Mark Marron: Yes. Backlog was actually up, Matt.
Matt Sheerin: Your backlog is up. Okay.
Mark Marron: Yeah.
Matt Sheerin: What are some of the — what are the product constrained areas that you’re still seeing? Because we’re hearing from some distributors and suppliers that networking demand — I mean, orders and supply seems to be improving, but you’re not seeing that across the board?
Mark Marron: Yes. We’re not seeing it across the board. The networking has got the longest lead times and it’s improving some, but that’s probably the biggest piece from a, I’ll say, supply chain and lead time standpoint, Matt.
Matt Sheerin: Okay. Okay. Thank you.
Mark Marron: All right, Matt. Talk to you soon.
Operator: Your next question will come from the line of Greg Burns with Sidoti & Company. Please go ahead.
Greg Burns: Good afternoon. So just to start off with some of the strength you saw in the quarter. So, I guess, the upside, I guess, relative to consensus, or maybe your internal expectations was mainly driven by demand. It was more weighted towards just market demand as opposed to dipping into your open orders?
Mark Marron: Well, no, Greg, I’d actually say it’s a combination of the two. So when I looked at the quarter, once again, if you — I’ll just go by customer size segments in the mid to enterprise. We actually grew very nicely. And that’s by design with some of our account planning and some of the things that we’re trying to do there. I think I mentioned it on to Matt or Maggie as well as our tech segment had a very strong quarter, where the net sales for tech were actually up 28.3% overall. So I think it was by design on some of that, but there was also some supply chain easing with the open orders going down 5%. And in terms of the inventory going down $30 million, so there was a real focus internally to try to get the product out as soon as we got it in, get it out the door. So it’s a little bit of supply chain easing plus a nice quarter by the team.
Greg Burns: Okay. Is it like 1:1, the $30 million decline of inventory that turns into revenue, or how should we think about the magnitude of what’s left on the balance sheet in terms of open orders — in terms of revenue potential?
Mark Marron: Yeah, yeah. On the inventory, it would be at 1:1 on the inventory. But on the overall sales, that’s a small percentage, as you can imagine, Greg, with our numbers. So yeah, it’s a 1:1 on the inventory, for sure.
Greg Burns: Okay. And then the OpEx level this quarter, is that a good way to model going forward, or is there any other puts and takes why it might increase or decrease from here?
Mark Marron: Yeah. I think there’s a couple of things there. I think the overall level is good on the OpEx. I think there will obviously be some movement based on a smaller quarter in terms of revenue in GP based on Q3 being our largest quarter-to-date so far. So that will be the variable from an OpEx. It will be in that range overall less that difference, if you will, Greg. But realize we are watching it pretty closely. So we’re watching the market. And with all the economic uncertainties, if you think about all the different tech layoffs, we’re watching very closely, and we’re going to adjust accordingly. Actually, I look at the tech layoffs it’s potentially an opportunity for us. It sounds a little bit crazy with everything going on.
But I think with the solutions and skill sets we have, we might be able to pick up some of those opportunities. But when you look at Gartner projecting 2.4% IT spend and stuff like that. We’re watching it and managing it very closely in terms of the OpEx. It actually, overall, our OpEx as a percentage of GP and AGB actually went in the right direction this quarter for sure, Greg.
Greg Burns: Okay. And then to your point about the tech layoffs, we are seeing some more cautious commentary in the industry. Are you seeing anything in terms of maybe customer decision cycles, sales cycles extending, or anything that you see that would maybe give you some more caution going forward?
Mark Marron: Yes, there’s definitely some caution in ePlus, Greg. I mean as you know, there’s always challenges and opportunities in this kind of market. But I do see some budget tightening. Some are the sales cycles getting a little bit longer, especially with some of the bigger customers. So there’s definitely some of that going on as the economic uncertainties, kind of, stay out there. So yes, the sales cycles are longer for sure.
Greg Burns: Okay. And then lastly, you launched a new service, storage as a service. Pure Storage. Can you just talk about how that works? Are you just reselling it? Are you actually providing service? And when you launch something like that, is it market driven? Like have you been — is it something that your customers have been asking you to do, or is it just something net new that you see as an opportunity?
