News Column

ePlus Reports Third Quarter Financial Results

February 5, 2014

HERNDON, Va. , Feb. 5, 2014 (GLOBE NEWSWIRE) -- ePlus inc. (Nasdaq:PLUS), 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 18.1% 17.5% Total revenue . Total revenues for the nine months ended December 31, 2013 increased by $52.1 million , or 7.3%, to $769.5 million due to increases in demand for products and services primarily from the Company's Fortune 100 customers and increases in ePlus professional service revenues. Total costs and expenses . Total costs and expenses for the nine months ended December 31, 2013 increased $49.5 million , or 7.3%, to $731.0 million due to increases in cost of sales, product and services, salaries and benefits and general and administrative expenses. Gross margin on the sale of product and services increased to 18.1% for the nine months ended December 31, 2013 , from 17.5% in the prior year from increases in ePlus professional service revenues, as well as sales of third party software assurance, maintenance and services which are recorded on a net basis. These increases were offset by a slight reduction in the amount of vendor incentives earned during the nine months ended December 31, 2013 . Salaries and benefits expense increased $10.8 million to $83.6 million , compared to $72.8 million in the prior year, an increase of 14.8%. This increase was driven by an increase in the number of employees to 903 and the related benefits as well as higher commissions resulting from higher gross profits. General and administrative expenses increased $1.4 million , or 10.0%, to $15.6 million during the nine months ended December 31, 2013 compared to the prior year, due to higher rent and travel expenses as a result of our continued expansion efforts, as well as an adjustment to increase the fair value of contingent consideration related to a previous acquisition, which was settled and paid during the current fiscal year. Segment earnings . As a result of the foregoing, segment earnings increased $2.6 million to $38.5 million for the nine months ended December 31, 2013 , an increase of 7.3%. Financing Segment The results of operations for the financing segment for the nine months ended December 31, 2013 and 2012 were as follows (in thousands): Nine Months Ended December 31 , 2013 2012 Change Financing revenue $ 27,989 $ 27,823 $ 166 0.6% Fee and other income 94 1,511 (1,417) (93.8%) Total revenues 28,083 29,334 (1,251) (4.3%) Direct lease costs 9,803 7,638 2,165 28.3% Professional and other fees 940 1,514 (574) (37.9%) Salaries and benefits 7,559 7,982 (423) (5.3%) General and administrative 861 792 69 8.7% Interest and financing costs 1,325 1,298 27 2.1% Total costs and expenses 20,488 19,224 1,264 6.6% Segment earnings $ 7,595 $ 10,110 $ (2,515) (24.9%) Total revenues . Total revenues decreased by $1.3 million , or 4.3%, to $28.1 million for the nine months ended December 31, 2013 due to decreases in remarketing and broker fee income. Our investments in notes and leases increased as of December 31, 2013 to $140.1 million from $123.1 million in the prior year. Total costs and expenses . Total costs and expenses increased $1.3 million to $20.5 million . Direct lease costs increased $2.2 million , or 28.3%, to $9.8 million mostly due to increases in depreciation expense for equipment under operating leases. Professional and other fees decreased by $574 thousand , or 37.9%, due to lower broker fees and legal fees. Salary and benefits expenses decreased by $423 thousand , or 5.3% to $7.6 million , due to lower commissions and bonuses as a result of the decrease in revenues during the period. Our financing segment employed 58 people as of December 31, 2013 , down slightly from 59 people as of December 31, 2012 . Non-recourse and recourse notes payable was $53.4 million at December 31, 2013 , as compared to $36.2 million at December 31, 2012 . Our weighted average interest rate for notes payable declined to 3.49% as of December 31, 2013 , as compared to 4.83% as of December 31, 2012 , and as a result, interest and financing costs were flat as compared to the prior year. Segment earnings . As a result of the foregoing, segment earnings decreased $2.5 million to $7.6 million for the nine months ended December 31, 2013 . Conference Call Information The Company will host a conference call on Wednesday, February 5, 2014 at 5:00 p.m. Eastern Time to review and discuss the Company's results for the third quarter ended December 31 , 2013. The call can be accessed live over the phone by dialing (877) 870-9226, or for international callers, (973) 890-8320. Passcode 35792296. A live webcast will be available via the Company's investor relations Web site at www.eplus.com/investors . A replay will be available shortly after the call and can be accessed by dialing (855) 859-2056, or for international callers, (404) 537-3406. Passcode 68944298. The replay will be available until February 12, 2014 , and the webcast will also remain available for replay via the Company's investor relations page of its Web site. About ePlus inc. ePlus is a leading integrator of technology solutions. ePlus enables organizations to optimize their IT infrastructure and supply chain processes by delivering world-class IT products from top manufacturers, managed and professional services, flexible lease financing, proprietary software, and patented business methods and systems. Founded in 1990, ePlus has more than 900 associates serving federal, state, municipal, and commercial customers nationally. The Company is headquartered in Herndon , VA. For more information, visit www.eplus.com , call 888-482-1122, or email info@eplus.com . Connect with ePlus on Facebook at www.facebook.com/ePlusinc and on Twitter at www.twitter.com/ePlusinc . ePlus ® and ePlus products referenced herein are either registered trademarks or trademarks of ePlus inc. in the United States and/or other countries. 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, possible adverse effects resulting from financial market disruption and general slowdown of the U.S. economy such as our current and potential customers' delaying or reducing technology purchases, increasing credit risk associated with our customers and vendors, reduction of vendor incentive programs, the possibility of additional goodwill impairment charges, and restrictions on our access to capital necessary to fund our operations; 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 adapt to changes in the IT industry and/or rapid change in product standards; our ability to hire and retain sufficient personnel; our ability to realize our investment in leased equipment; our ability to protect our intellectual property; our ability to consummate and integrate acquisitions; the creditworthiness of our customers; our ability to raise capital and obtain non-recourse financing for our transactions; our ability to reserve adequately for credit losses; the impact of competition in our markets; the possibility of defects in our products or catalog content data; and other risks or uncertainties detailed in our reports filed with the Securities and Exchange Commission including the Company's most recent reports on Form 10-Q and Form 10-K. 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 UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS As of As of December 31, 2013 March 31, 2013 ASSETS (amounts in thousands) Cash and cash equivalents $ 40,498 $ 52,720 Short-term investments -- 982 Accounts receivable—trade 214,123 173,445 Accounts receivable—other 27,821 18,809 Inventories—net 24,285 14,795 Notes receivable—net 43,312 31,893 Investment in leases and leased equipment—net 96,760 90,710 Property and equipment—net 4,253 2,213 Deferred costs 11,473 10,234 Other assets 9,238 9,107 Goodwill and other intangible assets 35,014 32,964 TOTAL ASSETS $ 506,777 $ 437,872 LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Accounts payable—equipment $ 7,799 $ 5,379 Accounts payable—trade 43,313 31,331 Accounts payable—floor plan 84,761 66,251 Salaries and commissions payable 12,274 12,911 Deferred revenue 23,108 16,970 Accrued expenses and other liabilities 17,897 20,264 Recourse notes payable 2,914 1,484 Non-recourse notes payable 50,451 40,255 Deferred tax liability 4,516 4,795 Total Liabilities 247,033 199,640 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY Preferred stock, $.01 par value; 2,000,000 shares authorized; none issued or outstanding -- -- Common stock, $.01 par value; 25,000,000 shares authorized; 13,025,745 issued and 8,088,484 outstanding at December 31, 2013 and 12,899,386 issued and 8,149,706 outstanding at March 31, 2013 130 129 Additional paid-in capital 104,525 99,641 Treasury stock, at cost, 4,937,261 and 4,749,680 shares, respectively (77,614) (67,306) Retained earnings 232,414 205,358 Accumulated other comprehensive income—foreign currency translation adjustment 289 410 Total Stockholders' Equity 259,744 238,232 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 506,777 $ 437,872 ePlus inc. AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS Three Months Ended Nine Months Ended December 31 , December 31 , 2013 2012 2013 2012 (amounts in thousands, except shares and per share data) Sales of product and services $ 255,747 $ 228,053 $ 764,067 $712,513 Financing revenue 9,228 12,510 27,989 27,823 Fee and other income 2,207 1,462 5,572 6,464 TOTAL REVENUES 267,182 242,025 797,628 746,800 COSTS AND EXPENSES Cost of sales, product and services 207,378 188,103 625,562 587,693 Direct lease costs 3,055 2,934 9,803 7,638 210,433 191,037 635,365 595,331 Professional and other fees 2,008 2,498 7,154 8,318 Salaries and benefits 30,795 27,535 91,162 80,808 General and administrative expenses 5,397 4,909 16,457 14,975 Interest and financing costs 496 517 1,389 1,368 38,696 35,459 116,162 105,469 TOTAL COSTS AND EXPENSES 249,129 226,496 751,527 700,800 EARNINGS BEFORE PROVISION FOR INCOME TAXES 18,053 15,529 46,101 46,000 PROVISION FOR INCOME TAXES 7,443 6,496 19,050 18,872 NET EARNINGS $ 10,610 $ 9,033 $ 27,051 $27,128 NET EARNINGS PER COMMON SHARE—BASIC $ 1.33 $ 1.11 $ 3.37 $ 3.42 NET EARNINGS PER COMMON SHARE—DILUTED $ 1.32 $ 1.11 $ 3.34 $ 3.38 WEIGHTED AVERAGE SHARES OUTSTANDING—BASIC 7,950,354 7,843,153 7,946,746 7,778,174 WEIGHTED AVERAGE SHARES OUTSTANDING—DILUTED 7,982,418 7,843,153 8,012,840 7,867,982 ePlus inc. AND SUBSIDIARIES UNAUDITED STATEMENTS OF OPERATIONS BY SEGMENT Three Months Ended December 31 , 2013 2012 Technology Financing Technology Financing (amounts in thousands) Sales of product and services $ 255,747 $ -- $ 228,053 $ -- Financing revenue -- 9,228 -- 12,510 Fee and other income 2,193 14 1,360 102 TOTAL REVENUE 257,940 9,242 229,413 12,612 Cost of sales, product and services 207,378 -- 188,103 -- Direct lease costs -- 3,055 -- 2,934 Professional and other fees 1,770 238 2,041 457 Salaries and benefits 28,460 2,335 24,330 3,205 General and administrative expenses 5,082 315 4,733 176 Interest and financing costs 19 477 19 498 TOTAL COSTS AND EXPENSES 242,709 6,420 219,226 7,270 SEGMENT EARNINGS $ 15,231 $ 2,822 $ 10,187 $ 5,342 Nine Months Ended December 31 , 2013 2012 Technology Financing Technology Financing (amounts in thousands) Sales of product and services $ 764,067 $ -- $ 712,513 $ -- Financing revenues -- 27,989 -- 27,823 Fee and other income 5,478 94 4,953 1,511 TOTAL REVENUES 769,545 28,083 717,466 29,334 Cost of sales, product and services 625,562 -- 587,693 -- Direct lease costs -- 9,803 -- 7,638 Professional and other fees 6,214 940 6,804 1,514 Salaries and benefits 83,603 7,559 72,826 7,982 General and administrative expenses 15,596 861 14,183 792 Interest and financing costs 64 1,325 70 1,298 TOTAL COSTS AND EXPENSES 731,039 20,488 681,576 19,224 SEGMENT EARNINGS $ 38,506 $ 7,595 $ 35,890 $ 10,110 CONTACT: Kleyton Parkhurst SVP ePlus inc. investors@eplus.com 703-984-8150 Source: ePlus inc.


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