• Net Sales: $544.5 million, down from $574.2 million year-over-year.
• Product Revenue: Decreased 8.2% year-over-year.
• Service Revenues: Up 15.8% to $78.2 million.
• Managed Services Growth: Up 28% year-over-year.
• Gross Profit: $134.5 million, down from $142.3 million year-over-year.
• Gross Margin: Declined 10 basis points to 24.7%.
• Operating Income: $35.5 million, down from $46.3 million year-over-year.
• Net Earnings: $27.3 million or $1.02 per diluted share, down from $33.8 million or $1.27 per diluted share year-over-year.
• Adjusted EBITDA: $43.1 million, compared to $53.9 million year-over-year.
• Cash and Cash Equivalents: $350 million, up from $253 million at March 31, 2024.
• Inventory: $89.1 million, a three-year low.
• Cash Conversion Cycle: 37 days, down from 48 days year-over-year.
• Share Repurchase: 162,319 shares costing $11.9 million.

• Warning! GuruFocus has detected 6 Warning Sign with PLUS.

Release Date: August 06, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• ePlus Inc (NASDAQ:PLUS) reported a 15.8% increase in service revenues, with managed services up 28% year-over-year.
• The company experienced strong growth in managed services bookings, up approximately 70% year-over-year, indicating a stable recurring revenue stream.
• Security remains a strong area for ePlus Inc (NASDAQ:PLUS), contributing over 20% of gross billings and showing a 9% increase quarter-over-quarter.
• The finance segment performed well, with a 6.4% increase in revenue and a 24.3% increase in adjusted EBITDA.
• ePlus Inc (NASDAQ:PLUS) ended the quarter with a strong cash position of $350 million, up from $253 million, providing financial flexibility for future growth initiatives.

Negative Points

• Net sales declined by 5.2% for the first quarter of fiscal year 2025 compared to the previous year, primarily due to lower product sales in the technology business.
• Product revenue decreased by 8.2% year-over-year, mainly due to lower sales of cloud and networking products.
• Higher SG&A expenses were reported, primarily due to increased headcount from organic hires and the PEAK acquisition.
• Consolidated operating income and earnings before taxes decreased compared to the prior year, due to lower gross profit in the technology business and increased operating expenses.
• Consolidated net earnings and non-GAAP diluted earnings per share decreased compared to the previous year, reflecting the challenges in the technology business.

Q & A Highlights

Q: Can you provide insights on the fiscal second quarter and your confidence in meeting the full-year guidance? A: Mark Marron, President and CEO, stated that the second quarter is in line with expectations despite being a tough comparison. The company remains confident in its full-year guidance, although the first half of the year is challenging due to the IT environment and tough comparisons.

Q: How do you expect operating leverage to manifest over the next year? A: Mark Marron explained that they have already seen some operating leverage, with a 20% increase in operating income sequentially. The company is focusing on measured hires and expects new hires to ramp up, which should drive revenues and operating leverage.

Q: What is the status of the customer product backlog, and do you expect a return to normal order flow? A: Mark Marron indicated that the backlog has normalized, with gross billings essentially flat despite a tough comparison. The supply chain has stabilized, and they expect a return to normal seasonal order flow.

Q: Can you provide more details on the AI business and its opportunities? A: Mark Marron highlighted strong customer interest in their AI Ignite program. Customers face challenges like data silos and lack of AI governance. ePlus is conducting workshops and strategy sessions, and while it's early, they are seeing pipeline growth and expect AI to drive future revenue.

Q: Are there any impacts from the CrowdStrike issue? A: Mark Marron noted no negative impacts and mentioned a benefit from helping a customer resolve issues, leading to an extended service agreement. However, the revenue impact was minimal.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.