Quarterly Highlights:
- Net sales increased 23.0% to $367.2 million; technology segment net sales increased 22.9% to $358.1 million.
- Adjusted gross billings of product and services increased 21.2% to $481.7 million.
- Consolidated gross profit increased 14.7% to $77.6 million; consolidated gross margin was 21.1%.
- Net earnings increased 25.8% to $13.4 million.
- Adjusted EBITDA increased 17.2% to $22.6 million.
- Diluted earnings per share increased 28.0% to $0.96. Non-GAAP diluted earnings per share increased 16.9% to $0.90.
HERNDON, Va., Aug. 02, 2017 (GLOBE NEWSWIRE) -- ePlus inc. (NASDAQ:PLUS), a leading provider of technology solutions, today announced financial results for the three months ended June 30, 2017.
Management Comment
“This was a period of strong performance for ePlus, reflecting solid execution of our growth strategy. Organic growth accounted for most of our year-on-year sales increase, demonstrating strong demand from enterprise and middle market customers for our product and service offerings, particularly around security, cloud and digital infrastructure. Notably, this quarter’s net sales included several large projects with major enterprise customers. Also, we saw a positive impact on the top line from our December 2016 acquisition of Minneapolis-based Consolidated IT Services,” said Mark Marron, president and chief executive officer.
“Year-on-year, net earnings increased 25.8% and diluted EPS increased 28.0%, both of which outpaced sales growth of 23.0%. These results were achieved despite a lower gross margin due in part to sales of product relating to large, competitive projects, and an 11% year-on-year increase in headcount. While ePlus remains focused on effective cost management, we continue to invest in strategic acquisitions, and customer-facing engineering and sales personnel, to support future growth and further enhance the advanced solutions we provide to customers,” Mr. Marron noted.
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.
First Quarter Fiscal 2018 Results
For the first quarter ended June 30, 2017 as compared to the first quarter of the prior fiscal year ended June 30, 2016:
Consolidated net sales rose 23.0% to $367.2 million, from $298.5 million.
Technology segment net sales rose 22.9% to $358.1 million, from $291.5 million.
Adjusted gross billings of product and services increased 21.2% to $481.7 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 29.0% to $9.1 million, from $7.0 million.
Consolidated gross profit rose 14.7% to $77.6 million, from $67.7 million.
Consolidated operating income rose 17.3% to $20.5 million, from $17.5 million.
Net earnings rose 25.8% to $13.4 million.
Adjusted EBITDA rose 17.2% to $22.6 million, from $19.3 million.
Diluted earnings per share was $0.96, compared with $0.75 in the prior year quarter. Non-GAAP diluted earnings per share was $0.90, compared with $0.77 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 June 30, 2017, ePlus had cash and cash equivalents of $98.2 million, compared with $109.8 million as of March 31, 2017. Total stockholders' equity was $357.0 million, compared with $345.9 million as of March 31, 2017. Total shares outstanding were 14.2 million on June 30, 2017 and March 31, 2017.
Summary and Outlook
“ePlus’ first quarter results underscore our competitive strengths and the success of our strategy of providing complex and customized solutions to mid-market and enterprise customers. In fiscal 2018, we expect organic growth to outpace overall IT spending in our core solution areas. In addition, we are increasing our focus on the fastest growing segments of the market, which has been further enhanced by our recent acquisition of OneCloud Consulting, including services around IT automation, DevOps, OpenStack and other transformative technologies. Thanks to a strong balance sheet, ePlus has the financial resources to continue to augment organic growth with strategic acquisitions that add products and services, new customers and new geographies,” Mr. Marron concluded.
Results of Operations – Three Months Ended June 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 June 30, 2017 and 2016 were as follows (dollars in thousands):
| Three Months Ended June 30, | ||||||||||||||||
| 2017 | 2016 | Change | ||||||||||||||
| Sales of product and services | $357,080 | $290,181 | $66,899 | 23.1% | ||||||||||||
| Fee and other income | 986 | 1,276 | (290) | (22.7%) | ||||||||||||
| Net sales | 358,066 | 291,457 | 66,609 | 22.9% | ||||||||||||
| Cost of sales, product and services | 288,433 | 229,847 | 58,586 | 25.5% | ||||||||||||
| Gross profit | 69,633 | 61,610 | 8,023 | 13.0% | ||||||||||||
| Selling, general and administrative | 51,501 | 45,213 | 6,288 | 13.9% | ||||||||||||
| Depreciation and amortization | 2,062 | 1,771 | 291 | 16.4% | ||||||||||||
| Operating expenses | 53,563 | 46,984 | 6,579 | 14.0% | ||||||||||||
| Operating income | $16,070 | $14,626 | $1,444 | 9.9% | ||||||||||||
| Adjusted EBITDA | $18,132 | $16,397 | $1,735 | 10.6% | ||||||||||||
Net sales rose 22.9% to $358.1 million, from $291.5 million in the first quarter of fiscal 2017. Adjusted gross billings of products and services grew 21.2% to $481.7 million, from $397.5 million in the first quarter of fiscal 2017. The increase in net sales and adjusted gross billings of products and services was due, in part, to an increase in demand for products and services from customers in the technology, telecom, media and entertainment, and financial services industries and sales during the quarter relating to several large projects for major customers.
Gross margin on sales of product and services was 19.2%, compared with 20.8% in the first quarter of fiscal 2017. The decrease in margins was due to a shift in product mix, as we sold a lower proportion of third party software assurance, maintenance and services, and lower margins from sales of product.
Operating expenses rose 14.0% to $53.7 million, from $47.0 million in the first quarter of fiscal 2017, mainly attributable to an increase of $5.6 million, or 15.0%, in salaries and benefits due to an increase in variable compensation and an increase of 127, or 12.1%, in personnel to 1,175 from 1,048, of which 57 related to the acquisition of OneCloud Consulting in May 2017 and 48 relate to the acquisition of Consolidated Communications IT services and equipment integration business in December 2016. The position additions included 116 sales and engineering positions with the remaining additions being administrative hires. General administrative expenses increased $0.4 million primarily due to higher travel expense and software license and maintenance expense. Professional and other fees also increased due to legal fees related to the acquisition of OneCloud Consulting.
Segment operating income was $16.1 million, up 9.9% from $14.6 million in the first quarter of fiscal 2017. Adjusted EBITDA increased 10.6% to $18.1 million for the quarter, from $16.4 million in the first quarter 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 June 30, 2017 and 2016 were as follows:
| Twelve Months Ended June 30, | ||||||||||||
| 2017 | 2016 | Change | ||||||||||
| Technology | 25% | 22% | 3% | |||||||||
| State & Local Government & Educational Institutions | 19% | 22% | (3%) | |||||||||
| Telecom, Media, and Entertainment | 15% | 14% | 1% | |||||||||
| Financial Services | 13% | 12% | 1% | |||||||||
| Healthcare | 11% | 11% | - | |||||||||
| Other | 17% | 19% | (2%) | |||||||||
| Total | 100% | 100% | ||||||||||
Financing Segment
The results of operations for the financing segment for the three months ended June 30, 2017 and 2016 were as follows (dollars in thousands):
| Three Months Ended June 30, | |||||||||||||||||||||||||||
| 2017 | 2016 | Change | |||||||||||||||||||||||||
| Financing revenue | $9,071 | $6,987 | $2,084 | 29.8% | |||||||||||||||||||||||
| Fee and other income | 20 | 59 | (39) | (66.1%) | |||||||||||||||||||||||
| Net sales | 9,091 | 7,046 | 2,045 | 29.0% | |||||||||||||||||||||||
| Direct lease costs | 1,131 | 992 | 139 | 14.0% | |||||||||||||||||||||||
| Gross profit | 7,960 | 6,054 | 1,906 | 31.5% | |||||||||||||||||||||||
| Selling, general and administrative | 3,163 | 2,841 | 322 | 11.3% | |||||||||||||||||||||||
| Depreciation and amortization | 1 | 4 | (3) | (75.0%) | |||||||||||||||||||||||
| Interest and financing costs | 359 | 349 | 10 | 2.9% | |||||||||||||||||||||||
| Operating expenses | 3,523 | 3,194 | 329 | 10.3% | |||||||||||||||||||||||
| Operating income | $4,437 | $2,860 | $1,577 | 55.1% | |||||||||||||||||||||||
| Adjusted EBITDA | $4,438 | $2,864 | $1,574 | 55.0% | |||||||||||||||||||||||
Net sales were $9.1 million, up 29.0% from $7.0 million in the first quarter of fiscal 2017, as a result of higher transactional gains and revenues earned from consumption based financing arrangements. During the quarters ended June 30, 2017 and 2016, we recognized net gains on sales of financial assets of $2.3 million and $1.5 million, respectively.
Direct lease costs increased $0.1 million or 14.0% due to higher depreciation expense from operating leases.
Operating expenses increased 10.3% over the previous year period, mainly due to changes in reserve for credit losses.
Segment operating income and adjusted EBITDA both increased to $4.4 million from $2.9 million in the first quarter of fiscal 2017.
Recent Corporate Developments
- On July 11, ePlus announced the enhancement of its Managed Security Services Offering by adding support for Palo Alto Networks and Fortinet security appliances to existing support for Cisco devices.
- On June 26, ePlus announced it would both present and exhibit at Cisco Live, held on June 25-29. The presentations and exhibit would be made by the newly-acquired OneCloud division.
- On June 20, ePlus announced it was named Intel’s server platform Partner of the Year. The award was presented on May 23 at the Intel Solutions Summit to recognize ePlus’ engineering and deployment of a hybrid cloud solution built on Intel technology for a large non-profit organization.
- On June 6, ePlus announced that it was named to CRN®’s 2017 Solution Provider 500 list. The list is CRN’s annual ranking of the largest technology integrators, solution providers and IT consultants in North America by revenue.
- On June 1, ePlus announced management would present at the 2017 Global Consumer, Technology & Services Conference held in New York on June 8, 2017.
- On May 30, ePlus announced management would present at the 2017 Technology, Internet & Media conference held in San Francisco on June 5, 2017.
- On May 16, ePlus announced the acquisition of OneCloud Consulting, expanding ePlus’ ability to address its customers’ needs in cloud-based solutions and infrastructure.
- On May 10, ePlus announced it extended the availability of Enhanced Maintenance Support (EMS) to all of its customers. The EMS service helps customers improve their device availability and reduce downtime.
Conference Call Information
ePlus will hold a conference call and webcast at 4:30 p.m. ET on August 2, 2017:
| Date: | Wednesday, August 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: | 48272309 (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 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 | |||||||||
| June 30, 2017 | March 31, 2017 | |||||||||
| ASSETS | (in thousands, except per share data) | |||||||||
| Current assets: | ||||||||||
| Cash and cash equivalents | $98,244 | $109,760 | ||||||||
| Accounts receivable—trade, net | 276,671 | 266,029 | ||||||||
| Accounts receivable—other, net | 25,665 | 24,987 | ||||||||
| Inventories | 90,497 | 93,557 | ||||||||
| Financing receivables—net, current | 61,372 | 51,656 | ||||||||
| Deferred costs | 13,737 | 7,971 | ||||||||
| Other current assets | 39,330 | 43,364 | ||||||||
| Total current assets | 605,516 | 597,324 | ||||||||
| Financing receivables and operating leases—net | 66,821 | 71,883 | ||||||||
| Property, equipment and other assets | 11,904 | 11,956 | ||||||||
| Goodwill | 55,396 | 48,397 | ||||||||
| Other intangible assets—net | 15,547 | 12,160 | ||||||||
| TOTAL ASSETS | $755,184 | $741,720 | ||||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||
| LIABILITIES | ||||||||||
| Current liabilities: | ||||||||||
| Accounts payable | $111,955 | $113,518 | ||||||||
| Accounts payable—floor plan | 138,932 | 132,612 | ||||||||
| Salaries and commissions payable | 16,067 | 18,878 | ||||||||
| Deferred revenue | 62,679 | 65,312 | ||||||||
| Recourse notes payable—current | 799 | 908 | ||||||||
| Non-recourse notes payable—current | 28,788 | 26,085 | ||||||||
| Other current liabilities | 22,323 | 19,179 | ||||||||
| Total current liabilities | 381,543 | 376,492 | ||||||||
| Non-recourse notes payable—long term | 6,908 | 10,431 | ||||||||
| Deferred tax liability—net | 1,794 | 1,799 | ||||||||
| Other liabilities | 7,909 | 7,080 | ||||||||
| TOTAL LIABILITIES | 398,154 | 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; 14,170 outstanding at June 30, 2017 and 14,161 outstanding at March 31, 2017 | 142 | 142 | ||||||||
| Additional paid-in capital | 125,043 | 123,536 | ||||||||
| Treasury stock, at cost | (4,130) | - | ||||||||
| Retained earnings | 236,246 | 222,823 | ||||||||
| Accumulated other comprehensive income—foreign currency translation adjustment | (271) | (583) | ||||||||
| Total Stockholders' Equity | 357,030 | 345,918 | ||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $755,184 | $741,720 | ||||||||
| ePlus inc. AND SUBSIDIARIES | |||||||||||
| UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||
| Three Months Ended June 30, | |||||||||||
| 2017 | 2016 | ||||||||||
| (in thousands, except per share data) | |||||||||||
| Net sales | $367,157 | $298,503 | |||||||||
| Cost of sales | 289,564 | 230,839 | |||||||||
| Gross profit | 77,593 | 67,664 | |||||||||
| Selling, general and administrative expenses | 54,664 | 48,054 | |||||||||
| Depreciation and amortization | 2,063 | 1,775 | |||||||||
| Interest and financing costs | 359 | 349 | |||||||||
| Operating expenses | 57,086 | 50,178 | |||||||||
| OPERATING INCOME | 20,507 | 17,486 | |||||||||
| Other income | 271 | - | |||||||||
| EARNINGS BEFORE PROVISION FOR INCOME TAXES | 20,778 | 17,486 | |||||||||
| PROVISION FOR INCOME TAXES | 7,355 | 6,815 | |||||||||
| NET EARNINGS | $13,423 | $10,671 | |||||||||
| NET EARNINGS PER COMMON SHARE—BASIC | $0.97 | $0.76 | |||||||||
| NET EARNINGS PER COMMON SHARE—DILUTED | $0.96 | $0.75 | |||||||||
| WEIGHTED AVERAGE COMMON SHARES OUTSTANDING—BASIC | 13,806 | 14,066 | |||||||||
| WEIGHTED AVERAGE COMMON SHARES OUTSTANDING—DILUTED | 14,019 | 14,216 | |||||||||
| 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 June 30, | |||||||
| 2017 | 2016 | ||||||
| (in thousands) | |||||||
| Sales of product and services | $357,080 | $290,181 | |||||
| Costs incurred related to sales of third party software assurance, maintenance and services | |||||||
| 124,605 | 107,292 | ||||||
| Adjusted gross billings of product and services | $481,685 | $397,473 | |||||
| Three Months Ended June 30, | |||||||
| 2017 | 2016 | ||||||
| (in thousands) | |||||||
| Consolidated | |||||||
| Net earnings | $13,423 | $10,671 | |||||
| Provision for income taxes | 7,355 | 6,815 | |||||
| Depreciation and amortization [1] | 2,063 | 1,775 | |||||
| Other income [2] | (271) | - | |||||
| Adjusted EBITDA | $22,570 | $19,261 | |||||
| Three Months Ended June 30, | |||||||
| 2017 | 2016 | ||||||
| (in thousands) | |||||||
| Technology Segment | |||||||
| Operating income | $16,070 | $14,626 | |||||
| Depreciation and amortization [1] | 2,062 | 1,771 | |||||
| Adjusted EBITDA | $18,132 | $16,397 | |||||
| Financing Segment | |||||||
| Operating income | $4,437 | $2,860 | |||||
| Depreciation and amortization [1] | 1 | 4 | |||||
| Adjusted EBITDA | $4,438 | $2,864 | |||||
| Three Months Ended June 30, | |||||||
| 2017 | 2016 | ||||||
| (in thousands, except per share data) | |||||||
| GAAP: Earnings before provision for income taxes | $20,778 | $17,486 | |||||
| Acquisition related amortization expense [3] | 1,121 | 1,089 | |||||
| Other income [2] | (271) | - | |||||
| Non-GAAP: Earnings before provision for income taxes | 21,628 | 18,575 | |||||
| GAAP: Provision for income taxes | 7,355 | 6,815 | |||||
| Acquisition related amortization expense | 424 | 365 | |||||
| Other income | (114) | - | |||||
| Tax benefit on restricted stock | 1,359 | 436 | |||||
| Non-GAAP: Provision for income taxes | 9,024 | 7,616 | |||||
| Non-GAAP: Net earnings | $12,604 | $10,959 | |||||
| GAAP: Net earnings per common share – diluted | $0.96 | $0.75 | |||||
| Non-GAAP: Net earnings per common share – diluted | $0.90 | $0.77 | |||||
| [1] Amount consists of depreciation and amortization for assets used internally. |
| [2] Interest income and foreign currency transaction gain. |
| [3] Amount consists of amortization of intangible assets from acquired businesses. |