Investment research report for PLUS

Table of Contents

Executive Summary
Valuation Analysis
Industry and Competitors Analysis
Financial Analysis
Earnings Call Multi-Year Analysis
Financial Statements Multi Year
Insider Trading Analysis
Management Compensation Benchmark Analysis
Proxy Statement Analysis
News Analysis
Technical Indicators Analysis
Financial Statements Annual
Financial Statements Quarterly
Earnings Call Analysis

Executive Summary

Company Overview

ePlus inc. is a leading provider of information technology solutions and services, offering a comprehensive suite of products, services, and financing solutions to help organizations optimize their IT environment and supply chain processes. The company operates through two main segments: Technology and Financing.

Growth Strategy

ePlus is focused on driving growth through strategic acquisitions, expanding its geographic footprint, and capitalizing on high-growth areas such as cloud, security, and digital transformation. The company has a proven track record of successfully integrating acquisitions and cross-selling its solutions to a diversified customer base across various industries.

Financial Performance

ePlus has demonstrated consistent revenue and earnings growth over the past few years, driven by strong performance in its technology business segments. The company maintains a robust balance sheet, healthy cash flows, and ample liquidity to fund operations, investments, and shareholder returns. ePlus actively repurchases shares and has the potential for future dividend payments.

Competitive Positioning

ePlus operates in the competitive IT solutions space, offering an integrated suite of products and services. Its diversified business model, technical expertise, and strategic partnerships with leading technology vendors position the company as a well-rounded solutions provider. However, the company faces competition from other IT services firms and technology companies with IT services arms.

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Valuation Analysis

PE Ratio

The PE ratio for company PLUS is as follows:
– Low: 11.198364309614899
– Base: 15.667375036929322
– High: 20.136385764243744

PB Ratio

The PB ratio for company PLUS is as follows:
– Low: 1.6379350860845143
– Base: 2.287247250553518
– High: 2.936559415022522

EPS Growth

The EPS growth for company PLUS is as follows:
– Low: 12.72%
– Med: 14.74%
– High: 16.49%

Unable to provide price targets since this company’s financials are highly unstable. We recommend not to hold this stock in your portfolio.

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Industry and Competitors Analysis

ePlus Inc. (PLUS) Competitive Positioning

Based on the information provided, ePlus inc. (PLUS) operates in the software application industry, providing information technology solutions and services. Some key points about the company and its competitive positioning:

ePlus offers a range of software, hardware, services and financing solutions to help organizations optimize their IT environment and supply chain processes. Its main competitors likely include other IT services and solutions providers like CDW, Insight Enterprises, SHI International, and large technology companies with IT services arms like IBM, Dell, HP, etc.

ePlus seems to have a diversified revenue stream from software, hardware, services and financing, which could give it an advantage over pure-play software or services firms. Its financial metrics like revenue growth, profitability ratios and balance sheet position appear relatively stable, indicating a solid competitive positioning.

However, without more specific competitive benchmarking data, it’s difficult to definitively assess ePlus’ positioning versus direct rivals in areas like market share, pricing power, product capabilities etc.

In summary, ePlus operates in the competitive IT solutions space, offering an integrated suite of products/services. Its diversified model and financial health suggest a reasonably strong competitive position, but a more granular competitive analysis would provide deeper insights into its positioning versus closest rivals.

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Chart of Competitors

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Financial Analysis

Financial Strength

The company has maintained a healthy current ratio above 1.5 in most periods, indicating good liquidity position. The debt-to-equity ratio has been relatively stable around 0.3-0.5 range, suggesting a moderate level of leverage. Interest coverage ratio is quite high, above 25x in most periods, signaling the company’s ability to comfortably service its debt obligations.

Potential for Growth

Revenue growth has been volatile, ranging from negative to high single-digit positive growth rates in recent years. The company has demonstrated the ability to grow earnings faster than revenue in certain periods, indicating operational efficiency improvements. Analyst estimates project moderate revenue growth of around 2-3% annually over the next two fiscal years.

Competitive Advantage

As an IT solutions provider, the company likely benefits from the growing demand for technology services and solutions. However, the industry is competitive, and the company’s competitive advantages are not explicitly clear from the provided data.

Quality of Management

Profitability metrics like return on equity and return on assets have been relatively stable, suggesting decent management of resources. The company has consistently generated positive free cash flows, indicating disciplined capital allocation.

Shareholder Friendliness

The company does not pay dividends, retaining all earnings for reinvestment or debt reduction. Share repurchases or other direct shareholder return initiatives are not evident from the data.

Valuation

The price-to-earnings ratio has varied significantly, ranging from around 10x to over 20x in different periods, making it difficult to assess valuation based on this metric alone. The price-to-book ratio has generally been above 1.5x, which could indicate a premium valuation compared to its book value. Analyst EPS estimates for the next two fiscal years suggest a forward P/E multiple of around 19-20x based on the current stock price, which may be considered reasonable for a growth company in the technology sector.

Overall, ePlus appears to be a financially stable company with moderate growth prospects, operating in a competitive industry. While the company seems to be managed reasonably well, its shareholder-friendly policies are not particularly evident. Valuation appears to be within a reasonable range based on analyst estimates, but a more comprehensive analysis would be required to make a definitive assessment.

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Chart of Absolute Metrics

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Earnings Call Multi-Year Analysis

Diversified business model

ePlus has two main segments – Technology (products and services) and Financing. This diversification provides revenue stability and helps weather challenges in one segment.

Focus on high-growth areas

The company is strategically focused on faster-growing solution areas like cloud, security, digital transformation, and managed services. This aligns with key IT trends and customer demands.

Expanding services business

ePlus is successfully growing its higher-margin services revenue, including managed and professional services. This provides a more recurring revenue stream and enhances profitability.

Competitive advantage in financing

The financing segment offers customers flexible payment options, which is a differentiator and enables larger technology investments.

Disciplined acquisition strategy

ePlus actively pursues strategic acquisitions to expand capabilities and geographic reach, but maintains a disciplined approach to integration.

Supply chain challenges

While ePlus has navigated supply chain constraints effectively so far, this remains a potential headwind that investors should monitor closely.

Strong financial position

The company has a solid balance sheet, providing flexibility for investments and acquisitions to drive long-term growth.

Cautious outlook

Management maintains a prudent approach, acknowledging potential economic uncertainties and headwinds, which is appreciated by long-term investors.

Overall, ePlus appears to be a well-managed company with a diversified business model, focus on strategic growth areas, and a disciplined approach to operations and acquisitions. Long-term investors should pay close attention to the company’s ability to execute on its priorities and navigate potential challenges like supply chain disruptions and economic uncertainties.

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Financial Statements Multi Year

Revenue and Earnings Growth

ePlus has demonstrated consistent revenue and earnings growth over the past few years, driven by strong performance in its technology business segments (product, professional services, managed services).

Diversified Business Model

ePlus operates across technology solutions (hardware, software, services) and financing, providing diversification and multiple growth avenues. Its customer base is also well-diversified across industries.

Expanding Services and Higher Margins

The company is successfully shifting its revenue mix towards higher-margin professional and managed services offerings, improving overall profitability.

Strategic Acquisitions

ePlus has a track record of making strategic acquisitions to expand capabilities, geographic reach, and cross-selling opportunities, contributing to growth.

Strong Financial Position

The company maintains a robust balance sheet, healthy cash flows, and ample liquidity to fund operations, investments, and shareholder returns.

Shareholder-Friendly Actions

ePlus actively repurchases shares and has the potential for future dividend payments, demonstrating commitment to shareholder value creation.

Potential Headwinds

Supply chain constraints, inflation, and economic uncertainties pose challenges that ePlus will need to navigate effectively.

Overall, ePlus appears to be a well-managed company with a diversified business model, consistent financial performance, and growth opportunities, making it an attractive long-term investment prospect in the IT solutions and financing space.

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Insider Trading Analysis

Long-term Patterns

The CEO (BOWEN BRUCE M) and CFO (HOVDE ERIC D) have been actively trading ePlus inc. stock over the past several years. The CEO has engaged in both buying and selling of shares, with large gift/grant transactions as well as open market sales. The CFO has been a net seller of shares, with multiple large sale transactions over time. Other key insiders like the President (MARRON MARK P) and EVP (Marion Elaine D) have also been active traders, with both buying and selling activity.

Recent Patterns

In the most recent 2 years, the CEO and CFO have continued their trading activity: the CEO received several large stock grants/awards, made some gift transfers, and executed open market sales; the CFO executed multiple open market sale transactions, reducing his overall share ownership. Other insiders like the President and EVP have also been active, with both buying and selling activity. The trading volumes and frequency suggest the insiders are actively managing their positions in the company.

Implications

The active trading by the CEO, CFO, and other key insiders suggests they have a mixed outlook on the company’s long-term prospects. The net selling by the CEO and CFO, in particular, may indicate some concerns about the company’s future performance. However, the continued stock grants/awards to the CEO and CFO suggest the board still has confidence in the leadership team. Overall, the insider trading patterns paint a mixed picture and warrant close monitoring by long-term and short-term investors.

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Management Compensation Benchmark Analysis

Executive Compensation Insights

Based on the executive compensation details provided, the key insights for a long-term investor in PLUS are:

  1. The average percentage of base salary out of total compensation for PLUS executives across all years is 33.80%. This is higher than the average for MODN (17.72%) and PRO (25.67%), but lower than the average for AGYS (54.63%) and PDFS (75.56%). This suggests that PLUS’s executive compensation structure has a higher variable component compared to some peers, which could align better with long-term shareholder value creation.

  2. The base salary portion of total compensation for the top executives at PLUS (CEO, CFO, COO) ranges from around 16-17% in recent years. This is on the lower end compared to some peers, indicating a greater emphasis on performance-based pay.

  3. PLUS does not appear to provide annual cash bonuses to its top executives. Instead, a significant portion of their total compensation comes from stock awards and incentive plan compensation, which are more closely tied to long-term company performance.

  4. The total compensation levels for PLUS’s top executives are generally in line with or lower than those of its peers, suggesting the company is not overpaying its leadership team.

Overall, the executive compensation structure at PLUS seems to be reasonably well-aligned with long-term shareholder value creation, with a greater emphasis on variable, performance-based pay compared to some of its industry peers. This could be a positive sign for long-term investors in the company.

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Proxy Statement Analysis

Compensation Structure Analysis

The following analysis is based on the latest proxy statement of PLUS:

Based on the information provided in the DEF 14A filing, there are several key insights that suggest the executives’ compensation is aligned with creating long-term shareholder value:

  1. Significant portion of compensation is in the form of long-term incentives like stock options, restricted stock units, and performance-based equity awards. This ties executive pay to the company’s long-term stock performance.

  2. Performance-based equity awards are linked to achieving specific financial and operational goals critical for long-term success.

  3. Stock ownership guidelines require executives to maintain a certain level of stock ownership, further aligning their interests with shareholders.

  4. The company has a clawback policy to recoup incentive pay from executives in case of misconduct or financial restatements, promoting sound decision-making.

Overall, the compensation structure appears designed to motivate executives to focus on long-term value creation and align their interests with those of long-term shareholders. However, I don’t have full confidence in this assessment without reviewing the specific details and metrics in the filing.

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News Analysis

Earnings Performance

ePlus has consistently beaten earnings and revenue estimates in recent quarters, indicating strong financial performance. However, there were a couple of instances where the company missed estimates, which could raise some concerns.

Industry Recognition

ePlus has been recognized by various industry bodies, such as CRN’s Solution Provider 500 List, Managed Service Provider 500 List, and AWS Competency Status, highlighting its strong position in the business-software services industry.

Acquisitions and Partnerships

The company has been actively pursuing growth through acquisitions, such as the acquisition of System Management Planning, and partnerships, like its collaboration with AWS and the availability of its services on AWS Marketplace.

Stock Valuation

Several articles suggest that ePlus stock is trading at attractive valuations based on metrics like price-to-sales ratio, indicating potential upside for value investors.

Momentum and Growth Prospects

ePlus has been identified as a momentum stock with fast-paced growth, which could appeal to growth investors. However, some articles also caution about the stock being a bargain despite its momentum, suggesting a balanced approach.

Industry Outlook

The business-software services industry is described as prospering and thriving, which bodes well for ePlus’s long-term prospects.

Overall, the sentiment seems generally positive, with ePlus’s consistent financial performance, industry recognition, growth initiatives, and attractive valuation being highlighted as potential catalysts for long-term investors. However, there are also some cautionary notes about the stock being a bargain despite its momentum, suggesting a need for careful evaluation.

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Technical Indicators Analysis

Next Week Trading

The recent price action and technical indicators suggest a mixed outlook for the next week. The 20-day TEMA is currently at 73.24, indicating a slight downward trend in the short-term. However, the 10-day RSI is around 51.5, suggesting the stock is in neutral territory and not overbought or oversold. The 14-day ADX is at 24.79, indicating a relatively weak trend. Based on this, a next week trader might adopt a cautious, range-bound trading approach, looking for opportunities to buy on dips and sell on rallies, as the stock appears to lack a clear directional bias in the near term.

Resistance and Support Levels

The 20-day SMA at 74.82 and the 50-day SMA at 76.87 could act as potential resistance levels, while the 200-day SMA at 72.75 could provide support. A short-term investor might look to take profits around the 20-day and 50-day SMA levels, and consider buying on dips towards the 200-day SMA.

Short-Term Investor

The recent price action and technical indicators paint a mixed picture for a short-term investor. The 10-day RSI is in neutral territory, suggesting the stock is not overbought or oversold. However, the 20-day TEMA is below the current price, indicating a potential downward trend in the short term. A short-term investor might consider taking a cautious, opportunistic approach, looking to buy on dips and sell on rallies, until a clearer trend emerges.

Long-Term Investor

For a long-term investor, the overall technical picture appears more favorable. The 200-day SMA at 72.75 is below the current price, suggesting the long-term trend is still positive. Additionally, the 50-day SMA at 76.87 is above the 200-day SMA, indicating a bullish long-term outlook. A long-term investor might consider this a buying opportunity, as the stock appears to be in a healthy uptrend from a broader, long-term perspective.

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Chart of Valuation History

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Financial Statements Annual

Financial Statements Annual 2024 Q2

Diversified customer base and end markets

ePlus has a broad and diverse customer base across various industries including telecom/media, technology, state/local government, healthcare, and financial services. This diversification helps mitigate reliance on any single customer or industry.

Balanced business model

ePlus has a well-rounded business model with three main segments – product, professional services, and managed services. This diversification across hardware, software, and services provides stability and growth opportunities.

Strong technology expertise and partnerships

ePlus maintains deep technical expertise and top-level engineering certifications with leading IT vendors. This allows them to deliver advanced, integrated solutions to customers.

Expanding geographic footprint

ePlus is strategically expanding its sales and delivery capabilities internationally, which could open up new growth avenues.

Consistent financial performance

ePlus has demonstrated steady revenue growth, healthy gross margins, and profitability over the past three years. The company’s Adjusted EBITDA margin remains industry-leading.

Prudent capital allocation

ePlus has a track record of successfully integrating acquisitions to expand its capabilities and customer reach. The company also actively repurchases its own shares, demonstrating confidence in its long-term prospects.

Cybersecurity and IT infrastructure investments

ePlus is proactively investing in its own cybersecurity measures and IT systems to ensure operational resilience, which is critical given the nature of its business.

Potential headwinds

Factors like supply chain constraints, inflation, rising interest rates, and potential economic slowdown could pose challenges that ePlus would need to navigate effectively.

Overall, ePlus appears to be a well-diversified, technically-proficient IT solutions provider with a balanced business model and strong financial performance, making it an attractive long-term investment proposition.

Financial Statements Annual 2023 Q2

Strong Revenue Growth

ePlus has achieved consistent revenue growth, with net sales increasing by 13.5% in fiscal year 2023 to $2.07 billion, up from $1.82 billion in fiscal year 2022. This growth was driven by higher revenues in the technology segment.

Improved Profitability

Net earnings increased by 13.0% to $119.4 million in fiscal year 2023, up from $105.6 million in the prior year. This was driven by the increase in gross profit, which grew 12.3% to $517.5 million. Operating income margin remained strong at 8.0%.

Diversified Customer Base

ePlus serves a diverse set of end markets, with the top five markets (Telecom/Media/Entertainment, Technology, SLED, Healthcare, and Financial Services) accounting for over 80% of net sales. This diversification helps mitigate reliance on any single customer or industry.

Expanding Services Offerings

ePlus has continued to grow its higher-margin professional and managed services, which now account for 12.8% of total net sales, up from 11.6% in the prior year. This shift towards services helps improve the company’s overall profitability.

Supply Chain Challenges

Like others in the industry, ePlus is experiencing ongoing supply constraints that have affected lead times, inventory levels, and costs. The company is working to mitigate these disruptions, but they may continue to impact financial results in the near-term.

Strong Balance Sheet and Liquidity

ePlus maintains a healthy balance sheet, with $103.1 million in cash and cash equivalents as of March 31, 2023. The company’s credit facility provides ample liquidity to fund operations and growth initiatives.

Shareholder-Friendly Capital Allocation

ePlus has an active share repurchase program, having bought back $7.2 million worth of shares in fiscal year 2023. The company has also maintained a flexible capital structure to support its financing segment.

Overall, ePlus demonstrates a track record of consistent growth, profitability, and prudent financial management, positioning it well to navigate the current macroeconomic and industry challenges.

Financial Statements Annual 2022 Q2

Strong Revenue and Earnings Growth

ePlus has demonstrated consistent revenue and earnings growth over the past 3 years, with net sales increasing 16.1% to $1.82 billion and net earnings increasing 41.9% to $105.6 million in fiscal year 2022 compared to the prior year. This indicates the company is executing well on its growth strategy.

Expanding Gross Margins

Gross margins have improved, increasing from 25.1% in fiscal 2021 to 25.3% in fiscal 2022, driven by a shift in revenue mix towards higher-margin professional and managed services as well as third-party maintenance and software sales. This suggests ePlus is able to deliver more value-added solutions to customers.

Robust Cash Flow and Balance Sheet

ePlus generated $129.5 million in operating cash flow in fiscal 2021 and maintained a strong cash balance of $155.4 million as of March 31, 2022. This provides ePlus with ample liquidity to fund growth initiatives, make strategic acquisitions, and return capital to shareholders through share repurchases.

Diversified Customer Base and End-Markets

ePlus serves a diverse set of customers across various industries, with the top 5 end-markets (telecom/media, healthcare, technology, state/local government, and financial services) accounting for over 80% of revenues. This diversification helps mitigate concentration risk.

Successful Acquisition Integration

ePlus has demonstrated the ability to successfully integrate acquired businesses, as evidenced by the accretive contribution from the Systems Management Planning (SMP) acquisition completed in December 2020. This suggests ePlus can continue to grow through strategic M&A.

Potential Headwinds from Supply Chain Constraints and Inflation

ePlus is experiencing supply chain disruptions and rising costs, which could pressure margins if the company is unable to fully pass along price increases to customers. Managing these external factors will be crucial going forward.

Overall, ePlus appears to be a well-run technology solutions provider with a diversified business model, strong financial position, and proven ability to grow both organically and through acquisitions. The key will be navigating the current macroeconomic challenges while continuing to deliver innovative solutions to its customer base.

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Financial Statements Quarterly

Financial Statements Quarterly 2024 Q2

Diversified business model

ePlus operates in two main segments – a technology business (product, professional services, and managed services) and a financing business. This diversification helps mitigate risks and provides multiple avenues for growth.

Strong technology business performance

The technology business segments (product, professional services, and managed services) saw revenue growth of 6% year-over-year for the 9-month period, driven by increased demand across key customer end-markets like SLED, healthcare, and financial services. Gross margins also improved in these segments.

Financing business resilience

The financing business segment maintained solid operating income despite a decline in post-contract earnings, demonstrating the resilience of this business line. The segment was able to offset lower post-contract earnings with higher portfolio earnings and transactional gains.

Operational efficiency

The company’s cash conversion cycle for the technology business improved slightly to 54 days, indicating efficient working capital management. This, combined with the company’s ability to pass on price increases, suggests strong operational control.

Inorganic growth strategy

ePlus has been actively pursuing acquisitions, such as the acquisition of Network Solutions Group, to expand its geographic reach and capabilities. These strategic moves position the company for continued growth.

Strong balance sheet and liquidity

ePlus maintains a healthy balance sheet with $142 million in cash and cash equivalents and access to a $5 billion credit facility. This financial flexibility supports the company’s growth initiatives and ability to navigate market uncertainties.

Shareholder-friendly actions

The company has an active share repurchase program, which demonstrates its commitment to enhancing shareholder value. The consistent profitability and cash flow generation also support the potential for future dividend payments.

Overall, ePlus’s diversified business model, operational efficiency, strategic acquisitions, and strong financial position make it an attractive long-term investment opportunity for investors seeking exposure to the IT solutions and financing industry.

Financial Statements Quarterly 2024 Q1

Strong revenue growth

The company’s total net sales increased 19% year-over-year for the three months ended September 30, 2023 and 22% year-over-year for the six months ended September 30, 2023. This was driven by robust demand across the company’s technology business segments, including product, professional services, and managed services.

Margin pressure, but profitability remains healthy

Gross margin declined 240 basis points to 24.6% in Q2 FY2024 and 120 basis points to 24.7% in the first half of FY2024. This was primarily due to lower product margins, though the company’s professional services and managed services segments saw margin expansion. Despite the margin pressure, the company maintained strong profitability, with operating income margin of 7.6% in Q2 and 7.8% in the first half.

Successful acquisitions driving growth

The company’s acquisition of Network Solutions Group in Q1 FY2024 contributed $250 million to product revenue in Q2 and $595 million in the first half, highlighting the company’s ability to integrate and cross-sell acquired capabilities.

Robust cash flow and balance sheet

The company generated $31.2 million in operating cash flow in the first half of FY2024. Its balance sheet remains strong, with $82.5 million in cash and cash equivalents and $845.7 million in total stockholders’ equity as of September 30, 2023.

Shareholder-friendly capital allocation

The company repurchased $8.4 million of its common stock in the first half of FY2024, demonstrating its commitment to returning capital to shareholders.

Overall, the company is executing well, driving strong revenue growth through its technology solutions while maintaining profitability. The successful integration of acquisitions, healthy cash flow, and shareholder-friendly capital allocation suggest the company is well-positioned for long-term value creation.

Financial Statements Quarterly 2023 Q4

Revenue Growth

ePlus’ total net sales increased 25.3% to $574.2 million in Q1 FY2024 compared to $458.4 million in Q1 FY2023. This was driven by strong growth in the technology business segments, particularly product and managed services.

Profitability Improvement

Gross profit increased 25.3% to $142.3 million, and operating income increased 39.6% to $46.3 million. This led to a 51.5% increase in net earnings to $33.8 million.

Technology Segment Performance

The product segment saw a 29.2% increase in net sales, driven by higher networking and cloud product sales. The professional services segment saw a 4.3% decline in net sales due to lower staff augmentation revenue. The managed services segment grew 23.2% in net sales due to expansion of service offerings. Overall, the technology business segments saw a 26.0% increase in net sales and a 28.6% increase in gross profit.

Financing Segment Performance

Net sales in the financing segment declined 11.3% due to lower transactional gains and post-contract earnings. Gross profit in the financing segment declined 19.2% due to higher cost of sales and lower depreciation expense.

Liquidity and Capital Resources

ePlus used $20.9 million in operating cash flow in Q1 FY2024, compared to $102.9 million used in the prior year period. The company made $59.6 million in cash payments for the acquisition of Network Solutions Group. ePlus had $101.6 million in cash and cash equivalents as of June 30, 2023.

Segment Reporting Changes

ePlus split its technology segment into three new segments: product, professional services, and managed services. This provides better visibility into the performance of these business lines.

In summary, ePlus delivered strong revenue and profitability growth in Q1 FY2024, driven by the performance of its technology business segments. The financing segment saw a decline, but the overall business momentum remains positive. The company continues to invest in acquisitions and technology capabilities to drive future growth.

Financial Statements Quarterly 2023 Q3

Revenue Growth

ePlus saw strong revenue growth, with net sales increasing 26% to $623.5 million in Q3 2022 compared to $494.8 million in Q3 2021. For the 9-month period, net sales increased 15% to $1.58 billion. This was driven by increased demand and higher prices for products in the technology segment.

Profitability

Gross profit increased 18% to $138.4 million in Q3 2022, though gross margin declined 150 basis points to 22.2%. Operating income increased 29% to $46.5 million, and net earnings increased 35% to $35.7 million. Adjusted EBITDA increased 27% to $53.3 million.

Segment Performance

The technology segment drove the majority of the revenue and profit growth, with net sales increasing 28% and operating income increasing 51% in Q3 2022. The financing segment saw a decline in net sales and operating income due to lower portfolio income and transactional gains.

Cash Flows and Liquidity

ePlus used $147 million in operating cash flow in the 9-month period, primarily due to increases in accounts receivable and inventory. The company had $99.4 million in cash at the end of Q3 2022 and access to $1.5 billion in revolving credit.

Capital Allocation

ePlus repurchased $7.2 million of its common stock during the 9-month period. The company also completed the $13.3 million acquisition of Future Com Ltd to expand its cybersecurity capabilities.

In summary, ePlus delivered strong revenue and earnings growth in Q3 2022, driven by its technology segment, though profitability was impacted by lower margins. The company maintained a solid liquidity position to fund growth initiatives and return capital to shareholders.

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Earnings Call Analysis

Earnings Call Analysis 2024 Q2

Well-positioned to Outperform IT Spending Market

ePlus is well-positioned to continue outperforming the overall IT spending market, driven by its focus on faster-growing solution areas and strategic acquisitions.

Easing Supply Chain Constraints

The company has seen an easing of supply chain constraints, which has allowed it to complete previously delayed customer projects and drive strong sales growth.

Broad-based Demand Across Segments

ePlus is seeing broad-based demand across its customer segments, with particular strength in the mid-market segment, which aligns well with the company’s strengths in areas like cloud, security, and technology modernization.

Managed Services as a Key Growth Driver

The company’s managed services business is a key growth driver, with 23.2% year-over-year revenue growth and a 5-year CAGR of 24.1%. This provides a more stable, recurring revenue stream.

Acquisitions as a Growth Strategy

ePlus is actively pursuing acquisitions as a fundamental component of its growth strategy, and the pipeline remains active. The recent acquisitions of Network Solutions Group and Future Com have contributed significantly to the company’s performance.

Guidance and Potential Headwinds

While the company is providing guidance, it appears to be taking a somewhat conservative approach, likely due to tough comparisons in the financing segment and the potential for some pull-forward of demand in the first quarter.

Pricing Power and Value Proposition

ePlus has maintained its ability to pass through vendor price increases, suggesting it has pricing power and a strong value proposition for its customers.

Overall, ePlus appears to be executing well on its strategic priorities, leveraging its diversified customer base, focus on faster-growing solution areas, and disciplined approach to acquisitions to drive consistent outperformance. The long-term investor should closely monitor the company’s ability to sustain its growth momentum and manage any potential macroeconomic headwinds.

Earnings Call Analysis 2024 Q1

Diversified Business Model

ePlus has a diversified business model with two main segments – Technology and Financing. This provides revenue diversification and stability.

Technology Segment Growth

The Technology segment, which accounts for the majority of revenue, has seen strong growth in both product and services revenue, particularly in higher-value and higher-growth areas like workplace transformation, security, and managed services. This indicates the company is successfully executing on its growth strategy.

Financing Segment Performance

The Financing segment has more volatile results, but management acknowledges this and does not expect the exceptional performance seen in fiscal 2022 to be repeated. This segment can still provide a differentiating factor compared to peers.

Improved Gross Margins

Gross margins have improved, particularly in the services business, due to factors like price increases and a shift towards higher-margin offerings like managed services. This suggests the company has pricing power and can maintain profitability.

Investments in Workforce and Capabilities

The company continues to invest in its workforce and capabilities, which has driven higher operating expenses. However, it has maintained operating leverage, with operating income growing faster than expenses. This indicates the investments are paying off.

Potential Macro Headwinds

While management acknowledges potential macro headwinds like longer sales cycles and reduced customer purchasing power, they believe ePlus is well-positioned to weather these challenges due to its focus on recession-resilient solutions and strong customer relationships.

Acquisition of Network Solutions Group

The recent acquisition of Network Solutions Group provides an opportunity to expand ePlus’ presence in the telecom market, leveraging its existing capabilities and customer base.

Overall, ePlus appears to be executing well on its strategic priorities, diversifying its revenue streams, and maintaining profitability – all positive signs for long-term investors. However, the company’s exposure to broader economic conditions should be monitored closely.

Earnings Call Analysis 2023 Q4

Broad-based growth across customer segments and verticals

ePlus saw strong growth in the quarter, with net sales up 26% and adjusted gross billings up 29.7%, driven by growth across all customer size segments and vertical markets. This suggests ePlus is gaining market share.

Investments in capabilities are paying off

The investments ePlus has made in its teams and capabilities are driving growth and delivering value to customers, particularly in areas like digital transformation, hybrid workforce, security, and cloud.

Managed services are a key differentiator

ePlus’ managed services business generates higher-margin recurring revenue and creates sticky long-term customer relationships. This is an important competitive advantage.

Economic uncertainty ahead

While ePlus sees continued demand in its focus areas, the company is cautious about the potential for an economic slowdown in 2023. It is monitoring the market closely and will make adjustments as needed.

Supply chain challenges persist, but improving

ePlus saw some easing of supply chain constraints in the quarter, allowing it to fulfill more customer projects. However, supply chain issues are expected to continue for the next few quarters.

Cautious on near-term outlook

The company expects Q4 to be a smaller quarter sequentially, with the financing segment facing a tough year-over-year comparison. Longer-term, ePlus remains well-positioned, but near-term results may be impacted by economic uncertainty.

Overall, ePlus appears to be executing well on its growth strategy, but investors should be mindful of the potential for near-term volatility due to macroeconomic conditions.

Earnings Call Analysis 2023 Q3

Well-Positioned for Growth

ePlus is well-positioned to capture market share and growth opportunities despite economic uncertainty, supported by its financial strength, mission-critical technology offerings, and focus on high-growth areas like security, cloud, and managed services.

Strategic Workforce Investments

The company is making strategic investments in its workforce, particularly in customer-facing roles and specialized talent in professional and annuity services, to meet current and anticipated future demand. This may impact margins in the short-term but positions the company for long-term success.

Supply Chain Challenges

Supply chain constraints continue to be a challenge, affecting revenue, margins, and operating expenses across both product and services. However, ePlus is managing this proactively by building up inventory levels to support customer demand.

Financing Segment Differentiator

The company’s financing segment provides a competitive differentiator, especially in the current economic environment where payment flexibility is valuable. However, this segment can be lumpy quarter-to-quarter.

Executing Strategic Priorities

ePlus is focused on executing its strategy, generating solid sales and adjusted gross billings growth, while maximizing its long-term opportunity through continued investment in its employees and capabilities.

Cautious Interpretation

Investors should be cautious about taking the company’s statements at face value and instead pay attention to the implied meaning behind analyst questions, which may reveal potential risks or challenges not explicitly stated.

Overall, ePlus appears to be a well-managed, financially strong company that is positioning itself for long-term growth in the IT solutions and services market, despite near-term economic uncertainties and supply chain disruptions.

Earnings Call Analysis 2023 Q2

Solid financial performance

ePlus reported double-digit year-over-year growth in both net sales (10%) and adjusted gross billings (10.9%) for the quarter, indicating strong demand across its business.

Diversified revenue streams

The company’s technology segment, which accounts for the majority of revenue, saw 12.1% growth in net sales. This was driven by strong performance in hybrid cloud and security offerings, highlighting the company’s ability to capitalize on key IT trends.

Expanding services business

ePlus’ technology services revenue grew 13.5% year-over-year, as customers increasingly look to the company for consulting and managed services. This suggests the services business is becoming a more recurring and higher-margin revenue stream.

Acquisition of Future Com

The acquisition of cybersecurity firm Future Com enhances ePlus’ security capabilities and expands its presence in the Texas region, further strengthening its comprehensive IT solutions offering.

Supply chain challenges

While ePlus is navigating supply chain issues, the company is managing vendor relationships and meeting customer needs. This suggests the company is well-positioned to weather the current environment.

Cautious on financing segment

The financing segment’s performance can be variable quarter-to-quarter, and the company does not expect to replicate the large transactions that benefited the segment in the prior year period.

Overall, the call suggests ePlus is executing well, diversifying its revenue streams, and investing in growth areas like security and services, which could position the company for long-term success. However, the company’s financing segment and supply chain challenges warrant close monitoring.

Earnings Call Analysis 2023 Q1

Strong financial performance and market share gains

ePlus has delivered exceptional results, with 28% growth in Q4 net sales and 16% growth in FY2022 net sales. This suggests the company is gaining market share, which is a positive sign for long-term investors.

Diversified business model

ePlus operates in both the Technology and Financing segments, providing a diversified revenue stream. The financing segment, in particular, has seen strong performance, though management expects it to revert to more normalized levels going forward.

Expanding services and solutions

ePlus has been investing in its teams and capabilities to capitalize on long-term trends in areas like cloud, data center, cybersecurity, and managed services. The growth in the services business, which saw 19% sales growth in FY2022, is a positive indicator.

Supply chain challenges

While demand remains strong, ePlus is facing supply chain constraints that are leading to extended project timelines and revenue headwinds. This is an industry-wide issue, and ePlus seems to be managing it well, but it is something to monitor going forward.

Acquisition strategy

ePlus is actively evaluating acquisition targets to enhance growth and expand its geographic presence. Its strong balance sheet and credit facility provide the necessary flexibility to pursue strategic M&A opportunities.

Cautious outlook

While ePlus expects to continue outpacing industry growth, management is cautious about the supply chain situation and its potential impact on revenue in the coming year. This suggests investors should be mindful of potential near-term headwinds.

Overall, ePlus appears to be a well-positioned IT solutions provider with a diversified business model, strong growth trends, and a focus on strategic investments. However, the supply chain challenges and potential normalization of the financing segment are factors that long-term investors should closely monitor.

Earnings Call Analysis 2022 Q4

Strong financial performance

ePlus delivered strong financial results in Q3 FY2022, with double-digit growth in adjusted gross billings, net sales, and earnings per share. This demonstrates the company’s ability to execute on its growth strategy.

Diversified customer base and end markets

ePlus serves a broad range of customers, including commercial entities, government, and educational institutions. Its top end markets include telecom/media, healthcare, and technology, providing diversification.

Expanding services business

ePlus’ services revenue, which includes managed and professional services, grew 20% in the quarter and year-to-date. This higher-margin business is driving improved profitability and more predictable revenue.

Financing segment contribution

The financing segment continues to be a valuable part of ePlus’ business, generating strong operating income growth of 39% year-over-year in Q3.

Supply chain challenges

While ePlus is navigating supply chain constraints, it is working closely with vendors and customers to manage the situation. This has led to higher inventory levels, which are expected to decline as supply chain issues ease.

Disciplined acquisition strategy

ePlus has a robust balance sheet and integration expertise, allowing it to pursue acquisitions, but it remains disciplined in its approach.

Positive market fundamentals

ePlus is encouraged by continued favorable market conditions, as evidenced by its strong open orders and growing services backlog, suggesting continued demand for its solutions.

Overall, ePlus appears to be executing well on its strategy, diversifying its revenue streams, and maintaining a strong financial position, which should benefit long-term investors. The company’s ability to navigate supply chain challenges and continue investing in its business are also positive signs.

Earnings Call Analysis 2022 Q3

Strong business model and growth strategy

ePlus has demonstrated the strength of its business model and the success of its strategy to drive growth, particularly in high-growth areas like cloud, security, and digital infrastructure.

Diversified revenue streams

The company has a balanced mix of revenue from products, services, and financing, which provides diversification and stability.

Recurring revenue growth

The company’s service business is generating increasing amounts of recurring, annuity-type revenue, which enhances the predictability and visibility of its revenue stream.

Operational efficiency and profitability

ePlus has shown strong discipline in its cost structure, which has led to significant improvements in profitability and operating leverage as revenue scales.

Acquisition strategy

The company remains active in identifying and evaluating potential acquisition candidates that can further expand its capabilities and geographic presence, though it maintains a disciplined approach.

Supply chain challenges

While ePlus has effectively managed the supply chain bottlenecks so far, these challenges could act as a potential headwind going forward and should be monitored closely.

Shareholder-friendly actions

The company’s announcement of a 2-for-1 stock split demonstrates its confidence in the business and its commitment to enhancing shareholder value.

Overall, ePlus appears to be a well-positioned, diversified IT solutions provider with a strong track record of growth and profitability. The company’s focus on high-growth areas, operational efficiency, and disciplined acquisition strategy suggest it is well-equipped to navigate the evolving IT landscape and deliver long-term value for investors.

Earnings Call Analysis 2022 Q2

Strong financial performance

ePlus reported solid Q1 FY2022 results, with 17.4% growth in net sales, 29.8% growth in operating income, and 35.5% growth in net earnings. This indicates the company’s business model is scalable and efficient.

Diversified revenue streams

ePlus has a balanced revenue mix between product sales and services, with services revenue growing 16.3% in Q1. The recurring annuity-type revenue from services enhances predictability.

Focus on high-growth areas

ePlus is seeing strong demand in areas like security, cloud, and digital infrastructure. Security represents 20.8% of its trailing 12-month adjusted gross billings, indicating its strategic importance.

Supply chain challenges

While ePlus was minimally affected in Q1, it recognizes potential revenue headwinds from component shortages and supply chain disruptions going forward. This is a risk factor to monitor.

Acquisition strategy

ePlus plans to continue evaluating strategic acquisitions that can broaden its geographic presence and enhance its capabilities in high-growth markets.

Financing segment

This segment provides a unique differentiator, offering customers flexibility in managing IT budgets. The timing and size of transactions can make this segment lumpy, but it saw strong interest in Q1.

Overall, ePlus appears to be executing well on its growth strategy, with a diversified business model and focus on high-growth technology areas. However, the potential supply chain challenges should be closely monitored by long-term investors.

Earnings Call Analysis 2022 Q1

Diversified Business Model

ePlus has a diversified business model with two main segments – Technology and Financing. This provides revenue diversification and stability.

Transition to Recurring Revenue

The company has seen strong growth in its higher-margin services business, which now accounts for 12.9% of net revenues. This indicates the company is successfully transitioning towards more recurring, annuity-based revenue streams.

Focus on Security Solutions

Security solutions are a key focus area for ePlus, accounting for 20.8% of adjusted gross billings. This aligns with increasing customer demand for cloud security and data protection.

Competitive Financing Offerings

ePlus’ financing segment provides a competitive advantage by offering flexible financing options to customers, enabling technology investments that fit their budgets.

Strong Balance Sheet

The company has a strong balance sheet with $129.6 million in cash, providing flexibility for strategic acquisitions and investments to enhance its technology solutions offerings.

While component shortages in the supply chain may act as a near-term headwind, ePlus appears confident in its ability to navigate these challenges based on past experience.

Growth Opportunities

ePlus is seeing increasing customer demand in areas like cloud, security, digital transformation and collaboration, which are expected to drive growth going forward as the economy recovers.

Overall, ePlus appears to be executing well on its strategic priorities, diversifying its revenue streams, and positioning itself to capitalize on key IT market trends. The company’s strong financial performance and balance sheet provide a solid foundation for long-term growth.

Earnings Call Analysis 2021 Q4

Diversified business model

ePlus has a diversified business model with both a Technology segment and a Financing segment. This diversification helps the company weather challenges in one segment by the strength in the other.

Focus on high-growth areas

ePlus is strategically focused on cloud, security, collaboration, and related services – areas that have seen increased demand during the pandemic. This focus on high-growth markets is a positive for long-term investors.

Acquisition strategy

ePlus is selectively acquiring companies like Systems Management Planning to expand its geographic footprint and service offerings. This inorganic growth strategy can be beneficial if the acquisitions are well-integrated.

Operational efficiency

ePlus has been able to reduce operating expenses through measures like lower travel/entertainment and facility costs. This suggests the company is managing costs well, which can improve profitability.

Financing segment volatility

The Financing segment can be lumpy, with significant quarter-to-quarter variations. Investors should be aware of this volatility and not overreact to short-term fluctuations in this business.

Cautious outlook

Despite the company’s solid performance, management remains cautious about the broader economic environment due to the ongoing uncertainty around COVID-19 and its impacts. This prudent approach is appreciated by long-term investors.

Overall, ePlus appears to be a well-diversified IT solutions provider with a focus on high-growth areas and a disciplined approach to operations and acquisitions. Long-term investors should closely monitor the company’s ability to execute on its strategic priorities and manage the volatility in the Financing segment.

Earnings Call Analysis 2021 Q3

Operational Agility

ePlus has been able to successfully execute and support its customers despite the challenging business environment due to COVID-19. The company has adjusted its go-to-market plans and service delivery models to meet changing customer needs.

Margin Pressure

ePlus has seen strong demand from enterprise and state/local/education customers, particularly for product sales. However, this has put pressure on gross margins as these sales tend to be lower margin.

Cost Optimization

The company has made progress in reducing operating expenses, primarily through lower travel, entertainment, and marketing costs. ePlus is looking for longer-term structural savings, including in facilities costs.

Financing Advantage

ePlus’ financing segment provides a competitive advantage, allowing the company to help customers, especially in the state/local/education space, access solutions while reducing their long-term costs.

Financial Flexibility

ePlus has a strong balance sheet, providing financial flexibility to make organic investments and consider acquisitions, even as some competitors may be more constrained.

Market Positioning

The company remains cautious about the uncertain impact of COVID-19 on demand in the second half of the fiscal year, but believes its solutions are well-positioned in the market.

Overall, the key insights highlight ePlus’ operational agility, financial strength, and strategic positioning, which could be attractive for a long-term investor despite the near-term uncertainty.

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The information provided on this blog is for informational purposes only and should not be considered as financial advice. You should consult with a qualified financial professional before making any investment decisions. Past performance is not indicative of future results. Investing involves risk, including the potential loss of principal.