ePlus Reports First Quarter Financial Results

--Favorable Business Mix Drove Strong Profitability Growth--

Quarterly Highlights:

HERNDON, VA – August 5, 2020 – 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

Conference Call Information

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

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.

Contact:

Kleyton Parkhurst, SVP

ePlus inc.

703-984-8150

 

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.