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ePlus Reports First Quarter Financial Results


ePlus Reports First Quarter Financial Results

--Favorable Business Mix Drove Strong Profitability Growth--

Quarterly Highlights:

  • Net sales decreased 6.9% to $355.0 million; technology segment net sales decreased 7.4% to $341.2 million; service revenues increased 4.4% to $47.8 million; financing segment net sales increased 7.6% to $13.8 million.
  • Adjusted gross billings decreased 0.4% to $546.4 million.
  • Consolidated gross profit increased 6.4% to $98.6 million.
  • Consolidated gross margin was 27.8%, an increase of 350 basis points.
  • Net earnings increased 7.2% to $17.4 million.
  • Adjusted EBITDA increased 7.5% to $30.7 million.
  • Diluted earnings per share increased 8.3% to $1.30. Non-GAAP diluted earnings per share increased 4.9% to $1.51.

 

 

HERNDON, Va.--(BUSINESS WIRE)-- ePlus inc. (NASDAQ: PLUS), a leading provider of technology and financing solutions, today announced financial results for the three months ended June 30, 2020.

Management Comment

“Our business performed well across key profitability metrics in the first quarter of fiscal 2020 as we worked closely with customers to support their evolving IT product and service needs during these challenging times. Adjusted gross billings held steady, and gross profit increased 6.4% as consolidated gross margin increased to 27.8%. Diluted earnings per share grew 8.3%. Our performance reflected a favorable mix as higher margin services revenue grew 4.4%, in-line with our strategy of increasing managed and recurring services which mitigated the impact of lower product sales,” said Mark Marron, president and chief executive officer.

“Our focus on critical IT solutions most relevant to customers in this difficult pandemic environment has enabled ePlus to report strong earnings comparisons. During the quarter, we saw a marked increase in third-party maintenance, software assurance, and subscriptions, as customers invested to support remote workforce initiatives.”

First Quarter Fiscal 2021 Results

For the first quarter ended June 30, 2020 as compared to the first quarter of the prior fiscal year ended June 30, 2019:

Consolidated net sales decreased 6.9% to $355.0 million, from $381.4 million.

Technology segment net sales decreased 7.4% to $341.2 million, from $368.5 million primarily due to a larger portion of our sales that were recognized on a net basis. Service revenues increased 4.4% to $47.8 million, from $45.8 million primarily due to an increase in managed services. Adjusted gross billings was $546.4 million, a slight decrease of 0.4% from $548.4 million.

Financing segment net sales increased 7.6% to $13.8 million, from $12.8 million, primarily due to an increase in post-contract earnings.

Consolidated gross profit increased 6.4% to $98.6 million, from $92.6 million. Consolidated gross margin increased to 27.8% from 24.3% last year, due to higher product margins.

Operating expenses increased 5.3% to $73.6 million, from $69.9 million, primarily due to an increase in variable compensation and replacement costs for turnover. Our headcount at the end of the quarter was 1,536, compared with 1,538 a year ago.

Consolidated operating income increased 9.8% to $25.0 million.

Our effective tax rate for the current quarter was 30.8%, higher than the prior year quarter of 28.7%, due to an adjustment to the federal benefit from state taxes.

Net earnings increased 7.2% to $17.4 million.

Adjusted EBITDA increased 7.5% to $30.7 million, from $28.6 million.

Diluted earnings per share was $1.30, compared with $1.20 in the prior year quarter. Non-GAAP diluted earnings per share was $1.51, compared with $1.44 last year.

Balance Sheet Highlights

As of June 30, 2020, ePlus had cash and cash equivalents of $144.4 million, compared with $86.2 million as of March 31, 2020. The increase is primarily the result of a decrease in working capital in the technology segment and an increase in non-recourse debt. Inventory, which represents equipment ordered by customers but not yet delivered, increased 85.7% due to ongoing projects and some delivery delays due to temporary closures at our customer sites related to COVID-19. Total shareholder’s equity was $502.7 million, compared with $486.1 million as of March 31, 2020. Total shares outstanding were 13.6 million and 13.5 million on June 30, 2020 and March 31, 2020, respectively.

Summary and Outlook

“ePlus is effectively managing through difficult business conditions with a strong balance sheet, a favorable mix of products and services and a dedicated team of IT professionals, who have proven their commitment to customer service.

“Our focus on the high demand areas of Cloud, Security and Digital Infrastructure are all the more relevant in today’s business environment. Our diversified customer base, which we believe represents minimal exposure to those industries hardest hit by the economic downturn, depends on ePlus to continue to deliver critical IT solutions that enable them to effectively navigate the current marketplace challenges.

“We appreciate the excellent execution demonstrated by the ePlus team during these unprecedented times, and as a company, we have taken precautions to protect the health and safety of our employees. Our strong financial position provides the resources to continue to make strategic investments opportunistically. In summary, we believe we are well positioned to manage through near-term pandemic-related disruptions to our business and to achieve growth over the long term,” Mr. Marron concluded.

Recent Corporate Developments/Recognitions

  • In the month of June:
    • ePlus announced that CRN® a brand of The Channel Company, has named ePlus to its 2020 Solution Provider 500 list for the 10th consecutive year.
    • ePlus announced that it has been recognized with four new awards, including three Partner of the Year designations, from its partners Equinix, Juniper Networks, and NetApp.
  • In the month of May:
    • ePlus announced that its board of directors authorized the Company to repurchase up to 500,000 shares of ePlus’ outstanding common stock over a 12-month period which commenced on May 28, 2020.
    • ePlus announced that it has launched ePlus Public Cloud Managed Services, a portfolio of offerings that enables customers to deliver services cost-effectively and securely in public cloud platforms, including AWS and Azure.

Conference Call Information

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

Date:

August 5, 2020

Time:

4:30 p.m. ET

Live Call:

(833) 714-0957, domestic; (778) 560-2893, international

Replay:

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

 

Passcode:

6879148 (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 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 lifecycle services 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, LinkedIn, Twitter and Instagram.

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, the duration and impact of the COVID-19 pandemic, which could materially adversely affect our financial condition and results of operations and has resulted worldwide in governmental authorities imposing numerous unprecedented measures to try to contain the virus that has impacted and may further impact our workforce and operations, the operations of our customers, and those of our respective vendors, suppliers, and partners; 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, 2020

 

March 31, 2020

ASSETS

 

 

 

 

 

 

 

 

 

Current assets:

 

 

Cash and cash equivalents

 

$144,382

$86,231

Accounts receivable—trade, net

 

393,044

374,998

Accounts receivable—other, net

 

33,076

36,570

Inventories

 

93,323

50,268

Financing receivables—net, current

 

116,120

70,169

Deferred costs

 

20,785

22,306

Other current assets

 

6,102

9,256

Total current assets

 

806,832

649,798

 

 

Financing receivables and operating leases—net

 

68,862

74,158

Property, equipment and other assets

 

33,025

 

32,596

Goodwill

 

118,097

 

118,097

Other intangible assets—net

 

32,046

34,464

TOTAL ASSETS

 

$1,058,862

$909,113

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

Current liabilities:

 

 

 

Accounts payable

 

$136,507

 

$82,919

Accounts payable—floor plan

 

175,701

127,416

Salaries and commissions payable

 

26,460

30,952

Deferred revenue

 

57,271

55,480

Recourse notes payable—current

 

37,271

37,256

Non-recourse notes payable—current

 

55,667

29,630

Other current liabilities

 

30,683

22,986

Total current liabilities

 

519,560

386,639

 

 

Non-recourse notes payable—long term

 

5,500

5,872

Deferred tax liability—net

 

2,731

2,730

Other liabilities

 

28,346

27,727

TOTAL LIABILITIES

 

556,137

422,968

 

 

 

 

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; 13,553 outstanding at June 30, 2020 and 13,500
outstanding at March 31, 2020

 

145

144

Additional paid-in capital

 

147,082

145,197

Treasury stock, at cost, 934 shares at June 30, 2020 and

 

 

 

(71,127)

 

(68,424)

Retained earnings

 

427,579

410,219

Accumulated other comprehensive income—foreign currency translation adjustment

 

(954)

(991)

Total Stockholders' Equity

 

502,725

486,145

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

 

$1,058,862

$909,113

 
ePlus inc. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

 

 

 

Three Months Ended June 30,

2020

2019

 

 

 

 

 

 

 

 

Net sales

 

 

Product

$307,240

 

$335,601

Services

47,791

 

45,771

Total

355,031

 

381,372

 

 

 

 

Cost of sales

 

 

 

Product

226,634

 

260,063

Services

29,840

 

28,670

Total

256,474

 

288,733

 

 

 

 

Gross profit

98,557

 

92,639

 

 

 

Selling, general, and administrative

69,467

 

65,787

Depreciation and amortization

3,516

 

3,463

Interest and financing costs

577

 

628

Operating expenses

73,560

 

69,878

 

 

Operating income

24,997

 

22,761

 

 

 

Other income (expense)

98

 

(45)

 

 

Earnings before taxes

25,095

 

22,716

 

 

Provision for income taxes

7,735

 

6,528

 

 

Net earnings

$17,360

 

$16,188

 

 

 

Net earnings per common share—basic

$1.30

 

$1.21

Net earnings per common share—diluted

$1.30

 

$1.20

 

 

 

Weighted average common shares outstanding—basic

13,322

 

13,356

Weighted average common shares outstanding—diluted

13,388

 

13,457

 

Technology Segment

 

Three Months Ended June 30,

 

2020

2019

% Change

 

(in thousands)

 

 

 

 

Net sales

 

 

 

 

 

 

Product

$293,433

 

$322,764

 

(9.1%)

 

Services

47,791

 

45,771

 

4.4%

 

Total

341,224

 

368,535

 

(7.4%)

 

 

 

 

 

 

 

 

Cost of sales

 

 

 

 

 

 

Product

224,543

 

258,054

 

(13.0%)

 

Services

29,840

 

28,670

 

4.1%

 

Total

254,383

 

286,724

 

(11.3%)

 

 

 

 

 

 

 

 

Gross profit

86,841

81,811

6.1%

 

Selling, general, and administrative

65,556

62,667

4.6%

Depreciation and amortization

3,488

3,407

2.4%

Interest and financing costs

265

 

-

 

nm

 

Operating expenses

69,309

66,074

4.9%

 

Operating income

$17,532

$15,737

11.4%

Adjusted gross billings

$546,394

$548,363

(0.4%)

Adjusted EBITDA

$23,161

$21,419

8.1%

 

Technology Segment Net Sales by Customer End Market

 

Twelve Months Ended June 30,

 

 

2020

 

2019

 

% Change

 

 

 

 

 

 


Technology

21%

 

21%

 

-

Telecom, Media, & Entertainment

19%

 

14%

 

5%

SLED

16%

 

17%

 

(1%)

Healthcare

15%

 

15%

 

-

Financial Services

13%

 

15%

 

(2%)

All Others

16%

 

18%

 

(2%)

Total

100%

 

100%

 

 

 

Financing Segment

Three Months Ended June 30,

 

2020

2019

% Change

 

(in thousands)

 

 

 

 

Net sales

$13,807

 

$12,837

 

7.6%

 

Cost of sales

2,091

 

2,009

 

4.1%

 

Gross profit

11,716

 

10,828

 

8.2%

 

 

 

 

 

 

 

 

Selling, general, and administrative

3,911

3,120

25.4 %

Depreciation and amortization

28

56

(50.0%)

Interest and financing costs

312

628

(50.3%)

Operating expenses

4,251

3,804

11.8%

 

Operating income

$7,465

$7,024

6.3%

Adjusted EBITDA

$7,553

$7,148

5.7%

 

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,

 

 

2020

 

2019

 

 

(in thousands)

 

 

 

 

 

 

Technology segment net sales

$341,224

 

$368,535

 

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

205,170

 

179,828

 

Adjusted gross billings

$546,394

 

$548,363

 

Three Months Ended June 30,

 

 

2020

 

2019

 

 

(in thousands)

Consolidated

 

 

 

 

 

 

 

 

 

Net earnings

$17,360

 

$16,188

 

Provision for income taxes

7,735

 

6,528

 

Depreciation and amortization [1]

3,516

 

3,463

 

Share based compensation

1,907

 

1,942

 

Acquisition and integration expense

29

 

401

 

Interest and financing costs

265

 

-

 

Other (income) expense [2]

(98)

 

45

 

Adjusted EBITDA

$30,714

 

$28,567

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30,

 

 

2020

 

2019

 

 

(in thousands)

Technology Segment

 

 

 

 

Operating income

$17,532

 

$15,737

 

Depreciation and amortization [1]

3,488

 

3,407

 

Share based compensation

1,847

 

1,874

 

Acquisition and integration expense

29

 

401

 

Interest and financing costs

265

 

-

 

Adjusted EBITDA

$23,161

 

$21,419

 

 

 

 

 

 

Financing Segment

 

 

 

 

Operating income

$7,465

 

$7,024

 

Depreciation and amortization [1]

28

 

56

 

Share based compensation

60

 

68

 

Adjusted EBITDA

$7,553

 

$7,148

 

 

 

 

 

 

 

Three Months Ended June 30,

 

 

2020

 

2019

 

 

(in thousands)

 

GAAP: Earnings before taxes

$25,095

 

$22,716

 

Share based compensation

1,907

 

1,942

 

Acquisition and integration expense

29

 

401

 

Acquisition related amortization expense [3]

2,228

 

2,187

 

Other (income) expense [2]

(98)

 

45

 

Non-GAAP: Earnings before taxes

29,161

 

27,291

 

 

 

 

 

 

GAAP: Provision for income taxes

7,735

 

6,528

 

Share based compensation

587

 

559

 

Acquisition and integration expense

9

 

115

 

Acquisition related amortization expense [3]

667

 

607

 

Other (income) expense [2]

(30)

 

13

 

Tax benefit on restricted stock

(14)

 

10

 

Non-GAAP: Provision for income taxes

8,954

 

7,832

 

 

 

 

 

 

Non-GAAP: Net earnings

$20,207

 

$19,459

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30,

 

 

2020

 

2019

 

 

 

 

 

 

GAAP: Net earnings per common share – diluted

$1.30

 

$1.20

 

 

 

 

 

 

Share based compensation

0.10

 

0.10

 

Acquisition and integration expense

-

 

0.02

 

Acquisition related amortization expense [3]

0.12

 

0.12

 

Other (income) expense [2]

(0.01)

 

-

 

Total non-GAAP adjustments – net of tax

0.21

 

0.24

 

 

 

 

 

 

Non-GAAP: Net earnings per common share – diluted

$1.51

 

$1.44

 

 

[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.

 

Contacts

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


Source: ePlus inc.

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