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ePlus Reports Third Quarter Financial Results


Diluted EPS Increased 18.9% on 10.4% Revenue Growth
HERNDON, VA - February 4, 2014 - ePlus inc. (NASDAQ NGS: PLUS - news) today announced financial results for the three and nine months ending December 31, 2013. For the third quarter of its fiscal year ending March 31, 2014, compared to the same quarter last year:
  • Total revenues increased 10.4% to $267.2 million.
  • Net earnings increased 17.5% to $10.6 million.
  • Fully diluted earnings per share increased 18.9% to $1.32 per share.
  • Gross margin on sales of products and services increased 140 basis points to 18.9%.
  • The company repurchased 82,522 shares of common stock.

"Third quarter results illustrate our ability to achieve double-digit revenue growth as a provider of complex integrated solutions to a diversified customer base. Gross margin on sales of products and services expanded by 140 basis points, year-on-year and was up 110 basis points sequentially due primarily to a more favorable business mix. As a result, net earnings increased 17.5%, a faster rate than revenues reflecting our on-going focus on improving productivity and optimizing operations," stated Phillip G. Norton, chairman, CEO, and president of ePlus. "We are continuing to invest in expanding engineering and sales headcount to address market opportunities."

Cash and cash equivalents were $40.5 million at December 31, 2013, down from $52.7 million at March 31, 2013, in part due to the repurchase of $7.8 million in stock, the acquisition of AdviStor, Inc., and purchases of equipment or software that are financed for customers through the Company's financing segment. As of December 31, 2013, the Company had total stockholders' equity of $259.7 million and 8.1 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 December 31, 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 December 31, 2013 and 2012 were as follows (in thousands):

  Three Months Ended December 31,  
         
  2013 2012 Change
Sales of product and services $ 255,747 $ 228,053 $ 27,694 12.1%
Fee and other income 2,193 1,360 833 61.3%
Total revenues 257,940 229,413 28,527 12.4%
         
Cost of sales, product and services 207,378 188,103 19,275 10.2%
Professional and other fees 1,770 2,041 (271) (13.3%)
Salaries and benefits 28,460 24,330 4,130 17.0%
General and administrative expenses 5,082 4,733 349 7.4%
Interest and financing costs 19 19 -- 0.0%
Total costs and expenses 242,709 219,226 23,483 10.7%
         
Segment earnings $ 15,231 $ 10,187 $ 5,044 49.5%
         
Gross margin, product and services 18.9% 17.5%    

Total revenues. Total revenues increased 12.4% to $257.9 million compared to $229.4 million in the quarter ended December 31, 2012, driven by a combination of higher revenues from the Company's Fortune 100 customer base and increased professional service revenues.

Total costs and expenses. Total costs and expenses were $242.7 million compared to $219.2 million in the same quarter last year, an increase of 10.7%. The increase in costs and expenses was due primarily to revenue growth as well as the Company's investments in sales and technical support personnel to provide customers with advanced technology solutions. 

Gross margin on sales of product and services increased 140 basis points to 18.9% for the quarter ended December 31, 2013 from 17.5% for the same quarter last year, primarily due to increases in revenues from sales of third-party software assurance, maintenance, and services, which are presented on a net basis, as well as higher vendor incentives earned. Gross margin increased sequentially from 17.8% in the quarter ending September 30, 2013, which was also due to the increase in sales of third party software assurance, maintenance and service.

The increase in costs and expenses was also attributable to increases in salaries and benefits, due to increases in personnel, higher commissions, and higher healthcare costs. The technology segment's headcount increased 11.5% to 903 employees at the end of the third fiscal quarter from the comparable 2012 period. Most of the increased headcount is comprised of sales and engineering personnel, as ePlus continues to build its solutions offerings and expand its geographical footprint.

Segment earnings. Segment earnings increased 49.5% to $15.2 million for the quarter.

Financing Segment

The results of operations for the financing segment for the three months ended December 31, 2013 and 2012 were as follows (in thousands):

  Three Months Ended December 31,  
         
  2013 2012 Change
Financing revenue $ 9,228 $ 12,510 $ (3,282) (26.2%)
Fee and other income 14 102 (88) (86.3%)
Total revenues 9,242 12,612 (3,370) (26.7%)
         
Direct lease costs 3,055 2,934 121 4.1%
Professional and other fees 238 457 (219) (47.9%)
Salaries and benefits 2,335 3,205 (870) (27.1%)
General and administrative expenses 315 176 139 79.0%
Interest and financing costs 477 498 (21) (4.2%)
Total costs and expenses 6,420 7,270 (850) (11.7%)
         
Segment earnings $ 2,822 $ 5,342 $ (2,520) (47.2%)

Total revenues. Total revenues decreased 26.7% to $9.2 million from $12.6 million in the comparable year-ago period. Last year's results  included  a large amount of net gains from the early termination of certain lease agreements and the buyout of the related equipment. As of December 31, 2013, the Company had $140.1 million of investments in notes and leases compared to $123.1 million at December 31, 2012, an increase of $17.0 million, or 13.8%.

Total costs and expenses. Total costs and expenses were $6.4 million, 11.7% lower than the quarter ended December 31, 2012, due mainly to lower commission expenses. As of December 31, 2013 this segment had 58 employees, down from 59 employed as of December 31, 2012. Professional and other fees decreased $0.2 million, or 47.9% due to lower broker and outside service fees.

Segment earnings. Segment earnings were $2.8 million compared to $5.3 million for the same quarter of the prior year.

Results of Operations - Nine Months Ended December 31, 2013

Technology Segment

The results of operations for the technology segment for the nine months ended December 31, 2013 and 2012 were as follows (in thousands):

  Nine Months Ended December 31,  
         
  2013 2012 Change
Sales of product and services $ 764,067 $ 712,513 $ 51,554 7.2%
Fee and other income 5,478 4,953 525 10.6%
Total revenues 769,545 717,466 52,079 7.3%
         
Cost of sales, products and services 625,562 587,693 37,869 6.4%
Professional and other fees 6,214 6,804 (590) (8.7%)
Salaries and benefits 83,603 72,826 10,777 14.8%
General and administrative 15,596 14,183 1,413 10.0%
Interest and financing costs 64 70 (6) (8.6%)
Total costs and expenses 731,039 681,576 49,463 7.3%
         
Segment earnings $ 38,506 $ 35,890 $ 2,616 7.3%
         
Gross margin, products and services

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