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ePlus Reports Third Quarter and First Nine Months Financial Results


ePlus Reports Third Quarter and First Nine Months Financial Results

--Double-digit Growth Across Key Metrics--

 

Third Quarter Fiscal Year 2020

  • Net sales increased 24.1% to $429.0 million; technology segment net sales increased 22.7% to $410.6 million; service revenues increased 43.2% to $50.4 million; financing segment net sales increased 67.7% to $18.4 million.
  • Adjusted gross billings increased 22.5% to $586.3 million.
  • Consolidated gross profit increased 25.1% to $103.7 million.
  • Consolidated gross margin was 24.2%, an increase of 20 basis points.
  • Net earnings increased 31.5% to $19.6 million.
  • Adjusted EBITDA increased 24.7% to $31.9 million.
  • Diluted earnings per share increased 32.7% to $1.46. Non-GAAP diluted earnings per share increased 27.1% to $1.64.

First Nine Months Fiscal Year 2020

  • Net sales increased 16.7% to $1,222 million; technology segment net sales increased 15.8% to $1,177 million; service revenues increased 38.0% to $144.3 million; financing segment net sales increased 45.8% to $45.0 million.
  • Adjusted gross billings increased 18.5% to $1,714 million.
  • Consolidated gross profit increased 20.2% to $299.4 million.
  • Consolidated gross margin was 24.5%, an increase of 70 basis points.
  • Net earnings increased 16.0% to $55.8 million.
  • Adjusted EBITDA increased 18.6% to $95.8 million.
  • Diluted earnings per share increased 17.5% to $4.16. Non-GAAP diluted earnings per share increased 19.3% to $4.89.
 
 

HERNDON, Va.--(BUSINESS WIRE)-- ePlus inc. (NASDAQ:PLUS), a leading provider of technology and financing solutions, today announced financial results for the three and nine months ended December 31, 2019.

Management Comment

“ePlus achieved strong double-digit growth across key financial metrics in both the third quarter and first nine months of fiscal 2020, demonstrating the competitive advantages of our portfolio of technology products and services, complemented by our financing capabilities. We continued to gain market share in the third quarter, underscored by 20.3% growth in technology product sales and 43.2% growth in technology services revenue, which combined with strong performance from our financing segment, drove a 31.5% increase in net earnings,” commented Mark Marron, CEO and President of ePlus.

“Growth in gross profit and earnings per share outpaced revenue growth in the third quarter, and consolidated gross margin expanded by 20 basis points to 24.2%. Our continuing investment in customer-facing professionals supports growth in the high demand areas of cloud, security and digital infrastructure.”

Third Quarter Fiscal 2020 Results

For the third quarter ended December 31, 2019 as compared to the third quarter of the prior fiscal year ended December 31, 2018:

Consolidated net sales increased 24.1% to $429.0 million, from $345.7 million.

Technology segment net sales increased 22.7% to $410.6 million, from $334.7 million primarily from an increase in sales to customers in the telecom, media and entertainment industry as well as technology, healthcare, and state and local government and educational institutions. Service revenues increased 43.2% to $50.4 million, from $35.2 million due to increases across all our services offerings including professional and managed services, and staff augmentation.

Adjusted gross billings increased 22.5% to $586.3 million due, in part, to organic growth and the acquisitions of SLAIT Consulting, LLC in January 2019 and ABS Technology in August 2019.

Financing segment net sales increased 67.7% to $18.4 million, from $11.0 million, primarily due to an increase in transactional gains.

Consolidated gross profit increased 25.1% to $103.7 million, from $82.9 million. Consolidated gross margin increased to 24.2% from 24.0% last year, due to higher gross profit in our financing segment.

Operating expenses increased 23.1% to $77.4 million, from $62.9 million, primarily due to an increase in salaries and variable compensation and additional costs associated with the acquisitions and operations of SLAIT Consulting, LLC and ABS Technology. Our headcount increased 337 employees primarily from the acquisitions.

Consolidated operating income increased 31.2% to $26.3 million.

Our effective tax rate for the current quarter was 28.3%, consistent with the prior year quarter.

Net earnings increased 31.5% to $19.6 million.

Adjusted EBITDA increased 24.7% to $31.9 million, from $25.6 million.

Diluted earnings per share was $1.46, compared with $1.10 in the prior year quarter. Non-GAAP diluted earnings per share was $1.64, compared with $1.29 last year.

First Nine Months Fiscal 2020 Results

For the nine months ended December 31, 2019 as compared to the nine months of the prior fiscal year ended December 31, 2018:

Consolidated net sales increased 16.7% to $1,221.9 million, from $1,047.2 million.

Technology segment net sales increased 15.8% to $1,176.9 million, from $1,016.3 million. Service revenues increased 38.0% to $144.3 million, from $104.5 million.

Adjusted gross billings increased 18.5% to $1,713.8 million due, in part, to organic growth as well as the acquisitions of SLAIT Consulting, LLC in January 2019 and ABS Technology in August 2019.

Financing segment net sales increased 45.8% to $45.0 million, from $30.9 million, primarily due to an increase in transactional gains from several large government related transactions.

Consolidated gross profit increased 20.2% to $299.4 million, from $249.1 million. Consolidated gross margin improved 70 basis points to 24.5%, compared with 23.8% last year, due to higher service revenues and higher transaction gains from the financing segment.

Operating expenses increased 20.6% to $222.0 million, from $184.1 million, primarily due to an increase in salaries and variable compensation and additional costs associated with the acquisitions and operations of SLAIT Consulting, LLC and ABS Technology.

Consolidated operating income increased 19.0% to $77.4 million.

Our effective tax rate for the current period was 28.7%, compared with 27.3% in the prior year. The increase in the rate was primarily due to a decrease in the tax benefit from the vesting of restricted stock.

Net earnings increased 16.0% to $55.8 million.

Adjusted EBITDA increased 18.6% to $95.8 million, from $80.8 million.

Diluted earnings per share was $4.16, compared with $3.54 in the prior year period. Non-GAAP diluted earnings per share was $4.89, compared with $4.10 last year.

Balance Sheet Highlights

As of December 31, 2019, ePlus had cash and cash equivalents of $59.6 million, compared with $79.8 million as of March 31, 2019. The decrease in cash and cash equivalents was primarily due to investments in our financing portfolio, acquisition funding, and share repurchases totaling $13.7 million. Total stockholders' equity was $472.5 million, compared with $424.3 million as of March 31, 2019. Total shares outstanding were 13.5 million and 13.6 million on December 31, 2019 and March 31, 2019, respectively.

Summary and Outlook

“Year-to-date results set the stage for fiscal 2020 to be a year of significant growth for ePlus, driven by our ability to capture demand from our growing base of mid-market and enterprise customers for complex solutions that optimize and protect their IT initiatives. In addition to our organic growth, we have successfully integrated the August, 2019 ABS Technology acquisition, and we continue to evaluate additional acquisition opportunities that would expand our technology capabilities and our geographic reach,” Mr. Marron concluded.

Conference Call Information

ePlus will hold a conference call and webcast at 4:30 p.m. ET on February 5, 2020:

Date:

February 5, 2020

Time:

4:30 p.m. ET

Live Call:

(844)-603-5099, domestic, (825) 312-2246, international

Replay:

(800) 585-8367, domestic, (416) 621-4642, international

Passcode:

9387537 (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 February 12, 2020.

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 1,600 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. 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)

 

 

 

 

 

 

 

 

 

December 31, 2019

 

March 31, 2019

ASSETS

 

 

 

 

 

 

 

Current assets:

 

 

Cash and cash equivalents

 

$59,555

$79,816

Accounts receivable—trade, net

 

413,741

299,899

Accounts receivable—other, net

 

37,187

41,328

Inventories

 

61,065

50,493

Financing receivables—net, current

 

89,229

63,767

Deferred costs

 

20,421

17,301

Other current assets

 

8,809

7,499

Total current assets

 

690,007

560,103

 

 

 

Financing receivables and operating leases—net

 

73,506

59,032

Property, equipment and other assets

 

34,000

 

17,328

Goodwill

 

118,225

 

110,807

Other intangible assets—net

 

36,870

38,928

TOTAL ASSETS

 

$952,608

$786,198

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

Current liabilities:

 

 

 

Accounts payable

 

$126,154

 

$86,801

Accounts payable—floor plan

 

144,483

116,083

Salaries and commissions payable

 

27,476

21,286

Deferred revenue

 

55,128

47,251

Recourse notes payable—current

 

2,239

28

Non-recourse notes payable—current

 

59,015

38,117

Other current liabilities

 

24,995

19,285

Total current liabilities

 

439,490

328,851

 

 

 

Non-recourse notes payable—long term

 

7,120

10,502

Deferred tax liability—net

 

4,924

4,915

Other liabilities

 

28,588

17,677

TOTAL LIABILITIES

 

480,122

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; 13,513 outstanding at December 31, 2019 and 13,611 outstanding at March 31, 2019

 

144

143

Additional paid-in capital

 

143,262

137,243

Treasury stock, at cost, 884 shares at December 31, 2019 and 693 shares at March 31, 2019

 

(67,691)

 

(53,999)

Retained earnings

 

396,973

341,137

Accumulated other comprehensive income—foreign currency translation adjustment

 

(202)

(271)

Total Stockholders' Equity

 

472,486

424,253

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

 

$952,608

$786,198

 
 

ePlus inc. AND SUBSIDIARIES

 

 

 

 

 

 

 

 

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

Three Months Ended December 31,

Nine Months Ended December 31,

 

2019

2018

2019

2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

 

 

 

 

 

 

Product

$378,569

 

$310,443

 

$1,077,667

 

$942,735

 

Services

50,422

 

35,221

 

144,261

 

104,504

 

Total

428,991

 

345,664

 

1,221,928

 

1,047,239

 

 

 

 

 

 

 

 

 

 

Cost of sales

 

 

 

 

 

 

 

 

Product

293,209

 

241,856

 

832,135

 

735,802

 

Services

32,086

 

20,895

 

90,427

 

62,321

 

Total

325,295

 

262,751

 

922,562

798,123

 

 

 

 

 

 

 

 

 

 

Gross profit

103,696

 

82,913

 

299,366

 

249,116

 

 

 

 

 

 

 

 

Selling, general, and administrative

73,090

 

59,728

 

209,400

174,399

 

Depreciation and amortization

3,647

 

2,719

 

10,667

 

8,250

 

Interest and financing costs

694

 

443

 

1,898

1,403

 

Operating expenses

77,431

 

62,890

 

221,965

184,052

 

 

 

 

 

 

 

Operating income

26,265

 

20,023

 

77,401

65,064

 

 

 

 

 

 

Other income (expense)

997

 

721

 

912

1,140

 

 

 

 

 

Earnings before taxes

27,262

 

20,744

 

78,313

 

66,204

 

 

 

 

 

 

Provision for income taxes

7,712

 

5,880

 

22,477

18,064

 

 

 

 

 

 

Net earnings

$19,550

 

$14,864

 

$55,836

$48,140

 

 

 

 

 

 

 

 

Net earnings per common share—basic

$1.47

 

$1.10

 

$4.19

$3.57

 

Net earnings per common share—diluted

$1.46

 

$1.10

 

$4.16

$3.54

 

 

 

 

 

 

 

 

Weighted average common shares outstanding—basic

13,320

 

13,471

 

13,329

 

13,467

 

Weighted average common shares outstanding—diluted

13,378

 

13,544

 

13,410

 

13,592

 

 

 

Technology Segment

Three Months Ended December 31,

 

Nine Months Ended December 31,

 

2019

2018

% Change

2019

2018

% Change

 

 

(in thousands)

 

 

 

(in thousands)

 

 

 

 

Net sales

 

 

 

 

 

 

 

 

 

 

 

 

Product

$360,206

 

$299,490

 

20.3%

 

$1,032,620

 

$911,839

 

13.2%

 

Services

50,422

 

35,221

 

43.2%

 

144,261

 

104,504

 

38.0%

 

Total

410,628

 

334,711

 

22.7%

 

1,176,881

 

1,016,343

 

15.8%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of sales

 

 

 

 

 

 

 

 

 

 

 

 

Product

290,980

 

239,843

 

21.3%

 

825,509

 

730,311

 

13.0%

 

Services

32,086

 

20,895

 

53.6%

 

90,427

 

62,321

 

45.1%

 

Total

323,066

 

260,738

 

23.9%

 

915,936

 

792,632

 

15.6%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

87,562

73,973

18.4%

260,945

223,711

16.6%

 

 

Selling, general, and administrative

67,759

56,607

19.7%

197,615

166,199

18.9%

 

Depreciation and amortization

3,619

2,714

33.3%

10,555

8,243

28.0%

 

Operating expenses

71,378

59,321

20.3%

208,170

174,442

19.3%

 

 

Operating income

$16,184

$14,652

10.5%

$52,775

$49,269

7.1%

 

Adjusted gross billings

$586,308

$478,447

22.5%

$1,713,755

$1,446,603

18.5%

 

Adjusted EBITDA

$21,687

$20,074

8.0%

$70,895

$64,699

9.6%

 

 

Technology Segment Net Sales by Customer End Market

 

Twelve Months Ended December 31,

 

 

2019

 

2018

 

% Change

 

 

 

 

 

 

Technology

22%

 

22%

 

-

SLED

17%

 

17%

 

-

Telecom, Media, & Entertainment

17%

 

14%

 

3%

Healthcare

15%

 

14%

 

1%

Financial Services

14%

 

15%

 

(1%)

All others

15%

 

18%

 

(3%)

Total

100%

 

100%

 

 

Financing Segment

Three Months Ended December 31,

 

Nine Months Ended December 31,

 

 

2019

2018

% Change

2019

2018

% Change

 

(in thousands)

 

 

 

(in thousands)

 

 

 

Net sales

$18,363

 

$10,953

 

67.7%

 

$45,047

 

$30,896

 

45.8%

Cost of sales

2,229

 

2,013

 

10.7%

 

6,626

 

5,491

 

20.7%

Gross profit

16,134

 

8,940

 

80.5%

 

38,421

 

25,405

 

51.2%

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general, and administrative

5,331

3,121

70.8%

11,785

8,200

43.7%

Depreciation and amortization

28

5

460.0%

112

7

1,500.0%

Interest and financing costs

694

443

56.7%

1,898

1,403

35.3%

Operating expenses

6,053

3,569

69.6%

13,795

9,610

43.5%

 

Operating income

$10,081

$5,371

87.7%

$24,626

$15,795

55.9%

Adjusted EBITDA

$10,169

$5,480

85.6%

$24,933

$16,105

54.8%

 

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 December 31,

 

Nine Months Ended December 31,

2019

2018

2019

2018

 

(in thousands)

 

 

 

 

 

Technology segment net sales

$410,628

$334,711

$1,176,881

$1,016,343

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

175,680

143,736

536,874

430,260

Adjusted gross billings

$586,308

$478,447

$1,713,755

$1,446,603

 
 

 

Three Months Ended December 31,

 

Nine Months Ended December 31,

 

2019

 

2018

 

2019

 

2018

 

(in thousands)

Consolidated

 

 

 

 

 

 

 

 

 

Net earnings

$19,550

$14,864

55,836

$48,140

Provision for income taxes

7,712

5,880

22,477

18,064

Depreciation and amortization [1]

3,647

2,719

10,667

8,250

Share based compensation

1,944

1,857

6,021

5,418

Acquisition and integration expense

-

955

1,739

2,072

Other (income) expense [2]

(997)

(721)

(912)

(1,140)

Adjusted EBITDA

$31,856

$25,554

$95,828

$80,804

 

 

 

 

 

 

 

 

 

Three Months Ended December 31,

 

Nine Months Ended December 31,

 

2019

 

2018

 

2019

 

2018

 

(in thousands)

Technology Segment

 

 

 

 

Operating income

$16,184

$14,652

$52,775

$49,269

Depreciation and amortization [1]

3,619

2,714

10,555

8,243

Share based compensation

1,884

1,753

5,826

5,115

Acquisition and integration expense

-

955

1,739

2,072

Adjusted EBITDA

$21,687

$20,074

$70,895

$64,699

 

 

 

 

 

Financing Segment

 

 

 

 

Operating income

$10,081

$5,371

$24,626

$15,795

Depreciation and amortization [1]

28

5

112

7

Share based compensation

60

104

195

303

Adjusted EBITDA

$10,169

$5,480

$24,933

$16,105

 

 

 

 

 

 

 

Three Months Ended December 31,

 

Nine Months Ended December 31,

 

2019

 

2018

 

2019

 

2018

 

(in thousands)

GAAP: Earnings before taxes

$27,262

 

$20,744

 

$78,313

 

$66,204

Share based compensation

1,944

 

1,857

 

6,021

 

5,418

Acquisition and integration expense

-

 

955

 

1,739

 

2,072

Acquisition related amortization expense [3]

2,421

 

1,552

 

6,953

 

5,035

Other (income) expense [2]

(997)

 

(721)

 

(912)

 

(1,140)

Non-GAAP: Earnings before taxes

30,630

 

24,387

 

92,114

 

77,589

 

 

 

 

 

 

 

 

GAAP: Provision for income taxes

7,712

 

5,880

 

22,477

 

18,064

Share based compensation

553

 

526

 

1,736

 

1,534

Acquisition and integration expense

-

 

270

 

506

 

586

Acquisition related amortization expense [3]

668

 

414

 

1,938

 

1,343

Other (income) expense [2]

(283)

 

(204)

 

(258)

 

(322)

Tax benefit on restricted stock

39

 

-

 

87

 

672

Non-GAAP: Provision for income taxes

8,689

 

6,886

 

26,486

 

21,877

 

 

 

 

 

 

 

 

Non-GAAP: Net earnings

$21,941

 

$17,501

 

$65,628

 

$55,712

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended December 31,

 

Nine Months Ended December 31,

 

2019

 

2018

 

2019

 

2018

 

 

 

 

 

 

 

 

GAAP: Net earnings per common share – diluted

$1.46

 

$1.10

 

$4.16

 

$3.54

 

 

 

 

 

 

 

 

Share based compensation

0.10

 

0.10

 

0.32

 

0.30

Acquisition and integration expense

-

 

0.05

 

0.09

 

0.10

Acquisition related amortization expense [3]

0.14

 

0.08

 

0.38

 

0.27

Other (income) expense [2]

(0.05)

 

(0.04)

 

(0.05)

 

(0.07)

Tax benefit on restricted stock

(0.01)

 

-

 

(0.01)

 

(0.04)

Total non-GAAP adjustments – net of tax

$0.18

 

$0.19

 

$0.73

 

$0.56

 

 

 

 

 

 

 

 

Non-GAAP: Net earnings per common share – diluted

$1.64

 

$1.29

 

$4.89

 

$4.10

[1] Amount consists of depreciation and amortization for assets used internally.

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

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

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