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ePlus Reports Second Quarter and First Half Financial Results


ePlus Reports Second Quarter and First Half Financial Results

Second Quarter Fiscal Year 2018

  • Consolidated net sales declined 0.2% to $370.8 million.
  • Technology segment net sales declined 1.1% to $358.8 million; financing segment net sales increased 37.7% to $12.0 million.
  • Technology segment adjusted gross billings of product and services increased 3.3% to $503.6 million.
  • Consolidated gross profit increased 6.9% to $87.6 million; consolidated gross margin expanded 150 basis points to 23.6%.
  • Net earnings increased 2.7% to $17.2 million.
  • Adjusted EBITDA increased 3.4% to $31.0 million.
  • Diluted earnings per share increased 1.7% to $1.23. Non-GAAP diluted earnings per share increased 3.3% to $1.27.

First Half Fiscal Year 2018

  • Consolidated net sales increased 10.2% to $738.0 million
  • Technology segment net sales increased 9.6% to $716.9 million; financing segment net sales increased 33.8% to $21.1 million.
  • Technology segment adjusted gross billings of product and services increased 11.4% to $985.3 million.
  • Consolidated gross profit increased 10.4% to $165.2 million; consolidated gross margin expanded 10 basis points to 22.4%.
  • Net earnings increased 11.7% to $30.6 million.
  • Adjusted EBITDA increased 8.8% to $53.5 million.
  • Diluted earnings per share increased 12.3% to $2.19. Non-GAAP diluted earnings per share increased 8.5% to $2.17.

HERNDON, VA – November 2, 2017 – ePlus inc. (NASDAQ: PLUS - news), a leading provider of technology solutions, today announced financial results for the three and six months ended September 30, 2017.

Management Comment

“We continued to execute on our long term strategic plans and performed well on key metrics.  Our net sales were flat based on a higher proportion of sales of third party software assurance, maintenance and services which are presented on a net basis and a challenging comparison to last year’s second quarter results.  We recorded a 3.3% increase in adjusted gross billings and achieved a 6.9% increase in gross profit.  These increases, as well as a 150 basis point expansion in consolidated gross margin, were due in part to an increase in our services revenues and post contract earnings from early terminations of financing agreements.  These results led to net earnings growth of 2.7%, even as we continue to invest in future growth, by increasing our customer facing headcount, absorbing acquisition-related costs necessary to expand our geographic reach and footprint, and expanding our solution set,” said Mark Marron, president and chief executive officer.

“Our net sales growth of 10.2% in the first half of fiscal 2018 follows a similar double-digit sales growth rate in the comparable year ago period, and gross profit increased 10.4% while net earnings increased 11.7%.  These metrics demonstrate solid execution of our strategic growth plan to expand and enhance our solutions in cloud, digital infrastructure, and security.  Underscoring this, adjusted gross billings of security product and services increased 30% year-on-year and accounted for 17.3% of adjusted gross billings.  We are continuing to deliver the transformative IT solutions that our enterprise and mid-market customers need to achieve their desired business outcomes.”

Prior Period Reclassifications due to Stock Split

Reclassifications of prior period amounts related 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.

Second Quarter Fiscal 2018 Results

For the second quarter ended September 30, 2017 as compared to the second quarter of the prior fiscal year ended September 30, 2016:

Consolidated net sales decreased 0.2% to $370.8 million, from $371.5 million.

Technology segment net sales decreased 1.1% to $358.8 million, from $362.7 million.

Adjusted gross billings of product and services increased 3.3% to $503.6 million. Adjusted gross billings are sales of product and services adjusted to exclude the costs incurred of applicable third-party software assurance, maintenance, and services.

Financing segment net sales increased 37.7% to $12.0 million, from $8.7 million.

Consolidated gross profit rose 6.9% to $87.6 million, from $81.9 million.

Consolidated operating income rose 2.2% to $28.8 million, from $28.2 million.

Net earnings rose 2.7% to $17.2 million.

Adjusted EBITDA rose 3.4% to $31.0 million, from $29.9 million.

Diluted earnings per share was $1.23, compared with $1.21 in the prior year quarter. Non-GAAP diluted earnings per share was $1.27, compared with $1.23 last year. Non-GAAP diluted earnings per share is based on net earnings calculated in accordance with GAAP, adjusted to exclude other income and acquisition related amortization expense, net of taxes and the tax (benefit) expense recognized due to the vesting of share based compensation.

First Half Fiscal 2018 Results

For the six months ended September 30, 2017 as compared to the six months of the prior fiscal year ended September 30, 2016:

Consolidated net sales rose 10.2% to $738.0 million, from $670.0 million.

Technology segment net sales rose 9.6% to $716.9 million, from $654.2 million.

Adjusted gross billings of product and services increased 11.4% to $985.3 million. Adjusted gross billings are sales of product and services adjusted to exclude the costs incurred of applicable third-party software assurance, maintenance, and services.

Financing segment net sales increased 33.8% to $21.1 million, from $15.8 million.

Consolidated gross profit rose 10.4% to $165.2 million, from $149.6 million.

Consolidated operating income rose 8.0% to $49.3 million, from $45.7 million.

Net earnings rose 11.7% to $30.6 million.

Adjusted EBITDA rose 8.8% to $53.5 million, from $49.2 million.

Diluted earnings per share was $2.19, compared with $1.95 in the prior year quarter. Non-GAAP diluted earnings per share was $2.17, compared with $2.00 last year. Non-GAAP diluted earnings per share is based on net earnings calculated in accordance with GAAP, adjusted to exclude other income and acquisition related amortization expense, net of taxes and the tax (benefit) expense recognized due to the vesting of share based compensation.

Balance Sheet Highlights

As of September 30, 2017, ePlus had cash and cash equivalents of $60.2 million, compared with $109.8 million as of March 31, 2017.  Inventory decreased 45.0% to $51.4 million and deferred revenue decreased 30.2% to $45.6 million primarily due to the partial shipment of large projects within the first half of the fiscal year.  Total stockholders' equity was $376.1 million, compared with $345.9 million as of March 31, 2017. Total shares outstanding were 14.2 million on September 30, 2017 and March 31, 2017.

Summary and Outlook

“We remain confident that our focus on the fastest growing solutions and emerging technologies in the IT market positions us to grow faster than forecast for overall IT spending levels.  ePlus’ approach to supporting customers through every phase of the IT lifecycle, from consulting to designing, architecting, implementing, and managing solutions, helps customers achieve the business outcomes they need in a digital economy.  Our recent acquisitions of IDS and OneCloud have allowed us to complement our cloud consulting capabilities and expand market reach in desired geographies.  We will continue to use our strong balance sheet and deep experience in identifying and integrating acquisitions to supplement organic growth,” Mr. Marron concluded.

Results of Operations – Three Months Ended September 30, 2017

The Company's operations are conducted through two business segments. The technology segment includes sales of information technology products, third-party software, third-party maintenance contracts, advanced professional services and managed services, and the Company's proprietary software to commercial entities and state and local governments. The financing segment consists of the financing of equipment, software, and related services to commercial entities, state and local governments, and government contractors.

Technology Segment

The results of operations for the technology segment for the three months ended September 30, 2017 and 2016 were as follows (dollars in thousands):

       
    Three Months Ended September 30,  
    2017   2016   Change
Sales of product and services   $  357,759   $  361,227   $  (3,468 )   (1.0 %)
Fee and other income     1,043       1,488      (445 )   (29.9 %)
Net sales       358,802       362,715     (3,913 )   (1.1 %)
                 
Cost of sales, product and services     281,953       288,204     (6,251 )   (2.2 %)
                 
Gross profit     76,849     74,511     2,338     3.1 %
                 
Selling, general and administrative       53,503       48,302     5,201     10.8 %
Depreciation and amortization     2,128     1,721     407     23.6 %
Operating expenses     55,631     50,023     5,608     11.2 %
                 
Operating income   $  21,218   $  24,488   $  (3,270 )   (13.4 %)
                 
Key Business Metrics                
Adjusted gross billings, product and services   $ 503,581   $ 487,308   $ 16,273     3.3 %
Adjusted EBITDA   $ 23,346   $ 26,209   $ (2,863 )   (10.9 %)
 

Net sales were $358.8 million, down 1.1% from $362.7 million in the second quarter of fiscal 2017. The decrease in net sales was primarily due to a higher proportion of sales of third party software assurance, maintenance and services in the current period, which are presented on a net basis.

Adjusted gross billings of products and services grew 3.3% to $503.6 million, from $487.3 million in the second quarter of fiscal 2017.

Gross margin on sales of product and services was 21.2%, up from 20.2% in the second quarter of fiscal 2017.  The increase in margins was due to a shift in product mix, as we sold a higher proportion of third party software assurance, maintenance and services, and increases in sales of services as well as higher margins from sales of services.

Operating expenses rose 11.2% to $55.6 million, from $50.0 million in the second quarter of fiscal 2017, mainly attributable to an increase of $2.8 million, or 7.0%, in salaries and benefits due to an increase of 186, or 17.8%, in personnel to 1,233 from 1,047, of which 50 related to the acquisition of IDS in September 2017, 57 related to the acquisition of OneCloud Consulting in May 2017 and 48 related to the acquisition of Consolidated Communication’s IT services and equipment integration business in December 2016. The position additions included 162 sales and engineering positions with the remaining additions being administrative hires. The increase in salaries and benefits was also attributable to higher healthcare cost. General administrative expenses increased $2.0 million primarily due to higher advertising and marketing expense, the incremental expenses from contingent consideration for acquisitions, and additional expenses from recent acquisitions.

Segment operating income was $21.2 million, compared with $24.5 million in the second quarter of fiscal 2017.  Adjusted EBITDA was $23.3 million for the current quarter, compared with $26.2 million in the second quarter of fiscal 2017. 

Financing Segment

The results of operations for the financing segment for the three months ended September 30, 2017 and 2016 were as follows (dollars in thousands):

                           
    Three Months Ended September 30,
             
     2017    2016   Change
Financing revenue   $ 12,035   $ 8,722   $  3,313     38.0 %
Fee and other income     8     25     (17 )   (68.0 %)
Net sales     12,043     8,747     3,296     37.7 %
                           
Direct lease costs     1,321     1,325      (4 )   (0.3 %)
                           
Gross profit     10,722     7,422     3,300     44.5 %
                           
                           
Selling, general and administrative     2,837     3,305     (468 )   (14.2 %)
Depreciation and amortization     1     2     (1 )   (50.0 %)
Interest and financing costs     274     400     (126
)
  (31.5 %)
Operating expenses     3,112     3,707       (595 )   (16.1 %)
                 
                 
Operating income   $ 7,610   $ 3,715   $  3,895     104.8 %
                 
Key Business Metrics                
Adjusted EBITDA   $ 7,611   $ 3,717   $ 3,894     104.8 %
                           

Net sales were $12.0 million, up 37.7% from $8.7 million in the second quarter of fiscal 2017, as a result of higher post-contract earnings due to early terminations of several large leases. In addition, revenues increased due to earnings on consumption based financing arrangements.  Direct lease costs decreased slightly over the previous year period.

Operating expenses decreased $0.6 million, or 16.1%, mainly due to changes in reserve for credit losses.

Segment operating income and adjusted EBITDA both increased to $7.6 million from $3.7 million in the second quarter of fiscal 2017.

Results of Operations – Six Months Ended September 30, 2017

Technology Segment

The results of operations for the technology segment for the six months ended September 30, 2017 and 2016 were as follows (dollars in thousands):

                   
    Six Months Ended September 30,
             
    2017   2016   Change
Sales of product and services   $ 714,839   $ 651,408   $ 63,431     9.7 %
Fee and other income     2,029     2,764      (735 )   (26.6 %)
Net sales     716,868     654,172     62,696     9.6 %
                           
Cost of sales, product and services     570,386     518,051     52,335     10.1 %
                           
Gross profit     146,482     136,121     10,361     7.6 %
                           
Selling, general and administrative     105,004     93,515     11,489     12.3 %
Depreciation and amortization     4,190     3,492     698     20.0 %
Operating expenses     109,194     97,007     12,187     12.6 %
                           
Operating income   $ 37,288   $ 39,114   $ (1,826 )   (4.7 %)
                 
Key Business Metrics                
Adjusted gross billings, product and services   $ 985,266   $ 884,781   $ 100,485     11.4 %
Adjusted EBITDA   $ 41,478   $ 42,606   $ (1,128 )   (2.6 %)
                           

Net sales rose 9.6% to $716.9 million, from $654.2 million in the first half of fiscal 2017.

Adjusted gross billings grew 11.4% to $985.3 million, from $884.8 million in the first half of fiscal 2017. The increase in net sales and adjusted gross billings of products and services was a result of an increase in demand for products and services from our large corporate and healthcare customers, and the acquisitions of Consolidated Communication’s IT services and equipment integration business in December 2016 and OneCloud Consulting in May 2017.

Gross margin on sales of product and services was 20.2%, compared with 20.5% in the first half of fiscal 2017.  The decrease in gross margin was due to lower margins from sales of product primarily related to a large competitively bid project, most of which was delivered in the first half of fiscal year 2018, partially offset by higher margins from sales of services.

Operating expenses rose 12.6% to $109.2 million, from $97.0 million in the first half of fiscal 2017, reflecting increased salaries and benefits due to increased variable compensation and a 17.8% increase in personnel to 1,233 from 1,047, of which 50 related to the acquisition of IDS in September 2017, 57 related to the acquisition of OneCloud Consulting in May 2017 and 48 relate to the acquisition of Consolidated Communication’s IT services and equipment integration business in December 2016. The position additions included 162 sales and engineering positions with the remaining additions being administrative hires. Also contributing to the increase in salaries and benefits was higher healthcare cost. General administrative expenses increased $2.4 million primarily due to higher expenses in advertising and marketing, travel, and software license and maintenance. Depreciation and amortization increased $0.7 million due to the acquisitions. Professional and other fees also increased $0.7 million or 22.3%, due to legal fees related to the acquisitions of IDS and OneCloud Consulting.

Segment operating income was $37.3 million, compared with $39.1 million in the first half of fiscal 2017.  Adjusted EBITDA was $41.5 million, compared with $42.6 million in the first half of fiscal 2017.

The Company maintained its balanced portfolio of customer-end markets. The breakdown of net sales by customer-end market for the twelve months ended September 30, 2017 and 2016 were as follows:

       
  Twelve Months Ended September 30,    
  2017    2016    Change
Technology 24   23   1 %
State & Local Government & Educational Institutions 18 %   22 %   (4 %)
Telecom, Media, and Entertainment 15 %   15 %   -  
Financial Services 14 %   12 %   2 %
Healthcare  12 %   10 %   2 %
Other 17 %   18 %    (1 %)
Total 100 %   100 %    
               

Financing Segment

The results of operations for the financing segment for the six months ended September 30, 2017 and 2016 were as follows (dollars in thousands):

                           
    Six Months Ended September 30,
             
    2017   2016   Change
Financing revenue   $ 21,106   $ 15,709   $ 5,397     34.4 %
Fee and other income     28     84     (56 )   (66.7 %)
Net sales     21,134     15,793     5,341     33.8 %
                           
Direct lease costs     2,452     2,317      135     5.8 %
                           
Gross profit     18,682     13,476     5,206     38.6  %
                           
Selling, general and administrative     6,000     6,146     (146 )   (2.4 %)
Depreciation and amortization     2     6     (4 )   (66.7 %)
Interest and financing costs     633     749      (116 )   (15.5 %)
Operating expenses     6,635     6,901       (266 )   (3.9 %)
                           
Operating income   $ 12,047   $ 6,575   $  5,472     83.2 %
                           
Key Business Metrics                          
Adjusted EBITDA   $ 12,049   $ 6,581   $ 5,468     83.1 %
 

Net sales were $21.1 million, up 33.8% from $15.8 million in the first half of fiscal 2017, as a result of higher post-contract earnings due to early terminations of several large leases, as well as revenues earned from consumption based financing arrangements.

Direct lease costs increased $0.1 million or 5.8% due to higher depreciation expense from operating leases.

Operating expenses were $6.6 million, down 3.9% from the prior year period due to changes in reserve for credit losses and decreases professional and other fees as well as lower interest and financing costs, which were offset by higher salaries and benefits.

Segment operating income and adjusted EBITDA both increased to $12.0 million from $6.6 million in the first half of fiscal 2017.

Recent Corporate Developments

  • On October 24, ePlus announced it will lead a Chief Information Security Officer round table panel at the Triangle InfoSeCon conference in Raleigh, North Carolina on October 27.
  • On October 12, ePlus announced participation in a technology panel presentation at the Rochester Security Summit 2017 on October 19-20.
  • On September 18, ePlus announced the acquisition of IDS, a Midwest data center technology integrator and cloud services provider.
  • On August 30, ePlus announced management would present at the Telecom, Media and Technology Conference held in New York on September 6.
  • On August 30, ePlus announced it was named NetApp FlexPod Partner of the Year at the Inaugural Channel Connect conference in recognition of its overall FlexPod bookings and year-over-year FlexPod bookings growth.  
  • On August 18, ePlus announced its board of directors authorized the Company to repurchase up to 500,000 shares of common stock over the 12-month period commencing August 19, 2017.
  • On August 15, ePlus announced the launch of a new website (www.igxglobal.com) for its London-based IGX Global subsidiary.

Conference Call Information

ePlus will hold a conference call and webcast at 4:30 p.m. ET on November 2, 2017:

     
Date:     Thursday, November 2, 2017
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:   95927274 (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 November 10, 2017.

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 in key technologies from data center to security, cloud, and collaboration, ePlus transforms IT from a cost center to a business enabler.  Founded in 1990, ePlus has more than 1,200 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, possible adverse effects resulting from financial market disruption and volatility in the U.S. economy such as our current and potential customers delaying or reducing technology purchases, increasing credit risk associated with our customers and vendors, 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 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 major 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 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; 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; our ability to hire and retain sufficient qualified personnel; 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 CONDENSED CONSOLIDATED BALANCE SHEETS
           
    As of   As of
    September 30, 2017   March 31, 2017
                     
ASSETS   (in thousands, except per share data) 
Current assets:        
Cash and cash equivalents   $  60,185     $  109,760  
Accounts receivable—trade, net     293,098       266,029  
Accounts receivable—other, net     29,900       24,987  
Inventories     51,431       93,557  
Financing receivables—net, current     69,932       51,656  
Deferred costs     18,868       7,971  
Other current assets     31,931       43,364  
Total current assets     555,345       597,324  
         
Financing receivables and operating leases—net     61,847       71,883  
Property, equipment and other assets     16,278       11,956  
Goodwill     76,470       48,397  
Other intangible assets—net     29,056       12,160  
TOTAL ASSETS   $  738,996     $  741,720  
         
LIABILITIES AND STOCKHOLDERS' EQUITY        
         
LIABILITIES        
         
Current liabilities:        
Accounts payable   $  99,965     $  113,518  
Accounts payable—floor plan     120,217       132,612  
Salaries and commissions payable     17,484       18,878  
Deferred revenue     45,562       65,312  
Recourse notes payable—current     688       908  
Non-recourse notes payable—current     31,767       26,085  
Other current liabilities     20,438       19,179  
Total current liabilities     336,121       376,492  
         
Non-recourse notes payable—long term     4,666       10,431  
Deferred tax liability—net     1,791       1,799  
Other liabilities     20,356       7,080  
TOTAL LIABILITIES      362,934       395,802  
         
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; 14,171 outstanding at September 30, 2017 and 14,161 outstanding at March 31, 2017     142       142  
Additional paid-in capital     126,716       123,536  
Treasury stock, at cost      (4,383 )      -  
Retained earnings     253,467       222,823  
Accumulated other comprehensive income—foreign currency
     120        (583 )
Total Stockholders' Equity     376,062       345,918  
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY   $  738,996     $  741,720  

 

                 
ePlus inc. AND SUBSIDIARIES                
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS            
               
  Three Months Ended   Six Months Ended
  September 30,   September 30,
  2017   2016   2017   2016
                                                 
  (in thousands, except per share data)
               
Net sales $ 370,845     $ 371,462   $ 738,002   $ 669,965
Cost of sales   283,274       289,529     572,838     520,368
Gross profit   87,571       81,933     165,164     149,597
               
Selling, general and administrative expenses   56,340       51,607     111,004     99,661
Depreciation and amortization   2,129       1,723     4,192     3,498
Interest and financing costs   274       400     633     749
Operating expenses   58,743       53,730     115,829     103,908
               
OPERATING INCOME   28,828       28,203     49,335     45,689
               
Other income (expense)   (141 )     380     130     380
               
EARNINGS BEFORE PROVISION FOR INCOME TAXES   28,687       28,583     49,465     46,069
               
PROVISION FOR INCOME TAXES   11,466       11,808     18,821     18,623
               
NET EARNINGS $  17,221     $ 16,775   $  30,644   $ 27,446
               
NET EARNINGS PER COMMON SHARE—BASIC $  1.24     $ 1.21   $  2.21   $ 1.97
NET EARNINGS PER COMMON SHARE—DILUTED $  1.23     $ 1.21   $  2.19   $ 1.95
               
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING—BASIC   13,879       13,818     13,843     13,941
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING—DILUTED   14,008       13,884     14,021     14,055

 

               
ePlus inc. AND SUBSIDIARIES              
RECONCILIATION OF NON-GAAP INFORMATION              

We included reconciliations below for the following non-GAAP information: (i) Adjusted Gross Billings of Product and Services, (ii) Adjusted EBITDA, (iii) Segment Adjusted EBITDA, and (iv) non-GAAP Net Earnings per Common Share - Diluted. We define adjusted gross billings of product and services as our sales of product and services calculated in accordance with GAAP, adjusted to exclude the costs incurred related to sales of third-party software assurance, maintenance and services.  We define Adjusted EBITDA as net earnings calculated in accordance with GAAP, adjusted for the following: interest expense, depreciation and amortization, provision for income taxes, and other income. Segment Adjusted EBITDA is defined as operating income calculated in accordance with GAAP, adjusted for interest expense, 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 per common share are based on net earnings calculated in accordance with GAAP, adjusted to exclude other income and acquisition related amortization expense, and the related effects on income taxes, and the tax (benefit) expense recognized due to the vesting of share based compensation.

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 similar non-GAAP Adjusted Gross Billings, Adjusted EBITDA, and non-GAAP Net Earnings per Common Share - Diluted or similarly titled measures differently, which may reduce their usefulness as comparative measures.

 
  Three Months Ended September 30,   Six Months Ended September 30,
   2017    2016    2017    2016
                       
  (in thousands)
               
Sales of product and services $  357,759   $  361,227   $  714,839   $ 651,408
Costs incurred related to sales of third party software assurance, maintenance and services   145,822     126,081     270,427     233,373
Adjusted gross billings of product and services $ 503,581   $ 487,308   $  985,266   $ 884,781

 

 
  Three Months Ended September 30,   Six Months Ended September 30,
  2017   2016   2017   2016
                               
  (in thousands)
Consolidated              
               
Net earnings $ 17,221     $ 16,775     $  30,644     $  27,446  
Provision for income taxes   11,466       11,808       18,821         18,623  
Depreciation and amortization [1]   2,129       1,723       4,192       3,498  
Other income [2]   141       (380 )      (130 )     (380 )
Adjusted EBITDA $
30,957
    $ 29,926     $  53,527     $  49,187  
               
       
  Three Months Ended September 30,   Six Months Ended September 30,
  2017   2016    2017    2016
                               
  (in thousands)
Technology Segment              
Operating income $ 21,218     $ 24,488     $  37,288     $  39,114  
Depreciation and amortization [1]   2,128       1,721       4,190         3,492  
Adjusted EBITDA $ 23,346     $ 26,209     $  41,478     $  42,606  
               
Financing Segment              
Operating income $ 7,610     $ 3,715     $  12,047     $  6,575  
Depreciation and amortization [1]   1       2       2         6  
Adjusted EBITDA $ 7,611     $ 3,717     $  12,049     $  6,581  
               

 

  Three Months Ended September 30,   Six Months Ended September 30,
  2017
  2016   2017   2016
                               
  (in thousands, except per share data)
GAAP: Earnings before provision for income taxes $ 28,687     $ 28,583     $ 49,465     $ 46,069  
Acquisition related amortization expense [3]   1,186       974       2,307       2,063  
Other (income) expense [2]   141       (380 )     (130 )     (380 )
Non-GAAP: Earnings before provision for income taxes   30,014       29,177       51,642       47,752  
               
GAAP: Provision for income taxes   11,466       11,808       18,821       18,623  
Acquisition related amortization expense   450       324       874       689  
Other (income) expense   59       (157 )     (55 )     (157 )
Tax benefit on restricted stock   204       72       1,563       508  
Non-GAAP: Provision for income taxes   12,179       12,047       21,203       19,663  
               
Non-GAAP: Net earnings $ 17,835     $ 17,130     $ 30,439     $ 28,089  
               
GAAP: Net earnings per common share – diluted $  1.23     $ 1.21     $  2.19     $ 1.95  
Non-GAAP: Net earnings per common share – diluted $ 1.27     $ 1.23     $ 2.17     $ 2.00  

 

[1] Amount consists of depreciation and amortization for assets used internally.
[2] Interest income and foreign currency transaction gains or losses.
[3] Amount consists of amortization of intangible assets from acquired businesses.

 

 
 

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