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ePlus Reports Second Quarter Financial Results

HERNDON, Va., Nov. 7, 2013 (GLOBE NEWSWIRE) -- ePlus inc. (Nasdaq:PLUS), a leading provider of technology solutions, today announced financial results. For the second quarter of fiscal year 2014, which ended September 30, 2013, total revenues increased 4.3% to $271.1 million compared to $260.1 million in the quarter ended September 30, 2012. Net earnings were $8.6 million in the second quarter of fiscal year 2014, as compared to $10.0 million in the prior year. Fully diluted earnings per common share were $1.06 compared to $1.25 in the quarter ended September 30, 2012.

"For the first time ever, ePlus has reached the milestone of recording over $1 billion in revenue for the trailing 12-month period," stated Phillip G. Norton, Chairman, President and Chief Executive Officer. "We have continued to focus on our strategy of building a national footprint and providing advanced technology solutions to our customers, and as a result, revenues increased 4.3% during the quarter. We are committed to meeting customer needs for advanced technology solutions, such as big data, cloud, mobile device management, security solutions, and software defined networks."

Mr. Norton continued, "As the rate of change in these evolving technologies accelerates, we need to hire the best and brightest engineers and salespeople to provide our customers with the technological leadership they expect from ePlus. At the same time, we have taken approximately $2.9 million of annual costs out of SG&A during our third fiscal year quarter, and we should start to see an improved expense run rate beginning in our fourth quarter. We continue to focus on our strategic goal of becoming more operationally efficient by improving internal processes and reducing costs."

As of September 30, 2013, the Company had $53.7 million of cash and cash equivalents, as compared to $52.7 million on March 31, 2013. As of September 30, 2013, the Company had total stockholders' equity of $252.8 million and 8.2 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 September 30, 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 September 30, 2013 and 2012 were as follows (in thousands):

Three Months Ended September 30,
2013 2012 Change
Sales of product and services $261,283 $250,178 $11,105 4.4%
Fee and other income 1,829 1,591 238 15.0%
Total revenues 263,112 251,769 11,343 4.5%
Cost of sales, product and services 214,854 205,199 9,655 4.7%
Professional and other fees 1,580 2,260 (680) (30.1%)
Salaries and benefits 27,244 24,414 2,830 11.6%
General and administrative expenses 5,701 5,011 690 13.8%
Interest and financing costs 26 21 5 23.8%
Total costs and expenses 249,405 236,905 12,500 5.3%
Segment earnings $13,707 $14,864 $(1,157) (7.8%)
Gross margin, product and services 17.8% 18.0%

Total revenues. Total revenues increased 4.5% to $263.1 million compared to $251.8 million in the quarter ended September 30, 2012. The increase in revenues was due to increases in demand for products and services.

Total costs and expenses. Total costs and expenses were $249.4 million compared to $236.9 million in the same quarter last year, an increase of 5.3%. The increase in costs and expenses was primarily due to increases in cost of sales, product, and services, which was consistent with the increase in sales of product and services.

Gross margin on sales of product and services decreased to 17.8% for the quarter ended September 30, 2013 from 18.0% for the same quarter last year, which was primarily due to the amount of vendor incentives earned as well as the amount of revenues from the sale of third-party software assurance, maintenance, and services, which are presented on a net basis. These decreases were partially offset by higher service revenues.

The increase in costs and expenses was also attributable to increases in salaries and benefits, due to increases in personnel and higher commissions. The technology segment had 881 employees as of September 30, 2013, an increase of 88, or 11.1%, from September 30, 2012. Most of the increase relates to sales and engineering personnel, as the Company continues to invest in sales and support personnel in order to expand its geographical presence and solutions offerings.

Segment earnings. Segment earnings decreased 7.8% to $13.7 million for the quarter.

Financing Segment

The results of operations for the financing segment for the three months ended September 30, 2013 and 2012 were as follows (in thousands):

Three Months Ended September 30,
2013 2012 Change
Financing revenue $8,001 $7,413 $588 7.9%
Fee and other income 16 869 (853) (98.2%)
Total revenues 8,017 8,282 (265) (3.2%)
Direct lease costs 3,495 2,461 1,034 42.0%
Professional and other fees 328 447 (119) (26.6%)
Salaries and benefits 2,441 2,505 (64) (2.6%)
General and administrative expenses 358 400 (42) (10.5%)
Interest and financing costs 407 425 (18) (4.2%)
Total costs and expenses 7,029 6,238 791 12.7%
Segment earnings $988 $2,044 $(1,056) (51.7%)

Total revenues. Total revenues decreased 3.2% to $8.0 million compared to $8.3 million in the quarter ended September 30, 2012. The decrease in revenues was primarily the result of lower remarketing income, partially offset by higher net gains on sales of financial assets of $1.2 million during the three months ended September 30, 2013, as compared to $0.5 million last year. As of September 30, 2013, the Company had $140.5 million of investments in notes and leases, compared to $130.5 million at September 30, 2012, an increase of $10.0 million, or 7.7%.

Total costs and expenses. Total costs and expenses were $7.0 million, 12.7% higher than the quarter ended September 30, 2012, which was driven by higher direct lease costs due to increases in depreciation expense for operating leases.

Segment earnings. Segment earnings were $1.0 million compared to $2.0 million for the same quarter of the prior year.

Results of Operations – Six Months Ended September 30, 2013

Technology Segment

The results of operations for the technology segment for the six months ended September 30, 2013 and 2012 were as follows (in thousands):

Six Months Ended September 30,
2013 2012 Change
Sales of product and services $508,320 $484,460 $23,860 4.9%
Fee and other income 3,286 3,593 (307) (8.5%)
Total revenues 511,606 488,053 23,553 4.8%
Cost of sales, products and services 418,184 399,590 18,594 4.7%
Professional and other fees 4,443 4,763 (320) (6.7%)
Salaries and benefits 55,142 48,496 6,646 13.7%
General and administrative 10,515 9,450 1,065 11.3%
Interest and financing costs 46 52 (6) (11.5%)
Total costs and expenses 488,330 462,351 25,979 5.6%
Segment earnings $23,276 $25,702 $(2,426) (9.4%)
Gross margin, products and services 17.7% 17.5%

Total revenue. Total revenues for the six months ended September 30, 2013 increased by $23.6 million, or 4.8%, to $511.6 million due to increases in demand for products and services.

Total costs and expenses. Total costs and expenses for the six months ended September 30, 2013 increased $26.0 million, or 5.6%, to $488.3 million due to increases in cost of sales, product, and services; salaries and benefits; and general and administrative expenses. The increase in cost of sales, product, and services was consistent with the increase in sales of product and services. Gross margin on the sale of product and services increased to 17.7% for the six months ended September 30, 2013, from 17.5% in the prior year due to higher service revenues, which were offset by a decrease in vendor incentives earned.

Salaries and benefits expense increased $6.6 million, or 13.7% to $55.1 million compared to $48.5 million in the prior year. This increase was driven by increases in the number of employees and related benefits as well as commission expenses. The technology segment had 881 employees as of September 30, 2013, an increase of 88 from 793 at September 30, 2012. Most of the increase relates to sales and engineering personnel. In addition, commission expenses increased due to the increase in the gross profit from sales of product and services during the six months ended September 30, 2013.

General and administrative expenses increased $1.1 million, or 11.3%, to $10.5 million during the six months ended September 30, 2013 compared to prior year, due to increases in office locations, higher rent, and travel expenses from additional headcount, as well as adjustments to the fair value of contingent consideration related to a previous acquisition, which was settled and paid during the second quarter.

Segment earnings. As a result of the foregoing, segment earnings decreased $2.4 million, or 9.4%, to $23.3 million for the six months ended September 30, 2013.

Financing Segment

The results of operations for the financing segment for the six months ended September 30, 2013 and 2012 were as follows (in thousands):

Six Months Ended September 30,
2013 2012 Change
Financing revenue $18,761 $15,313 $3,448 22.5%
Fee and other income 79 1,409 (1,330) (94.4%)
Total revenues 18,840 16,722 2,118 12.7%
Direct lease costs 6,748 4,704 2,044 43.5%
Professional and other fees 703 1,057 (354) (33.5%)
Salaries and benefits 5,225 4,777 448 9.4%
General and administrative 545 616 (71) (11.5%)
Interest and financing costs 847 799 48 6.0%
Total costs and expenses 14,068 11,953 2,115 17.7%
Segment earnings $4,772 $4,769 $3 0.1%

Total revenues. Total revenues increased by $2.1 million, or 12.7%, to $18.8 million for the six months ended September 30, 2013 principally due to increases in net gains on sales of financial assets, due to a higher volume of transactions sold. Investments in notes and leases increased as of September 30, 2013 to $140.5 million from $130.5 million in the prior year. Offsetting this increase was lower remarketing income, as well as lower broker fee income.

Total costs and expenses. Total costs and expenses increased $2.1 million, or 17.7% to $14.1 million. Direct lease costs increased $2.0 million, or 43.5%, to $6.7 million mostly due to increases in depreciation expense for equipment under operating leases. Professional and other fees decreased by $354 thousand, or 33.5%, due to lower broker fees and legal fees. Salary and benefits expenses increased by $448 thousand, or 9.4% to $5.2 million, due to higher commissions and bonuses as a result of the increase in revenues during the period. The financing segment employed 59 people as of September 30, 2013, up slightly from 58 people as of September 30, 2012.

Interest and financing costs were consistent with the prior year. Non-recourse and recourse notes payable was $43.7 million at September 30, 2013, as compared to $34.7 million at September 30, 2012. The weighted average interest rate for non-recourse notes payable was 3.82% and 5.22% as of September 30, 2013 and 2012, respectively.

Segment earnings. As a result of the foregoing, segment earnings were $4.8 million for the six months ended September 30, 2013.

Conference Call Information

The Company will host a conference call on Thursday, November 7, 2013 at 5:00 p.m. Eastern Time to review and discuss the Company's results for the second quarter ended September 30, 2013. The call can be accessed live over the phone by dialing (877) 870-9226, or for international callers, (973) 890-8320. Passcode 68944298. 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 November 14, 2013, 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 twitter.com/ePlus.

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; our ability to maintain effective internal controls; 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
September 30, 2013
As of
March 31, 2013
ASSETS (amounts in thousands)
Cash and cash equivalents $53,696 $52,720
Short-term investments -- 982
Accounts receivable—trade, net 160,008 173,445
Accounts receivable—other, net 35,397 18,809
Inventories—net 20,202 14,795
Notes receivable—net 49,110 31,893
Investment in leases and leased equipment—net 91,421 90,710
Property and equipment—net 3,963 2,213
Deferred costs 8,350 10,234
Other assets 10,220 9,107
Goodwill and other intangible assets 32,934 32,964
TOTAL ASSETS $465,301 $437,872
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Accounts payable—equipment $13,523 $5,379
Accounts payable—trade 31,042 31,331
Accounts payable—floor plan 80,294 66,251
Salaries and commissions payable 10,617 12,911
Deferred revenue 14,886 16,970
Accrued expenses and other liabilities 13,692 20,264
Recourse notes payable 1,520 1,484
Non-recourse notes payable 42,148 40,255
Deferred tax liability 4,795 4,795
Total Liabilities 212,517 199,640
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; 13,025,021 issued and 8,170,282 outstanding at September 30, 2013 and 12,899,386 issued and 8,149,706 outstanding at March 31, 2013 130 129
Additional paid-in capital 103,684 99,641
Treasury stock, at cost, 4,854,739 and 4,749,680 shares, respectively (73,207) (67,306)
Retained earnings 221,804 205,358
Accumulated other comprehensive income—foreign currency translation adjustment 373 410
Total Stockholders' Equity 252,784 238,232
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $465,301 $437,872
ePlus inc. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended
September 30,
Six Months Ended
September 30,
2013 2012 2013 2012
(amounts in thousands, except shares and per share data)
Sales of product and services $261,283 $250,178 $508,320 $484,460
Financing revenue 8,001 7,413 18,761 15,313
Fee and other income 1,845 2,460 3,365 5,002
TOTAL REVENUES 271,129 260,051 530,446 504,775
COSTS AND EXPENSES
Cost of sales, product and services 214,854 205,199 418,184 399,590
Direct lease costs 3,495 2,461 6,748 4,704
218,349 207,660 424,932 404,294
Professional and other fees 1,908 2,707 5,146 5,820
Salaries and benefits 29,685 26,919 60,367 53,273
General and administrative expenses 6,059 5,411 11,060 10,066
Interest and financing costs 433 446 893 851
38,085 35,483 77,466 70,010
TOTAL COSTS AND EXPENSES 256,434 243,143 502,398 474,304
EARNINGS BEFORE PROVISION FOR INCOME TAXES 14,695 16,908 28,048 30,471
PROVISION FOR INCOME TAXES 6,104 6,875 11,607 12,376
NET EARNINGS $8,591 $10,033 $16,441 $18,095

NET EARNINGS PER COMMON SHARE—BASIC
$1.07 $1.26 $2.05 $2.27
NET EARNINGS PER COMMON SHARE—DILUTED $1.06 $1.25 $2.03 $2.25
WEIGHTED AVERAGE SHARES OUTSTANDING—BASIC 7,975,590 7,770,206 7,944,932 7,745,506
WEIGHTED AVERAGE SHARES OUTSTANDING—DILUTED 8,019,557 7,847,227 8,006,572 7,822,079
ePlus inc. AND SUBSIDIARIES
UNAUDITED STATEMENTS OF OPERATIONS BY SEGMENT
Three Months Ended September 30,
2013 2012
Technology Financing Technology Financing
(amounts in thousands)
Sales of product and services $261,283 $ -- $250,178 $ --
Financing revenue -- 8,001 -- 7,413
Fee and other income 1,829 16 1,591 869
TOTAL REVENUE 263,112 8,017 251,769 8,282
Cost of sales, product and services 214,854 -- 205,199 --
Direct lease costs -- 3,495 -- 2,461
Professional and other fees 1,580 328 2,260 447
Salaries and benefits 27,244 2,441 24,414 2,505
General and administrative expenses 5,701 358 5,011 400
Interest and financing costs 26 407 21 425
TOTAL COSTS AND EXPENSES 249,405 7,029 236,905 6,238
SEGMENT EARNINGS $13,707 $988 $14,864 $2,044
Six Months Ended September 30,
2013 2012
Technology Financing Technology Financing
(amounts in thousands)
Sales of product and services $508,320 $ -- $484,460 $ --
Financing revenues -- 18,761 -- 15,313
Fee and other income 3,286 79 3,593 1,409
TOTAL REVENUES 511,606 18,840 488,053 16,722
Cost of sales, product and services 418,184 -- 399,590 --
Direct lease costs -- 6,748 -- 4,704
Professional and other fees 4,443 703 4,763 1,057
Salaries and benefits 55,142 5,225 48,496 4,777
General and administrative expenses 10,515 545 9,450 616
Interest and financing costs 46 847 52 799
TOTAL COSTS AND EXPENSES 488,330 14,068 462,351 11,953
SEGMENT EARNINGS $23,276 $4,772 $25,702 $4,769

CONTACT: Kleyton Parkhurst, SVP ePlus inc. investors@eplus.com 703-984-8150Source:ePlus inc.