ePlus Reports Fourth Quarter and Fiscal Year 2021 Financial Results

ePlus inc. (NASDAQ: PLUS), a leading provider of technology and financing solutions, today announced financial results for the three months and fiscal year ended March 31, 2021.

Management Comment

“Our fourth quarter earnings performance reflected continued progress driving profitable growth from our IT solutions, particularly in the areas of security, cloud/data center, collaboration and annuity services, coupled with a steady focus on managing our cost structure. In the fourth quarter, gross profit increased 6.6%, and we realized an strong gross profit margin of 27.8%, our highest ever, due to growth in services revenue, increased product margins, and a high gross to net conversion. Our improved margins and lower costs drove operating income up 31.9% in the quarter and 11.6% for the year. EPS increased 17.2%, to $1.16, and adjusted EBITDA grew 25.7%, reflecting the strength and resilience of our business model,” said Mark Marron, President and Chief Executive Officer.

“In what was an unprecedented year, I am extremely proud of the entire ePlus team for responding with agility and unwavering commitment to support our customers’ evolving needs for integrated technology solutions. For fiscal 2021, lower net sales were due, in part, to the industry’s continuing conversion to the XaaS revenue model and revenues recorded on a net basis. We grew our services revenue, a key focus area that offers enhanced visibility due to our annuity-quality services offerings. Importantly, we recorded substantive increases in operating income, adjusted EBITDA, and earnings per share.”

Fourth Quarter Fiscal 2021 Results

For the fourth quarter ended March 31, 2021 as compared to the fourth quarter of the prior fiscal year ended March 31, 2020:

Consolidated net sales decreased 3.8% to $352.6 million, from $366.5 million.

Technology segment net sales decreased 6.1% to $331.8 million, from $353.3 million due to lower product sales. Service revenues increased 8.2% to $52.9 million, from $48.9 million due to an increase in managed services. Adjusted gross billings increased 2.8% to $528.6 million from $514.1 million.

Financing segment net sales increased 57.4% to $20.8 million, from $13.2 million due to an increase from sales of off lease equipment.

Consolidated gross profit increased 6.6% to $97.9 million, from $91.8 million. Consolidated gross margin was 27.8%, up from 25.1% last year, due to higher product margin in our technology segment as well as higher service margins.

Operating expenses were $74.3 million, up 0.5% from $73.9 million last year, primarily due to increases in variable compensation stemming from higher gross profit, partially offset by lower travel expenses and changes in reserve for credit losses. Our headcount at the end of the quarter was 1,560, down 19 from a year ago.

Consolidated operating income increased 31.9% to $23.6 million.

Our effective tax rate for the current quarter was 32.6%, higher than the prior year quarter of 24.9%, primarily due to an increase of non-deductible compensation.

Net earnings increased 17.4% to $15.6 million.

Adjusted EBITDA increased 25.7% to $29.6 million, from $23.5 million.

Diluted earnings per share was $1.16, compared with $0.99 in the prior year quarter. Non-GAAP diluted earnings per share was $1.41, compared with $1.24 last year.

Fiscal Year 2021 Results

For the fiscal year ended March 31, 2021 as compared to the prior fiscal year ended March 31, 2020:

Consolidated net sales decreased 1.3% to $1,568.3 million, from $1,588.4 million.

Technology segment net sales decreased 1.4% to $1,508.0 million, from $1,530.1 million due to a larger portion of our sales that were recognized on a net basis. Service revenues increased 4.7% to $202.2 million, from $193.1 million primarily due to an increase in managed services. Adjusted gross billings was $2,263.9 million, an increase of 1.6% from $2,227.9 million.

Financing segment net sales increased 3.6% to $60.4 million, from $58.3 million, primarily due to an increase in proceeds from sales of off lease equipment.

Consolidated gross profit increased 0.6% to $393.6 million, from $391.2 million. Consolidated gross margin was 25.1%, up from 24.6% last year, due to higher product margin in our technology segment as well as higher service margins.

Operating expenses were $287.2 million, down 2.9% from $295.9 million last year, primarily due to a decrease in travel, advertising & marketing, acquisition related expenses, and healthcare cost.

Consolidated operating income increased 11.6% to $106.3 million.

Our effective tax rate for the current fiscal year was 30.4%, higher than last year of 28.0%, primarily due to an adjustment to the federal benefit from state taxes.

Net earnings increased 7.7% to $74.4 million.

Adjusted EBITDA increased 7.4% to $128.2 million, from $119.4 million.

Diluted earnings per share was $5.54, compared with $5.15 in the prior year. Non-GAAP diluted earnings per share was $6.38, compared with $6.13 last year.

Balance Sheet Highlights

As of March 31, 2021, ePlus had cash and cash equivalents of $129.6 million, compared with $86.2 million as of March 31, 2020. Inventory, which represents equipment ordered by customers but not yet delivered, increased 39.2% due to ongoing projects. Total shareholders’ equity was $562.4 million, compared with $486.1 million as of March 31, 2020. Total shares outstanding were 13.5 million on March 31, 2021 and March 31, 2020.

Summary and Outlook

“Fiscal 2021 was a very successful and productive year for ePlus, as we strengthened our capabilities both organically and through acquisitions, while generating growth in adjusted gross billings, margins and earnings. Although component shortages may delay some near-term revenue, as the market continues to evolve, we expect to see accelerated demand for collaboration, remote work solutions, security, and cloud services. We remain positive in our outlook for fiscal 2022 as ePlus continues to focus on the high growth areas that are critical to our customers’ digital transformation initiatives.”

Recent Corporate Developments/Recognitions

• In the month of April:
  • Achieved VMware Cloud on AWS VMware Master Services Competency.
  • ePlus will plant 10,000 trees through One Tree Planted, a non-profit organization dedicated to making it easier for individuals and businesses to give back to the environment, create a healthier climate, protect biodiversity, and help reforestation efforts.

• In the month of March:
  • CRN, a brand of The Channel Company, recognized ePlus with a place on its 2021 Tech Elite 250 list.
  • Board of directors authorized the Company to repurchase up to 500,000 shares of ePlus’ outstanding common stock over a 12-month period commencing May 28, 2021.
  • CRN, a brand of The Channel Company, named ePlus to its 2021 Managed Service Provider (MSP) 500 list in the Elite 150 category.

• In the month of February:
  • Achieved Amazon Web Services (AWS) Storage Competency status.
  • Implemented a cloud-based Cisco call center solution that helped clear the way for Rowan University in New Jersey to become one of only four of the initial COVID vaccine distribution centers in the state.
  • IGXGlobal UK Limited, its London-based subsidiary, renewed its Cisco Gold Certified Partner designation in the UK.

Conference Call Information

ePlus will hold a conference call and webcast at 4:30 p.m. ET on May 20, 2021:

Webcast (Live & Replay):
https://event.on24.com/wcc/r/3082272/D1D0303B8D92F5555E6FA9690D2FDDDC

Live Call:				[phone] (toll-free/domestic)
				[phone] (international)
Replay:				[phone] (toll-free/domestic) or
				[phone] (international)
Passcode:				1655478 (live call and replay)

The replay of this webcast will be available approximately two hours after the call through May 27, 2021.

About ePlus inc.

ePlus is a leading consultative technology solutions provider that helps customers imagine, implement, and achieve more from their technology. With the highest certifications from top technology partners and lifecycle services expertise across key areas including security, cloud, data center, collaboration, networking, and emerging technologies, ePlus transforms IT from a cost center to a business enabler. Founded in 1990, ePlus has more than 1,500 associates serving a diverse set of customers in the U.S., Europe, and Asia-Pac. The Company is headquartered at 13595 Dulles Technology Drive, Herndon, VA, 20171. For more information, visit www.eplus.com, call 888-482-1122, or email [e-mail]. Connect with ePlus on Facebook, LinkedIn, Twitter 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, which could materially adversely affect our financial condition and results of operations and has resulted worldwide in governmental authorities imposing numerous unprecedented measures to try to contain the virus that has impacted and may further impact our workforce and operations, the operations of our customers, and those of our respective vendors, suppliers, and partners; national and international political instability fostering uncertainty and volatility in the global economy including an economic downturn, an increase in tariffs or adverse changes to trade agreements, exposure to fluctuation in foreign currency rates, interest rates and downward pressure on prices; 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 or our vendors’ or suppliers’ IT systems and data and audio communication networks, supply chains or other systems; 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 largest 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; uncertainty regarding the phase out of LIBOR may negatively affect our operating results; 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 or ransomware attack; future growth rates in our core businesses; the impact of competition in our markets; our reliance on third parties to perform some of our service obligations to our customers; 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.

ePlus inc. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
		March 31, 2021		March 31, 2020
ASSETS
Current assets:
Cash and cash equivalents		$129,562		$86,231
Accounts receivable—trade, net		391,567		374,998
Accounts receivable—other, net		41,053		36,570
Inventories		69,963		50,268
Financing receivables—net, current		106,272		70,169
Deferred costs		28,201		22,306
Other current assets		10,976		9,256
Total current assets		777,594		649,798
Financing receivables and operating leases—net		90,165		74,158
Deferred tax asset--net		1,468		-
Property, equipment and other assets		42,289		32,596
Goodwill		126,645		118,097
Other intangible assets—net		38,614		34,464
TOTAL ASSETS		$1,076,775		$909,113
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Current liabilities:
Accounts payable		$165,162		$82,919
Accounts payable—floor plan		98,653		127,416
Salaries and commissions payable		36,839		30,952
Deferred revenue		72,802		55,480
Recourse notes payable—current		5,450		37,256
Non-recourse notes payable—current		50,397		29,630
Other current liabilities		30,061		22,986
Total current liabilities		459,364		386,639
Recourse notes payable—long term		12,658		-
Non-recourse notes payable—long term		5,664		5,872
Deferred tax liability—net		-		2,730
Other liabilities		36,679		27,727
TOTAL LIABILITIES		514,365		422,968
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; 13,503 outstanding at March 31, 2021 and 13,500 outstanding at March 31, 2020		145		144
Additional paid-in capital		152,366		145,197
Treasury stock, at cost, 993 shares at March 31, 2021 and 896 shares at March 31, 2020		(75,372)		(68,424)
Retained earnings		484,616		410,219
Accumulated other comprehensive income—foreign currency translation adjustment		655		(991)
Total Stockholders' Equity		562,410		486,145
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY		$1,076,775		$909,113

ePlus inc. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
	Three Months Ended March 31,				Year Ended March 31,
	2021		2020		2021		2020
Net sales
Product	$299,750		$317,621		$1,366,158		$1,395,288
Services	52,857		48,855		202,165		193,116
Total	352,607		366,476		1,568,323		1,588,404
Cost of sales
Product	222,566		244,638		1,049,677		1,076,773
Services	32,157		30,013		125,092		120,440
Total	254,723		274,651		1,174,769		1,197,213
Gross profit	97,884		91,825		393,554		391,191
Selling, general, and administrative	69,517		69,782		271,263		279,182
Depreciation and amortization	3,951		3,489		13,951		14,156
Interest and financing costs	826		676		2,005		2,574
Operating expenses	74,294		73,947		287,219		295,912
Operating income	23,590		17,878		106,335		95,279
Other income (expense)	(524)		(232)		571		680
Earnings before taxes	23,066		17,646		106,906		95,959
Provision for income taxes	7,513		4,400		32,509		26,877
Net earnings	$15,553		$13,246		$74,397		$69,082
Net earnings per common share—basic	$1.17		$0.99		$5.58		$5.18
Net earnings per common share—diluted	$1.16		$0.99		$5.54		$5.15
Weighted average common shares outstanding—basic	13,323		13,318		13,337		13,327
Weighted average common shares outstanding—diluted	13,416		13,390		13,417		13,415

Technology Segment
	Three Months Ended March 31,						Year Ended March 31,
	2021		2020		Change		2021		2020		Change
	(in thousands)						(in thousands)
Net sales
Product	$278,944		$304,402		(8.4%)		$1,305,789		$1,337,022		(2.3%)
Services	52,857		48,855		8.2%		202,165		193,116		4.7%
Total	331,801		353,257		(6.1%)		1,507,954		1,530,138		(1.4%)
Cost of sales
Product	215,768		243,601		(11.4%)		1,036,627		1,069,110		(3.0%)
Services	32,157		30,013		7.1%		125,092		120,440		3.9%
Total	247,925		273,614		(9.4%)		1,161,719		1,189,550		(2.3%)
Gross profit	83,876		79,643		5.3%		346,235		340,588		1.7%
Selling, general, and administrative	65,691		66,508		(1.2%)		256,210		264,123		(3.0%)
Depreciation and amortization	3,923		3,461		13.3%		13,839		14,016		(1.3%)
Interest and financing costs	255		294		(13.3%)		521		294		77.2%
Operating expenses	69,869		70,263		(0.6%)		270,570		278,433		(2.8%)
Operating income	$14,007		$9,380		49.3%		$75,665		$62,155		21.7%
Adjusted gross billings	$528,582		$514,130		2.8%		$2,263,865		$2,227,885		1.6%
Adjusted EBITDA	$19,907		$14,945		33.2%		$97,219		$85,840		13.3%

Technology Segment Net Sales by Customer End Market
	Twelve Months Ended March 31,
	2021		2020		Change
Telecom, Media, & Entertainment	25%		19%		6%
Technology	17%		21%		(4%)
SLED	16%		16%		-
Healthcare	13%		15%		(2%)
​Financial Services	13%		13%		-
​All others	16%		16%		-
Total	100%		100%

Financing Segment
	Three Months Ended March 31,						Year Ended March 31,
	2021		2020		Change		2021		2020		Change
	(in thousands)						(in thousands)
Net sales	$20,806		$13,219		57.4%		$60,369		$58,266		3.6%
Cost of sales	6,798		1,037		555.5%		13,050		7,663		70.3%
Gross profit	14,008		12,182		15.0%		47,319		50,603		(6.5%)
Selling, general, and administrative	3,826		3,274		16.9%		15,053		15,059		(0.0%)
Depreciation and amortization	28		28		0.0%		112		140		(20.0%)
Interest and financing costs	571		382		49.5%		1,484		2,280		(34.9%)
Operating expenses	4,425		3,684		20.1%		16,649		17,479		(4.7%)
Operating income	$9,583		$8,498		12.8%		$30,670		$33,124		(7.4%)
Adjusted EBITDA	$9,668		$8,586		12.6%		$31,026		$33,519		(7.4%)

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, (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.

	Three Months Ended March 31,				Year Ended March 31,
	2021		2020		2021		2020
	(in thousands)
Technology segment net sales	$331,801		$353,257		$1,507,954		$1,530,138
Costs incurred related to sales of third-party maintenance, software assurance and subscription / SaaS licenses, and services	196,781		160,873		755,911		697,747
Adjusted gross billings	$528,582		$514,130		$2,263,865		$2,227,885

	Three Months Ended March 31,				Year Ended March 31,
	2021		2020		2021		2020
	(in thousands)
Consolidated
Net earnings	$15,553		$13,246		$74,397		$69,082
Provision for income taxes	7,513		4,400		32,509		26,877
Depreciation and amortization [1]	3,951		3,489		13,951		14,156
Share based compensation	1,740		1,933		7,167		7,954
Acquisition and integration expense	39		(63)		271		1,676
Interest and financing costs	255		294		521		294
Other (income) expense [2]	524		232		(571)		(680)
Adjusted EBITDA	$29,575		$23,531		128,245		$119,359

	Three Months Ended March 31,				Year Ended March 31,
	2021		2020		2021				2020
	(in thousands)
Technology Segment
Operating income	$14,007		$9,380		$75,665				$62,155
Depreciation and amortization [1]	3,923		3,461		13,839				14,016
Share based compensation	1,683		1,873		6,923				7,699
Acquisition and integration expense	39		(63)		271				1,676
Interest and financing costs	255		294		521				294
Adjusted EBITDA	$19,907		$14,945		$97,219				$85,840
Financing Segment
Operating income	$9,583		$8,498		$30,670				$33,124
Depreciation and amortization [1]	28		28		112				140
Share based compensation	57		60		244				255
Adjusted EBITDA	$9,668		$8,586		$31,026				$33,519

	Three Months Ended March 31,				Year Ended March 31,
	2021		2020		2021		2020
	(in thousands)
GAAP: Earnings before taxes	$23,066		$17,646		$106,906		$95,959
Share based compensation	1,740		1,933		7,167		7,954
Acquisition and integration expense	39		(63)		271		1,676
Acquisition related amortization expense [3]	2,730		2,264		9,116		9,217
Other (income) expense [2]	524		232		(571)		(680)
Non-GAAP: Earnings before taxes	28,099		22,012		122,889		114,126
GAAP: Provision for income taxes	7,513		4,400		32,509		26,877
Share based compensation	567		482		2,188		2,218
Acquisition and integration expense	13		(16)		78		490
Acquisition related amortization expense [3]	874		549		2,730		2,487
Other (income) expense [2]	171		58		(143)		(200)
Tax benefit on restricted stock	-		-		(40)		87
Non-GAAP: Provision for income taxes	9,138		5,473		37,322		31,959
Non-GAAP: Net earnings	$18,961		$16,539		$85,567		$82,167

	Three Months Ended March 31,				Year Ended March 31,
	2021		2020		2021		2020
GAAP: Net earnings per common share – diluted	$1.16		$0.99		$5.54		$5.15
Share based compensation	0.09		0.11		0.38		0.43
Acquisition and integration expense	-		-		0.01		0.09
Acquisition related amortization expense [3]	0.13		0.13		0.48		0.51
Other (income) expense [2]	0.03		0.01		(0.03)		(0.04)
Tax benefit on restricted stock	-		-		-		(0.01)
Total non-GAAP adjustments – net of tax	$0.25		$0.25		$0.84		$0.98
Non-GAAP: Net earnings per common share – diluted	$1.41		$1.24		$6.38		$6.13

[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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