ePlus Reports First Quarter Financial Results
| · | Revenue increased 5% to $272.3 million, led by 6% growth in technology segment |
| · | Gross margin expanded to 20.7% from 20.3%, driven by gross margin increase on products and services of 18.5% from 17.7% |
| · | Earnings per diluted share of $1.25 includes gain on retirement of liability; excluding gain, non-GAAP earnings per diluted share was $1.14, up 17.5% from $0.97 per share |
Herndon, VA – August 6, 2014 - ePlus inc. (NASDAQ NGS: PLUS – news), a leading provider of technology solutions, today announced financial results for the first quarter ended June 30, 2014.
Management Comment
“First quarter results represented a strong start to fiscal 2015, consistent with our focus on providing increasingly complex IT solutions and supported by a full suite of IT services,” said Phillip G. Norton, CEO, chairman and president of ePlus.
“Our operating income growth of 10.4% outpaced revenue growth by a factor of two, while we continued to invest in future technical and go-to-market capabilities by adding headcount in the key areas of technical services and sales. Our technology segment posted 30.0% year-on-year growth in operating income, driven by the increasing contribution of services revenues and our emphasis on high-end technology solutions, drawing on our expertise in key areas such as cloud, data storage and security. The performance of the technology segment more than offset lower results from our financing business, which faced difficult year-on-year comparisons due to net gains on sales of financial assets that benefitted last year’s first quarter,” Mr. Norton noted.
First Quarter Fiscal 2015 Results
For the quarter ended June 30, 2014, consolidated revenues increased 5.0% to $272.3 million, from $259.3 million in the first quarter of fiscal 2014.
Technology revenues were up 6.0% to $263.4 million, from $248.5 million in the first quarter of fiscal 2014.
Financing revenues were $8.9 million, compared with $10.8 million in the first quarter of fiscal 2014.
Operating income was up 10.4% to $14.7 million, from $13.4 million. Operating margin was 5.4%, up from 5.2% a year earlier.
Earnings per diluted share were $1.25, inclusive of a gain of $0.11 per diluted share related to the retirement of a liability. Excluding this benefit, non-GAAP diluted earnings per share were $1.14, up 17.5% from $0.97 per share a year earlier.
Balance Sheet Highlights
At June 30, 2014, the Company had $66.9 million of cash and cash equivalents, compared to $72.7 million on June 30, 2013. Total stockholders’ equity was $248.7 million and total shares outstanding were 7.5 million, compared to $246.2 million and 8.2 million shares, respectively, at June 30, 2013.
Summary and Outlook
“Our performance in the first quarter was in line with our expectations and demonstrated our ability to continue to achieve market share gains. Today, we are addressing the IT needs of over 2,800 customers, compared with over 2,300 at the same time last year. This provides us with substantial opportunities to further penetrate our existing base as well as to leverage our growing expertise in diversified end-user markets, in order to add new customers to our roster.
“Additionally, we are well positioned with our key traditional and emerging technology vendor partners, as evidenced by our recognition on the CRN Tech Elite 250. This enhances ePlus’ positioning as an independent provider of IT products and services to customers, with the strategic relationships needed to provide best-in-class customized solutions.
“As a result, we believe that ePlus should continue to grow revenues at a faster pace than the industry average and continue to achieve year-over-year growth in services revenues. In addition, our balance sheet remains strong, with cash and cash equivalents of $66.9 million at the end of the 2015 first quarter, and unfunded portfolio assets, which could be funded to generate additional cash, if necessary. This provides the financial resources and flexibility to take advantage of accretive organic and acquisition investment opportunities as they develop,” Mr. Norton said.
Results of Operations – Three Months Ended June 30, 2014
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, state and local governments. The financing segment consists of the financing of equipment, software and related services to commercial, state and local governments, and government contractors.
Technology Segment
The results of operations for the technology segment for the three months ended June 30, 2014 and 2013 were as follows (dollars in thousands):
| | | Three Months Ended June 30, |
| | | 2014 | | 2013 | | Change |
| Sales of product and services | | $261,356 | | $247,037 | | $14,319 | | 5.8% |
| Fee and other income | | 2,047 | | 1,457 | | 590 | | 40.5% |
| Total revenues | | 263,403 | | 248,494 | | 14,909 | | 6.0% |
| | | | | | | | | |
| Cost of sales, product and services | | 212,908 | | 203,330 | | 9,578 | | 4.7% |
| | | | | | | | | |
| Professional and other fees | | 1,586 | | 2,863 | | (1,277) | | (44.6%) |
| Salaries and benefits | | 30,670 | | 27,898 | | 2,772 | | 9.9% |
| General and administrative | | 5,758 | | 4,814 | | 944 | | 19.6% |
| Interest and financing costs | | 39 | | 20 | | 19 | | 95.0% |
| Operating expenses | | 38,053 | | 35,595 | | 2,458 | | 6.9% |
| | | | | | | | | |
| Segment earnings | | $12,442 | | $9,569 | | $2,873 | | 30.0% |
| | | | | | | | | |
| Gross margin, product and services | | 18.5% | | 17.7% | | | | |
Revenues grew 6.0% to $263.4 million, compared to $248.5 million a year earlier, reflecting strong growth in the sale of both products and services.
Gross margin on sales of products and services was 18.5%, compared with 17.7% a year earlier.
Segment earnings rose 30.0% to $12.4 million, compared with $9.6 million a year earlier. Segment earnings margin was 4.7%, compared with 3.9% a year earlier.
Financing Segment
The results of operations for the financing segment for the three months ended June 30, 2014 and 2013 were as follows (dollars in thousands):
| | | Three Months Ended June 30, |
| | | 2014 | | 2013 | | Change |
| Financing revenue | | $8,874 | | $10,760 | | $(1,886) | | (17.5%) |
| Fee and other income | | 27 | | 63 | | (36) | | (57.1%) |
| Total revenues | | 8,901 | | 10,823 | | (1,922) | | (17.8%) |
| | | | | | | | | |
| Direct lease costs | | 2,957 | | 3,253 | | (296) | | (9.1%) |
| | | | | | | | | |
| Professional and other fees | | 247 | | 375 | | (128) | | (34.1%) |
| Salaries and benefits | | 2,277 | | 2,784 | | (507) | | (18.2%) |
| General and administrative | | 515 | | 187 | | 328 | | 175.4% |
| Interest and financing costs | | 605 | | 440 | | 165 | | 37.5% |
| Operating expenses | | 3,644 | | 3,786 | | (142) | | (3.8%) |
| | | | | | | | | |
| Operating income | | 2,300 | | 3,784 | | (1,484) | | (39.2%) |
| | | | | | | | | |
| Other income | | 1,434 | | - | | 1,434 | | - |
| | | | | | | | | |
| Segment earnings | | $3,734 | | $3,784 | | $ (50) | | (1.3%) |
Total revenues fell 17.8% to $8.9 million, compared to $10.8 million a year earlier, primarily due to higher transactional gains last year that were not replicated to the same extent in the current quarter.
Operating income was $2.3 million, compared with $3.8 million a year earlier. Operating margin was 25.8%, compared with 35.0% a year earlier. The decrease in operating income and margin was due to lower revenues.
During the quarter ended June 30, 2014, we entered into an agreement to repurchase the rights, title, and interest to payments due under a financing arrangement. This financing arrangement was previously assigned to a third party financial institution and accounted for as a secured borrowing. In conjunction with the repurchase agreement, we recognized a gain of $1.4 million, which is included in other income.
Recent Corporate Developments and Recognitions
| · | On April 1, 2014, ePlus announced it had been recognized as Cloud Builder of the Year at the Cisco Partner Summit. ePlus also received the following recognitions at the summit: |
| o | Commercial Partner of the Year, Americas |
| o | Architectural Excellence - Collaboration, US/Canada: East |
| o | Cisco Meraki Elevate East Partner of the Year, US/Canada: East |
| o | SLED Partner of the Year, US/Canada: West |
| · | On April 8, 2014, ePlus was named co-winner in the Enterprise Group U.S. 2014 Top Growth Partner HP Storage VAR category at Hewlett-Packard’s Global Partner Conference. ePlus is a HP Platinum Partner with HP specializations in Converged Infrastructure and Printing and Computing Systems. |
| · | On April 15, 2014, ePlus announced it had been named to CRN’s annual list of the Tech Elite 250. The list recognized an elite group of IT solution providers that have invested in training and education needed to earn the most advanced technical certifications from leading vendors. |
| · | On May 2, 2014, ePlus achieved Telehealth Authorized Technology Provider (ATP) status from Cisco. This designation recognized ePlus as having fulfilled the training requirements and program prerequisites to sell, deploy and support Cisco Telehealth solutions. |
| · | On June 2, 2014, ePlus announced that it had started including components of its Executive Services Portfolio (ESP) in its Managed Services contracts. The ESP portfolio delivers tailored, strategic, technology-driven insight and guidance to align customers’ IT initiatives with business objectives. ESP components included in the Managed Services Engagement include infrastructure analysis, organization fingerprinting, strategic roadmapping and participation in an annual CIO executive council. |
| · | On June 17, 2014, ePlus announced it has been named to the 2014 Solution Provider 500 by CRN Magazine. The list ranks the top revenue-generating technology integrators in the U.S. and Canada with a focus on the current cloud and services-driven IT era. The list has categories including managed IT services, hardware sales and software sales. ePlus ranked 36th out of 500. |
Conference Call Information
The Company will host a conference call on Wednesday, August 6, 2014 at 5:00 p.m. Eastern Time to review and discuss the Company’s results for the first quarter ended June 30, 2014. The call can be accessed live over the phone by dialing (877) 870-9226, or for international callers, (973) 890-8320. Passcode 64359871. A live webcast will be available via the Company’s investor relations Web site at http://www.ePlus.com/investors.
A replay will be available shortly after the call and can be accessed by dialing (855) 859-2056, domestic, international, or for international callers, (404) 537-3406. Passcode 64359871. The replay will be available until August 8, 2014, and the webcast will also remain available for replay via the Company’s investor relations page of its Web site.
About ePlus inc.
ePlus is a leading integrator of technology solutions. ePlus enables organizations to optimize their IT infrastructure and supply chain processes by delivering complex information technology solutions, which may include managed and professional services and products from top manufacturers, flexible financing, and proprietary software. Founded in 1990, ePlus has more than 900 associates serving commercial, state, municipal, and education customers nationally. The Company is headquartered in Herndon, VA. 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® 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.
Use of Non-GAAP Financial Information
In this release, ePlus discloses certain non-GAAP financial measures. A “non-GAAP financial measure” is a numerical measure of a company’s historical or future financial performance, financial position or cash flows that excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable measure calculated and presented in accordance with GAAP in the statement of income, balance sheet or statement of cash flows of the Company; or includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable measure so calculated and presented. ePlus uses the financial measures that are included in this news release in its internal evaluation and management of its business. Management believes that these measures and the information they provide are useful to investors because they permit investors to view the Company’s performance using the same tools that ePlus uses and to better evaluate the Company’s ongoing business performance. These measures should not be considered an alternative to measurements required by accounting principles generally accepted in the United States (GAAP), such as net earnings and earnings per share. These non-GAAP measures are unlikely to be comparable to non-GAAP information provided by other companies. In accordance with SEC regulations, reconciliation of the ePlus GAAP information to the non-GAAP information is provided in the table below. We will also make available on the investor relations page of our website at www.eplus.com this press release, and a reconciliation of the difference between the GAAP and non-GAAP financial measures.
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 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; significant adverse changes in, reductions in, or losses of relationships with major customers or vendors; our ability to implement comprehensive plans to archive customer account coverage, cost containment, asset rationalization, systems integration and other key strategies; our ability to secure our electronic and other confidential information; changes to our senior management team; 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.
Contact:
Kley Parkhurst, SVP
ePlus inc.
kparkhurst@ePlus.com
703-984-8150
| ePlus inc. AND SUBSIDIARIES | | | | |
| UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS | | | | | | | |
| | | | | | | | |
| | | As of | | As of | | | |
| | | June 30, 2014 | | March 31, 2014 | | | |
| ASSETS | | (amounts in thousands) | | | |
| | | | | | | | |
| Current assets: | | | | | | | |
| Cash and cash equivalents | | $66,852 | | $80,179 | | | |
| Accounts receivable—trade, net | | 178,506 | | 211,314 | | | |
| Accounts receivable—other, net | | 28,932 | | 31,902 | | | |
| Inventories—net | | 29,661 | | 22,629 | | | |
| Financing receivables—net, current | | 57,982 | | 57,749 | | | |
| Deferred costs | | 9,356 | | 10,819 | | | |
| Deferred tax assets | | 3,742 | | 3,742 | | | |
| Other current assets | | 12,845 | | 6,925 | | | |
| Total current assets | | 387,876 | | 425,259 | | | |
| | | | | | | | |
| Financing receivables and operating leases—net | | 100,412 | | 85,990 | | | |
| Property, equipment and other assets | | 7,995 | | 8,013 | | | |
| Goodwill and other intangible assets | | 34,203 | | 34,583 | | | |
| TOTAL ASSETS | | $530,486 | | $553,845 | | | |
| | | | | | | | |
| LIABILITIES AND STOCKHOLDERS' EQUITY | | | | | | | |
| | | | | | | | |
| LIABILITIES | | | | | | | |
| | | | | | | | |
| Current liabilities: | | | | | | | |
| Accounts payable—equipment | | $23,856 | | $6,772 | | | |
| Accounts payable—trade | | 36,393 | | 61,940 | | | |
| Accounts payable—floor plan | | 103,960 | | 93,416 | | | |
| Salaries and commissions payable | | 10,989 | | 12,401 | | | |
| Deferred revenue | | 19,271 | | 21,840 | | | |
| Recourse notes payable - current | | 311 | | 1,460 | | | |
| Non-recourse notes payable - current | | 34,589 | | 30,907 | | | |
| Other current liabilities | | 14,706 | | 15,382 | | | |
| Total current liabilities | | 244,075 | | 244,118 | | | |
| | | | | | | | |
| Recourse notes payable - long term | | 1,638 | | 2,100 | | | |
| Non-recourse notes payable - long term | | 29,630 | | 34,421 | | | |
| Deferred tax liability - long term | | 5,001 | | 5,001 | | | |
| Other liabilities | | 1,480 | | 1,822 | | | |
| TOTAL LIABILITIES | | 281,824 | | 287,462 | | | |
| | | | | | | | |
| COMMITMENTS AND CONTINGENCIES | | | | | | | |
| | | | | | | | |
| STOCKHOLDERS' EQUITY | | | | | | | |
| | | | | | | | |
| Preferred stock, $.01 per share par value; 2,000 shares authorized; none issued or outstanding | | - | | - | | | |
| Common stock, $.01 per share par value; 25,000 shares authorized; 13,105 issued and 7,528 outstanding at June 30, 2014 and 13,026 issued and 8,036 outstanding at March 31, 2014 | | 131 | | 130 | | | |
| Additional paid-in capital | | 107,858 | | 105,924 | | | |
| Treasury stock, at cost, 5,577 and 4,990 shares, respectively | | (109,743) | | (80,494) | | | |
| Retained earnings | | 250,114 | | 240,637 | | | |
| Accumulated other comprehensive income—foreign currency translation adjustment | | 302 | | 186 | | | |
| Total Stockholders' Equity | | 248,662 | | 266,383 | | | |
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | | $530,486 | | $553,845 | | | |
| | | | | |
| ePlus inc. AND SUBSIDIARIES | | | |
| UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS |
| | | | |
| | Three Months Ended June 30, |
| | 2014 | | 2013 |
| | (amounts in thousands, except per share data) |
| | | | |
| Sales of product and services | $261,356 | | $247,037 |
| Financing revenue | 8,874 | | 10,760 |
| Fee and other income | 2,074 | | 1,520 |
| TOTAL REVENUES | 272,304 | | 259,317 |
| | | | |
| Cost of sales, product and services | 212,908 | | 203,330 |
| Direct lease costs | 2,957 | | 3,253 |
| Cost of revenues | 215,865 | | 206,583 |
| | | | |
| Professional and other fees | 1,833 | | 3,238 |
| Salaries and benefits | 32,947 | | 30,682 |
| General and administrative expenses | 6,273 | | 5,001 |
| Interest and financing costs | 644 | | 460 |
| Operating expenses | 41,697 | | 39,381 |
| | | | |
| OPERATING INCOME | 14,742 | | 13,353 |
| | | | |
| Other income | 1,434 | | - |
| | | | |
| EARNINGS BEFORE PROVISION FOR INCOME TAXES | 16,176 | | 13,353 |
| | | | |
| PROVISION FOR INCOME TAXES | 6,699 | | 5,503 |
| | | | |
| NET EARNINGS | $9,477 | | $7,850 |
| | | | |
| NET EARNINGS PER COMMON SHARE—BASIC | $1.26 | | $0.98 |
| NET EARNINGS PER COMMON SHARE—DILUTED | $1.25 | | $0.97 |
| | | | |
| WEIGHTED AVERAGE SHARES OUTSTANDING—BASIC | 7,504 | | 7,914 |
| WEIGHTED AVERAGE SHARES OUTSTANDING—DILUTED | 7,559 | | 7,985 |
| | | | |
| ePlus inc. AND SUBSIDIARIES | | | | |
| RECONCILIATION OF NON-GAAP INFORMATION | | | | |
| | Three Months Ended June 30, | |
| | 2014 | | 2013 [2] | |
| | (in thousands, except per share amount) | |
| | | | | |
| GAAP earnings before provision for income taxes as reported | $16,176 | | $13,353 | |
| Less: Other income | 1,434 | | - | |
| Non-GAAP earnings before provision for income taxes | 14,742 | | 13,353 | |
| Non-GAAP provision for income taxes [1] | 6,105 | | 5,503 | |
| Non-GAAP net earnings | $8,637 | | $7,850 | |
| | | | | |
| GAAP net earnings per common share – diluted | $1.25 | | $0.97 | |
| Non-GAAP net earnings per common share – diluted | $1.14 | | $0.97 | |
| | | | | |
| [1] Non-GAAP tax rate is calculated at the same tax rate as GAAP earnings. | |
| [2] Figures in the 2013 column are GAAP and provided for comparative purposes. | |
