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ePlus Reports Second Quarter Financial Results


 Earnings Conference Call Scheduled for November 7, 2013

HERNDON, VA - November 7, 2013 - ePlus inc. (Nasdaq NGM: PLUS - news), a leading provider of technology solutions, today announced financial results. For the second quarter of fiscal year 2014, which ended September 30, 2013, total revenues increased 4.3% to $271.1 million compared to $260.1 million in the quarter ended September 30, 2012. Net earnings were $8.6 million in the second quarter of fiscal year 2014, as compared to $10.0 million in the prior year. Fully diluted earnings per common share were $1.06 compared to $1.25 in the quarter ended September 30, 2012.

"For the first time ever, ePlus has reached the milestone of recording over $1 billion in revenue for the trailing 12-month period," stated Phillip G. Norton, Chairman, President and Chief Executive Officer. "We have continued to focus on our strategy of building a national footprint and providing advanced technology solutions to our customers, and as a result, revenues increased 4.3% during the quarter. We are committed to meeting customer needs for advanced technology solutions, such as big data, cloud, mobile device management, security solutions, and software defined networks."

Mr. Norton continued, "As the rate of change in these evolving technologies accelerates, we need to hire the best and brightest engineers and salespeople to provide our customers with the technological leadership they expect from ePlus. At the same time, we have taken approximately $2.9 million of annual costs out of SG&A during our third fiscal year quarter, and we should start to see an improved expense run rate beginning in our fourth quarter. We continue to focus on our strategic goal of becoming more operationally efficient by improving internal processes and reducing costs."

As of September 30, 2013, the Company had $53.7 million of cash and cash equivalents, as compared to $52.7 million on March 31, 2013. As of September 30, 2013, the Company had total stockholders' equity of $252.8 million and 8.2 million shares outstanding, as compared to $238.2 million and 8.1 million shares, respectively, as of March 31, 2013.

Results of Operations - Three Months Ended September 30, 2013

The Company presents its financial results in two segments, the technology and financing segments. The technology segment sells information technology equipment, 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 segment offers lease and other financing solutions to commercial and governmental entities nationwide.

Technology Segment

The results of operations for the technology segment for the three months ended September 30, 2013 and 2012 were as follows (in thousands):

  Three Months Ended September 30,
  2013 2012 Change
Sales of product and services $261,283  $250,178 $11,105 4.4%
Fee and other income 1,829 1,591 238 15.0%
Total revenues 263,112 251,769 11,343 4.5%
         
Cost of sales, product and services 214,854 205,199 9,655 4.7%
Professional and other fees 1,580 2,260 (680) (30.1%)
Salaries and benefits 27,244 24,414 2,830 11.6%
General and administrative expenses 5,701 5,011 690 13.8%
Interest and financing costs  26  21 5 23.8%
Total costs and expenses 249,405 236,905 12,500 5.3%
         
Segment earnings $13,707  $14,864  $(1,157) (7.8%)
         
Gross margin, product and services 17.8% 18.0%    

Total revenues. Total revenues increased 4.5% to $263.1 million compared to $251.8 million in the quarter ended September 30, 2012. The increase in revenues was due to increases in demand for products and services. 

Total costs and expenses. Total costs and expenses were $249.4 million compared to $236.9 million in the same quarter last year, an increase of 5.3%. The increase in costs and expenses was primarily due to increases in cost of sales, product, and services, which was consistent with the increase in sales of product and services.

Gross margin on sales of product and services decreased to 17.8% for the quarter ended September 30, 2013 from 18.0% for the same quarter last year, which was primarily due to the amount of vendor incentives earned as well as the amount of revenues from the sale of third-party software assurance, maintenance, and services, which are presented on a net basis. These decreases were partially offset by higher service revenues.

The increase in costs and expenses was also attributable to increases in salaries and benefits, due to increases in personnel and higher commissions.  The technology segment had 881 employees as of September 30, 2013, an increase of 88, or 11.1%, from September 30, 2012. Most of the increase relates to sales and engineering personnel, as the Company continues to invest in sales and support personnel in order to expand its geographical presence and solutions offerings.

Segment earnings. Segment earnings decreased 7.8% to $13.7 million for the quarter.

Financing Segment

The results of operations for the financing segment for the three months ended September 30, 2013 and 2012 were as follows (in thousands):

  Three Months Ended September 30,  
  2013 2012 Change
Financing revenue $8,001  $7,413 $588 7.9%
Fee and other income 16 869 (853) (98.2%)
Total revenues 8,017 8,282 (265) (3.2%)
         
Direct lease costs 3,495 2,461 1,034 42.0%
Professional and other fees 328 447 (119) (26.6%)
Salaries and benefits 2,441 2,505 (64) (2.6%)
General and administrative expenses 358 400 (42) (10.5%)
Interest and financing costs 407 425 (18) (4.2%)
Total costs and expenses 7,029 6,238 791 12.7%
         
Segment earnings $988 $2,044 $(1,056) (51.7%)
         

Total revenues. Total revenues decreased 3.2% to $8.0 million compared to $8.3 million in the quarter ended September 30, 2012. The decrease in revenues was primarily the result of lower remarketing income, partially offset by higher net gains on sales of financial assets of $1.2 million during the three months ended September 30, 2013, as compared to $0.5 million last year. As of September 30, 2013, the Company had $140.5 million of investments in notes and leases, compared to $130.5 million at September 30, 2012, an increase of $10.0 million, or 7.7%.

Total costs and expenses. Total costs and expenses were $7.0 million, 12.7% higher than the quarter ended September 30, 2012, which was driven by higher direct lease costs due to increases in depreciation expense for operating leases.

Segment earnings. Segment earnings were $1.0 million compared to $2.0 million for the same quarter of the prior year.

Results of Operations - Six Months Ended September 30, 2013

Technology Segment

The results of operations for the technology segment for the six months ended September 30, 2013 and 2012 were as follows (in thousands):

  Six Months Ended September 30,    
  2013 2012 Change
Sales of product and services $508,320 $484,460 $23,860 4.9%
Fee and other income 3,286 3,593  (307) (8.5%)
Total revenues 511,606 488,053 23,553 4.8%
         
Cost of sales, products and services 418,184 399,590 18,594 4.7%
Professional and other fees 4,443 4,763  (320) (6.7%)
Salaries and benefits 55,142 48,496 6,646 13.7%
General and administrative 10,515 9,450 1,065 11.3%
Interest and financing costs 46 52  (6) (11.5%)
Total costs and expenses 488,330 462,351 25,979 5.6%
         
Segment earnings $23,276 $25,702 $(2,426) (9.4%)
         
Gross margin, products and services 17.7% 17.5%    

Total revenue. Total revenues for the six months ended September 30, 2013 increased by $23.6 million, or 4.8%, to $511.6 million due to increases in demand for products and services.

Total costs and expenses. Total costs and expenses for the six months ended September 30, 2013 increased $26.0 million, or 5.6%, to $488.3 million due to increases in cost of sales, product, and services; salaries and benefits; and general and administrative expenses. The increase in cost of sales, product, and services was consistent with the increase in sales of product and services. Gross margin on the sale of product and services increased to 17.7% for the six months ended September 30, 2013, from 17.5% in the prior year due to higher service revenues, which were offset by a decrease in vendor incentives earned.

Salaries and benefits expense increased $6.6 million, or 13.7% to $55.1 million compared to $48.5 million in the prior year. This increase was driven by increases in the number of employees and related benefits as well as commission expenses. The technology segment had 881 employees as of September 30, 2013, an increase of 88 from 793 at September 30, 2012. Most of the increase relates to sales and engineering personnel. In addition, commission expenses increased due to the increase in the gross profit from sales of product and services during the six months ended September 30, 2013.

General and administrative expenses increased $1.1 million, or 11.3%, to $10.5 million during the six months ended September 30, 2013 compared to prior year, due to increases in office locations, higher rent, and travel expenses from additional headcount, as well as adjustments to the fair value of contingent consideration related to a previous acquisition, which was settled and paid during the second quarter.

Segment earnings. As a result of the foregoing, segment earnings decreased $2.4 million, or 9.4%, to $23.3 million for the six months ended September 30, 2013.

Financing Segment

The results of operations for the financing segment for the six months ended September 30, 2013 and 2012 were as follows (in thousands):

  Six Months Ended September 30,    
  2013 2012 Change
Financing revenue  $18,761  $15,313  $3,448 22.5%
Fee and other income 79 1,409  (1,330) (94.4%)
Total revenues 18,840 16,722

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