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ePlus Reports Fourth Quarter and Fiscal 2014 Results


For Fourth Quarter 2014

  • Revenue increased 10% to $259.9 million, driven by 11.6% growth in Technology segment
  • Gross profit margin of 21%; 18.8% on Products and Services
  • Earnings Per Diluted Share of $1.03, up 8.4%

For Fiscal Year 2014

  • Revenue increased 7.6% to $1.1 billion
  • Gross profit margin of 20.5%; 18.3% on Products and Services
  • Earnings Per Diluted Share of $4.37, up from $4.32
  • Build out of engineering and sales capabilities to drive future growth

HERNDON, VA - June 3, 2014 - ePlus inc. (NASDAQ NGS: PLUS - news) a leading provider of technology solutions, today announced financial results for the fourth quarter and fiscal year ended March 31, 2014.

Management Comment

"Fiscal 2014 was a year of continued progress for ePlus and demonstrated our ability to generate solid revenue growth, significantly ahead of the overall IT spending growth rate," said Phillip G. Norton, CEO, Chairman and President of ePlus. "Technology revenues increased 8.3% for the year, supported by higher services revenues, as we continued to emphasize this value-added, higher margin part of our business and provide existing and new customers with increasingly complex IT solutions. Our technology segment, which accounted for 96.6% of total revenue, produced a 10.3% increase in earnings before taxes, thanks to our ongoing focus on containing and even reducing certain administrative costs, while expanding our engineering and sales headcount. This positive performance more than offset the year-over-year decrease in revenues from our financing business, where comparisons tend to be more uneven. Demand for our financing services from new and existing customers, however, remains strong.

"After a more muted first half, our technology product and services sales re-accelerated in the second half of fiscal 2014. We ended fiscal 2014 with positive momentum, posting year-over-year improvements in revenues and diluted earnings per share and a 20.5% gross profit margin.

"Our balance sheet remained strong, with cash and cash equivalents of $80.2 million at the end of fiscal 2014 and unfunded financing portfolio assets which could generate up to $71 million in cash proceeds if funded. This provides us with the financial resources and flexibility to take advantage of organic and acquisition growth opportunities in the periods ahead," Mr. Norton noted.

Fiscal Fourth Quarter 2014 Results

  • For the quarter ended March 31, 2014, consolidated revenues increased 10.0% to $259.9 million from $236.3 million in last year's fourth quarter.
     
  • Technology revenues increased 11.6% to $251.9 million, up from $225.7 million a year earlier.
     
  • Financing revenues were $8.0 million, down from $10.6 million in the fiscal 2013 fourth quarter.
     
  • Net earnings rose 6.8% to $8.2 million, or $1.03 per diluted share, compared with $7.7 million, or $0.95 per diluted share, in last year's fourth quarter.

Fiscal 2014 Results

  • For fiscal year 2014, consolidated revenues rose 7.6% to $1.1 billion, from $983.1 million a year earlier.
     
  • Technology revenues were $1.0 billion, an increase of 8.3% from the $943.2 million reported last year.
     
  • Financing revenues for fiscal 2014 were $36.1 million, compared with $39.9 million a year earlier.
     
  • Net earnings rose 1.3% to $35.3 million, or $4.37 per diluted share, compared with $34.8 million, or $4.32 per diluted share in fiscal 2013.

Balance Sheet Highlights

At March 31, 2014, the Company had $80.2 million of cash and cash equivalents and short term investments, compared to $53.7 million on March 31, 2013. Total stockholders' equity was $266.4 million and total diluted shares outstanding were 8.0 million, compared to $238.2 million and 7.9 million diluted shares, respectively, at March 31, 2013.

Summary and Outlook

"Fiscal 2014 was another year of solid performance for ePlus and has set the stage for continued growth and progress. Ongoing investments to expand our engineering capabilities and headcount and increase our sales and marketing personnel and programs, we believe should enable us to continue to grow revenues at a faster pace than the overall IT market and to continue to post significant year-over-year increases in services revenues. We believe that we are competitively well-positioned to achieve organic growth by providing complex IT solutions to a diversified and expanding roster of over 2,800 customers, and that there will be significant opportunities ahead to make accretive acquisitions designed to further broaden our customer base and capabilities, and build out the geographic coverage of our national footprint," Mr. Norton concluded.

Results of Operations - Three Months Ended March 31, 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 licensing of the Company's proprietary software to commercial, and state and local governments and educational institutions. The financing segment consists of the financing of equipment, software and related services to commercial, state and local governments, educational institutions and government contractors.

Technology Segment

The results of operations for the technology segment for the three months ended March 31, 2014 and 2013 were as follows (dollars in thousands):

  Three Months Ended March 31,
  2014 2013 Change
Sales of product and services $249,307 $223,715 $25,592 11.4%
Fee and other income 2,559 1,996 563 28.2%
Total revenues 251,866 225,711 26,155 11.6%
         
Cost of sales, product and services 202,313 179,754 22,559 12.5%
Professional and other fees 1,343 2,833 (1,490) (52.6%)
Salaries and benefits 29,878 27,621 2,257 8.2%
General and administrative 5,507 4,845 662 13.7%
Interest and financing costs 20 19 1 5.3%
Total costs and expenses 239,061 215,072 23,989 11.2%
Segment earnings $12,805 $10,639 $2,166 20.4%
         
Gross margin, product and services 18.8% 19.7%    

Total revenues increased 11.6% to $251.9 million, compared to $225.7 million in last year's fourth quarter, reflecting higher sales of products and services to large and middle-market customers. Total costs and expenses increased 11.2% to $239.1 million, compared with $215.1 million in the year-ago quarter, due to a combination of higher revenues and related costs, and a 6.6% increase in engineering and sales and marketing headcount.

Gross margin on sales of products and services was 18.8%. The 19.7% reported for the same quarter last year included product mix and pricing benefits specific to that period.

Technology segment earnings were $12.8 million, compared with $10.6 million a year earlier.

Financing Segment

The results of operations for the financing segment for the three months ended March 31, 2014 and 2013 were as follows (dollars in thousands):

  Three Months Ended March 31,
  2014 2013 Change
Financing revenue $7,907 $10,561 $(2,654) (25.1%)
Fee and other income 135 40 95 237.5%
Total revenues 8,042 10,601 (2,559) (24.1%)
         
Direct lease costs 2,945 3,254 (309) (9.5%)
Professional and other fees 544 1,947 (1,403) (72.1%)
Salaries and benefits 2,111 2,534 (423) (16.7%)
General and administrative 711 279 432 154.8%
Interest and financing costs 539 481 58 12.1%
Total costs and expenses 6,850 8,495 (1,645) (19.4%)
Segment earnings $1,192 $2,106 $(914) (43.4%)

Total revenues fell 24.1% to $8.0 million, compared to $10.6 million a year earlier, primarily due to lower transactional gains. Total costs and expenses fell 19.4% to $6.9 million, compared with $8.5 million a year earlier, in line with the revenue decline.

Financing segment earnings were $1.2 million, compared to $2.1 million a year earlier.

Results of Operations - Year Ended March 31, 2014

Technology Segment

The results of operations for our technology segment for the years ended March 31, 2014 and 2013 were as follows (dollars in thousands):

  Year Ended March 31,
  2014 2013 Change
Sales of product and services $1,013,374 $936,228 $77,146 8.2%
Fee and other income 8,037 6,949 1,088 15.7%
Total revenues 1,021,411 943,177 78,234 8.3%
         
Cost of sales, product and services 827,875 767,447 60,428 7.9%
Professional and other fees 7,557 9,638 (2,081) (21.6%)
Salaries and benefits 113,481 100,447 13,034 13.0%
General and administrative 21,103 19,028 2,075 10.9%
Interest and financing costs 84 89 (5) (5.6%)
Total costs and expenses 970,100 896,649 73,451 8.2%
Segment earnings $51,311 $46,528 $4,783 10.3%
         
Gross margin, product and services 18.3% 18.0%    

Total revenues for the year ended March 31, 2014 increased 8.3% to $1.0 billion, from $943.2 million a year earlier, assisted by an increase in professional service revenues.

The Company maintained its balanced portfolio of customer end markets. The breakdown of sales of products and services as a percentage of total was as follows:

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