Kley Parkhurst - Senior Vice President Mark Marron - President and Chief Executive Officer Elaine Marion - Chief Financial Officer Erica Stoecker - General Counsel.

Maggie Nolan - William Blair Matthew Galinko - Sidoti Matt Sheerin - Stifel.

Good day, ladies and gentlemen. Welcome to the ePlus Earnings Results Conference Call. As a reminder, this conference call is being recorded. I would now like to introduce your host for today’s conference, Mr. Kley Parkhurst, SVP. Sir, you may begin..

Thank you for joining us today. On the call is Mark Marron, CEO and President; Elaine Marion, CFO; 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 maybe 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 31, 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 reference 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.

Reclassifications of prior period amounts relating to numbers of shares and per share amounts have been made to conform to the current period presentation due to the March 31, 2017 stock split. The effect of the stock split was recognized retroactively in the stockholders’ equity and in all share data.

The financial statements include the effect of the stock split on per share amounts and weighted average common shares outstanding for each of the fiscal years ended March 31, 2018 and 2017. I’d now like to turn the call over to Mark Marron.

Mark?.

Thanks, Clay and thank you all for participating in today’s call to discuss our fourth quarter and full year 2018 results.

There are four key takeaways from our fourth quarter results that speak to the work we have been doing to position the business for the future, some relate to anticipating and adjusting to the underlying trends in our industry and some relate to our focus on strong execution.

The first important factor of note is the improvement evident in our gross profit dollars and our gross margin. On a consolidated basis, gross profit increased 6.9% to $81.6 million.

This was achieved on a stable revenue base, which was an accomplishment given the runoff of the large project that we called out in prior quarters as well as the impact of changes in the way software and solutions are consumed.

I will speak more in a little while on the changes to revenue recognition and while we look at gross profit as a key metric to track our progress in today’s industry landscape.

We are pleased with our increased gross profit and the industry leading gross margins that we reported in the fourth quarter, with consolidated gross margins reaching 24.7% and the gross margin on products and services of 22.3%, up 180 basis points over the prior year.

This growth demonstrates the benefit of our investments in delivering high value-added services and developing complex solutions for our clients as well as the success of our land-and-expand strategy, which gets us in the door with large enterprise customers. Next is the growth in our services business.

We have a growing annuity quality revenue base and our backlog continues to increase significantly. Over the last several years, we have built out our capabilities in professional services, managed services and enhanced maintenance support both organically and through acquisitions.

We continue to invest in service offerings and solutions by adding and training customer-facing professionals in those areas in which there is a significant customer demand.

At the same time, we remain open to strategic acquisitions like OneCloud and IDS that help build-out our cloud offerings and capabilities by leveraging the strength and flexibility of our platform and our strong balance sheet. Third, security product sales and services were another strong point for the fourth quarter and the year.

We continue to grow our business to gain additional share in this increasingly important arena as evidenced by the 47.9% growth in sales of security products and services in the fourth quarter. For fiscal 2018, sales of security products and services were up 23.8% and represented 18.9% of adjusted gross billings, up 280 basis points year-on-year.

Momentum built throughout the year and we expect this to continue to be an important growth area for ePlus. And finally, we made progress on resource realignment in an effort to staff up where necessary while reducing our costs and other areas.

While technology segment headcount was up 7.9% year-on-year, what is harder to see and also more important is the underlining realignment, which involves adding staff to areas of high customer demand while at the same time optimizing our overall cost structure. The upside from this cost rationalization should be more evident as we move through 2019.

As many of you know, ePlus has made substantial investments in highly credentialed technical staff over the past several years in anticipation of changing trends in both customer demand and the way business is transacted in our industry.

We are seeing the benefits of these investments with the increasing contribution of our services business and its positive impact on gross profit and gross margin. And we believe we are well-positioned with respect to changes that are taking place in our industry.

One important change is that solutions are increasingly being sold on a subscription or ratable basis by many of our major vendors.

We believe we are well positioned to leverage both our technology and financing capabilities to provide the solutions our customers need both today and in the future by providing the technology and services they need in any way they want to consume and pay for them. This approach model will benefit our customers, our vendors and ePlus.

From a revenue perspective, there is some initial pressure given the inflection from one-time sales to subscription sales and as a result, revenue during the transition period maybe less indicative of our progress. Gross profit on the other hand should continue to be a good indicator of our success in performance.

And importantly, the solution subscription model can give us several years of visibility giving us annuity quality revenue and the potential to up-sell additional services. Similarly, our gross margin on these sales is generally higher only recognized over a longer period.

One example of our ability to build annuity streams in cloud solutions is a recent win with a middle-market customer. The relationship started with a paid onsite engagement to assess their requirements and develop solution designs.

We are able to leverage the cloud offerings, Backup as a Service and Disaster Recovery as a Service from our IDS acquisition to sell them a service capability that we did not have a year ago. What is notable about this engagement is that we are now able to leverage the expertise and offerings from acquisitions across our broader customer base.

This project will generate approximately $1 million for ePlus that will be recognized ratably over 60 months with a healthy margin. It also allows us to go back to them with other annuity service offerings as well.

What is not changing is our emphasis on emerging technologies and our focus on the high-growth areas that are in high demand by our customers namely cloud, security and digital infrastructure. We remain committed to enhancing our solutions and services while expanding our overall footprint.

Our international subsidiary, IGX Global recently gained Cisco Gold certification, which provides us with additional competitive advantages in the UK market and across Continental Europe and enables us to better support our multinational customers and build on our international revenue. For the year, we are very pleased with our results.

Sales reached a record $1.41 billion, which is a 6.1% year-on-year increase and I am particularly happy with our consolidated gross margin of 22.9%, a 40 basis point expansion year-over-year, which helped drive gross profit to $323.5 million, a 7.9% increase.

Our financing business had a strong year with double-digit growth in both sales and operating income and Elaine will provide additional color on this business. While it was additive to our fiscal year 2018 profitability, we do not expect it to replicate this performance in fiscal 2019.

Additionally, I am really pleased to announce that early this month we named Darren Raiguel to Chief Operating Officer of ePlus and President of ePlus technology. Darren has been with the plus for over 20 years and most recently served as Executive Vice President of Technology Sales.

This expansion of our executive management team gives us additional depth as we continue to scale our business. With that background, I will now turn the call over to our CFO, Elaine Marion to review our fourth quarter and full year fiscal 2018 results.

Elaine?.

Thank you, Mark and thank you everyone for joining our call. I would like to lead off with a few financial highlights. First, we are pleased to report that we achieved solid growth across key metrics, including gross profit, gross margin and adjusted EBITDA.

We think the tough revenue comparison, particularly relating to a large competitively priced project that we began delivering largely in the fourth quarter of fiscal 2017 and substantially completed in the third quarter of fiscal 2018.

These types of projects enable us to further penetrate large enterprise customers and up-sell additional services building the potential for gross profit growth and margin expansion in future periods. Second, our fourth quarter EPS performance included adjustments which brought the effective tax rate for the quarter to 51%.

The primary adjustment was to finalize the re-measurement of deferred tax assets and liabilities related to the change in the federal statutory rate. Going forward, we expect an effective tax rate of approximately 29%.

Third, we have adjusted the way we calculate non-GAAP EPS and adjusted EBITDA to include stock compensation and acquisition-related expenses. Now, I will begin my discussion of our quarterly results.

Our consolidated net sales amounted to $330.4 million, just below $332.8 million reported in the fourth quarter of fiscal 2017 despite the large project previously mentioned. Gross profit grew by 6.9% to $81.6 million and our consolidated gross margin reached 24.7%.

This 170 basis point expansion in gross margin from year ago quarter is mainly attributable to higher product margin and higher sales of services.

Operating expenses for the quarter amounted to $63.1 million mainly due to a 6.8% increase in salaries and benefits as a result of higher headcount primarily due to the acquisitions of OneCloud in May 2017 and IDS in September 2017 and higher variable compensation related to the additional gross profit.

Our G&A expenses grew by 16.8% mainly due to an increase in software license and maintenance expenses and adjustments to contingent consideration related to acquisitions.

As a result of higher SG&A as well as an additional $1 million from acquisition-related amortization, our operating income for the quarter declined 1.2% to $18.5 million from $18.7 million in the comparable quarter last year.

Adjusted EBITDA increased 5.6% year-over-year to $23.3 million and our adjusted EBITDA margin of 7.1% increased by 50 basis points from the same period last year. Our consolidated net earnings amounted to $8.9 million or $0.65 per diluted share compared to $10.5 million or $0.75 per share last year.

As I noted earlier, this year-over-year decline was mainly attributable to a higher than usual tax rate of 51% as we had a $1.8 million adjustment to the estimate we recorded in the third quarter, which was due to the remeasurement of deferred taxes under the new federal income tax rate.

For fiscal 2019, we continue to expect an effective tax rate of approximately 29%. Non-GAAP diluted earnings per share amounted to $0.96 representing a 5.5% increase from $0.91 in the fourth quarter of fiscal 2017.

Now, I will give you more color on the financial performance of our technology segment, which represented almost 97% of consolidated sales.

Net revenue in the technology segment for the fourth quarter of fiscal 2018 reached $320 million, representing a 0.8% decline from $322.5 million in the prior year quarter due primarily to the runoff of the large project.

Adjusted gross billings of product and services amounted to $441.7 million compared to $458.5 million in the same period a year ago.

The adjustment from adjusted gross billings to net sales of product and services represented 27.9% compared to 29.9% in the year ago quarter, reflecting a lower proportion of third-party software assurance, maintenance and services sales.

Gross profit for the technology segment was $72.7 million, an 8.4% increase over $67.1 million in the comparable quarter of fiscal 2017. Gross margin on products and services was 22.3%, 180 basis points above last year as a result of better product mix yielding higher margins as well as higher services revenue.

Operating offenses were $59 million, an increase of 8.9% from $54.1 million in the fourth quarter of fiscal 2017. SG&A for the quarter was $56.1 million, up 7.3% over the fourth quarter last year primarily as a result of an increase in personnel as well as software and maintenance expenses.

We had 1,215 technology segment employees at the end of March 2018, an increase of 89 employees from 1,126 year-over-year primarily as a result of the acquisitions of OneCloud and IDS. Of the 89 new additions, 74 were sales and engineering staff with the remaining new hires administrative staff.

Operating income for the quarter was $13.7 million, up 6% and adjusted EBITDA amounted to $18.4 million, up 13.8% year-over-year. Now turning to our financing segment, we reported revenue growth to $10.4 million compared to $10.3 million in the fourth quarter of fiscal 2017 on a strong compare from last year.

This part of her business benefited from an increase in post-contract earnings due to the sale of equipment related to several leases as well as higher portfolio earnings.

Our operating expenses in the financing segment were $4.1 million, representing 18.4% increase from $3.5 million in the last year’s fourth quarter due to higher variable compensation resulting from higher gross profit coupled with changes in reserves for credit losses that were partially offset by lower professional and other fees and interest in financing costs.

As a result, operating income was $4.8 million, 17.1% below the fourth quarter of fiscal 2017. Adjusted EBITDA was $4.9 million, 16.7% below the fourth quarter of fiscal 2017. Now, let me briefly summarize our financial performance for the full fiscal year of 2018.

Our net sales reached $1.41 billion, a 6.1% year-on-year increase driven by the strong performance in our technology segment, where net sales increased 5.8% to $1.37 billion and supported by 20.4% revenue growth in the financing segment to $41.5 million. Adjusted gross billings for the year were $1.89 billion, up 6.5%.

Gross profit for 2018 was $323.5 million, representing a 7.9% increase and consolidated gross margin was 22.9%, a 40 basis point expansion year-over-year, while gross margin on products and services improved 20 basis points to 20.7%. Adjusted EBITDA amounted to $102.8 million, up 3.5. Net earnings increased 9% to $55.1 million.

Fully diluted earnings per share were $3.95 up 9.7% and non-GAAP earnings per diluted share was $4.40, 4% above the $4.23 for fiscal year 2017. Moving to the balance sheet, we ended the year with cash and cash equivalents of $118.2 million, up from $109.8 million at the end of fiscal 2017.

Inventory decreased 57.4% year-on-year as the large projects we spoke about was delivered. Deferred revenue decreased by 40.5% to $38.9 million due primarily to the same large project. Our healthy balance sheet and strong cash position allows us to consider strategic acquisitions to further scale our business.

During fiscal 2018, we spent $31.6 million to repurchase almost 410,000 shares. Our cash conversion cycle decreased 24 days compared with 38 days at the end of fiscal 2017 and remained flat sequentially.

Looking at our end markets on a trailing 12-month basis, technology and SLED were once again our largest markets, representing 24% and 17% of total sales for the full fiscal year respectively. Financial services represented 15%. Telecom, media and entertainment was approximately 14% as was healthcare.

The remaining 16% is attributed to certain smaller client types that we classify as other. In our quarter ended June 30, 2018, we will adopt the new revenue standard using the full retrospective methods. We have determined that our accounting for revenue within our technology segment will not materially change from our current policies.

However, in our financing segment, we will recognize revenues on the sale of off-lease equipment on a gross basis under the new revenue standard, which we currently recognize on a net basis, which will result in an increase to our reported net sales of $4.5 million for the year ended March 31, 2018.

The changes to the previous years will be illustrated in the Form 10-K we will file shortly. Looking ahead to fiscal 2019, we remain focused on growing our gross profit and optimizing our cost structure to allow us to improve operating leverage while continuing to invest in technology and people. Thank you for your time today.

I will now turn the call back over to Mark.

Mark?.

Thanks, Elaine. We are pleased with our 2018 results and our progress in executing on our long-term strategy. We have added solutions and services organically and through acquisitions to support our customers in key areas and help them achieve their business objectives.

Market dynamics appear to be positive heading into our fiscal 2019 benefiting from corporate tax savings and the strong economy. Within this environment, we are focused on growing our gross profit dollars with continued emphasis on security, cloud and digital infrastructure and on building our service offerings.

Higher gross profit dollars combined with effective resource alignment and a sharp focus on costs should support operating leverage in fiscal 2019, while we continue to invest for future growth. Operator, I would now like to open the call for questions..

Thank you. [Operator Instructions] Our first question comes from Maggie Nolan with William Blair. Your line is now open..

I wanted to ask a few questions around margins.

Can you give a little more detail on why you saw better product mix that drove the gross margin up, what the dynamics were behind that?.

Sure. Hey, Maggie, it’s Mark. How are you? A couple of different things. We are starting to see our services mix trend up, so the blended margins on our services are higher than product margins. Also as we have talked on prior calls, we are building up our annuity services capabilities.

So, we are starting to see where that’s starting to make a difference in our margins. We are pretty excited about where we are both from a product and services as well as consolidated gross margins overall..

And can you give us an idea of that mix of services in your business or perhaps if you can’t get that much detail just how that’s changed over the last couple of years?.

Okay. Well, we don’t break it out, Maggie, but a couple of different things to kind of keep in mind. Elaine had talked about the customer-facing headcount that we added was approximately 75 heads of the 89 heads or so that we – the employees that we added this year. The majority of those were in the services space.

We have seen with the OneCloud acquisition and the IDS acquisition. We have been able to build out our cloud capabilities and a lot of that is services related. We have also built up our managed services and enhanced maintenance services portfolio of solutions that our customers are looking for.

So, it’s a combination of consultative services, upfront consultative services and then the ongoing annuity service which are driving up those gross margins. One other thing to note, Elaine had mentioned that our consolidated gross margins were up 170 basis points. Sequentially, they are up 230 basis points.

So, we feel like we are moving in the right direction as it relates to the services that we are offering to our customers. One other thing to keep in mind that I think is affecting some of those two, Maggie, is our security.

There is a lot going on in the security space and a lot of our customers are looking for help from us from resellers like ourselves and that’s trending up very nicely where it was almost up 50% for the quarter and it was up 280 basis points for the year..

So with all those dynamics at play, do you think that where you exited this year in the fourth quarter do you think that’s maybe representing a more normalized gross margin range for you going forward?.

That’s a tough on, Maggie. I do believe that well, if you look at our margins as compared to our peers, I think we are on the very high end of gross margins. I do believe that we will continue to see expansion there, but there are some things at play as it relates to annuity.

There is also some things that we had mentioned on prior calls where we have a land-and-expand strategy where we have some big enterprise customers that we are actually winning large deals at small margins if you will like it affected over time..

Okay, understood. And then just one quick one if I can squeeze it in.

You mentioned further optimizing the cost structure, what additional steps do you need to take to continue doing that?.

Well, there is a couple of different things. So one is we still believe that we have the ability to grab market share and mind share with our customers.

So, some of the acquisitions that we have made that I noted earlier, the OneCloud and IDS, really I won’t say put us on the map, but really expanded our capabilities in our cloud capabilities that we can bring back to our customers. So, we are going to continue to invest in key areas of growth if you will.

The one thing that we are very cognizant of we watch the SG&A very tightly. So, we are going to rationalize it. We are going to optimize the cost. And the one thing I can note is that our headcount is actually down 24 employees sequentially.

So we are watching that and we do believe over time we will start to see some economies of scale, as it relates to our operating leverage..

Great. Well, thank you very much..

Thanks, Maggie. We will see you soon..

Thank you. And our next question comes from Matthew Galinko of Sidoti. Your line is now open..

Hey, good afternoon..

Hi, Matt..

So, Mark you touched on I think the sale of some backup and disaster recovery services in the customer you highlighted this quarter.

I am wondering if that was a quicker turnaround from acquisition to being able to sell products and it deals than you typically see and India I guess just generally how is the pipeline for those services and I guess tag on to the end of that question is do you see kind of an acceleration in being able to ramp up acquired kind of subscale acquisitions?.

Yes. So, hey, Matt, a couple of different things, one I don’t know if we can say that, it was a quicker sale if you will. I think the customer had a need in that space that we were able to provide.

What’s nice about that is that as this service that we picked up from our IDS acquisition that we were able to I will say take to the rest of our customers and we have one that was very interested in terms of we have got over roughly 3,300 customers that we can actually go back with this service. So, that’s what’s exciting to us.

It’s still a little early in the cycle for us to know how much it will add to our incremental revenue growth, but we are excited that, that was a deal over a 60-month period at nice margins.

So it will be an ongoing annuity stream that we can now go back to that customer and sell all the other types of services that we sell in that space as well and we would hope that we can take that service to more of our customers over time..

Got it, okay. So, it was sorry to say, right place, right time or it seems like it’s something that customers would be on the process of adoption or adopting in some ways.

So did you get a sense or have you gotten a sense yet whether the 3,300 customers are actively evaluating and just how are conversations going with those sorts of annuity type services particularly the acquirable?.

Yes. So, this was one where the account executive had a real good relationship with the account and knew what they were looking for and was able to match it to the technology that we acquired from IDS.

I can tell you that, yes, I won’t say most, a good percentage of customers will look for solutions in this space, either they have them or they will look for them over time..

Got it. Okay.

Alright, last question just around that deal is that sort of the – should we be thinking of 60 months as the right kind of contract term for that sort of deal or is that not necessarily mature enough data to determine?.

Yes. On this I would say that’s probably a little extended compared to most, I would say most of our annuity deals were in the 36 months or 3-year range, Matt. So, I would think that’s the norm and then the 60 months would be the outliers over time..

Got it.

Alright, maybe just one more around M&A, I know you touched on it a little bit, but how is the pipeline so to speak of potential deals there? Are you still kind of chomping it a bit for more consolidation or are you kind of in execution mode on what you already have?.

We are always looking, Matt. So, part of our corporate objectives if you will is to continue to expand our footprint. So, there is no shortage of opportunities out there of potential companies for us to acquire.

We do try pretty hard once we bring the company on board to integrate them into ePlus on day 1 and then ensure that they get on track and understand everything about ePlus and all the offerings so that they can hopefully one and one will equal three if you will. I give you an example of how we go about it.

So, if you look at the IGX acquisition that we did about 2 years ago, Matt, that was a security reseller that built out our Northern New England presence, but just as importantly, gave us a footprint in the UK.

Now, what we have done since then is we have hired sales and service management, we have added sales reps, we noted that we got the Cisco Gold certification.

So, we now have the ability to provide that technology to their customer base as well as potential net new customer base not only in the UK, but in Europe and then what’s nice about that is our multinational customers that are used to us supporting let’s just say Cisco and this example, we have the ability to do it across the Atlantic.

So, we will look for acquisitions that give us that territory coverage and a technical expertise and then the example I just gave you is hey, it kind of helps in a lot of different ways, we build up our revenues in the UK, we can expand to Continental Europe and we can support our multinational customers over time..

Got it. Alright, thank you..

Alright. Thanks, Matt. We will see you soon..

Thank you. [Operator Instructions] Our next question comes from Matt Sheerin with Stifel. Your line is now open..

Yes, thank you and hello everyone. Matt, question on that big customer that rolled off last quarter, so it looks like you are going to have tough comps at least for the next couple of quarters, right.

And along with that, I know you have talked about, Mark, in the past about big volume deals like that putting some pressure on margins and the fact that, that’s largely behind you.

Did that have some positive, I know the security and the services sales bumped up gross margin, but didn’t this impact of the lower volumes from that big customer also helped margin and wouldn’t that be the case for the next couple of quarters or so unless you have another big volume deal?.

Yes. So, Matt, a couple of different things. One, yes, this will affect us for the next couple of quarters a little bit on the project run-off. The other thing is as you noted it was a tough compare, so our net sales were up 11% last year and the GP was up 14%.

So the thing to note though is our GP was up 6.9%, almost 7% on a 14% growth the previous year.

Do I think it helped the margins? Yes, without a doubt, the hard thing to tell you about the margins going forward though is we have got many deals in the pipeline similar to this that are out there that in any time could pop in a given quarter or year that could affect those margins.

What we have been doing, which I think we have kind of stressed on other calls is really building up our consultative and annuity services, building up our solutions in cloud, security and you have seen we have noted the growth, so I won’t say it again on security and building up our digital capabilities.

So, those are what I’d call value-add solutions that our customers are looking for and the services that we are looking for you would hope that would trend up, but I can’t predict the future on another big deal that’s competitive at low margins that we may want to get into..

Okay.

You talked about the security representing 18%, but was that security and related services as well and because I am trying to get at what percentage of your services are tied to security and what else is there?.

Yes, here is what I would tell you, Matt. There is a few things and I won’t highlight others problems, but there has been some pretty significant data breaches. If you think about WannaCry supposedly the loss on that was anywhere from $1.5 billion to $4 billion.

So, it’s based on the solutions and the security both product and services expertise that we built up we have been able to go back into our customer base and kind of help them build their security roadmap. So that’s why I think you are seeing almost a 50% growth in Q4.

You are seeing that we grew almost 24% for the year and a 280 basis point year-over-year is a nice jump in any one of our areas, but that’s a nice jump in the security space..

Okay, great. And then just in terms of it sounds like you talked about having a pretty good pipeline both on the services side and on the transaction side, are you getting any feedback from customers that they have stepped up spending, how they feel about their business whether or not that U.S.

tax reform is prompting them to put more CapEx in place and those types of things?.

What I can tell you we are cautiously optimistic on what we are seeing both from a pipeline as well as what we are hearing from the customers and some of the customers that I am visiting with in terms of what they are looking for. I do believe the tax benefits maybe helping there and the economy overall Matt.

I have rarely heard any customer say hey, based on the tax benefit, here is what we are doing. I can tell you for ePlus as we take benefit of these tax benefits, we are looking to build up our infrastructure spending. So we can scale or as we scale it will be a bigger company and I would assume other companies are thinking the same thing..

Okay.

And then you highlighted security, but you didn’t highlight some of the other product areas and could you talk about some of the strength and maybe weakness you are seeing in some areas specifically storage and the transition to all-flash arrays that networking converged those types of technologies?.

Yes. So, a couple of different things. As it relates to storage, we are still seeing nice growth in storage. A lot of it’s driven by the flash space. We are getting a lot of interest in the hyper-converged with good players like Nutanix and some of the major OEMs that have solutions in that space.

There is a large opportunity as it relates in the networking space with Cisco with what they call Cat9k, so the 9000 series. So there is a huge base of I’d call Cat3, 4 and 6 series that can be upgraded or refreshed up to this Cat9k series. So, there is a nice opportunity there.

And with that technology, there is some add-on sales and advanced technologies as well as some upside expansion. So, there is an opportunity there. Those would be the bigger things, Matt.

On the digital space, I think you are going to start seeing a lot more in the digital space over time as customers move more towards some of the analytics plays, the IoT, IoE plays, if you will and what that means both from a security as well as from a data analytics or artificial intelligence play.

Did we lose you, Matt?.

Yes, sorry.

And just last question regarding the leasing business in the change of revenue recognition, which is only I think you said $4.5 million last year, does also have an impact on gross margin where you would actually lowered the gross margin somewhat?.

No, it wouldn’t have an impact. I mean, it’s pretty small number..

Okay, so no impact, okay. Okay, thanks very much..

Alright. Take care, Matt..

Thank you. And I am not showing any further questions at this time. I would now like to turn the call back over to Mark Marron for any further remarks..

Okay. Thanks, Daniel. Hey, if I could just close one, I want to thank everybody for joining us on the call today. We still feel very good about our long-term strategy and what we are building and it shows in our gross profit as well as our gross margins and we are focused on the areas that our customers need.

With that, I would like to wish everybody an enjoyable holiday season with your family and friends and we will see you on the next call. Take care..

Thank you..

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude today’s program and you may all disconnect. Everyone, have a wonderful day..