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ePlus Reports Fourth Quarter and Fiscal Year 2023 Financial Results



ePlus Reports Fourth Quarter and Fiscal Year 2023 Financial Results

Fourth Quarter Fiscal Year 2023

  • Net sales increased 9.0% to $492.2 million from last year's quarter; technology segment net sales increased 15.2% to $483.2 million; service revenues increased 11.5% to $68.7 million.
  • Technology segment gross billings increased 17.6% to $733.1 million.
  • Consolidated gross profit increased 14.7% to $132.3 million.
  • Consolidated gross margin was 26.9%, up 140 basis points.
  • Net earnings increased 35.5% to $32.9 million.
  • Adjusted EBITDA increased 22.4% to $48.7 million.
  • Diluted earnings per share increased 35.2% to $1.23. Non-GAAP diluted earnings per share increased 34.7% to $1.36.

Fiscal Year 2023

  • Net sales increased 13.5% to $2,067.7 million; technology segment net sales increased 16.3% to $2,015.2 million; service revenues increased 9.9% to $264.4 million.
  • Technology segment gross billings increased 19.8% to $3,145.9 million.
  • Consolidated gross profit increased 12.3% to $517.5 million.
  • Consolidated gross margin was 25.0%, compared with 25.3% last year.
  • Net earnings increased 13.0% to $119.4 million.
  • Adjusted EBITDA increased 12.1% to $190.6 million.
  • Diluted earnings per share increased 14.0% to $4.48. Non-GAAP diluted earnings per share increased 14.4% to $5.02.

 

HERNDON, Va., May 24, 2023 /PRNewswire/ -- ePlus inc. (NASDAQ:  PLUS), a leading provider of technology and financing solutions, today announced financial results for the three months and fiscal year ended March 31, 2023.

 

Management Comment

"Our strong fourth quarter results concluded a solid fiscal year that highlighted the success of our growth strategy and our ability to meet our customers' needs with innovative solutions despite persistent supply chain constraints," said Mark Marron, president and chief executive officer of ePlus. "Fourth quarter net sales improved 9% and fiscal 2023 net sales advanced 13.5%, reflecting our strategic focus on serving higher-value and higher-growth end markets, such as cloud, security and collaboration.  Over the past year, we invested significantly in our people to expand our service offerings and build on our market position.  Even with these investments, we managed overall expenses efficiently and generated diluted earnings per share growth of 35% in the fourth quarter and 14% for fiscal 2023.  I am pleased with our financial performance and proud of our team's consistent execution to achieve these results."

Mr. Marron continued, "Earlier this month, we announced the acquisition of certain assets and liabilities of the Network Solutions Group (NSG) business unit of CCI Systems, Inc., a leading solutions provider to broadband Service Providers. This acquisition both complements our existing solutions offerings in the telecom market and expands our customer base nationwide. We believe this strategic acquisition will drive enhanced value and performance over time."

Fourth Quarter Fiscal Year 2023 Results

For the fourth quarter ended March 31, 2023, as compared to the fourth quarter of the prior fiscal year ended March 31, 2022:

Consolidated net sales increased 9.0% to $492.2 million, from $451.5 million.

Technology segment net sales increased 15.2% to $483.2 million, from $419.4 million primarily due to an increase in sales to customers in the technology and SLED end markets.   Service revenues increased 11.5% to $68.7 million, from $61.6 million due to increases in professional services and managed services.  Gross billings increased 17.6% to $733.1 million from $623.6 million.  Gross billings is an operational metric defined as the total dollar value of customer purchases of goods and services including shipping charges during the period, net of customer returns and credit memos, sales, or other taxes.

Financing segment net sales decreased 72.1% to $9.0 million, from $32.1 million and cost of goods sold was lower by $18.6 million, both due to a decline in sales of leased equipment. Gross profit in the financing segment was lower by $4.6 million due to lower sales of leased equipment and lower transactional gains.

Consolidated gross profit increased 14.7% to $132.3 million, from $115.4 million. Consolidated gross margin was 26.9%, up from 25.5% last year due to higher margins from sales of product and services in our technology segment.

Operating expenses were $89.9 million, up 11.2% from $80.9 million last year, primarily due to increases in salaries and benefits, variable compensation stemming from higher gross profit, professional fees, software license and maintenance, and travel expenses, partially offset by changes in allowance for credit losses.  Our headcount at the end of the quarter was 1,754, up 177 from a year ago, partially due to the Future Com acquisition on July 15, 2022. Of the 177 additional employees, 140 were customer facing employees, including 84 professional services and technical support personnel due to demand for our services.

Consolidated operating income increased 23.0% to $42.4 million. 

Our effective tax rate for the current quarter was 22.4%, lower than the prior year quarter of 29.6%, due to lower than forecasted non-deductible expenses, increased benefits from foreign sales along with favorable state return to provision adjustments.

Net earnings increased 35.5% to $32.9 million.

Adjusted EBITDA increased 22.4% to $48.7 million.

Diluted earnings per share was $1.23, compared with $0.91 in the prior year quarter. Non-GAAP diluted earnings per share was $1.36, compared with $1.01 last year. 

Fiscal Year 2023 Results

For the fiscal year ended March 31, 2023, as compared to the prior fiscal year ended March 31, 2022:

Consolidated net sales increased 13.5% to $2,067.7 million, from $1,821.0 million.

Technology segment net sales increased 16.3% to $2,015.2 million, from $1,733.0 million primarily due to an increase in sales to customers in the technology and SLED end markets.  Service revenues increased 9.9% to $264.4 million, from $240.6 million due to increases in professional services and managed services.  Gross billings was $3,145.9 million, an increase of 19.8% from $2,625.7 million. 

Financing segment net sales decreased 40.4% to $52.5 million, from $88.0 million, and cost of sales was $9.4 million, 73.1% lower than the prior year, both primarily due to fewer early lease buyouts and a decline in sales of leased equipment.   Gross profit in the financing segment decreased $9.8 million due to lower sales of leased equipment, transactional gains and portfolio earnings.

Consolidated gross profit increased 12.3% to $517.5 million, from $461.0 million. Consolidated gross margin was 25.0%, overall consistent with the consolidated gross margin of 25.3% last year, as higher product margins were offset by lower service margins.

Operating expenses were $351.4 million, up 12.0% from $313.7 million last year, primarily due to increases in variable compensation stemming from higher gross profit, salaries and benefits, professional fees, advertising and marketing, software license and maintenance, travel expenses, and changes in allowance for credit losses.

Consolidated operating income increased 12.8% to $166.2 million. During fiscal year 2023, we incurred foreign currency transaction losses of $5.4 million, which was partially offset by $1.9 million related to our receipt of funds resulting from our claim in a class action lawsuit.

Our effective tax rate for the current year period was 26.8%, lower than last year's 28.1%, due to lower than forecasted non-deductible expenses, increased benefits from foreign sales along with favorable state return to provision adjustments.

Net earnings increased 13.0% to $119.4 million.

Adjusted EBITDA increased 12.1% to $190.6 million.

Diluted earnings per share was $4.48, compared with $3.93 in the prior year. Non-GAAP diluted earnings per share was $5.02, compared with $4.39 last year.

Balance Sheet Highlights

As of March 31, 2023, ePlus had cash and cash equivalents of $103.1 million, compared with $155.4 million as of March 31, 2022.  Inventory, which represents equipment ordered by customers but not yet delivered, increased 56.9% to $243.3 million from March 31, 2022 due to ongoing projects with customers coupled with continued supply chain constraints. Total stockholders' equity was $782.3 million, compared with $660.7 million as of March 31, 2022.  Total shares outstanding were 26.9 million on both March 31, 2023 and March 31, 2022.

Summary and Outlook

"ePlus achieved solid sales and earnings growth in fiscal 2023, driven by the outstanding performance of our team, the strength of our competitive positioning and our expanded breadth of offerings. Supported by our extensive vendor network, we continued to deliver transformative solutions that enabled our more than 4,300 customers to realize their technology goals and progress on their long-term IT strategies."

Mr. Marron concluded, "Despite an uncertain economic environment, we have a resilient business model and the capabilities to deliver cost effective technology solutions for our customers.  With IT spending still focused on solutions that drive growth, continue digital transformation, generate efficiencies, and strengthen cybersecurity, we believe our portfolio is strongly aligned with our customers' needs.  We remain committed to building long-term stakeholder value through consistent execution of our growth strategy both organically and through acquisitions and generating further operational efficiencies."

Recent Corporate Developments/Recognitions

In the month of April:

  • Renewed Cisco Advanced Customer Experience Specialization.
  • Announced a new share repurchase program of up to one million shares.

In the month of March:

  • Achieved inclusion on the CRN Tech Elite 250 List for tenth year.
  • Announced the expansion of ePlus' credit facility.
  • Announced the launch of ePlus Automated Virtual Assistant for Collaboration Spaces.

In the month of February:

  • Recognized on CRN's 2023 Managed Service Provider 500 List in the Elite 150 category.
  • Announced Cloud Hosted Services Powered by VMware Cloud on AWS.

Conference Call Information

ePlus will hold a conference call and webcast at 4:30 p.m. ET on May 24, 2023:

Audio Webcast (Live & Replay):           https://events.q4inc.com/attendee/484026067

Live Call:

(888) 330-2469 (toll-free/domestic)


(240) 789-2740 (international)

Replay:

(800) 770- 2030 (toll-free/domestic) or


(647) 362-9199 (international)

Passcode:

5403833 (live call and replay)

 

A replay of the call will be available approximately two hours after the call through May 31, 2023. A transcript of the call will also be available on the ePlus Investor Relations website at https://www.eplus.com/investors.

About ePlus inc.

ePlus has an unwavering and relentless focus on leveraging technology to create inspired and transformative business outcomes for its customers. Offering a robust portfolio of solutions, as well as a full set of consultative and managed services across the technology spectrum, ePlus has proudly achieved more than 30 years of success in the business, carrying customers forward through adversity, rapidly changing environments, and other obstacles. ePlus is a trusted advisor, bringing expertise, credentials, talent and a thorough understanding of innovative technologies, spanning security, cloud, data center, networking, collaboration and emerging solutions, to organizations across all industry segments. With complete lifecycle management services and flexible payment solutions, ePlus' more than 1,700 associates are focused on cultivating positive customer experiences and are dedicated to their craft, harnessing new knowledge while applying decades of proven experience. ePlus is headquartered in Virginia, with offices in the United States, UK, Europe, and Asia–Pacific. For more information, visit www.eplus.com, call 888-482-1122, or email info@eplus.com.  Connect with ePlus on LinkedIn, Twitter, Facebook, and Instagram.  ePlus, Where Technology Means More®.

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.

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, ongoing remote work trends, and the increase in cybersecurity attacks that have occurred while employees work remotely; national and international political instability fostering uncertainty and volatility in the global economy including exposure to fluctuation in foreign currency rates, interest rates, and  inflation, including increases in our costs and our ability to increase prices to our customers which may result in adverse changes in our gross profit; the possibility of a reduction of vendor incentives provided to us; significant and rapid inflation may cause price, wage, and interest rate increases, as well as increases in operating costs which may impact the arrangements that have pricing commitments over the term of the agreement; our ability to identify acquisition candidates, or perform sufficient due diligence prior to completing an acquisition, or failure to integrate a completed acquisition may affect our earnings; supply chain issues, including a shortage of IT products, may increase our costs or cause a delay in fulfilling customer orders, or increase our need for working capital, or completing professional services, or purchasing IT products or services needed to support our internal infrastructure or operations, resulting in an adverse impact on our financial results; significant adverse changes in, reductions in, or loss of one or more of our larger volume customers or vendors; a possible decrease in the capital spending budgets of our customers or a decrease in purchases from us; our ability to raise capital, maintain or increase as needed our lines of credit with vendors or floor planning facility, or obtain debt for our financing transactions or the effect of those changes on our common stock price; our ability to implement comprehensive plans for the integration of sales forces, cost containment, asset rationalization, systems integration and other key strategies; our ability to secure our own and our customers' electronic and other confidential information, while maintaining compliance with evolving data privacy and regulatory laws and regulations; our ability to remain secure during a cybersecurity attack, including both disruptions in our or our vendors' IT systems and data and audio communication networks; our reliance on third parties to perform some of our service obligations to our customers, and the reliance on a small number of key vendors in our supply chain with whom we do not have long-term supply agreements, guaranteed price agreements, or assurance of stock availability; changes in the IT industry and/or rapid changes in product offerings, including the proliferation of the cloud, infrastructure as a service, software as a service and platform as a service; maintaining and increasing advanced professional services by recruiting and retaining highly skilled, competent personnel and vendor certifications; 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.

ePlus inc. AND SUBSIDIARIES





CONSOLIDATED BALANCE SHEETS





(in thousands, except per share amounts)












March 31, 2023


March 31, 2022

ASSETS










Current assets:





Cash and cash equivalents


$103,093


$155,378

Accounts receivable—trade, net


504,122


430,380

Accounts receivable—other, net


55,508


48,673

Inventories


243,286


155,060

Financing receivables—net, current


89,829


61,492

Deferred costs


44,191


32,555

Other current assets


55,101


13,944

Total current assets


1,095,130


897,482






Financing receivables and operating leases—net


84,417


64,292

Deferred tax asset


3,682


5,050

Property, equipment and other assets


70,447


45,586

Goodwill


136,105


126,543

Other intangible assets—net


25,045


27,250

TOTAL ASSETS


$1,414,826


$1,166,203






LIABILITIES AND STOCKHOLDERS' EQUITY










LIABILITIES










Current liabilities:





Accounts payable


$220,159


$136,161

Accounts payable—floor plan


134,615


145,323

Salaries and commissions payable


37,336


39,602

Deferred revenue


114,028


86,469

Recourse notes payable—current


5,997


7,316

Non-recourse notes payable—current


24,819


17,070

Other current liabilities


24,372


28,095

Total current liabilities


561,326


460,036






Recourse notes payable—long-term


-


5,792

Non-recourse notes payable—long-term


9,522


4,108

Deferred tax liability


715


-

Other liabilities


60,998


35,529

TOTAL LIABILITIES 


632,561


505,465






COMMITMENTS AND CONTINGENCIES










STOCKHOLDERS' EQUITY





Preferred stock, $0.01 per share par value; 2,000 shares
     authorized; none outstanding


-


-

Common stock, $0.01 per share par value; 50,000 shares
     authorized; 26,905 outstanding at March 31, 2023 and
     26,886 outstanding at March 31, 2022


272


270

Additional paid-in capital


167,303


159,480

Treasury stock, at cost, 261 shares at March 31, 2023 and  





        130 shares at March 31, 2022


(14,080)


(6,734)

Retained earnings


627,202


507,846

Accumulated other comprehensive income—foreign currency





        translation adjustment


1,568


(124)

Total Stockholders' Equity


782,265


660,738

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY


$1,414,826


$1,166,203

 

ePlus inc. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)



Three Months Ended March 31,


Year Ended March 31,


2023


2022


2023


2022









Net sales








     Product

$423,462


$389,870


$1,803,275


$1,580,394

     Services

68,715


61,649


264,443


240,625

          Total

492,177


451,519


2,067,718


1,821,019









Cost of sales








     Product

317,148


296,277


1,379,500


1,210,943

     Services

42,704


39,891


170,694


149,094

          Total

359,852


336,168


1,550,194


1,360,037









Gross profit

132,325


115,351


517,524


460,982









Selling, general, and administrative

85,319


76,964


333,520


297,117

Depreciation and amortization

3,322


3,270


13,709


14,646

Interest and financing costs

1,270


641


4,133


1,903

Operating expenses

89,911


80,875


351,362


313,666









Operating income

42,414


34,476


166,162


147,316









Other income (expense), net

(76)


(55)


(3,188)


(432)









Earnings before taxes

42,338


34,421


162,974


146,884









Provision for income taxes

9,484


10,176


43,618


41,284









Net earnings

$32,854


$24,245


$119,356


$105,600









Net earnings per common share—basic

$1.24


$0.91


$4.49


$3.96

Net earnings per common share—diluted

$1.23


$0.91


$4.48


$3.93









Weighted average common shares outstanding—basic

26,593


26,553


26,569


26,638

Weighted average common shares outstanding—diluted

26,702


26,703


26,654


26,866

 

Technology Segment


Three Months Ended March 31,




Year Ended March 31,




2023


2022


Change


2023


2022


Change


(in thousands)




(in thousands)















Net sales












    Product

$414,493


$357,753


15.9 %


$1,750,802


$1,492,411


17.3 %

    Services

68,715


61,649


11.5 %


264,443


240,625


9.9 %

          Total

483,208


419,402


15.2 %


2,015,245


1,733,036


16.3 %













Cost of sales












     Product

315,794


276,352


14.3 %


1,370,061


1,175,789


16.5 %

     Services

42,704


39,891


7.1 %


170,694


149,094


14.5 %

          Total

358,498


316,243


13.4 %


1,540,755


1,324,883


16.3 %













Gross profit

124,710


103,159


20.9 %


474,490


408,153


16.3 %













Selling, general, and administrative

82,738


73,321


12.8 %


317,885


283,690


12.1 %

Depreciation and amortization

3,294


3,243


1.6 %


13,598


14,535


(6.4 %)

Interest and financing costs

780


235


231.9 %


2,897


928


212.2 %

Operating expenses

86,812


76,799


13.0 %


334,380


299,153


11.8 %













Operating income

$37,898


$26,360


43.8 %


$140,110


$109,000


28.5 %

Gross billings

$733,085


$623,558


17.6 %


$3,145,888


$2,625,749


19.8 %

Adjusted EBITDA

$44,049


$31,542


39.7 %


$164,184


$131,353


25.0 %

 

Technology Segment Net Sales by Customer End Market


Year Ended March 31,




2023


2022


Change


(in thousands)



Telecom, Media & Entertainment

$532,921


$502,408


6.1 %

Technology

393,594


250,485


57.1 %

SLED

290,624


241,769


20.2 %

Healthcare

274,936


270,481


1.6 %

Financial Services 

156,257


155,160


0.7 %

All others

366,913


312,733


17.3 %

Total

$2,015,245


$1,733,036


16.3 %

 

Financing Segment


Three Months Ended March 31,




Year Ended March 31,




2023


2022


Change


2023


2022


Change


(in thousands)




(in thousands)















Net sales

$8,969


$32,117


(72.1 %)


$52,473


$87,983


(40.4 %)

Cost of sales

1,354


19,925


(93.2 %)


9,439


35,154


(73.1 %)

Gross profit

7,615


12,192


(37.5 %)


43,034


52,829


(18.5 %)













Selling, general, and administrative

2,581


3,643


(29.2 %)


15,635


13,427


16.4 %

Depreciation and amortization

28


27


3.7 %


111


111


0.0 %

Interest and financing costs

490


406


20.7 %


1,236


975


26.8 %

Operating expenses

3,099


4,076


(24.0 %)


16,982


14,513


17.0 %













Operating income

$4,516


8,116


(44.4 %)


$26,052


$38,316


(32.0 %)

Adjusted EBITDA

$4,610


8,198


(43.8 %)


$26,408


$38,651


(31.7 %)

 

ePlus inc. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP INFORMATION

We included reconciliations below for the following non-GAAP financial measures: (i) Adjusted EBITDA, (ii) Segment Adjusted EBITDA, (iii) non-GAAP Net Earnings and (iv) non-GAAP Net Earnings per Common Share - Diluted.

We define adjusted EBITDA as net earnings calculated in accordance with GAAP, adjusted for the following: interest expense, depreciation and amortization, share based compensation, acquisition and integration expense, provision for income taxes, and other income (expense). Segment adjusted EBITDA is defined as operating income calculated in accordance with GAAP, adjusted for interest expense, share based compensation, acquisition and integration expenses, and depreciation and amortization. We consider the interest on notes payable from our financing segment and depreciation expense presented within cost of sales, which includes depreciation on assets financed as operating leases, to be operating expenses. 

Non-GAAP net earnings and non-GAAP net earnings per common share – diluted are based on net earnings calculated in accordance with GAAP, adjusted to exclude other income (expense), share based compensation, and acquisition related amortization expense, and the related tax effects.

We use the above non-GAAP financial measures as supplemental measures of our performance to gain insight into our operating performance and performance trends. We believe that such non-GAAP financial measures provide management and investors a useful measure for period-to-period comparisons of our business and operating results by excluding items that management believes are not reflective of our underlying operating performance. Accordingly, we believe that such non-GAAP financial measures provide useful information to investors and others in understanding and evaluating our operating results.

Our use of non-GAAP information as analytical tools has limitations, and you should not consider them in isolation or as substitutes for analysis of our financial results as reported under GAAP. In addition, other companies, including companies in our industry, might calculate adjusted EBITDA, non-GAAP net earnings and non-GAAP net earnings per common share or similarly titled measures differently, which may reduce their usefulness as comparative measures.


Three Months Ended March 31,


Year Ended March 31,


2023


2022


2023


2022


(in thousands)

Consolidated
















Net earnings

$32,854


$24,245


$119,356


$105,600

Provision for income taxes

9,484


10,176


43,618


41,284

Depreciation and amortization [1]

3,322


3,270


13,709


14,646

Share based compensation

2,143


1,759


7,824


7,114

Interest and financing costs

780


235


2,897


928

Other expense, net [2]

76


55


3,188


432

Adjusted EBITDA

$48,659


$39,740


$190,592


$170,004









 

 


Three Months Ended March 31,


Year Ended March 31,


2023


2022


2023


2022


(in thousands)

Technology Segment








Operating income

$37,898


$26,360


$140,110


$109,000

Depreciation and amortization [1]

3,294


3,243


13,598


14,535

Share based compensation

2,077


1,704


7,579


6,890

Interest and financing costs

780


235


2,897


928

Adjusted EBITDA

$44,049


$31,542


$164,184


$131,353









Financing Segment










Operating income

$4,516


$8,116


$26,052




$38,316

Depreciation and amortization [1]

28


27


111




111

Share based compensation

66


55


245




224

Adjusted EBITDA

$4,610


$8,198


$26,408




$38,651











 

 


Three Months Ended March 31,


Year Ended March 31,


2023


2022


2023


2022


(in thousands)

GAAP: Earnings before taxes

$42,338


$34,421


$162,974


$146,884

Share based compensation

2,143


$1,759


7,824


7,114

Acquisition related amortization expense [3]

2,229


2,218


9,411


10,072

Other expense, net [2]

76


55


3,188


432

Non-GAAP: Earnings before provision for income taxes

46,786


38,453


183,397


164,502









GAAP: Provision for income taxes

9,484


10,176


43,618


41,284

Share based compensation

480


520


2,104


2,014

Acquisition related amortization expense [3]

497


647


2,527


2,803

Other expense, net [2]

17


16


950


120

Tax benefit (expense) on restricted stock

-


-


267


317

Non-GAAP: Provision for income taxes

10,478


11,359


49,466


46,538









Non-GAAP: Net earnings

$36,308


$27,094


$133,931


$117,964









 

 


Three Months Ended March 31,


Year Ended March 31,


2023


2022


2023


2022









GAAP: Net earnings per common share – diluted

$1.23


$0.91


$4.48


$3.93









Share based compensation

0.07


0.05


0.21


0.20

Acquisition related amortization expense [3]

0.06


0.05


0.26


0.26

Other expense, net [2]

-


-


0.08


0.01

Tax benefit (expense) on restricted stock

-


-


(0.01)


(0.01)

Total non-GAAP adjustments – net of tax

0.13


0.10


0.54


0.46









Non-GAAP: Net earnings per common share – diluted

$1.36


$1.01


$5.02


$4.39

 

 

[1] Amount consists of depreciation and amortization for assets used internally.

[2] Legal settlement, interest income and foreign currency transaction gains and losses.

[3] Amount consists of amortization of intangible assets from acquired businesses.

 


 




Contact

Kley Parkhurst, SVP
ePlus inc.
kparkhurst@eplus.com 
703-984-8150

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