ePlus Reports First Quarter Fiscal Year 2025 Financial Results
First Quarter Fiscal Year 2025
- Net sales decreased 5.2% to
$544.5 million from last year's first quarter; technology business net sales decreased 5.3% to$535.5 million ; services revenues increased 15.8% to$78.2 million . - Technology business gross billings decreased 1.0% to
$833.7 million . - Consolidated gross profit decreased 5.5% to
$134.5 million . - Consolidated gross margin was 24.7% as compared to last year's 24.8%.
- Net earnings decreased 19.2% to
$27.3 million . - Adjusted EBITDA decreased 19.9% to
$43.1 million . - Diluted net earnings per common share decreased 19.7% to
$1.02 and non-GAAP diluted net earnings per common share decreased 19.9% to$1.13 .
Management Comment
"We continued to see strong growth in security and services overall with our managed services up 28%. For many years we have been building strong services and recurring revenue streams, in part to offset headwinds created by the increase in netted down revenues and ratable recognition of sales, both to build a more consistent financial model, but also to deliver the solutions that customers demand with today's advanced technologies," said
"Given a hard compare, with last year's first quarter growth of 25% due to supply chain easing, our first quarter net sales were down 5.2% and gross billings were down 1%. Both the revenue and gross billings decline year over year is attributable to a more normalized supply chain, the absorption of prior purchases by our customers, product mix, and the ratable trend as noted above. We do not see any long-term diminished demand for our products and services and our full year guidance remains unchanged."
First Quarter Fiscal Year 2025 Results
For the first quarter ended
Consolidated net sales decreased 5.2% to
Technology business net sales decreased 5.3% to
Product sales decreased 8.2% to
Professional service revenues increased 4.8% from last year to
Managed service revenues increased 28.0% to
Financing business segment net sales increased 6.4% to
Consolidated gross profit decreased 5.5% to
Consolidated operating expenses were
Consolidated operating income decreased 23.4% to
Our effective tax rate remained at 27.2% year over year.
Net earnings decreased 19.2% to
Consolidated adjusted EBITDA decreased 19.9% to
Diluted net earnings per common share was
Balance Sheet Highlights
As of
Fiscal Year Guidance
ePlus is maintaining fiscal year 2025 guidance for net sales growth over the prior fiscal year of between 3% and 6%, and an adjusted EBITDA range of
Summary and Outlook
"Looking ahead, as we add new products and services and benefit from recent acquisitions, ePlus continues to be positioned to achieve top-line growth. Our business is supported by deep customer and channel relationships. We have invested across the organization to strengthen our product and services offerings and to customize our solutions to meet the evolving needs of our customers. Our teams continue to execute well and operate efficiently with an unwavering commitment to superior customer service. These factors support our confidence in the underlying fundamentals of our business and our ability to deliver on our 2025 financial outlook and objectives.
"Additionally, our strong financial position provides us with considerable capital allocation options to drive long-term shareholder value, including the ability to expand our product offerings, make larger accretive acquisitions, and continue to return capital to shareholders through share repurchases. This flexibility, together with ongoing investments in differentiated capabilities, should enable us to build on our competitive advantage and advance our market positioning," concluded
Recent Corporate Developments/Recognitions
In the month of July:
- Announced Storage-as-a-Service leveraging NetApp.
- IGXGlobal, a subsidiary of ePlus, began offering Storage-as-a-Service powered by Pure Storage.
In the month of June:
- Awarded the Lenovo
U.S. Infrastructure Solutions Partner of the Year Award. - Announced the launch of Azure Recover.
- Recognized as Juniper Networks 2023 Partner of the Year for
Cloud Ready Data Center in both Worldwide and Americas Categories.
In the month of May:
- Named Growth Partner of the Year by Varonis.
- Earned a spot on CRN's 2024 Solution Provider 500 List.
Conference Call Information
ePlus will hold a conference call and webcast at
Date: |
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Time: |
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Audio Webcast (Live & Replay): |
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Live Call: |
(888) 596-4144 (toll-free/domestic) |
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(646) 968-2525 (international) |
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Archived Call: |
(800) 770-2030 (toll-free/domestic) |
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(609) 800-9909 (international) |
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Conference ID: |
6593768# (live call and replay) |
A replay of the call will be available approximately two hours after the call through
About ePlus inc.
ePlus has an unwavering and relentless focus on leveraging technology to create inspired and transformative business outcomes for its customers. Offering a robust portfolio of solutions, as well as a broad range of consultative and managed services across the technology spectrum, ePlus has proudly achieved more than 30 years of success, carrying customers forward through adversity, rapidly changing environments, and other obstacles. ePlus is a trusted advisor, bringing expertise, credentials, talent and a thorough understanding of innovative technologies, spanning security, cloud, data center, networking, collaboration and emerging solutions, to organizations across all industry segments. With complete lifecycle management services and flexible payment solutions, ePlus' more than 1,900 associates are focused on cultivating positive customer experiences and are dedicated to their craft, harnessing new knowledge while applying decades of proven experience. ePlus is headquartered in
ePlus® and ePlus products referenced herein are either registered trademarks or trademarks of ePlus inc. in
Forward-looking statements
Statements in this press release that are not historical facts may be deemed to be "forward-looking statements," including, among other things, statements regarding the future financial performance of ePlus. Actual and anticipated future results may vary materially due to certain risks and uncertainties, including, without limitation, exposure to fluctuation in foreign currency rates, interest rates, and inflation, including as a result of national and international political instability fostering uncertainty and volatility in the global economy, which may cause increases in our costs and our ability to increase prices to our customers, negative impacts to the arrangements that have pricing commitments over the term of the agreement, which may result in adverse changes in our gross profit; significant adverse changes in, reductions in, or loss of one or more of our larger volume customers or vendors; reliance on third-parties to perform some of our service obligations to our customers, and the reliance on a small number of key vendors in our supply chain with whom we do not have long-term supply agreements, guaranteed price agreements, or assurance of stock availability; our ability to remain secure during a cybersecurity attack or other IT outtage, including both disruptions in our or our vendors' or other third party's Information Technology ("IT") systems and data and audio communication networks; our ability to secure our own and our customers' electronic and other confidential information, while maintaining compliance with evolving data privacy and regulatory laws and regulations; ongoing remote work trends, and the increase in cybersecurity attacks that have occurred while employees work remotely and our ability to adequately train our personnel to prevent a cyber event; the possibility of a reduction of vendor incentives provided to us; our dependence on key personnel and our ability to hire, train and retain qualified personnel by recruiting and retaining highly skilled, competent personnel, and vendor certifications; our ability to manage a diverse product set of solutions, including artificial intelligence ("AI") products, in highly competitive markets with a number of key vendors; 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, platform as a service and AI; supply chain issues, including a shortage of IT products, may increase our costs or cause a delay in fulfilling customer orders, or increase our need for working capital, or delay completing professional services, or purchasing IT products or services needed to support our internal infrastructure or operations, resulting in an adverse impact on our financial results; our inability to identify acquisition candidates, or perform sufficient due diligence prior to completing an acquisition, or failure to integrate a completed acquisition may affect our earnings; our ability to raise capital, maintain or increase as needed our lines of credit with vendors or floor planning facility, obtain debt for our financing transactions, or the effect of those changes on our common stock price; our ability to implement comprehensive plans for the integration of sales forces, cost containment, asset rationalization, systems integration, and other key strategies; and other risks or uncertainties detailed in our reports filed with the
e Plus inc. AND SUBSIDIARIES |
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UNAUDITED CONSOLIDATED BALANCE SHEETS |
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(in thousands, except per share amounts) |
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ASSETS |
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Current assets: |
|
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Cash and cash equivalents |
|
|
|
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Accounts receivable—trade, net |
|
577,019 |
|
644,616 |
Accounts receivable—other, net |
|
54,987 |
|
46,884 |
Inventories |
|
89,134 |
|
139,690 |
Financing receivables—net, current |
|
109,119 |
|
102,600 |
Deferred costs |
|
59,985 |
|
59,449 |
Other current assets |
|
23,951 |
|
27,269 |
Total current assets |
|
1,264,104 |
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1,273,529 |
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|
|
|
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Financing receivables and operating leases—net |
|
85,032 |
|
79,435 |
Deferred tax asset |
|
5,620 |
|
5,620 |
Property, equipment and other assets |
|
94,417 |
|
89,289 |
|
|
161,508 |
|
161,503 |
Other intangible assets—net |
|
40,292 |
|
44,093 |
TOTAL ASSETS |
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LIABILITIES AND STOCKHOLDERS' EQUITY |
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LIABILITIES |
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Current liabilities: |
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Accounts payable |
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Accounts payable—floor plan |
|
119,511 |
|
105,104 |
Salaries and commissions payable |
|
40,491 |
|
43,696 |
Deferred revenue |
|
138,619 |
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134,596 |
Non-recourse notes payable—current |
|
29,898 |
|
23,288 |
Other current liabilities |
|
29,103 |
|
34,630 |
Total current liabilities |
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628,236 |
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656,990 |
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Non-recourse notes payable—long-term |
|
10,854 |
|
12,901 |
Other liabilities |
|
89,955 |
|
81,799 |
TOTAL LIABILITIES |
|
729,045 |
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751,690 |
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COMMITMENTS AND CONTINGENCIES |
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STOCKHOLDERS' EQUITY |
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Preferred stock, |
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- |
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- |
Common stock, |
|
276 |
|
274 |
Additional paid-in capital |
|
184,733 |
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180,058 |
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447 shares at |
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(35,746) |
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(23,811) |
Retained earnings |
|
770,317 |
|
742,978 |
Accumulated other comprehensive income—foreign currency |
|
|
|
|
translation adjustment |
|
2,348 |
|
2,280 |
Total Stockholders' Equity |
|
921,928 |
|
901,779 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY |
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e Plus inc. AND SUBSIDIARIES |
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UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS |
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(in thousands, except per share amounts) |
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Three Months Ended |
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2024 |
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2023 |
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Net sales |
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Product |
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Services |
78,189 |
|
67,519 |
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Total |
544,538 |
|
574,175 |
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Cost of sales |
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Product |
360,157 |
|
388,904 |
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Services |
49,900 |
|
42,998 |
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Total |
410,057 |
|
431,902 |
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|
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|
|
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Gross profit |
134,481 |
|
142,273 |
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|
|
|
|
|
|
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Selling, general, and administrative |
93,608 |
|
90,298 |
|
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Depreciation and amortization |
4,819 |
|
4,792 |
|
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Interest and financing costs |
585 |
|
851 |
|
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Operating expenses |
99,012 |
|
95,941 |
|
|
|
|
|
|
|
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Operating income |
35,469 |
|
46,332 |
|
|
|
|
|
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Other income (expense), net |
2,073 |
|
190 |
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|
|
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Earnings before taxes |
37,542 |
|
46,522 |
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|
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Provision for income taxes |
10,203 |
|
12,675 |
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Net earnings |
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Net earnings per common share—basic |
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Net earnings per common share—diluted |
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Weighted average common shares outstanding—basic |
26,642 |
|
26,552 |
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Weighted average common shares outstanding—diluted |
26,801 |
|
26,648 |
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Technology Business |
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Three Months Ended |
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|
2024 |
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2023 |
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Change |
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(in thousands) |
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||
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Net sales |
|
|
|
|
|
|
|
Product |
|
|
|
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(8.2 %) |
|
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Professional services |
37,279 |
|
35,556 |
|
4.8 % |
|
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Managed services |
40,910 |
|
31,963 |
|
28.0 % |
|
|
Total |
535,501 |
|
565,685 |
|
(5.3 %) |
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
|
|
|
|
|
Product |
98,505 |
|
111,391 |
|
(11.6 %) |
|
|
Professional services |
15,455 |
|
14,724 |
|
5.0 % |
|
|
Managed services |
12,834 |
|
9,797 |
|
31.0 % |
|
|
Total |
126,794 |
|
135,912 |
|
(6.7 %) |
|
|
|
|
|
|
|
|
|
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Selling, general, and administrative |
90,084 |
|
87,100 |
|
3.4 % |
|
|
Depreciation and amortization |
4,819 |
|
4,764 |
|
1.2 % |
|
|
Interest and financing costs |
- |
|
550 |
|
(100.0 %) |
|
|
Operating expenses |
94,903 |
|
92,414 |
|
2.7 % |
|
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|
|
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|
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Operating income |
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(26.7 %) |
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Gross billings |
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(1.0 %) |
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Adjusted EBITDA |
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(22.5 %) |
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Technology Business Gross Billings by Type
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Three Months Ended |
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|
2024 |
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2023 |
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Change |
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(in thousands) |
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||
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Networking |
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1.8 % |
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Cloud |
241,274 |
|
258,924 |
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(6.8 %) |
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Security |
151,883 |
|
147,343 |
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3.1 % |
|
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Collaboration |
32,976 |
|
22,161 |
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48.8 % |
|
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Other |
44,592 |
|
69,761 |
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(36.1 %) |
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|
Product gross billings |
752,253 |
|
774,834 |
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(2.9 %) |
|
|
Service gross billings |
81,455 |
|
67,136 |
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21.3 % |
|
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Total gross billings |
|
|
|
|
(1.0 %) |
|
|
Technology Business
|
|||||||
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Three Months Ended |
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|
2024 |
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2023 |
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Change |
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(in thousands) |
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||
|
|
|
|
|
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Networking |
|
|
|
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(4.3 %) |
|
|
Cloud |
137,231 |
|
172,044 |
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(20.2 %) |
|
|
Security |
48,005 |
|
45,796 |
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4.8 % |
|
|
Collaboration |
20,899 |
|
12,956 |
|
61.3 % |
|
|
Other |
16,437 |
|
22,182 |
|
(25.9 %) |
|
|
Total product |
457,312 |
|
498,166 |
|
(8.2 %) |
|
|
Professional services |
37,279 |
|
35,556 |
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4.8 % |
|
|
Managed services |
40,910 |
|
31,963 |
|
28.0 % |
|
|
Total net sales |
|
|
|
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(5.3 %) |
|
|
Technology Business
|
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Three Months Ended |
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|
2024 |
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2023 |
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Change |
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(in thousands) |
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Telecom, Media, & Entertainment |
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(16.8 %) |
|
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Technology |
109,106 |
|
73,403 |
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48.6 % |
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|
SLED |
92,096 |
|
109,405 |
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(15.8 %) |
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Healthcare |
75,280 |
|
86,656 |
|
(13.1 %) |
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Financial Services |
49,725 |
|
65,690 |
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(24.3 %) |
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All other |
91,741 |
|
89,196 |
|
2.9 % |
|
|
Total net sales |
|
|
|
|
(5.3 %) |
|
|
Financing Business Segment |
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|
Three Months Ended |
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|
2024 |
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2023 |
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Change |
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(in thousands) |
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||
|
|
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|
|
|
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Portfolio earnings |
|
|
|
|
35.4 % |
|
|
Transactional gains |
1,293 |
|
1,279 |
|
1.1 % |
|
|
Post-contract earnings |
3,315 |
|
3,634 |
|
(8.8 %) |
|
|
Other |
268 |
|
504 |
|
(46.8 %) |
|
|
Net sales |
9,037 |
|
8,490 |
|
6.4 % |
|
|
|
|
|
|
|
|
|
|
Gross profit |
7,687 |
|
6,361 |
|
20.8 % |
|
|
|
|
|
|
|
|
|
|
Selling, general, and administrative |
3,524 |
|
3,198 |
|
10.2 % |
|
|
Depreciation and amortization |
- |
|
28 |
|
(100.0 %) |
|
|
Interest and financing costs |
585 |
|
301 |
|
94.4 % |
|
|
Operating expenses |
4,109 |
|
3,527 |
|
16.5 % |
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
|
|
26.3 % |
|
|
Adjusted EBITDA |
|
|
|
|
24.3 % |
|
|
|
|
|
|
|
|
|
|
e
Plus inc. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP INFORMATION
We included reconciliations below for the following non-GAAP financial measures: (i) Adjusted EBITDA, (ii) Adjusted EBITDA for business segments, (iii) non-GAAP Net Earnings and (iv) non-GAAP Net Earnings per Common Share - Diluted.
We define Adjusted EBITDA as net earnings calculated in accordance with US GAAP, adjusted for the following: interest expense, depreciation and amortization, share-based compensation, acquisition and integration expenses, provision for income taxes, and other income (expense). Adjusted EBITDA presented for the technology business segments and the financing business segment is defined as operating income calculated in accordance with US 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 business segment and depreciation expense presented within cost of sales, which includes depreciation on assets financed as operating leases, to be operating expenses. As such, they are not included in the amounts added back to net earnings in the Adjusted EBITDA calculation.
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.
We use the above non-GAAP financial measures as supplemental measures of our performance to gain insight into our operating performance and performance trends. We believe that such non-GAAP financial measures provide management and investors a useful measure for period-to-period comparisons of our business and operating results by excluding items that management believes are not reflective of our underlying operating performance. Accordingly, we believe that such non-GAAP financial measures provide useful information to investors and others in understanding and evaluating our operating results.
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 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 |
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||
|
2024 |
|
2023 |
|
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(in thousands) |
|
||
|
|
|
|
|
Consolidated |
|
|
|
|
|
|
|
|
|
Net earnings |
|
|
|
|
Provision for income taxes |
10,203 |
|
12,675 |
|
Depreciation and amortization [1] |
4,819 |
|
4,792 |
|
Share based compensation |
2,855 |
|
2,205 |
|
Interest and financing costs |
- |
|
550 |
|
Other expense, net [2] |
(2,073) |
|
(190) |
|
Adjusted EBITDA |
|
|
|
|
|
|
|
|
|
Technology Business Segment |
|
|
|
|
Operating income |
|
|
|
|
Depreciation and amortization [1] |
4,819 |
|
4,764 |
|
Share based compensation |
2,791 |
|
2,137 |
|
Interest and financing costs |
- |
|
550 |
|
Adjusted EBITDA |
|
|
|
|
|
|
|
|
|
Financing Business Segment |
|
|
|
|
Operating income |
|
|
|
|
Depreciation and amortization [1] |
- |
|
28 |
|
Share based compensation |
64 |
|
68 |
|
Adjusted EBITDA |
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|||
|
2024 |
|
2023 |
|
|
|
(in thousands) |
|
|||
GAAP: Earnings before taxes |
|
|
|
|
|
Share based compensation |
2,855 |
|
2,205 |
|
|
Acquisition related amortization expense [3] |
3,750 |
|
3,469 |
|
|
Other (income) expense [2] |
(2,073) |
|
(190) |
|
|
Non-GAAP: Earnings before provision for income taxes |
42,074 |
|
52,006 |
|
|
|
|
|
|
|
|
GAAP: Provision for income taxes |
10,203 |
|
12,675 |
|
|
Share based compensation |
799 |
|
607 |
|
|
Acquisition related amortization expense [3] |
1,047 |
|
952 |
|
|
Other (income) expense, net [2] |
(580) |
|
(52) |
|
|
Tax benefit (expense) on restricted stock |
308 |
|
137 |
|
|
Non-GAAP: Provision for income taxes |
11,777 |
|
14,319 |
|
|
|
|
|
|
|
|
Non-GAAP: Net earnings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|||
|
2024 |
|
2023 |
|
|
|
|
|
|
|
|
GAAP: Net earnings per common share – diluted |
|
|
|
|
|
|
|
|
|
|
|
Share based compensation |
0.08 |
|
0.06 |
|
|
Acquisition related amortization expense [3] |
0.10 |
|
0.09 |
|
|
Other (income) expense, net [2] |
(0.06) |
|
- |
|
|
Tax benefit (expense) on restricted stock |
(0.01) |
|
(0.01) |
|
|
Total non-GAAP adjustments – net of tax |
0.11 |
|
0.14 |
|
|
|
|
|
|
|
|
Non-GAAP: Net earnings per common share – diluted |
|
|
|
|
|
[1] Amount consists of depreciation and amortization for assets used internally. |
[2] Legal settlement, interest income and foreign currency transaction gains and losses. |
[3] Amount consists of amortization of intangible assets from acquired businesses. |
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