ePlus Reports Second Quarter and First Half Financial Results

GlobeNewswire - finance.yahoo.com Posted 6 years ago
.S. economy such as our current and potential customers delaying or reducing technology purchases, rising interest rates, increasing credit risk associated with our customers and vendors, reduction of vendor incentive programs, and restrictions on our access to capital necessary to fund our operations; our ability to successfully perform due diligence and integrate acquired businesses; disruptions or a security breach in our IT systems and data and audio communication networks; the possibility of goodwill impairment charges in the future; significant adverse changes in, reductions in, or losses of relationships with major customers or vendors; 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; our ability to reserve adequately for credit losses; our ability to secure 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; 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 and software as a service; our ability to realize our investment in leased equipment; our ability to hire and retain sufficient qualified personnel; 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.
kparkhurst@eplus.com
703-984-8150

ePlus inc. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per shares amounts)
       
  September 30, 2018   March 31, 2018
   
ASSETS     (as adjusted)
       
Current assets:      
Cash and cash equivalents $75,647   $118,198
Accounts receivable—trade, net 292,045   268,287
Accounts receivable—other, net 40,312   28,401
Inventories 56,606   39,855
Financing receivables—net, current 86,253   69,936
Deferred costs 16,211   16,589
Other current assets 10,716   23,625
Total current assets 577,790   564,891
       
Financing receivables and operating leases—net 79,119   68,511
Property, equipment and other assets 18,037   19,143
Goodwill 76,445   76,624
Other intangible assets—net 23,805   26,302
TOTAL ASSETS 775,196   755,471
       
LIABILITIES AND STOCKHOLDERS' EQUITY      
       
LIABILITIES      
       
Current liabilities:      
Accounts payable $92,830   $106,933
Accounts payable—floor plan 120,771   112,109
Salaries and commissions payable 17,596   19,801
Deferred revenue 35,860   35,648
Recourse notes payable—current -   1,343
Non-recourse notes payable—current 52,630   40,863
Other current liabilities 20,698   33,370
Total current liabilities 340,385   350,067
       
Non-recourse notes payable—long term 12,656   10,072
Deferred tax liability—net 1,644   1,662
Other liabilities 21,234   21,067
TOTAL LIABILITIES 375,919   382,868
       
COMMITMENTS AND CONTINGENCIES      
       
STOCKHOLDERS' EQUITY      
Preferred stock, $.01 per share par value; 2,000 shares authorized; none outstanding -   -
Common stock, $.01 per share par value; 25,000 shares authorized; 13,727 outstanding at September 30, 2018 and 13,761 outstanding at March 31, 2018 143   142
Additional paid-in capital 133,561   130,000
Treasury stock, at cost, 578 shares at September 30, 2018 and 467 shares at March 31, 2018 (45,380)   (36,016)
Retained earnings 311,221   277,945
Accumulated other comprehensive income—foreign currency translation adjustment (268)   532
Total Stockholders' Equity 399,277   372,603
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $775,196   $755,471


ePlus inc. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
               
  Three Months Ended
  Six Months Ended
  September 30,
  September 30,
  2018   2017   2018   2017
      (as adjusted)       (as adjusted)
               
Net sales $345,043   $371,363   $701,575   $744,719
Cost of sales 259,543   283,792   535,372   579,555
Gross profit 85,500   87,571   166,203   165,164
               
Selling, general, and administrative expenses 57,705   56,340   114,671   111,004
Depreciation and amortization 2,741   2,129   5,531   4,192
Interest and financing costs 484   274   960   633
Operating expenses 60,930   58,743   121,162   115,829
               
Operating income 24,570   28,828   45,041   49,335
               
Other income (expense) 322   (141)   419   130
               
Earnings before taxes 24,892   28,687   45,460   49,465
               
Provision for income taxes 6,889   11,466   12,184   18,821
               
Net earnings  $18,003   $17,221   $33,276   $30,644
               
Net earnings per common share—basic  $1.33   $1.24   $2.47   $2.21
Net earnings per common share—diluted  $1.33   $1.23    $2.45   $2.19
               
Weighted average common shares outstanding—basic 13,494   13,879   13,464   13,843
Weighted average common shares outstanding—diluted 13,586   14,008   13,597   14,021


Technology Segment
  Three Months Ended September 30,
  Six Months Ended September 30,
  2018   2017   % Change   2018   2017   % Change
   
  (in thousands)
                       
Net sales $334,768   $358,678   (6.7%)   $681,632   $721,577   (5.5%)
Cost of sales 257,813   281,829   (8.5%)   531,894   575,095   (7.5%)
Gross profit 76,955   76,849   0.1%   149,738   146,482   2.2%
                       
Selling, general, and administrative expenses 55,138   53,503   3.1%   109,592   105,004   4.4%
Depreciation and amortization 2,740   2,128   28.8%   5,529   4,190   32.0%
Operating expenses 57,878   55,631   4.0%   115,121   109,194   5.4%
                       
Operating income $19,077   $21,218   (10.1%)   $34,617   $37,288   (7.2%)
                       
Key Business Metrics                      
Adjusted gross billings $485,856   $504,500   (3.7%)   $968,157   $992,004   (2.4%)
Adjusted EBITDA $24,284   $25,613   (5.2%)   $44,625   $45,499   (1.9%)


Technology Segment Net Sales by Customer End Market
  Twelve Months Ended September 30,  
  2018   2017   Change
           

Technology
23%   24%   (1%)
State & Local Government & Educational Institutions 17%   18%   (1%)
Telecom, Media, and Entertainment 13%   15%   (2%)
Financial Services 15%   14%   1%
​Healthcare 15%   12%   3%
​All others 17%   17%   -
Total 100%   100%    


Financing Segment
  Three Months Ended September 30,
  Six Months Ended September 30,
  2018   2017   % Change   2018   2017   % Change
   
  (in thousands)
                       
Net sales 10,275   12,685   (19.0%)   19,943   23,142   (13.8%)
Cost of sales 1,730   1,963   (11.9%)   3,478   4,460   (22.0%)
Gross profit 8,545   10,722   (20.3%)   16,465   18,682   (11.9%)
                       
Selling, general, and administrative expenses 2,567   2,837   (9.5%)   5,079   6,000   (15.4%)
Depreciation and amortization 1   1   0.0%   2   2   0.0%
Interest and financing costs 484   274   76.6%   960   633   51.7%
Operating expenses 3,052   3,112   (1.9%)   6,041   6,635   (9.0%)
                       
Operating income $5,493   $7,610   (27.8%)   $10,424   $12,047   (13.5%)
                       
Key Business Metrics                      
Adjusted EBITDA $5,596   $7,706   (27.4%)   $10,625   $12,227   (13.1%)

ePlus inc. AND SUBSIDIARIES
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, and (iv) 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.  The presentation of adjusted gross billings has been updated from prior period presentations to align with net sales within our technology segment.    

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 expenses, provision for income taxes, and other income. 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 per common share are based on net earnings calculated in accordance with GAAP, adjusted to exclude other income, share based compensation, and acquisition and integration expenses, and the related tax effects. The presentation of non-GAAP net earnings and non-GAAP net earnings per common share – diluted have been changed from prior period presentations to adjust our tax expense assuming a statutory income tax rate of 21.0% for U.S. operations.  .

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 similar non-GAAP Adjusted Gross Billings, Adjusted EBITDA, and non-GAAP Net Earnings per Common Share - Diluted or similarly titled measures differently, which may reduce their usefulness as comparative measures.

  Three Months Ended September 30,   Six Months Ended September 30,
  2018   2017   2018   2017
   
   
   
  (in thousands)
               
Technology segment net sales $334,768   $358,678   $681,632   $721,577
Costs incurred related to sales of third party maintenance, software assurance and subscription/Saas licenses, and services              
  151,088   145,822   286,525   270,427
Adjusted gross billings $485,856   $504,500   $968,157   $992,004
               
               
  Three Months Ended September 30,   Six Months Ended September 30,
  2018   2017   2018   2017
   
   
   
  (in thousands)
Consolidated              
               
Net earnings $18,003   $17,221   $33,276   $30,644
Provision for income taxes 6,889   11,466   12,184   18,821
Depreciation and amortization [1] 2,741   2,129   5,531   4,192
Share based compensation 1,868   1,673   3,561   3,180
Acquisition related expenses 701   689   1,117   1,019
Other (income) expense [2] (322)   141   (419)   (130)
Adjusted EBITDA $29,880   $33,319   $55,250   $57,726
               
               
  Three Months Ended September 30,   Six Months Ended September 30,
  2018   2017   2018   2017
   
   
   
  (in thousands)
Technology Segment              
Operating income $19,077   $21,218   $34,617   $37,288
Depreciation and amortization [1] 2,740   2,128   5,529   4,190
Share based compensation 1,766   1,578   3,362   3,002
Acquisition and integration expenses 701   689   1,117   1,019
Segment Adjusted EBITDA $24,284   $25,613   $44,625   $45,499
               
Financing Segment              
Operating income $5,493   $7,610   $10,424   $12,047
Depreciation and amortization [1] 1   1   2   2
Share based compensation 102   95   199   178
Segment Adjusted EBITDA $5,596   $7,706   $10,625   $12,227


  Three Months Ended September 30,
  Six Months Ended September 30,
  2018   2017   2018   2017
   
  (in thousands, except per share data)
GAAP: Earnings before taxes $24,892   $28,687   $45,460   $49,465
Share based compensation 1,868   1,673   3,561   3,180
Acquisition related expenses 701   689   1,117   1,019
Acquisition related amortization expense [3] 1,719   1,186   3,483   2,307
Other (income) expense [2] (322)   141   (419)   (130)
Non-GAAP: Earnings before taxes 28,858   32,376   53,202   55,841
               
GAAP: Provision for income taxes 6,889   11,466   12,184   18,821
Share based compensation 525   483   1,008   918
Acquisition related expenses 197   199   316   294
Acquisition related amortization expense [3] 455   309   929   600
Other (income) expense [2] (90)   41   (118)   (37)
Adjustment to US federal tax rate to 21% -   (3,792)   -   (6,514)
Tax benefit on restricted stock 103   189   672   1,444
Non-GAAP: Provision for income taxes 8,079   8,895   14,991   15,526
               
Non-GAAP: Net earnings $20,779   $23,481   $38,221   $40,315
               
GAAP: Net earnings per common share – diluted $1.33   $1.23   $2.45   $2.19
Non-GAAP: Net earnings per common share – diluted $1.53   $1.68   $2.81   $2.88


[1] Amount consists of depreciation and amortization for assets used internally, including acquisition related amortization expense.
[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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