ePlus Reports First Quarter Financial Results

-Double Digit Top-Line Growth Driven by Solid Demand for Technology Offerings-

HERNDON, VA – August 3, 2022 – ePlus inc. (NASDAQ:  PLUS), a leading provider of technology and financing solutions, today announced financial results for the three months ended June 30, 2022.

Management Comment

“Our fiscal 2023 year is off to a solid start, driven by broad-based demand across our customer base and end market segments,” said Mark Marron, president and chief executive officer of ePlus. “Our technology segment generated double-digit sales growth, reflecting continued strength for our solutions and services, particularly in our focus areas of hybrid cloud and security. We continued to invest in customer-facing headcount, successfully expanding our employee base by nearly 6% year-over-year.  While first quarter earnings were limited by our investments in personnel, foreign currency transaction losses, and higher reserves for credit losses, our enhanced capabilities strengthen our position for the long-term as an essential partner to help our customers achieve their strategic technology priorities.  Our financing segment had lower earnings compared to last year’s strong quarter, reflecting the variability of this business on a quarter-to-quarter basis.

Mr. Marron continued, “Cybersecurity remains a top concern for organizations of all sizes amid the adoption of cloud computing and transition to hybrid work environments. We recently announced the acquisition of assets of Future Com, Ltd., a provider of security solutions for middle market and enterprise customers. Future Com broadens our geographic scope in the South-Central U.S. and enhances our capabilities to more comprehensively manage cybersecurity risks for our customers.  Its solutions are complementary to our core security practice and its customers will benefit from ePlus’ broader portfolio across many solution areas.

Prior Period Reclassifications due to Stock Split

Reclassifications of prior period amounts related to number of shares and per share amounts have been made to conform to the current period presentation due to the December 13, 2021, two-for-one stock split.

First Quarter Fiscal 2023 Results

For the first quarter ended June 30, 2022, as compared to the first quarter of the prior fiscal year ended June 30, 2021:

Consolidated net sales increased 10.0% to $458.4 million, from $416.6 million.

Technology segment net sales increased 12.1% to $448.8 million, from $400.4 million due to higher sales of product and services. Service revenues increased 13.5% to $63.1 million, from $55.6 million due to increases in professional services and managed services.  Adjusted gross billings increased 10.9% to $701.9 million from $633.0 million.

Financing segment net sales decreased 41.2% to $9.6 million, from $16.3 million due to lower proceeds from sales of leased equipment and early lease buyouts, as well as lower transaction gains.

Consolidated gross profit increased 7.6% to $113.5 million, from $105.5 million. Consolidated gross margin was 24.8%, down from 25.3% last year, primarily due to lower service margins, partially offset by higher product margins. The decline in service margins was due to increases in third-party costs.

Operating expenses were $80.3 million, up 10.0% from $73.1 million last year, primarily due to increases in variable compensation stemming from higher gross profit, software license and maintenance, travel expenses, as well as changes in reserve for credit losses.  Our headcount at the end of the quarter was 1,637, up 90 from a year ago. We added 79 additional customer facing employees, of which 59 were professional services and technical support personnel due to demand for our services.

Consolidated operating income increased 2.3% to $33.2 million.  During the quarter we incurred foreign currency transaction losses of $2.2 million.

Our effective tax rate for the current quarter was 28.0%, compared with the prior year quarter of 27.8%.

Net earnings decreased 5.0% to $22.3 million.

Adjusted EBITDA was $38.3 million, consistent with the prior year quarter.

Diluted earnings per share was $0.84, compared with $0.87, in the prior year quarter. Non-GAAP diluted earnings per share was $0.99, compared with $0.98 last year.

Balance Sheet Highlights

As of June 30, 2022, ePlus had cash and cash equivalents of $83.5 million, compared with $155.4 million as of March 31, 2022.  Inventory, which represents equipment ordered by customers but not yet delivered, increased 59.2% from March 31, 2022 due to ongoing projects with customers coupled with continued supply chain constraints.  Total stockholders’ equity was $676.3 million, compared with $660.7 million as of March 31, 2022.  Total shares outstanding were 26.9 million on June 30, 2022 and March 31, 2022.

Summary and Outlook

“Supported by solid growth in our adjusted gross billings and backlog, we continue to see favorable market trends for information technology spending in our fiscal 2023.  In this dynamic environment, we remain focused on providing our customers with the integrated services and solutions that help fuel their growth and enhance their efficiency, while managing ever-present cybersecurity risks. Recent investments in our people and in our focus areas are key to driving our growth throughout fiscal 2023 and beyond.”

Mr. Marron concluded, “Product availability remains limited overall and will likely continue to extend timelines for project implementations. The ePlus team continues to perform admirably, leveraging the breadth and strength of our channel partner relationships and developing innovative solutions to minimize the impact on our customers.”

Recent Corporate Developments/Recognitions

Conference Call Information

ePlus will hold a conference call and webcast at 4:30 p.m. ET on August 3, 2022:

The replay of this webcast will be available approximately two hours after the call concludes and be available through August 15, 2022.

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 1,600 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 [email protected].  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, the duration and impact of the COVID-19 pandemic including but not limited to the impact and severity of new variants, vaccine efficacy and immunization rates, the closure of non-essential businesses and other associated governmental containment actions, and the increase in cyber-security 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 price increases to our customers which may result in adverse changes in our gross profit; 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 successfully perform due diligence and integrate acquired businesses; disruptions or a security breach in our or our vendors’ IT systems and data and audio communication networks; 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; the possibility of goodwill impairment charges in the future; significant adverse changes in, reductions in, or losses of relationships with 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; the demand for and acceptance of, our products and services; our ability to adapt our services to meet changes in market developments; our ability to implement comprehensive plans for the integration of sales forces, cost containment, asset rationalization, systems integration and other key strategies; the creditworthiness of our customers and our ability to reserve adequately for credit losses; our ability to secure our own and our customers’ electronic and other confidential information and remain secure during a cyber-security attack; future growth rates in our core businesses; the impact of competition in our markets; domestic and international economic regulations uncertainty (e.g., tariffs, sanctions, and trade agreements); 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; the possibility of defects in our products or catalog content data; our ability to adapt to 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; our ability to realize our investment in leased equipment; 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.

Contact:

Kleyton Parkhurst, SVP

ePlus inc.

703-984-8150

RECONCILIATION OF NON-GAAP INFORMATION

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

We define adjusted gross billings as our technology segment net sales calculated in accordance with GAAP, adjusted to exclude the costs incurred related to sales of third-party maintenance, software assurance and subscription/SaaS licenses, and services.

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.

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 non-GAAP adjusted gross billings, 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.

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

[2] Interest income and foreign currency transaction gains and losses.

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

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