| | Contact: Kleyton Parkhurst, SVP |
| | ePlus inc. |
| | |
| | 703-984-8150 |
ePlus Reports Fiscal 2012 Second Quarter Results
HERNDON, VA – November 3, 2011 – ePlus inc. (Nasdaq NGM: PLUS – news), a leading provider of technology solutions, today announced financial results for its second quarter ended September 30, 2011.
Revenues for the second quarter totaled $262.9 million, an increase of $29.8 million or 12.8%, compared to $233.0 million in the same quarter last fiscal year. Total costs and expenses increased 14.1% to $251.0 million, as compared to $219.9 million the prior year’s quarter. Net earnings decreased 10.7% to $7.1 million, or $0.85 per diluted share, as compared to $7.9 million, or $0.94 per diluted share, in the same quarter last fiscal year. The Company’s technology sales business segment, which comprises more than 96% of total revenue, had steady year-over-year pre-tax earnings as revenue growth was offset by an increase in employees, acquisition related costs, and a lower gross margin on sales of products and services. The financing business segment experienced a reduction in revenues and pre-tax earnings compared to the same quarter last year due to lower transaction volumes and a smaller lease portfolio.
For the six months ended September 30, 2011, total revenue increased 12.4% to $474.4 million, and total costs and expenses increased 13.7% to $456.3 million. Net earnings were $10.8 million for the six months or $1.28 per diluted share, a decrease of 14.7%, as compared to $12.6 million, or $1.51 per diluted share, during the six months ended September 30, 2010.
Phillip G. Norton, ePlus’ chairman, president and CEO stated, “We continue to execute our growth strategy by aggressively investing in new people, solutions, and product offerings through both organic growth and acquisitions. Marketplace demand for advanced IT solutions remains strong, and we are well positioned to capture opportunities with our managed services, eCloud, and video and security solutions. During the quarter, we leveraged our pricing power to compete for new customers and executed some large transactions with existing customers, which together with a slight reduction from some vendor incentive programs, reduced our gross margin by 50 basis points. Our gross margin is still at the upper end of the historical range, and capturing new customers is a long-term benefit that will allow us the opportunity to sell higher margin products and services in the future.”
Mr. Norton continued, “While strategic investments in personnel, building out our geographic footprint, broadening our solution set, and amortization of acquisition costs related to recent acquisitions continue to impact earnings, we believe these investments are essential to our long-term growth and competitiveness in the market. Over the past year, we added 99 people or about 15% of our total staff, with most being in customer-facing, revenue-producing sales and engineering positions. We are starting to see a return on these investments as they accounted for almost a third of our revenue increase this quarter.”
Litigation Update
On May 23, 2011, the trial court in the Company’s litigation against Lawson Software, Inc. issued an injunction, ordering Lawson and its successors to immediately stop selling and servicing products relating to its electronic procurement systems that infringe on ePlus' patents. The injunction also prevents Lawson from any ongoing or future maintenance, training, or installation of its infringing software products. Lawson has appealed the ruling; however, its requests that the injunction be stayed have been denied. Additionally, we have filed a motion seeking a finding that Lawson is in contempt of the injunction; we anticipate a hearing on the motion will be held in December 2011.
Stockholders’ Equity and Share Repurchase Plan Results
As of September 30, 2011, stockholders’ equity was $214.5 million, or $25.85 per share. Total cash and cash equivalents were $45.4 million. During the six months ended September 30, 2011, ePlus repurchased 387,958 shares of its outstanding common stock through open market purchases at an average cost of $24.96 per share, for a total purchase price of $9.7 million.
Quarterly Financial Results
The Company manages its business in two segments, the technology sales business segment and the financing business segment. The technology sales business segment sells information technology equipment and software and related services primarily to corporate customers on a nationwide basis, and also provides Internet-based business-to-business supply chain management solutions for information technology and other operating resources. The financing business segment offers lease-financing solutions to corporate, educational, and governmental entities nationwide.
Technology Sales Business Segment
The results of operations for the technology sales business segment for the three months ended September 30, 2011, and 2010, were as follows (in thousands):
| | | Three months ended September 30, | | | | | |
| | | 2011 | | 2010 | | Change |
| | | | | | | | | | |
| Sales of product and services | | $ 252,688 | | $ 221,275 | | $ 31,413 | | 14.2% | |
| Fee and other income | | 2,128 | | 2,074 | | 54 | | 2.6% | |
| Patent settlement income | | - | | 125 | | (125 | ) | - | |
| Total revenues | | 254,816 | | 223,474 | | 31,342 | | 14.0% | |
| | | | | | | | | | |
| Cost of sales, products and services | | 217,624 | | 189,427 | | 28,197 | | 14.9% | |
| Professional and other fees | | 1,986 | | 3,342 | | (1,356 | ) | (40.6% | ) |
| Salaries and benefits | | 21,717 | | 18,138 | | 3,579 | | 19.7% | |
| General and administrative | | 4,267 | | 3,320 | | 947 | | 28.5% | |
| | | 245,594 | | 214,227 | | 31,367 | | 14.6% | |
| Interest and financing costs | | 19 | | 23 | | (4 | ) | (17.4% | ) |
| Total costs and expenses | | 245,613 | | 214,250 | | 31,363 | | 14.6% | |
| Segment earnings before tax | | $ 9,203 | | $ 9,224 | | ($21 | ) | (0.2% | ) |
Total revenues. Total revenues during the three months ended September 30, 2011, were $254.8 million compared to $223.5 million during the three months ended September 30, 2010, an increase of 14.0%. The increase in revenues was due to investments made over the past 12 months to improve our product and service offerings and expand our geographic footprint, the adoption of new revenue recognition guidance, and other increases primarily driven by customer demand. On April 1, 2011, we implemented new revenue recognition guidance for multiple deliverable arrangements and recognized $12.0 million of revenues for the three months ended September 30, 2011, for products that were delivered during the period that were sold together with services. Prior to the adoption of this standard, we would have deferred the product revenue and costs until the services were completed.
Total costs and expenses. Total costs and expenses for the three months ended September 30, 2011, increased $31.4 million or 14.6%, to $245.6 million. These increases corresponded to the increases in cost of sales, products and services, salaries and benefits, and general and administrative expenses, partially offset by a reduction in professional and other fees. The increase in cost of sales, products and services was generally consistent with the increase in sales of products and services. Our gross margin on sales of products and services was 13.9% and 14.4% during the three months ended September 30, 2011, and 2010, respectively. Our gross margin was affected by the mix between products and services, vendor incentives earned, and competitive pricing pressure.
Professional and other fees decreased $1.4 million primarily due to a reduction in legal and other fees related to the patent infringement litigation.
Salaries and benefits expense increased $3.6 million driven by increases in the number of employees and by commission expenses related to the increase in sales of products and services. Our technology sales business segment had 700 employees as of September 30, 2011, an increase of 102 from 598 at September 30, 2010.
General and administrative expenses increased $947 thousand partially due to the acquisitions of NCC and ITI, as well as higher travel and other expenses associated with the increase in sales and support personnel.
Segment earnings before tax. As a result of the foregoing, segment earnings before tax decreased $21 thousand, or 0.2% to $9.2 million for the three months ended September 30, 2011.
Financing Business Segment
The results of operations for our financing business segment for the three months ended September 30, 2011, and 2010, were as follows (in thousands):
| | | Three months ended September 30, | | | | | |
| | | 2011 | | 2010 | | Change |
| | | | | | | | | | |
| Lease revenue | | $ 7,305 | | $ 8,835 | | ($1,530 | ) | (17.3% | ) |
| Fee and other income | | 729 | | 708 | | 21 | | 3.0% | |
| Total revenues | | 8,034 | | 9,543 | | (1,509 | ) | (15.8% | ) |
| | | | | | | | | | |
| Direct lease costs | | 2,078 | | 1,856 | | 222 | | 12.0% | |
| Professional and other fees | | 369 | | 359 | | 10 | | 2.8% | |
| Salaries and benefits | | 2,373 | | 2,459 | | (86 | ) | (3.5% | ) |
| General and administrative | | 240 | | 333 | | (93 | ) | (27.9% | ) |
| | | 5,060 | | 5,007 | | 53 | | 1.1% | |
| Interest and financing costs | | 329 | | 673 | | (344 | ) | (51.1% | ) |
| Total costs and expenses | | 5,389 | | 5,680 | | (291 | ) | (5.1% | ) |
| Segment earnings before tax | | $ 2,645 | | $ 3,863 | | ($1,218 | ) | (31.5% | ) |
Total revenues. Total revenues decreased by $1.5 million due to a reduction in the net gain on sales of leased equipment coupled with decreases in earnings from our lease portfolio. At September 30, 2011, we had $108.9 million of investment in leases, compared to $124.7 million at September 30, 2010.
Total costs and expenses. During the three months ended September 30, 2011, total costs and expenses decreased $291 thousand due to decreases in interest and financing costs, offset by increases in direct lease costs. Interest and financing costs decreased $344 thousand as a result of lower non-recourse note balances as we utilized our cash for new leases, thus funding fewer leases with non-recourse notes payable.
Segment earnings before tax. As a result of the foregoing, segment earnings before tax decreased $1.2 million, or 31.5%, to $2.6 million for the three months ended September 30, 2011.
Percentage changes stated throughout this press release are calculated based upon numbers from the Company’s financial statements (stated in thousands of dollars), not on the rounded numbers used herein. Investors are encouraged to read the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2011, Form 10-Q for the period ended June 30, 2011, and Form 10-Q for the period ending September, 30, 2011, when filed. Copies are available via the Company’s Web site at http://www.eplus.com, the SEC’s Web site at http://www.sec.gov, or by contacting the Company.
Conference Call Information
The Company will host a conference call on Friday, November 4, 2011 at 2:00 p.m. Eastern time to review and discuss the Company’s results for the second quarter of fiscal year 2012. The call can be accessed live over the phone by dialing (877) 870-9226, or for international callers, (973) 890-8320. Passcode 23934802. A live webcast will be available via the Company’s investor relations Web site at http://www.eplus.com/investors.htm.
A replay will be available shortly after the call and can be accessed by dialing (855) 859-2056, or for international callers, (404) 537-3406. Passcode 23934802. The replay will be available until November 11, 2011, and the webcast will also remain available for replay via the Company’s investor relations page of its Web site.
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 the recent financial crisis in the credit markets and general slowdown of 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, the possibility of additional goodwill impairment charges, and restrictions on our access to capital necessary to fund our operations; 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 adapt to changes in the IT industry and/or rapid change in product standards; our ability to hire and retain sufficient personnel; our ability to realize our investment in leased equipment; our ability to protect our intellectual property; our ability to consummate and integrate acquisitions; the creditworthiness of our customers; our ability to raise capital and obtain non-recourse financing for our transactions; our ability to reserve adequately for credit losses; the impact of competition in our markets; the possibility of defects in our products or catalog content data; 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.
About ePlus inc.
ePlus is a leading provider of technology solutions. ePlus enables organizations to optimize their IT infrastructure and supply chain processes by delivering world-class IT products from top manufacturers, professional services, flexible lease financing, proprietary software, and patented business methods. Founded in 1990, ePlus has more than 750 associates in 20+ locations serving federal, state, municipal, and commercial customers. The Company is headquartered in Herndon, VA. For more information, visit http://www.eplus.com, call 888-482-1122, or email info@eplus.com.
ePlus®, eCloud, 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.
ePlus inc. AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS |
| | | | | |
| | | As of | | As of |
| | | September 30, 2011 | | March 31, 2011 |
| ASSETS | | (in thousands) |
| | | | | |
| Cash and cash equivalents | | $ 45,406 | | $ 75,756 |
| Accounts receivable—net | | 151,699 | | 121,771 |
| Notes receivable—net | | 4,917 | | 5,843 |
| Inventories—net | | 12,618 | | 9,062 |
| Investment in leases and leased equipment—net | | 108,880 | | 118,308 |
| Property and equipment—net | | 1,767 | | 1,817 |
| Other assets | | 30,492 | | 38,415 |
| Goodwill | | 22,283 | | 18,604 |
| TOTAL ASSETS | | $ 378,062 | | $ 389,576 |
| | | | | |
| LIABILITIES AND STOCKHOLDERS' EQUITY | | | | |
| | | | | |
| LIABILITIES | | | | |
| | | | | |
| Accounts payable—equipment | | $ 7,525 | | $ 7,250 |
| Accounts payable—trade | | 16,693 | | 14,821 |
| Accounts payable—floor plan | | 63,760 | | 63,845 |
| Salaries and commissions payable | | 7,813 | | 8,065 |
| Accrued expenses and other liabilities | | 40,559 | | 49,414 |
| Non-recourse notes payable | | 22,973 | | 29,592 |
| Deferred tax liability | | 4,227 | | 4,227 |
| Total Liabilities | | 163,550 | | 177,214 |
| | | | | |
| COMMITMENTS AND CONTINGENCIES | | | | |
| | | | | |
| STOCKHOLDERS' EQUITY | | | | |
| Preferred stock, $.01 par value; 2,000,000 shares authorized; none issued or outstanding | | - | | - |
| Common stock, $.01 par value; 25,000,000 shares authorized; 12,637,720 issued and 8,297,590 outstanding at September 30, 2011 and 12,456,819 issued and 8,519,189 outstanding at March 31, 2011 | | 126 | | 125 |
| Additional paid-in capital | | 91,390 | | 89,792 |
| Treasury stock, at cost, 4,340,130 and 3,937,630 shares, respectively | | (56,032) | | (45,998) |
| Retained earnings | | 178,691 | | 167,924 |
| Accumulated other comprehensive income—foreign currency translation adjustment | | 337 | | 519 |
| Total Stockholders' Equity | | 214,512 | | 212,362 |
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | | $ 378,062 | | $ 389,576 |
ePlus inc. AND SUBSIDIARIES |
| UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS |
| | | | | | | | |
| | | | | | | | |
| | Three Months Ended September 30, | | Six Months Ended September 30, |
| | 2011 | | 2010 | | 2011 | | 2010 |
| | (amounts in thousands, except shares and per share data) |
| | | | | | | | |
| Sales of product and services | $ 252,688 | | $ 221,275 | | $ 454,654 | | $ 396,885 |
| Lease revenue | 7,305 | | 8,835 | | 14,739 | | 19,264 |
| Fee and other income | 2,857 | | 2,782 | | 5,001 | | 5,760 |
| Patent settlement income | - | | 125 | | - | | 125 |
| | | | | | | | |
| TOTAL REVENUES | 262,850 | | 233,017 | | 474,394 | | 422,034 |
| | | | | | | | |
| COSTS AND EXPENSES | | | | | | | |
| | | | | | | | |
| Cost of sales, product and services | 217,624 | | 189,427 | | 390,943 | | 340,266 |
| Direct lease costs | 2,078 | | 1,856 | | 4,174 | | 4,690 |
| | 219,702 | | 191,283 | | 395,117 | | 344,956 |
| | | | | | | | |
| Professional and other fees | 2,355 | | 3,701 | | 4,780 | | 7,228 |
| Salaries and benefits | 24,090 | | 20,597 | | 47,096 | | 40,647 |
| General and administrative expenses | 4,507 | | 3,653 | | 8,540 | | 6,798 |
| Interest and financing costs | 348 | | 696 | | 730 | | 1,482 |
| | 31,300 | | 28,647 | | 61,146 | | 56,155 |
| | | | | | | | |
| TOTAL COSTS AND EXPENSES (1) | 251,002 | | 219,930 | | 456,263 | | 401,111 |
| | | | | | | | |
| EARNINGS BEFORE PROVISION FOR INCOME TAXES | 11,848 | | 13,087 | | 18,131 | | 20,923 |
| | | | | | | | |
| PROVISION FOR INCOME TAXES | 4,784 | | 5,178 | | 7,364 | | 8,301 |
| | | | | | | | |
| NET EARNINGS | $ 7,064 | | $ 7,909 | | $ 10,767 | | $ 12,622 |
| | | | | | | | |
| NET EARNINGS PER COMMON SHARE—BASIC | $ 0.87 | | $ 0.97 | | $ 1.31 | | $ 1.55 |
| NET EARNINGS PER COMMON SHARE—DILUTED | $ 0.85 | | $ 0.94 | | $ 1.28 | | $ 1.51 |
| | | | | | | | |
| WEIGHTED AVERAGE SHARES OUTSTANDING—BASIC | 8,153,495 | | 8,131,088 | | 8,230,022 | | 8,127,228 |
| WEIGHTED AVERAGE SHARES OUTSTANDING—DILUTED | 8,327,748 | | 8,384,154 | | 8,422,099 | | 8,348,346 |
| (1) Includes amounts to related parties of $188 thousand and $482 thousand for the three and six months ended September 30, 2010, respectively. |
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ePlus inc. AND SUBSIDIARIES |
| UNAUDITED SEGMENT RESULTS |
| | | | | | | | |
| | Three Months Ended September 30, | | Six Months Ended September 30, |
| | 2011 | | 2010 | | 2011 | | 2010 |
| | (amounts in thousands) |
| Technology Business Segment | | | | | | | |
| Total revenues | $ 254,816 | | $ 223,474 | | $ 458,691 | | $ 401,285 |
| Total costs and expenses | 245,613 | | 214,250 | | 445,455 | | 388,311 |
| Segment earnings before tax | $ 9,203 | | $ 9,224 | | $ 13,236 | | $ 12,974 |
| | | | | | | | |
| Financing Business Segment | | | | | | | |
| Total revenues | $ 8,034 | | $ 9,543 | | $ 15,703 | | $ 20,749 |
| Total costs and expenses | 5,389 | | 5,680 | | 10,808 | | 12,800 |
| Segment earnings before tax | $ 2,645 | | $ 3,863 | | $ 4,895 | | $ 7,949 |
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