ePlus Reports First Quarter Financial Results

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:

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
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.

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