PLUS ePlus inc

--Double-digit Gross Profit Growth and Year-on-Year Gross Margin Expansion-- 

Quarterly Highlights:

• Net sales increased 7.0% to $381.4 million; technology segment net sales increased 6.2% to $368.5 million; service revenues increased 35.8% to $45.8 million; financing segment net sales increased 32.8% to $12.8 million.
• Adjusted gross billings increased 13.7% to $548.4 million.
• Consolidated gross profit increased 14.8% to $92.6 million.
• Consolidated gross margin was 24.3%, an increase of 170 basis points.
• Net earnings increased 6.0% to $16.2 million.
• Adjusted EBITDA increased 12.6% to $28.6 million.
• Diluted earnings per share increased 7.1% to $1.20. Non-GAAP diluted earnings per share increased 12.5% to $1.44.

ePlus inc. (NASDAQ:PLUS), a leading provider of technology solutions, today announced financial results for the three months ended June 30, 2019.

Management Comment

“Our first quarter results demonstrated ePlus’ strong positioning in several key areas and represented effective execution on our initiatives to drive gross profit growth. Enterprise and middle market customers continued to seek out our core security, cloud and digital infrastructure products and solutions. Double-digit growth in adjusted gross billings in the first quarter included a 54.9% increase in security products and solutions, which accounted for 21% of our trailing twelve month adjusted gross billings, up from 18.4% in the similar period last year,” said Mark Marron, president and chief executive officer.

“Growth in gross profit of 14.8% outpaced net sales growth by a factor of more than two, reflecting a favorable mix of products and services. Services revenue increased 35.8% year-on-year, as customers continue to take advantage of our broad capabilities in all aspects of IT, including professional, managed and staffing services. We continue to work toward managing operating costs, and we were pleased to see that operating income was up 11.2% and adjusted EBITDA and non-GAAP EPS increased 12.6% and 12.5%, respectively, in the first quarter, significantly ahead of revenue growth.”

First Quarter Fiscal 2020 Results

For the first quarter ended June 30, 2019 as compared to the first quarter of the prior fiscal year:

Consolidated net sales increased 7.0% to $381.4 million, from $356.5 million.

Technology segment net sales increased 6.2% to $368.5 million, from $346.9 million. Service revenues increased 35.8% to $45.8 million, from $33.7 million.

Adjusted gross billings increased 13.7% to $548.4 million due, in part, to the acquisition of SLAIT Consulting, LLC in January 2019 as well as organic growth.

Financing segment net sales increased 32.8% to $12.8 million, from $9.7 million, primarily due to an increase in transactional gains.

Consolidated gross profit increased 14.8% to $92.6 million, from $80.7 million. Consolidated gross margin improved 170 basis points to 24.3%, compared with 22.6% last year, due to a shift in mix towards third-party maintenance, software assurance, subscription/SaaS licenses, and services as well as an increase in product margins. Also contributing were higher service revenues.

Operating expenses increased 16.0% to $69.9 million, from $60.2 million, primarily due to an increase in variable compensation, software license and maintenance expense and additional costs associated with the acquisition and operation of SLAIT Consulting, LLC.

Consolidated operating income increased 11.2% to $22.8 million.

Our effective tax rate for the current quarter was 28.7%, compared with 25.7% in the prior year quarter. The increase in the rate was primarily due to a benefit from restricted stock that vested in the prior year’s quarter.

Net earnings increased 6.0% to $16.2 million.

Adjusted EBITDA increased 12.6% to $28.6 million, from $25.4 million.

Diluted earnings per share was $1.20, compared with $1.12 in the prior year quarter. Non-GAAP diluted earnings per share was $1.44, compared with $1.28 last year.

Balance Sheet Highlights

As of June 30, 2019, ePlus had cash and cash equivalents of $35.6 million, compared with $79.8 million as of March 31, 2019. The decrease in cash and cash equivalents was primarily due to increases in working capital in the technology segment, investments in our financing portfolio, and share repurchases totaling $13.5 million. Total stockholders' equity was $428.6 million, compared with $424.3 million as of March 31, 2019. Total shares outstanding were 13.5 million and 13.6 million on June 30, 2019 and March 31, 2019, respectively.

Summary and Outlook

Client demand continues to be strong for our customized solutions and service offerings. We are a partner of choice to architect and implement cloud services, design solutions to help protect digital infrastructure from cyberthreats and enable digital transformation. Our roster of over 3,400 enterprise and middle market customers provides substantial opportunities to cross sell our increasingly broad suite of products and services.

“Further, we continue to evaluate acquisition opportunities that will improve our geographic positioning and enhance our product and service offerings while bringing on talented sales and engineering professionals,” Mr. Marron concluded.

Recent Corporate Developments/Recognitions

• In July, ePlus announced the addition of Ben Xiang to a newly created seat on its board of directors. Mr. Xiang is a global executive for the Internet of Things, Artificial Intelligence, and Mixed-Reality at Ingram Micro, the world’s largest IT distributor, and brings a wealth of experience in digital, IoT, analytics and other emerging technologies, as well as a strong global background.
• In the month of June:
  • ePlus announced the launch of Vulnerability Management as a Service, providing identification, prioritization, and remediation of organizational cyber security weakness.
  • ePlus announced that ePlus Technology, inc. was named NetApp Cloud First Partner of the Year.
  • ePlus announced the launch of its Service Desk offering, further extending its Managed Services capabilities.
  • ePlus hosted the ePlus Technology Cyber Security Summit, where security professionals connected with their peers, exchanged ideas, and shared subject matter expertise.
  • ePlus announced that CRN ® has named ePlus Technology, inc. to its 2019 Solution Provider 500 list.

Conference Call Information

ePlus will hold a conference call and webcast at 4:30 p.m. ET on August 7, 2019:

Date:

Wednesday, August 7, 2019

Time:

4:30 p.m. ET

Live Call:

(877) 870-9226, domestic, (973) 890-8320, international

Replay:

(855) 859-2056, domestic, (404) 537-3406, international

Passcode:

2975458 (live and replay)

Webcast:

http://www.eplus.com/investors (live and replay)

The replay of this webcast will be available approximately two hours after the call and be available through August 14, 2019.

About ePlus inc.

ePlus is a leading consultative technology solutions provider that helps customers imagine, implement, and achieve more from their technology. With the highest certifications from top technology partners and expertise across key areas including security, cloud, data center, collaboration, networking and emerging technologies, ePlus transforms IT from a cost center to a business enabler. Founded in 1990, ePlus has more than 1,500 associates serving a diverse set of customers in the U.S., Europe, and Asia-Pac. The Company is headquartered at 13595 Dulles Technology Drive, Herndon, VA, 20171. For more information, visit www.eplus.com, call 888-482-1122, or email info@eplus.com. Connect with ePlus on Facebook at www.facebook.com/ePlusinc and on Twitter at www.twitter.com/ePlus.

ePlus. Where Technology Means More®.

ePlus® and ePlus products referenced herein are either registered trademarks or trademarks of ePlus inc. in the United States and/or other countries. OneCloud is a trademark of OneCloud Consulting, Inc. in the United States and/or other countries. The names of other companies and products mentioned herein may be the trademarks of their respective owners.

Forward-looking statements

Statements in this press release that are not historical facts may be deemed to be “forward-looking statements.” Actual and anticipated future results may vary materially due to certain risks and uncertainties, including, without limitation, national and international political instability fostering uncertainty and volatility in the global economy including exposure to fluctuation in foreign currency rates, interest rates and downward pressure on prices; reduction of vendor incentive programs; and restrictions on our access to capital necessary to fund our operations; our ability to successfully perform due diligence and integrate acquired businesses; disruptions or a security breach in our or our vendor’s IT systems and data and audio communication networks; the possibility of goodwill impairment charges in the future; significant adverse changes in, reductions in, or losses of relationships with one or more of our largest volume customers or vendors; the demand for and acceptance of, our products and services; our ability to adapt our services to meet changes in market developments; our ability to implement comprehensive plans for the integration of sales forces, cost containment, asset rationalization, systems integration and other key strategies; our ability to reserve adequately for credit losses; our ability to secure our own and our customers’ electronic and other confidential information and remain secure during a cyber-security attack; future growth rates in our core businesses; the impact of competition in our markets; our reliance on third parties to perform some of our service obligations to our customers; the possibility of defects in our products or catalog content data; our ability to adapt to 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; our ability to realize our investment in leased equipment; maintaining and increasing advanced professional services by recruiting and retaining highly skilled, competent personnel and vendor certifications; and other risks or uncertainties detailed in our reports filed with the Securities and Exchange Commission. All information set forth in this press release is current as of the date of this release and ePlus undertakes no duty or obligation to update this information.

ePlus inc. AND SUBSIDIARIES

 

UNAUDITED CONSOLIDATED BALANCE SHEETS

 

 

 

 

(in thousands, except per share amounts)

 

 

 

 

 

 

 

 

June 30, 2019

 

March 31, 2019

ASSETS

 

 

 

 

 

 

 

 

 

Current assets:

 

 

Cash and cash equivalents

 

$35,604

$79,816

Accounts receivable—trade, net

 

366,163

299,899

Accounts receivable—other, net

 

41,949

41,328

Inventories

 

58,205

50,493

Financing receivables—net, current

 

98,419

63,767

Deferred costs

 

17,665

17,301

Other current assets

 

8,227

7,499

Total current assets

 

626,232

560,103

 

 

 

 

Financing receivables and operating leases—net

 

71,097

59,032

Property, equipment and other assets

 

30,211

 

17,328

Goodwill

 

110,754

 

110,807

Other intangible assets—net

 

36,519

38,928

TOTAL ASSETS

 

$874,813

$786,198

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

Current liabilities:

 

 

 

Accounts payable

 

$108,954

 

$86,801

Accounts payable—floor plan

 

136,013

116,083

Salaries and commissions payable

 

20,298

21,286

Deferred revenue

 

48,613

47,251

Recourse notes payable—current

 

-

28

Non-recourse notes payable—current

 

64,583

38,117

Other current liabilities

 

28,959

19,285

Total current liabilities

 

407,420

328,851

 

 

 

 

Non-recourse notes payable—long term

 

8,362

10,502

Deferred tax liability—net

 

4,925

4,915

Other liabilities

 

25,463

17,677

TOTAL LIABILITIES

 

446,170

361,945

 

 

 

 

COMMITMENTS AND CONTINGENCIES

 

 

 

 

 

 

 

 

STOCKHOLDERS' EQUITY

 

 

 

Preferred stock, $.01 per share par value; 2,000 shares authorized; none outstanding

 

-

 

-

Common stock, $.01 per share par value; 25,000 shares authorized; 13,509 outstanding at June 30, 2019 and 13,611 outstanding at March 31, 2019

 

144

143

Additional paid-in capital

 

139,162

137,243

Treasury stock, at cost, 880 shares at June 30, 2019 and 693 shares at March 31, 2019

 

(67,454)

(53,999)

Retained earnings

 

357,325

341,137

Accumulated other comprehensive income—foreign currency translation adjustment

 

(534)

(271)

Total Stockholders' Equity

 

428,643

424,253

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

 

$874,813

$786,198

ePlus inc. AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts)  

Three Months Ended June 30,

2019

2018

 

 

 

 

 

 

 

 

Net sales

 

 

Product

$335,601

 

$322,817

Services

45,771

 

33,715

Total

381,372

 

356,532

 

 

 

 

Cost of sales

 

 

 

Product

260,063

 

255,812

Services

28,670

 

20,017

Total

288,733

 

275,829

 

 

 

 

Gross profit

92,639

 

80,703

 

 

 

Selling, general, and administrative

65,787

 

56,966

Depreciation and amortization

3,463

 

2,790

Interest and financing costs

628

 

476

Operating expenses

69,878

 

60,232

 

 

 

Operating income

22,761

 

20,471

 

 

 

Other income (expense)

(45)

 

97

 

 

 

Earnings before taxes

22,716

 

20,568

 

 

 

Provision for income taxes

6,528

 

5,295

 

 

 

Net earnings

$16,188

 

$15,273

 

 

 

Net earnings per common share—basic

$1.21

 

$1.14

Net earnings per common share—diluted

$1.20

 

$1.12

 

 

 

Weighted average common shares outstanding—basic

13,356

 

13,434

Weighted average common shares outstanding—diluted

13,457

 

13,597

Technology Segment

Three Months Ended June 30,

2019

2018

% Change

(in thousands)

Net sales

 

 

 

 

 

Product

$322,764

 

$313,149

 

3.1%

Services

45,771

 

33,715

 

35.8%

Total

368,535

346,864

6.2%

 

 

 

 

 

Cost of sales

 

 

 

 

 

Product

258,054

 

254,064

 

1.6%

Services

28,670

 

20,017

 

43.2%

Total

286,724

274,081

4.6%

 

 

 

 

 

Gross profit

81,811

72,783

12.4%

  Selling, general, and administrative

62,667

54,454

15.1%

Depreciation and amortization

3,407

2,789

22.2%

Operating expenses

66,074

57,243

15.4%

  Operating income

$15,737

$15,540

1.3%

Adjusted gross billings

$548,363

$482,301

13.7%

Adjusted EBITDA

$21,419

$20,341

5.3%

Technology Segment Net Sales by Customer End Market

 

 

 

 

Twelve Months Ended June 30,

 

 

2019

 

2018

 

Change

 

 

 

 

 

 

Technology

21%

 

24%

 

(3%)

SLED

17%

 

17%

 

-

Financial Services

15%

 

15%

 

-

Healthcare

15%

 

14%

 

1%

​Telecom, Media, & Entertainment

14%

 

14%

 

-

​All others

18%

 

16%

 

2%

Total

100%

 

100%

 

 

Financing Segment

Three Months Ended June 30,

 

2019

2018

% Change

 

(in thousands)

 

 

Net product sales

$12,837

$9,668

32.8%

 

Cost of product sales

2,009

1,748

14.9%

 

Gross profit

10,828

7,920

36.7%

 

 

Selling, general, and administrative

3,120

2,512

24.2%

 

Depreciation and amortization

56

1

5,500.0%

 

Interest and financing costs

628

476

31.9%

 

Operating expenses

3,804

2,989

27.3%

 

 

Operating income

$7,024

$4,931

42.4%

 

Adjusted EBITDA

$7,148

$5,029

42.1%

 

ePlus inc. AND SUBSIDIARIES RECONCILIATION OF NON-GAAP INFORMATION

We included reconciliations below for the following non-GAAP information: (i) Adjusted Gross Billings, (ii) Adjusted EBITDA, (iii) Segment Adjusted EBITDA, (iv) non-GAAP Net Earnings and (v) non-GAAP Net Earnings per Common Share - Diluted.

We define adjusted gross billings as our technology segment net sales calculated in accordance with GAAP, adjusted to exclude the costs incurred related to sales of third-party maintenance, software assurance and subscription/SaaS licenses, and services.

We define adjusted EBITDA as net earnings calculated in accordance with GAAP, adjusted for the following: interest expense, depreciation and amortization, share based compensation, acquisition and integration expense, provision for income taxes, and other income (expense). Segment adjusted EBITDA is defined as operating income calculated in accordance with GAAP, adjusted for interest expense, share based compensation, acquisition and integration expenses, and depreciation and amortization. We consider the interest on notes payable from our financing segment and depreciation expense presented within cost of sales, which includes depreciation on assets financed as operating leases, to be operating expenses.

Non-GAAP net earnings and non-GAAP net earnings per common share – diluted are based on net earnings calculated in accordance with GAAP, adjusted to exclude other income (expense), share based compensation, and acquisition related amortization expense, and the related tax effects.

Our use of non-GAAP information as analytical tools has limitations, and you should not consider them in isolation or as substitutes for analysis of our financial results as reported under GAAP. In addition, other companies, including companies in our industry, might calculate non-GAAP adjusted gross billings, adjusted EBITDA, non-GAAP net earnings and non-GAAP net earnings per common share or similarly titled measures differently, which may reduce their usefulness as comparative measures.

 

Three Months Ended June 30,

 

2019

 

2018

 

(in thousands)

 

 

 

 

Technology segment net sales

$368,535

 

$346,864

Costs incurred related to sales of third party maintenance, software assurance and subscription/Saas licenses, and services

179,828

135,437

Adjusted gross billings

$548,363

 

$482,301

   

 

Three Months Ended June 30,

 

2019

 

2018

 

(in thousands)

Consolidated

 

 

 

 

 

 

 

Net earnings

$16,188

 

$15,273

Provision for income taxes

6,528

 

5,295

Depreciation and amortization [1]

3,463

 

2,790

Share based compensation

1,942

 

1,693

Acquisition and integration expense

401

 

416

Other (income) expense [2]

45

 

(97)

Adjusted EBITDA

$28,567

 

$25,370

 

 

 

 

 

 

 

Three Months Ended June 30,

 

2019

 

2018

 

(in thousands)

Technology Segment

 

 

 

Operating income

$15,737

 

$15,540

Depreciation and amortization [1]

3,407

 

2,789

Share based compensation

1,874

 

1,596

Acquisition and integration expense

401

 

416

Adjusted EBITDA

$21,419

 

$20,341

 

 

 

 

Financing Segment

 

 

 

Operating income

$7,024

 

$4,931

Depreciation and amortization [1]

56

 

1

Share based compensation

68

 

97

Adjusted EBITDA

$7,148

 

$5,029

 

 

 

 

  

Three Months Ended June 30,

 

2019

 

2018

 

(in thousands)

GAAP: Earnings before taxes

$22,716

 

$20,568

Share based compensation

1,942

 

1,693

Acquisition and integration expense

401

 

416

Acquisition related amortization expense [3]

2,187

 

1,764

Other (income) expense [2]

45

 

(97)

Non-GAAP: Earnings before taxes

27,291

 

24,344

 

 

 

 

GAAP: Provision for income taxes

6,528

 

5,295

Share based compensation

559

 

483

Acquisition and integration expense

115

 

119

Acquisition related amortization expense [3]

607

 

474

Other (income) expense [2]

13

 

(28)

Tax benefit on restricted stock

10

 

569

Non-GAAP: Provision for income taxes

7,832

 

6,912

 

 

 

 

Non-GAAP: Net earnings

$19,459

 

$17,432

 

 

 

 

 

 

 

 

 

Three Months Ended June 30,

 

2019

 

2018

 

 

 

 

GAAP: Net earnings per common share – diluted

$1.20

 

$1.12

 

 

 

 

Share based compensation

0.10

 

0.09

Acquisition and integration expense

0.02

 

0.02

Acquisition related amortization expense [3]

0.12

 

0.10

Other (income) expense [2]

-

 

(0.01)

Tax benefit on restricted stock

-

 

(0.04)

Total non-GAAP adjustments – net of tax

$0.24

 

$0.16

 

 

 

 

Non-GAAP: Net earnings per common share – diluted

$1.44

 

$1.28

[1] Amount excludes depreciation related to the financing segment.

[2] Interest income and foreign currency transaction gains and losses.

[3] Amount consists of amortization of intangible assets from acquired businesses.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20190807005756/en/

Kleyton Parkhurst, SVP ePlus inc. kparkhurst@eplus.com 703-984-8150