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ePlus Reports Fourth Quarter and Fiscal 2015 Results


Fourth Quarter Fiscal Year 2015
  • Net sales increased 2.8% from fourth quarter 2014
  • Consolidated gross margin increased to 22.0%; gross margin on sales of products and services expands 120 basis points to 20.0%
  • Earnings per diluted share of $1.22, up 18.4%
  • Adjusted EBITDA of $16.3 million, up 10.5%

Fiscal Year 2015

  • Net sales up 8.1%; technology segment net sales up 8.5%
  • Consolidated gross margin of 21.4%; gross margin on sales of products and services increased 110 basis points to 19.4%
  • Earnings per diluted share of $6.19; non-GAAP earnings per diluted share of $5.59
  • Adjusted EBITDA of $75.0 million, up 19.3%

HERNDON, VA - May 28, 2015 - 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, 2015.

Management Comment

"Results for the fourth quarter of fiscal 2015 represented another period of solid execution, delivering operating income growth of 7.7%, which is more than twice net sales growth," said Phillip G. Norton, CEO, chairman and president of ePlus. "In our technology segment, net sales increased 2.8%, demonstrating our success delivering complex IT solutions around cloud, unified communications and collaboration, data center, and security to our nationwide customer base, supported and complemented by professional and managed services.

"Fiscal year 2015 results showed positive comparisons from fiscal 2014, highlighting our ability to grow ahead of the rate of the overall IT market. Net sales in the technology segment were up 8.5%, including an increase in services revenue, as we grew sales to both new and existing customers. We continued to leverage our nationwide presence, multi-faceted expertise, and nurture relationships with both established and emerging vendors. Consolidated operating income grew 17.7% despite higher operating expenses as we expanded headcount to capture marketplace opportunities. Non-GAAP earnings per share, which excludes certain non-operating income, was up 27.9%. Other achievements for the year included increasing our involvement in the Californian State, Local and Education (SLED) market through the acquisition of Evolve, expanding our presence in New England and New York, and receiving multiple certifications and awards from our key vendors," Mr. Norton commented.

Fourth Quarter Fiscal 2015 Results

For the fourth quarter ended March 31, 2015:

Consolidated net sales rose 2.8% to $267.3 million, from $259.9 million in the fourth quarter of fiscal 2014.

Technology segment net sales increased 2.8% to $258.9 million, up from $251.9 million in the fourth quarter of fiscal 2014. Non-GAAP gross sales of product and services increased 4.9% from $324.2 million to $340.1 million which are revenues prior to the reclassification to net sales for sales of third-party software assurance, maintenance and services.

Financing segment net sales rose 4.5% to $8.4 million, up from $8.0 million in the fourth quarter of fiscal 2014.

Consolidated operating income increased 7.7% to $15.1 million, up from $14.0 million in the fourth quarter of fiscal 2014.

Net earnings increased 8.4% to $8.9 million, up from $8.2 million in the fourth quarter of fiscal 2014.

Earnings per diluted share rose 18.4% to $1.22, up from $1.03 in the fourth quarter of fiscal 2014.

Adjusted EBITDA increased to $16.3 million from $14.7 million, a 10.5% increase over the prior year's period.

Fiscal 2015 Results

For the fiscal year ended March 31, 2015:

Consolidated net sales rose 8.1% to $1.14 billion, up from $1.06 billion in fiscal 2014.

Technology segment net sales rose 8.5% to $1.11 billion, up from $1.02 billion in fiscal 2014. Non-GAAP gross sales of products and services grew 12.5% to $1.44 billion.

Financing segment net sales were $34.8 million, compared with $36.1 million in fiscal 2014, due to lower transactional gains, offset by higher post-contract earnings.

Consolidated operating income rose 17.7% to $70.7 million, up from $60.1 million in fiscal 2014.

Net earnings were $45.8 million, inclusive of non-operating income from a gain on retirement of a liability and the Company's claim in a class action lawsuit. Excluding this non-operating income, non-GAAP net earnings was $41.4 million, up 17.3% from $35.3 million in fiscal 2014.

Earnings per diluted share were $6.19. Exclusive of non-operating income, non-GAAP earnings per diluted share were $5.59, up 27.9% from $4.37 in fiscal 2014.

Adjusted EBITDA rose 19.3% to $75.0 million, up from $62.9 million in fiscal 2014.

Balance Sheet Highlights

At March 31, 2015, ePlus had cash and cash equivalents of $76.2 million, down from $80.2 million on March 31, 2014. Total stockholders' equity was $279.3 million and shares outstanding were 7.4 million, compared with stockholders' equity of $266.4 million and shares outstanding of 8.0 million on March 31, 2014.

Summary and Outlook

"Following our success in the fourth quarter and fiscal year 2015, we believe we are well-positioned to capture opportunities for the most in-demand and emerging IT solutions. We have invested in additional engineering and sales resources to meet the growing demand from our diversified client base, and gain new customers. We believe that our services-based, go-to-market consultative strategy, which is led by assessments and supplemented by managed services, positions us to continue our track record of growing faster than the overall IT market. As always, we are highly focused on the bottom line and maintaining excellent margin performance. Finally, our balance sheet remains robust, including $76 million of cash and cash equivalents, giving us the ability to take advantage of organic growth opportunities and the financial flexibility to continue to make accretive acquisitions," Mr. Norton concluded.

Results of Operations - Three Months Ended March 31, 2015

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 organizations and state and local governments. The financing segment consists of the financing of equipment, software and related services to commercial organizations, state and local governments, and government contractors.

Technology Segment

The results of operations for the technology segment for the three months ended March 31, 2015 and 2014 were as follows (dollars in thousands):

  Three Months Ended March 31,
  2015 2014 Change
Sales of product and services $257,265 $249,307 $7,958 3.2%
Fee and other income 1,596 2,559 (963) (37.6%)
Net sales 258,861 251,866 6,995 2.8%
         
Cost of sales, product and services 205,821 202,313 3,508 1.7%
         
Gross profit 53,040 49,553 3,487 7.0%
         
Professional and other fees 1,275 1,343 (68) (5.1%)
Salaries and benefits 32,805 29,878 2,927 9.8%
General and administrative 6,058 5,507 551 10.0%
Interest and financing costs 19 20 (1) (5.0%)
Operating expenses 40,157 36,748 3,409 9.3%
         
Segment earnings $12,883 $12,805 $78 0.6%

Net sales increased 2.8% to $258.9 million, up from $251.9 million in the fourth quarter of fiscal 2014. The increase reflects a 4.9% increase in non-GAAP gross sales of products and services, which were offset by a shift in product mix, as a higher proportion of sales consisted of third-party software assurance, maintenance and services, which are presented on a net basis.

The shift in product mix resulted in an increase in gross margin of product and services to 20.0% as compared to 18.8% in the year ago quarter.

Operating expenses rose 9.3% to $40.2 million, compared with $36.7 million in the fourth quarter of fiscal 2014.  This increase reflects growth in headcount, variable compensation due to the increase in gross profit, and non-cash expenses related to the acquisition of Evolve Technology Group in August 2014.

Segment earnings were $12.9 million, compared with $12.8 million in the fourth quarter of fiscal 2014.

Financing Segment

The results of operations for the financing segment for the three months ended March 31, 2015 and 2014 were as follows (dollars in thousands):

  Three Months Ended March 31,
  2015 2014 Change
Financing revenue $8,389 $7,907 $482 6.1%
Fee and other income 15 135 (120) (88.9%)
Net sales 8,404 8,042 362 4.5%
         
Direct lease costs 2,698 2,945 (247) (8.4%)
         
Gross profit 5,706 5,097 609 12.0%
         
Professional and other fees 387 544 (157) (28.9%)
Salaries and benefits 2,450 2,111 339 16.1%
General and administrative 142 711 (569) (80.0%)
Interest and financing costs 530 539 (9) (1.7%)
Operating expenses 3,509 3,905 (396) (10.1%)
         
Segment earnings $2,197 $1,192 $1,005 84.3%

Net sales rose 4.5% to $8.4 million, up from $8.0 million in the fourth quarter of fiscal 2014.

Segment earnings rose 84.3% to $2.2 million, up from $1.2 million in the fourth quarter of fiscal 2014. The increase in earnings was due to an increase in transactional gains, a decrease in depreciation expense related to the Company's operating leases, and a decrease in the Company's reserve for credit losses.

Results of Operations - Year Ended March 31, 2015

Technology Segment

The results of operations for the technology segment for the years ended March 31, 2015 and 2014 were as follows (dollars in thousands):

  Year Ended March 31,
  2015 2014 Change
Sales of product and services $1,100,884 $1,013,374 $87,510 8.6%
Fee and other income 7,565 8,037 (472) (5.9%)
Net sales 1,108,449 1,021,411 87,038 8.5%
         
Cost of sales, product and services 887,673 827,875 59,798 7.2%
         
Gross profit 220,776 193,536 27,240

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