we do believe that we are adding the head count in the right spaces where the market is either hot or growing. Some of the easy ones, obviously, cloud security as you look at ACI and all the software-defined plays that are out there over time, we’re going to continue to look at those and add the head count where we can help our customers.

Some of the bigger areas as we noted previously that we’re adding head count is in the services space.

<Q – Bhavan Suri – William Blair & Co. LLC>: Right, right.

<A – Mark Marron – ePlus inc.>: And if you think about it, what a lot of customers are chartered with. So if you – and, Bhavan, you know this better than me, if you look at the cloud, everybody talks about security, which is a big piece, but there’s so many cloud offerings out there, customers are confused on what’s the right one for them based on their size, based on what efficiency, based on whatever cost savings they’re looking for. And the way that you’re able to help the customers is by having those services or systems engineers that are available to sit with them, understand their legacy systems, and as they move to the cloud, make their recommended suggestions on what’s the right, either cloud architecture or public cloud for them. So that’s why we do believe we’re adding head count in the right spaces that are what I’d call margin rich.

<Q – Bhavan Suri – William Blair & Co. LLC>: Great. That’s helpful. And then as you look at your sales hires and more importantly the services hires you’ve made and you think about sort of the ramp – you obviously have changed incentive program for the sales force to be gross margin related, as you look at the close rates for new business, new business that involves services, that might involve some finance bundling, how are those close rates – do you feel they’ve picked up over the last year? Do you feel like they’ve kind of been at a steady state? How should we think about the trend there?

<A – Mark Marron – ePlus inc.>: Bhavan, I don’t know if I could give you a trend of, meaning things are closing quicker, whatever. What I’d put it in is from a ePlus perspective is, I think what you’re looking at is what’s nice about ePlus is when we go to a customer, it’s not just a product sale, if you will. What we have, based on all the different things we have, we have the ability to kind of do the upfront assessments and consultative approach with our services team. We have the ability to potentially go in with maybe a leasing proposal or solution, if you will, with our customers to kind of get in the foot on the door and then look for technology and/or services.

We also have proprietary procurement software that some of our customers are looking for from an asset management and spend management that maybe we can leverage at to get in the door to provide some value and then look to expand both our technology and leasing capabilities.

So, I don’t know if I can give you anything market related that things are closing quicker. What I can tell you is, whatever I tell you in terms of how fast we’re growing our profits, that’s never fast enough for Phil. So, that’s probably the easiest way to put it in perspective. All right?

<Q – Bhavan Suri – William Blair & Co. LLC>: That’s good to see Phil’s still cracking the whip over there.

<A – Mark Marron – ePlus inc.>: Yeah. You’ve got it, Bhavan.

<Q – Bhavan Suri – William Blair & Co. LLC>: And then when you look at a couple of other companies in the software side have had pretty good quarters from a federal perspective, from a government spend perspective, and you guys have not had huge exposure, but are you seeing an uptick in that? And could that be a benefit as you look forward more near term than long term?

<A – Phil Norton – ePlus inc.>: We are seeing more business coming forward in the state and local and that’s where most of our focus is. We do deal with systems integrators, and we’ve seen some pickup in that business, the deal with the fed, but really, we do not really have a real direct sales group on the federal market. So most of our government spend is limited to fed and systems integrators. And we see some pickup in both of those.

<Q – Bhavan Suri – William Blair & Co. LLC>: Okay. And then last one from me is just – you’ve seen continued consolidation in space, you’ve seen sort of some marginalization of the smaller players. Two questions I guess there. One, as you think about acquisitions, would you acquire some of these guys just again – not that you need more scale, but to gain sort of customer scale, or you’re really focused on technology?

And then two, sort of in that trend of consolidation in the space, do you worry that some of the other guys like CDW might try and move up markets to become more to become more enterprise players rather than stay sort of sub-2000 company type players?

<A – Phil Norton – ePlus inc.>: First of all, on CDW, in the higher level, we have an enterprise – we really haven’t seen them be competitive on solutions. We have seen them in several situations where it’s more product driven and price driven. I think that’s where we are seeing that. On the acquisition side, we have to look at it in two ways: one, is new technology or people that have started out and don’t have the resources to grow, but have really built new technology in the cloud and security and mobility that we’re able to potentially buy.

And then there’s other – the other one is basically locations. And we still have several places in the country that we are not really well-established as well as some of the major areas in the country, New York, Irvine, San Jose, Washington, that we really can add additional companies at a much smaller scale, and we think that’s very accretive, and it also enables us to do more of them and have a broader reach for what we can go after.

<Q – Bhavan Suri – William Blair & Co. LLC>: That’s helpful. I said last question but one more quick one, you guys are – you guys have done a...

<A – Mark Marron – ePlus inc.>: Hey, Bhavan, can I add one thing just to put in perspective, what’s nice with our acquisition strategy, its territory coverage, its technical expertise, its accounts and people. And as it relates to accounts when you talk about some of the smaller players out there, they may have some very nice accounts, but they didn’t have either the financial capability or the resources to be able to sell some of these bigger, more complex integrated solutions. That’s where we – potentially if we acquire them, there’s an upside for us because we have both the financial capability and the resources to help them go sell solutions they weren’t able to sell before.

<Q – Bhavan Suri – William Blair & Co. LLC>: So just capture larger share of the customer’s wallet, so to speak?

<A – Mark Marron – ePlus inc.>: Yes.

<Q – Bhavan Suri – William Blair & Co. LLC>: Yeah. Okay. And so just higher level and maybe it’s to Phil, but when you look at it, you guys have a really nice business of building out a cloud platform. Obviously, you’ve done that for Verizon and other folks. And then you have the Managed Services business that you’re building out just sort of help people migrate to the cloud and then you can sort of provide then a pseudo private cloud environment.

If you look out five years, maybe even further, any sense sort of which one you think you’ll be doing more of? Is it more of Verizon sort of public cloud or sort of the private cloud environments where you’ll create sort of the private infrastructure for these players?

<A – Phil Norton – ePlus inc.>: I think two different ways we have to look at it. One is the private cloud or hybrid cloud, which is a big part of Verizon’s business.

I don’t think we’ll stop. I think that will continue for all the big players. And I think that’s a great opportunity for us. On the public cloud side, we’re investing in people to really understand how we can take advantage of it and deliver good options for our customers and making sure that we can be profitable there.

And I think both of them will grow. I think it’s IHS, one of the Gartner folks that – said in 2017 there’d be a $2 trillion overall market for IT and 12% would be cloud. So I think it’s got a lot of hype. I think it’s growing pretty fast, but I don’t think it’s going to be the main driver for a few more years. So it gives us a lot of opportunity to increase our capabilities and to drive more business in that area.

<Q – Bhavan Suri – William Blair & Co. LLC>: Thanks. That was my last question. Thanks, guys.

<A – Mark Marron – ePlus inc.>: Thanks, Bhavan.

Operator: Thank you. And I’m showing no further questions at this time. I’d like to turn the call back over to Phil Norton.

Phil Norton, Chairman, Chief Executive Officer and President

We’d like to thank you for joining our call today, and we hope to see you or hear from you three months from now. Thank you very much.