PLUS...Double Digit Third Quarter Operating Income Growth on Steady Sales
Third Quarter Fiscal Year 2021
Net sales decreased 0.3% to $427.6 million; technology segment net sales increased 1.2% to $415.6 million; service revenues increased 3.3% to $52.1 million.
Adjusted gross billings increased 0.3% to $587.8 million.
Consolidated gross profit decreased 5.3% to $98.2 million.
Consolidated gross margin was 23.0%, a decrease of 120 basis points.
Net earnings increased 10.7% to $21.6 million.
Adjusted EBITDA increased 8.0% to $34.4 million.
Diluted earnings per share increased 11.0% to $1.62. Non-GAAP diluted earnings per share increased 9.1% to $1.79.
First Nine Months Fiscal Year 2021
Net sales decreased 0.5% to $1,215.7 million; technology segment net sales decreased 0.1% to $1,176.2 million; service revenues increased 3.5% to $149.3 million.
Adjusted gross billings increased 1.3% to $1,735.3 million.
Consolidated gross profit decreased 1.2% to $295.7 million.
Consolidated gross margin was 24.3%, a decrease of 20 basis points.
Net earnings increased 5.4% to $58.8 million.
Adjusted EBITDA increased 3.0% to $98.7 million.
Diluted earnings per share increased 5.5% to $4.39. Non-GAAP diluted earnings per share increased 1.6% to $4.97.
ePlus inc. (NASDAQ: PLUS), a leading provider of technology and financing solutions, today announced financial results for the three and nine months ended December 31, 2020.
Management Comment
"We are very pleased with ePlus’ third quarter performance. Our strategic focus on supporting customers’ hybrid work environments with customized cloud, collaboration and security solutions continues to gain relevance. Net earnings increased 10.7% on flat revenues, driven by lower operating expenses and an increase in higher margin services revenues. Security solutions increased to 23.3% of adjusted gross billings, compared to 20.3% the prior quarter, as customers prioritized securing their remote workforce capabilities," noted Mark Marron, president and chief executive officer.
"The demand for our annuity-type and managed services and security continues to demonstrate that our long-term strategic focus in these areas is delivering the right solutions and value to our customers. Our technology segment’s operating income increased 41%, which more than offset a difficult quarter over quarter comparison in our financing segment. While we expect operating costs will increase post-pandemic, we do anticipate certain sustainable cost savings, especially from real estate and travel and entertainment costs."
Third Quarter Fiscal 2021 Results
For the third quarter ended December 31, 2020 as compared to the third quarter of the prior fiscal year ended December 31, 2019:
Consolidated net sales decreased 0.3% to $427.6 million, from $429.0 million.
Technology segment net sales increased 1.2% to $415.6 million, from $410.6 million due to an increase in sales of product and services. Service revenues increased 3.3% to $52.1 million, from $50.4 million due to an increase in managed services. Adjusted gross billings increased 0.3% to $587.8 million from $586.3 million.
Financing segment net sales decreased 34.5% to $12.0 million, from $18.4 million due to lower transactional gains, as we had several large government-related transactions last year.
Consolidated gross profit decreased 5.3% to $98.2 million, from $103.7 million. Consolidated gross margin was 23.0%, down from 24.2% last year, primarily due to lower product margins, partially offset by higher service margins.
Operating expenses were $68.9 million, down 11.0% from $77.4 million last year, primarily due to decreases in salaries and benefits, travel expenses, and advertising & marketing. Our headcount at the end of the quarter was 1,586, down 16 from a year ago and up 89 from the sequential quarter. The acquisition of System Management Planning, Inc. on December 31, 2020 added 102 employees to our headcount, of which 93 were customer-facing roles.
Consolidated operating income increased 11.4% to $29.3 million.
Our effective tax rate for the current quarter was 28.1%, lower than the prior year quarter of 28.3%.
Net earnings increased 10.7% to $21.6 million.
Adjusted EBITDA increased 8.0% to $34.4 million, from $31.9 million.
Diluted earnings per share was $1.62, compared with $1.46 in the prior year quarter. Non-GAAP diluted earnings per share was $1.79, compared with $1.64 last year.
First Nine Months Fiscal 2021 Results
For the nine months ended December 31, 2020 as compared to the nine months of the prior fiscal year ended December 31, 2019:
Consolidated net sales decreased 0.5% to $1,215.7 million, from $1,221.9 million.
Technology segment net sales decreased 0.1% to $1,176.2 million, from $1,176.9 million due to a larger portion of our sales that were recognized on a net basis. Service revenues increased 3.5% to $149.3 million, from $144.3 million primarily due to an increase in managed services. Adjusted gross billings was $1,735.3 million, an increase of 1.3% from $1,713.8 million.
Financing segment net sales decreased 12.2% to $39.6 million, from $45.0 million, primarily due to a decrease in transactional gains.
Consolidated gross profit decreased 1.2% to $295.7 million, from $299.4 million. Consolidated gross margin was 24.3%, compared with 24.5% last year, due to lower gross margin in our financing segment.
Operating expenses were $212.9 million, down 4.1% from $222.0 last year, primarily due to a decrease in travel expenses, healthcare cost, advertising & marketing, and acquisition related expenses.
Consolidated operating income increased 6.9% to $82.7 million.
Our effective tax rate for the first nine months of the current year was 29.8%, higher than last year of 28.7%, due to an adjustment to the federal benefit from state taxes.
Net earnings increased 5.4% to $58.8 million.
Adjusted EBITDA increased 3.0% to $98.7 million, from $95.8 million.
Diluted earnings per share was $4.39, compared with $4.16 in the prior year quarter. Non-GAAP diluted earnings per share was $4.97, compared with $4.89 last year.
Balance Sheet Highlights
As of December 31, 2020, ePlus had cash and cash equivalents of $86.5 million, compared with $86.2 million as of March 31, 2020. Inventory, which represents equipment ordered by customers but not yet delivered, increased 61.7% due to ongoing customer projects. Total shareholders’ equity was $545.0 million, compared with $486.1 million as of March 31, 2020. Total shares outstanding were 13.5 million on December 31, 2020 and March 31, 2020.
Summary and Outlook
"ePlus continues to execute on our strategy of providing premier technology solutions to our customers while expanding our offerings and our geographic footprint. The recent acquisition of System Management Planning (SMP) increases our presence in Upstate New York and the Northeast and adds to our existing collaboration expertise and staffing solutions, while building on our enterprise and state, local and education customer base.
"We will continue to utilize our strong financial position to add customer facing personnel, gain new customers, and adopt new technology solutions, both through prudent organic investments and acquisitions, to complement our geographic footprint and technology solutions portfolio, in support of long term, sustainable growth," Mr. Marron concluded.
Recent Corporate Developments/Recognitions
In the month of January:
ePlus announced the acquisition of the business of System Management and Planning, Inc. (SMP), an established provider of technology solutions and services in upstate New York and the Northeast.
In the month of December:
ePlus announced that it has teamed up with the Garden of Dreams Foundation and the Radio City Rockettes creating an exclusive, one-of-a-kind holiday celebration, entitled Delivering Joy.
ePlus announced that it developed a methodology to help Amazon Web Services (AWS) customers accelerate adoption of the new AWS Gateway Load Balancer (GWLB) service, which makes it easy to deploy, scale, and manage third-party virtual appliances.
ePlus announced participation with AWS on the launch of Professional Services in AWS Marketplace.
In the month of November:
ePlus announced that it is the recipient of a Cisco® Partner Summit Digital Geographical Region award for Americas Technology Excellence Partner of the Year: Data Center.
ePlus celebrated its 30th anniversary as a leading global technology and financing provider helping advise and enable customers to achieve more from their technology and flexible financing options.
In the month of October:
ePlus announced that it successfully completed multiple attestations for controls surrounding its Managed Services Center, Cloud Hosted Services, Service Desk and OneSource family of software products.
Conference Call Information
ePlus will hold a conference call and webcast at 4:30 p.m. ET on February 3, 2021:
In a new process, participants must pre-register in advance to listen or participate in the call. Once registered, the call-in numbers will be provided by email.
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