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 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.
June 3, 2014
Good day, ladies and gentlemen, and welcome to the ePlus Fourth Quarter and Fiscal Year 2014 Earnings Conference 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. As a reminder, this conference call is being recorded.
And now I would like to hand the conference over to your host, Mr. Kley Parkhurst, Senior Vice President. Sir, you may begin.
Kley Parkhurst, Senior Vice President
Thank you Sayyed, 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, 2013 and subsequent Forms 10-Q, and our 10-K for the year ended March 31, 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?
Phillip G. Norton, Chairman, CEO and President
Thank you Kley and thank you all for joining us to review our fourth quarter and full year fiscal 2014 results and discuss our business outlook.
Our final results for the fourth quarter were in line with the estimates provided in our pre-release of April 21st and demonstrated the re-acceleration in product and services sales that began in this year’s third quarter. Despite weather-related closures in the fourth quarter, we succeeded in posting total revenue growth of 10%, led by our technology segment, which was up 11.6% and produced a 20.4% increase in segment earnings. Supporting this strong segment performance was the growth of our services and security business, which have been a key element of our strategy over the past several years and continues to be a major priority for our sales force.
We produced strong results for our 2014 fiscal year—total revenue growth of 7.6% driven by an 8.3% increase in technology segment revenues, where gross margin on sales of products and services expanded by 30 basis points and segment earnings increased 10.3%, again thanks to our focus on building the higher margin services part of this business. Our financing operation faced difficult year-over-year comparisons, which our CFO, Elaine Marion, will address a little later in this call. However, we are seeing solid demand for our financing services from both new and existing customers and have further strengthened our cross sell programs. We consider our ability to help our customers make “buy or lease” decisions to be a competitive differentiator for ePlus, and we look to continued growth for this part of our business in the periods ahead.
Technology segment revenues represented 97% of total revenues in fiscal 2014 and will continue to be our key driver. Here, we are addressing the increasingly complex needs of our customers by offering end-to-end customized solutions across the entire IT lifecycle. Through significant investments to build our engineering capabilities, ePlus is now very well positioned in emerging technologies such as: mobility, cloud, security, and virtualization, all of which are expected to grow much faster than IT spending as a whole. And, this has led to our winning an increasing number of higher margin, longer term, managed services contracts, which will benefit profitability and enhance our customer relationships across our diversified end markets.
In a moment our Chief Operating Officer, Mark Marron, will provide more detail on our expanded engineering and sales and marketing headcount, our vendor relationships and how we leverage all of this to meet the needs of more than 2800 customers. Suffice it to say that we gained market share again in fiscal year 2014, and we believe we have significant organic growth opportunities ahead. At the same time, we have the financial and human resources to support internal investments and to make acquisitions that will expand our capabilities and our geographical reach.
At this point I would like to turn over the call to Mark.
Mark Marron, Chief Operating Officer
Thank you, Phil.
With industry analysts calling for a 4% growth rate in the overall IT market, our track record of growing faster than the IT market consensus is a result of our ability to combine expertise and relationships in existing technologies with cutting-edge providers and products. And, because we focus on the most sophisticated areas of IT, including services, we are drawing on the expertise of our highly skilled team of engineers and a experienced sales force.
In fiscal year 2014 we continued to add to staff in these areas, increasing our professional services headcount by 11%, and sales and marketing personnel by 4%, while reducing our administrative headcount by 2%.
We also made significant progress in further strengthening our customer offerings in fiscal 2014, particularly in the area of services.
For example, in the fourth quarter we announced our newest managed services center, built on the latest technology, to handle growing demand for our managed service offerings. ePlus provides customers with proactive control of their IT infrastructure (including network components, physical and virtual servers, private clouds, unified communications, storage, security, and more) from its 24/7/365 Managed Services Centers. The new managed service center, our third in the United States, is located near Raleigh, North Carolina, which is a vibrant market with a deep pool of technically talented personnel. By providing real time support for our customers, we believe our managed services business is driving further customer loyalty while at the same time positioning ePlus for future growth and improved profitability.
We built this third managed services center to prepare for our Enhanced Management Services, or EMS, a vendor-certified Tier 1 first call program which we announced on February 13th. Its designed to lower operating costs and improve customer service experiences, EMS is a manufacturer-certified alternative for customers' existing maintenance support programs. It delivers rapid problem resolution of critical network problems, access to expert U.S.-based technical support, flexible hardware coverage, and personalized capabilities. Customer adoption of EMS will add to our recurring revenues, a key objective in building our services business, and provide a platform to upsell additional managed services offerings. We have also introduced OneSource Asset Management, another unique value added solution by ePlus. OSAM, as we like to call it, is a software as- a-service offering designed to track assets, associated meta-data, and related maintenance contracts to deliver business intelligence including asset movement, warranty, and end of life notifications which can result in a lower total cost of ownership. Built on our long term business and customer experience of providing robust eprocurement software, OSAM is yet another way we are building a platform of long term recurring revenue streams to strengthen our customer engagement and differentiate ePlus from our peers.
What differentiates us from many of our traditional competitors is that we offer a full suite of products and services. We serve traditional areas like data center servers, storage, and networking, , but we are keenly focused on emerging technologies in the areas of cloud, mobility and security. Clients today are trying to determine how they can utilize cloud technologies securely. ePlus has the expertise, including a service methodology of plan-build-support-optimize, or PBSO, which helps customers identify the cloud solutions which makes sense for them.
We continue to see strong demand for security product sales across all regions of ePlus, and we believe we are adding market share, and growing well in excess of the industry analyst’s projected 8% annual growth rate. We are focused on providing security solutions that provide a secure perimeter and secure data for our customers while looking to compliment these offerings with our strategic security services and managed security offerings. For example, we are also focused on emerging technologies such as “next generation firewalls”, which provide security from the data center all the way to the mobile device. These solutions resonate with customers who understand the risks all too well. Industry analysts estimate that only 10% of the firewalls in place today meet the requirements to protect against sophisticated attacks, and projects that only 35% will meet requirements by the end of this calendar year, giving us a lot of opportunity to address this growing customer concern.
A number of ePlus’ recognitions and awards in fiscal 2014 were noted in today’s earnings release, but I would like to highlight the Global CloudBuilder of the Year award that we received on from Cisco April 1st of this year. This recognition was awarded based on criteria including: innovative practices, application successes, unique programs, Problem solving and sales approaches. These attributes demonstrate our commitment to this high impact technology and our success in implementing it for our customers, including some of the world’s largest service providers, as well as enterprise and mid-market customers.
We ended the year with more than 2800 customers, up from 2300 at the end of last fiscal year. Our customer base is comprised primarily of large and mid-sized companies across a broad spectrum of industries, many of which are household names, like Verizon, Wells Fargo, Quest Diagnostics, and NetApp. As you will have seen from today’s earnings release, we have a balanced cross-section of end markets. Similar to last fiscal year, technology, SLED—which is State and Local Government and Education—and Telecom, Media & Entertainment, each accounted for about 20% of fiscal 2014 revenues. Healthcare and financial services, each represented 11%, and the remaining customers, categorized by us as “Other”, include a diverse set of industries such as retail, energy, defense, and business services. We believe there are significant opportunities to sell more products and services into our existing customer base, and that our understanding of multiple vertical markets along with the resources we have available, and the expertise we have gained in providing complex IT solutions over the years, gives us an advantage in competing for new customers.
Turning now to our financing segment, we are continuing to find that customers and manufacturer partners are valuing our process automation, responsiveness, and ability to offer customized financing solutions that are tailored to their unique requirements. We remain focused on increasing volumes to increase profitability through building our on-balance sheet portfolio for the long term, to create recurring portfolio earnings while continually balancing risk in the portfolio by choosing to sell certain financing arrangements which create a gain, and increased earnings from post-contract transactions.
In summary, we remain focused on our corporate objectives of expanding and enhancing the solutions, services and support offerings in both traditional and emerging technologies, and building out our national footprint.
Now I would like to turn over the call to Elaine Marion, our CFO, who will discuss our financial results.
Elaine D. Marion, Chief Financial Officer
As Phil mentioned earlier, our fourth quarter results came in as anticipated in our pre-release. The 10% increase in total revenues to $259.9 million, was led by an 11.6% increase in the technology segment, which more than offset the decline in the financing segment, where year –over-year comps were skewed by several large transactions that generated post-contract earnings and transactional gains in last year’s second half.
Gross margin for the quarter was 21%, a composite of 18.8% on products and services and the margin contribution from our financing segment. Earnings per diluted share increased 8.4% in the quarter to $1.03, on a relatively flat share count, after absorbing a 10.0% increase in total costs and expenses— primarily reflecting the increased scope of our business and a 6.8% increase in services and sales and marketing headcount.
Our performance for fiscal 2014 was basically a tale of two halves. In the first half of the fiscal year, we saw slower growth in corporate IT spending due to the economy and uncertainties caused by the federal government. IT spending accelerated in the third and fourth quarters, driving a 7.6% revenue increase to almost $1.1 billion for the full year. We attribute our ability to outperform the overall industry to market share gains derived from increased sales to existing customers and our focus and capabilities in the faster growing segments of the market that Phil and Mark have spoken about. We also added new customers, through our sales and marketing programs as well as from vendor referrals.
Gross margin for the full year was 20.5%; comprised of 18.3% on products and services and the remainder from financing activities. Earnings per diluted share increased 1.2% to $4.37 per share, up from $4.32 on a similar share count—again after absorbing a 7.9% increase in total costs and expenses, primarily tied to our higher revenue base and increased headcount.
Moving to our segment results, our technology segment accounted for approximately 97% of total revenues in both the fourth quarter and fiscal year, respectively. In the fourth quarter, gross margin on product and services was 18.8%, as compared to 19.7% in the prior year. For comparative purposes, the prior quarter included a change in product mix that was above the norm as we explained last year. For the full year, gross margin on product and services increased 30 basis points to 18.3% due in part to an increase in services revenue. On an annual basis, services revenues grew faster than technology segment revenues, and services headcount increased by 11% compared to fiscal 2013. In fact, our services headcount is up 93% since 2010, during which time we have expanded the number of managed service centers from one to three.
Looking at other key items, we produced technology segment earnings growth of 20.4% and 10.3% for the fourth quarter and full year, respectively, benefitting from the business trends we have mentioned and lower professional fees—while absorbing higher salaries and general and administrative expenses associated with our long term growth strategy. Technology segment headcount increased 5.3% for the year, with over 90% of the increase related to sales and professional service personnel, while consolidated revenue per sales and marketing employee and revenue per employee increased 3.8% and 2.5%, respectively, over fiscal year 2013 levels.
In the financing segment, financial results have historically fluctuated due to the timing and nature of originations, post contract transactions, and sales of transactions. In both the fourth quarter and full year of fiscal 2014, the major variation was the decline in financing revenues. The decrease in revenues in the fourth quarter was due to lower transactional gains. The decrease for the full year was primarily due to lower post-contract earnings compared to fiscal 2013 when we had net gains resulting from the early termination of certain lease agreements, which were offset by higher transactional gains. As a result, segment earnings declined 28.1% for the year to $8.8 million and were down 43.4% in the fourth quarter. We did, however, see a 19% increase in transactional gains for full year 2014 compared to 2013 due to a higher volume of deals. Our financing portfolio amounted to $143.7 million at fiscal year- end, representing investments in leases and notes, part of which can be monetized to raise additional cash when needed.
ePlus ended the year with a strong balance sheet that provides us with significant financial flexibility. At fiscal year-end, the Company had cash and cash equivalents of over $80 million and total stockholders’ equity of $266.4 million, up from $238.2 million at the end of fiscal 2013. In May of this year, we repurchased 400,000 shares of ePlus common stock for $19.0 million in connection with the completion of a secondary stock offering by existing shareholders of 1,810,000 shares. We used proceeds generated from funding a portion of our financing portfolio with non-recourse notes payable to acquire the shares.
I would now like to turn back the call to Phil for his closing comments.
Phillip G. Norton, Chairman, CEO and President
Thank you, Elaine. Before opening the call to questions, let me discuss a little bit of few key points that we recently emphasized. First, we are confident that ePlus will continue to expand market share and grow at a faster rate than that of the overall IT market which industry analysts forecast at around 4%.
Second, our existing customer base provides us with tremendous cross selling opportunities and we can leverage our positioning in growing end market and with OEMs again new customers.
Third, you can expect us to continue to invest to build our managed services business, but also to maintain our focus on improving operating efficiency and controlling corporate overheads.
Fourth we will continue to explore accretive and strategic acquisitions while maintaining a conservative approach that has served us well in the past. Fifth, we will continue to hire, train, and retain the best talent in the industry.
Operator I would now like to open the call to questions. Thank you.
This concludes our prepared remarks, please open the line for questions.
QUESTION AND ANSWER SECTION
Operator: Thank you [Operator Instructions] And our first question comes from Matt Sheerin from Stifel. Your line is open. Please go ahead.
<Q – Matt Sheerin>: Yes, thanks very much and thanks for taking my questions. The first question, either Phil or Mark could you just give us some color on. I know that the March quarter for a lot of your competitors and distributors was fairly choppy a lot back end loaded. Some competitors and distributors talked about pushouts and in fact this numbers where – your numbers came in line or better than the analyst expectation. So could you give us color on what you saw in the quarter and you are two months into your June quarter now. I know you are talking above market growth. Obviously that’s a sort of open ended statement. You are coming off of double-digit growth in your technology segments. Would you expect to grow at that level on a year-over-year basis still or would it be more or like high single digits?
<A – Mark Marron>: So hey Matt it’s Mark. So on the Q1 forecast and forward looking I’ll turn that over to Phil, but on the Q4 choppiness what we saw in the market in Q4 we had a lot of weather related stuff that affected our revenue in the mid February or mid March timeframe. What we were seeing throughout the entire quarter though the deals weren’t slipping or I should say we weren’t losing the deals. They were pushed out a little bit further into the quarter. But as you can see from the numbers, we were able to bring those deals in at a pretty good growth rate year-over-year across the board from a technology segment standpoint. As per Q1, as you know, we don’t do any forward looking kind of forecasting. If you will, there is not much that I can add to help you out on that one right now.
<Q – Matt Sheerin>: Well maybe if I can just ask in another way I mean you are two months into the quarter, are you seeing and if you go back typically you seem to up in sort of the mid single-digits on the sequential basis in your technology segment on seasonality, are you still seeing normal seasonal trends?
<A – Mark Marron>: We haven’t seen anything different in the market that would suggest that even an uptick or a decline in any activity with our customers. We’re seeing the normal demand that we’ve seen in every quarter for Q1.
<Q – Matt Sheerin>: Okay and the breakout of end markets in your press release was certainly helpful. Could you give us an idea of those markets SLED, technology, healthcare et cetera. Which ones are growing faster than the overall business and which ones are may be laggards and what your expectations for the year are there?
<A – Mark Marron>: Okay well here is the thing. Year-over-year it’s pretty much about the same percentages that they were last year give or take. Matt we’re always going to have potentially a few deals, large deals that may see the percentage change either quarter-over-quarter or year-over-year. But across those verticals that we mentioned, we feel pretty good about what we put in place as it related to our go to market plans. So for example in this SLED space the state local and education space, we’ve got a dedicated focused team focused on that space and they’re working very hard.As you know Q1 and Q2 is when a lot of that revenue comes into play with those customers. So we’re still on track with that. Healthcare as you know, there is a lot going on in the healthcare space overall. As these companies continue to start to rehire more people, that need these different type of healthcare programs they’re looking to digitize a lot of the records so there is a lot opportunity within that space not only from a kind of cloud/ storage space, there is also telehealth and other areas that our customers are looking for. And I’m just trying to think of some of the other verticals. It’s pretty much the same across the rest of these articles. We’re not seeing anything either upper or down in those verticals, Matt.
<Q – Matt Sheerin>: Okay that’s helpful. And just a couple of questions before I get back in the queue, Could you tell us if you had any 10%, I’m sure you did have 10% vendors and be specific there. And then also whether you had any customers that represented 10% or more of sales either in the quarter or the fiscal year however you reported?
<A – Mark Marron>: So Matt did you ask for the vendors or if you give....
<Q – Matt Sheerin>: Vendors and customers, so both?
<A – Mark Marron>: Okay so the – and I’m doing this on just top of my head. I’ll let Elaine correct me if I missed anything. The big three that you’re looking at is at least over 10% is Cisco, HP and NetApp. And if you think of what those customers do across everything from server storage and networking, some of the software plays that have, the overall cloud play and our focus on security, it fits a lot in our sweet spot.
<Q – Matt Sheerin>: Okay.
<A – Mark Marron>: I don’t know if I addressed it, but I kind of ....
<Q – Matt Sheerin>: Yeah.
<A – Mark Marron>: I will give you the percentage just a ballpark. You’re looking at Cisco that about 48%, NetApp’s about 10%, and HP is about 8% to 9% approximately.
<Q – Matt Sheerin>: Okay. And any customers. I know last year Verizon was a 10% plus customer, are there any there now?
<A – Mark Marron>: Yeah, Verizon now once again is over a 10% customer. It’s now a 11%, and it was over 14% last year.
<Q – Matt Sheerin>: Okay, that’s very helpful, thanks a lot.
<A – Mark Marron>: No problem, Matt.
Operator: Thank you. And our next question comes from Bhavan Suri from William Blair. Your line is open. Please go ahead.
<Q – Bhavan Suri>: Hey guys Phil and Elaine and Mark thanks for taking my question. Just a couple of quick ones. It feels like you’ve accelerated a number of net new customer adds last year this year. Mark and Phil, any sort of drivers or key services that are resonating with that group. Is it the bundling of services, it is some of the newer big data offering, what’s driving sort of that higher new customer addition kind of metric?
<A – Mark Marron>: So Bhavan it’s Mark here. There is a few things that helping us in that space. From a go-to-market we have very clear plans in each of our regions about both as an named accounts in what we call territory accounts. The other thing is we also have a telesales and telemarketing team that’s kind of goaled and rewarded based on -- that’s totalled rewarded based recovering net new accounts as well net new opportunities. I think some of the other things we’re seeing with those customers is some of the value added assessments that we provide to our customers. For example whether it’s a cloud rating assessment or something that’s kind of really relevant in the market, some of the security assessments that we do, and provide for our customer around vulnerability assessments, Pen Testing, risking compliance. We also have a virtual CSO engagement that a lot of our newer customers are taking advantage of, letting us help them build their three to five-year roadmap. We’ve also added as we noted both in the press release and a few other things is we’re continuing to invest in our services and that includes our presales resources and these presales resources are goaled and rewarded with working with our sales team on selling the margin rich solutions in the areas that we want to focus and we think that’s really helped us uncover a lot or new portion of those net new customers.
<Q – Bhavan Suri>: Okay Mark and I apologize the background noise on my side I’m at the airport here. But the other question I had for you was as you look at the specific partners you had and you look at the growth in technology, any color on what areas were growing faster? You obviously touched on what’s driving new customers, but anyway as we are driving some of the growth faster, was it some of the big data initiatives or the cloud initiatives and security. Was it sort of reasonable across some of the newer emerging areas?
<A – Mark Marron>: So, I apologize, I missed some of that in the middle, so was it where the growth is coming from a technology standpoint?
<Q – Bhavan Suri>: Yes obviously technology performed well and my question was sort of was there a specific area within that. Was it big data, not just on the new customers, but for the existing customers? Was it cloud? Was it mobile? Sort of what drove that re-acceleration outside of the federal government in technology?
<A – Mark Marron>: So that’s still a lot of what we’ve done over the years with the data center cloud play and that’s everything from servers. Storage networking is still significant portion of where the growth is coming from. Security I mentioned that we’re outpacing the industry analyst 8% growth expected in security, so especially with what’s going on in the market and without naming some of the companies with the problems that they’ve had. We’ve seen a big pick up in companies willing to sit down with us and understand how we can help them in the security space. And then quite honestly the services that we’ve talked about, some of the managed service offerings that we have in place with getting those customers and the offerings we had. We do quarterly business reviews and that’s we’ve then been able to uncover other opportunities with our existing customer base based on doing those reviews.
<Q – Bhavan Suri>: Great.
<A – Phil Norton>: Hi Bhavan, this is Phil Norton. The other thing you asked about Fed. Our Fed business. is really now less than 2%. We do have however sell to systems integrators who have longer contracts with the Fed, but the Fed is not a real factor in our numbers.
<Q – Bhavan Suri>: Okay and then just continuing on that line for maybe a little bit, you did see sort of an uptick given sort of some of the slowdown in the earlier part of the year, do you consider that as pent up demand or do you think this is sort of a relative new normal so to speak as opposed to just a one time or two quarter uptick in demand?
<A – Phil Norton>: Well I don’t think we have to use the excuse to get there of weather, although weather is a factor, we got pushed toward the end. It’s pretty hard to say whether it’s a new normal and because you had all these different issues with weather and the shut down, I think after a quarter or two, the rest of the year, we will know whether it’s a new normal or not.
<A – Mark Marron>: And I do believe it will provide I think some of the things that we talked about on prior calls where we did an head count in the services and security space.
<Q – Bhavan Suri>: Right.
<A – Mark Marron>: You add that head count, it’s originally just expenses overtime and you start to build of pipeline. You make clients aware of the capabilities that you have in those spaces that I think part of that is based on that head count now being out there and being productive.
<Q – Bhavan Suri>: That makes sense. One last one from me, just quickly and I know you guys refrain from providing any forward on your metrics. You’ve done a great job of sort of providing additions in sales and engineering pre-sales. Any update on what you expect ro hire this year on either of those two segments?
< A – Mark Marron>: Yeah, at that point we have budgets obviously that we built with the expected head count growth across those areas. I can tell you that most of our growth will continue to come in what I call the customer facing head count in both sales, presales, and services as well as we’ll continue to invest. And in it we see if the market cooperates, and we continue to grow. Obviously we’ll continue to add in those areas.
<Q – Bhavan Suri>: That’s helpful guys, thanks for taking me question and nice job. Thanks.
<A – Mark Marron>: Thanks Bhavan. Save flight.
<Q – Bhavan Suri>: Thanks guys.
Operator: Thank you. And our next question comes from the Prabh Gowrisankaran [ph] , from Canaccord Genuity. Your line is open, please go ahead.
<Q – Bhavan Suri>: Thanks for taking my question and congrats on a good quarter. A couple of questions from me and just in terms of what you’re seeing. I know other VARs and this thing you have talked about and maybe your slowdown in storage. We saw strength in networking going forward, but saw pushed out deals, and an elongated sales cycle to storage. Did you see any of that? Any color on that would be great?
<A – Mark Marron>: You know it funny. The way I look at storage, there is a couple of things. You’ve got a lot of those flash vendors out there, so you got a lot of customers trying to figure out how to take advantage of flash both from an efficiency standpoint, and from a close standpoint, so you may have people taking a little more time to evaluate. When I look at some of the things that’s happened in the storage space with some of the folks letting go some their head count, I actually see it as an opportunity for us, because they would be looking to ePlus to provide the resources and support that customers need in the storage space. Earlier I think it was managed services and big data a little bit. I think as people start to try to figure out how to leverage big data with trends and patterns, it’s only going to add some more storage opportunities as we go forward. So I haven’t see anything either in actual numbers, pipeline or activity that would suggest any kind of major slowdown.
<Q– Bhavan Suri>: Okay. And the other question I had was on the financing segment. Do you -- Elaine do you expect it to normalize at these levels. I know it’s declined year-on-year in fiscal 2014. Is this a good level to think about or would they still be a lot of variability in the financing segment?
<A—Elaine Marion>: I think last year we had some transactions that were early buyouts that really generated a lot of earnings for us did not reoccur this year as being an early buy out. So if you look back to 2012, I believe that earnings were in the $8 million range. It went to $12 million, and some change in 2013 and 2014, and back down to the 8 range. So although we are very focused on it, it doesn’t take time to build the earnings in this type of business, because of the annuity and the portfolio incomes that you have from that as well as getting the post contract revenues. And you have to build out your balance sheet in order to provide more residual value that are returning in this particular year, so it has taken time to build that back up again when we will see the type of gains in the future.
<Q>: Okay. And within the technology segment, I know you talked about a new managed service center in North Carolina. Do you expect managed services growth to outpace products in terms of --- I know you posted 8% growth in fiscal 2014 for the technology segment. Looking forward to fiscal 2015 and I know you don’t provide metrics, but do you see managed services driving a bigger portion of that growth.
<A—Mark Marron>: Well we could expect our service overall as a percentage growth to outpace our product growth, similar to this year, as we would expect to see continued growth in managed services as we move forward based on the investment that we’ve made both in resources, facilities, tools and also expanding the offerings that we have in that space.
<Q– Bhavan Suri>: Okay, great. That’s all the questions I had. Thanks.
<A – Mark Marron>: Thanks we’ll see you.
Than you. I’m showing no further questions at this time. I would like to hand the conference back over for closing remarks.
Phillip G. Norton, Chairman, CEO and President
We would like to thank you all for attending the conference call and we appreciate all the questions. We will be talking to you in a few months.
Thank you. Take care.
Thank you. And Ladies and Gentlemen, thank you for participating in today’s conference. This concludes our program. You may all disconnect and have a wonderful day.