ePlus Q3 2025 Earnings Report

ePlus EPS Results

• Actual EPS: $0.91
• Consensus EPS: $1.28
• Beat/Miss: Missed by -$0.37
• One Year Ago EPS: N/A

ePlus Revenue Results

• Actual Revenue: N/A
• Expected Revenue: $563.40 million
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

ePlus Announcement Details

• Quarter: Q3 2025
• Date: 2/5/2025
• Time: After Market Closes
• Conference Call Date: Wednesday, February 5, 2025
• Conference Call Time: 4:30PM ET

ePlus (NASDAQ:PLUS), together with its subsidiaries, provides information technology (IT) solutions that enable organizations to optimize their IT environment and supply chain processes in the United States and internationally. It operates through two segments, Technology and Financing. The Technology segment offers hardware, perpetual and subscription software, maintenance, software assurance, and internally provided and outsourced services; managed services or infrastructure and cloud; and enhanced maintenance support, service desk, storage-as-a-service, cloud hosted and managed, and managed security services; and professional, staff augmentation, cloud consulting, consulting, and security services. The Financing segment engages in financing arrangements, such as sales-type and operating leases; loans and consumption-based financing arrangements; and underwriting, management, and disposal of IT equipment and assets. Its financing operations comprise sales, pricing, credit, contracts, accounting, and risk and asset management. This segment primarily finances IT, communication-related, and medical equipment; and industrial machinery and equipment, office furniture and general office equipment, transportation equipment, and other general business equipment directly, as well as through vendors. The company serves commercial entities, state and local governments, government contractors, healthcare, and educational institutions. The company was formerly known as MLC Holdings, Inc. and changed its name to ePlus inc. in 1999. ePlus inc. was founded in 1990 and is headquartered in Herndon, Virginia.

ePlus Q3 2025 Earnings Call Transcript

Presentation

[Operator]

Good day, ladies and gentlemen. Welcome to the ePlus Earnings for Tools Conference Call. As a reminder, this conference call is being recorded. I would like to introduce your host for today's conference, Mr. Clay Parkhurst, Senior Vice President.

[Operator]

Sir, you may begin.

[Kleyton Parkhurst, Senior Vice President at ePlus]

Thank you for joining us today. On the call is Mark Maran, CEO and President Darren Raguel, COO and President of ePlus Technology Elaine Marion, CFO and Erica Stoker, General Counsel. I want to take a moment to remind you that the statements we make this afternoon that are not historical facts may be deemed to be forward looking statements and are based on management's current plans, estimates and projections. Actual and anticipated future results may vary materially due to certain risks and uncertainties detailed in the earnings release we issued this afternoon and our periodic filings with the Securities and Exchange Commission, including our most recent annual report on Form 10 ks, quarterly reports on Form 10 Q and other documents we might file with the SEC. Any forward looking statement speaks only as of the date of which the statement is made, and the company undertakes no responsibility to update any of these forward looking statements in light of new information, future events or otherwise.

[Kleyton Parkhurst, Senior Vice President at ePlus]

In addition, we will be using certain non GAAP measures during the call. We have included a GAAP financial reconciliation in our earnings release, which is posted on the Investor Information section of our website at www.eplus.com. I'd now like to turn the call over to Mark Maran. Mark?

[Mark Marron, CEO, President & Director at ePlus]

Thank you, Clay. Good afternoon, everyone, and thank you for joining us. I will give a recap of our fiscal third quarter twenty twenty five highlights and an update on our business overall. Elaine will follow with a discussion of our financial results, and I will then conclude with an update of our current outlook. We continue to execute on our strategic priorities of expanding our footprint and customer base and broadening our suite of solution and service offerings as we are investing in the most promising growth areas.

[Mark Marron, CEO, President & Director at ePlus]

We continue to see the evolution of our industry transition to a more ratable consumption and subscription based model, which has impacted the comparability of our quarterly results. As noted last quarter, our revenue trends reflects an acceleration of gross billings recorded on a net basis as well as a move towards more ratable revenue models. Software subscriptions orders have continued to increase year over year with these deals being recognized on a net basis or ratably, While this evolution helped to contribute to a flat year over year revenue, we delivered solid growth in gross billings, gross profit and gross margin. It is also a solid forward indicator for growth with our subscription orders up 51.4% year over year, accounting for almost 46% of our open orders currently compared to 31.7% last year and growth of over $100,000,000 dollars On a consolidated basis, total revenues were flat as lower product sales were partially offset by faster growing high margin service revenue, which is partially reflected in our gross profit being up 5.3%. We believe customers are still digesting purchases from last year's inventory flush, primarily impacting our networking and data center cloud sales.

[Mark Marron, CEO, President & Director at ePlus]

The main factor though was that we had a much higher gross to net adjustment this year, which was up eight forty basis points from the prior year and impacted our top line revenues by approximately $60,000,000 This year over year increase in SG and A expenses was primarily due to increased headcount from the Bailiwick acquisition as well as investments in the business. Of note, much of the increased headcount were customer facing employees. Adjusted EBITDA decreased 15% as higher earnings in the finance segment were offset by a decrease in our Technology business adjusted EBITDA. We continue to see softer than expected hardware sales and lower demand from some enterprise customers. As we have moved towards a services led model, our services revenues continue to grow nicely, increasing 52% year on year and reaching a new high of 114,000,000 with services gross profit up 45% year over year.

[Mark Marron, CEO, President & Director at ePlus]

Revenue in the quarter benefited from the acquisition of Bailiwick early in the year, which is integrating well, and organic managed services revenue increased 28% year over year. Our finance segment delivered another solid quarter with revenue increasing 20%, primarily due to an increase in proceeds from the sale of equipment as well as higher portfolio earnings and transaction gains. As we look at our longer term growth drivers, AI is a good place to start. In an e plus AI survey, 76% of IT leaders have said their organizations have yet to reach AI maturity. They noted the top challenges they are facing are a skills gap, security concerns and cost.

[Mark Marron, CEO, President & Director at ePlus]

There is a disparity between AI aspirations and AI readiness, and most companies are in the early stages of their AI journey. With that, we continue to build out our AI Ignite and Secure Gen AI programs that deliver services and solutions our customers need to make informed decisions. Our Secure Gen AI program is a platform developed by ePlus utilizing leading AI technology from our strategic partners to deliver a Secure Gen AI chatbot experience. This allows customers to test use cases and convert them into actionable plans with built in guardrails. Ultimately, our Secure GenAI program helps our customers more quickly make informed decisions and adopt GenAI safely.

[Mark Marron, CEO, President & Director at ePlus]

We're also leveraging the benefits of AI internally to create efficiencies that improve customer satisfaction and we expect will provide cost savings long term. With our internal use of AI, we are seeing an increase in quality due to automation and an ability to resolve inquiries and tickets faster. As such, we expect that AI will help us deliver enhanced customer experiences. Security is key to customers' long term roadmap, especially related to AI initiatives around data strategy, governance and risk. Our security offerings also continue to be a solid performer for us.

[Mark Marron, CEO, President & Director at ePlus]

Our security gross billings accounted for 21.2% of our trailing twelve months gross billings. We continue to benefit from very attractive cash flow characteristics. In turn, our balance sheet provides financial flexibility to support future growth initiatives. We will continue to be disciplined and strategic with our deployment of capital as we prioritize investing in the business to drive long term growth both organically and via M and A transactions as well as return excess cash to our shareholders. I will now turn the call over to Elaine to discuss our financial results in more detail.

[Mark Marron, CEO, President & Director at ePlus]

Elaine?

[Elaine Marion, Chief Financial Officer at ePlus]

Thank you, Mark, and thank you, everyone, for joining us today. I will now review our financial performance for the third quarter of fiscal twenty twenty five. Consolidated net sales of $511,000,000 were modestly above the $509,100,000 reported in last year's third quarter. In our technology business, sales were flat year over year as a decline in product sales was more than offset by continued strength in services demand. The decline in product sales reflects a shift toward sales of third party software and services resulting in higher netted down revenues as Mark mentioned, as well as lower sales of product as a result of last year's supply chain easing, particularly from enterprise customers.

[Elaine Marion, Chief Financial Officer at ePlus]

Notably, gross billings growth of 6.6% year over year outpaced net sales growth, highlighting continued demand for E plus offerings and the netting down effect. Our strategic focus on services continues to deliver results as service revenue grew 52% in the quarter with strong contribution from both professional and managed services. The professional services segment benefited from the Bailiwick acquisition, while growth in the managed services segment was broad based. Within our technology business, our two largest markets continue to be telecom, media and entertainment and technology representing 2417% respectively of technology business net sales on a trailing twelve month basis. Sled, healthcare and financial services accounted for 16%, thirteen % and ten % respectively with the remaining 20% from other end markets.

[Elaine Marion, Chief Financial Officer at ePlus]

Our financing segment posted a solid quarter with revenues of $17,800,000 up 19.8% from $14,900,000 in last year's third quarter due to higher proceeds from sales of equipment and portfolio earnings. Consolidated gross profit grew 5.3% faster than our revenue growth to $140,900,000 representing a consolidated gross margin of 27.6%, up from 26.3% in the prior year. The 130 basis point expansion was primarily driven by higher product margins, which benefited from a shift in mix to third party maintenance and subscriptions. While product margins were higher than last year, a higher proportion of product sales to certain enterprise customers at lower overall margins weighed on product margins, but this was offset by contribution from the netting effect I've mentioned. Professional services gross margin declined to 40.1% from 43.3% due to a shift in mix of services provided, while managed services gross margin declined to 29.8% from 31.8%.

[Elaine Marion, Chief Financial Officer at ePlus]

Consolidated operating expenses increased 17.3% year over year to $112,400,000 primarily reflecting increased headcount due to the Bailiwick and Peak Resource acquisitions as well as continued investments in our business to support our growth. Our headcount at the end of the quarter increased to 2,291 from $18.97 a year ago, primarily reflecting additions of customer facing professionals acquired in the Bailiwick transaction. Operating income was $28,500,000 down from $38,000,000 and earnings before taxes declined to $32,200,000 from $38,400,000 in the prior year quarter. During the third quarter, we realized interest income of $1,800,000 and foreign exchange gains of $1,900,000 resulting in other income of $3,700,000 Our effective tax rate was 25 versus 29% a year ago due to lower state taxes. Third quarter consolidated net earnings were $24,100,000 or $0.91 per share, down from net earnings of $27,300,000 or $1.02 per share in last year's third quarter.

[Elaine Marion, Chief Financial Officer at ePlus]

Non GAAP diluted earnings came in at $1.06 per share compared to $1.18 per share last year. Our diluted share count at the end of the quarter was $26,600,000 compared to $26,700,000 in the prior year third quarter. Consolidated adjusted EBITDA amounted to $39,200,000 versus $46,200,000 in the third quarter of fiscal twenty twenty four. For the nine months ended 12/31/2024, our consolidated net sales totaled $1,570,000,000 down from $1,670,000,000 in the prior year. The decrease primarily reflects lower product sales in the Technology business, partially offset by growth in Services and stronger performance in our Financing segment.

[Elaine Marion, Chief Financial Officer at ePlus]

Technology business net sales were $1,520,000,000 year to date compared to $1,630,000,000 last year. Despite the decline in net sales, gross billings in the technology business were essentially flat year over year at $2,490,000,000 dollars Year to date consolidated gross profit rose 0.7% to $423,400,000 while gross margin rose 180 basis points to 27%. Gross margin expansion was driven by higher product margins, which benefited from an increase in netted down revenues, partially offset by lower upfront margins. For the nine months ended 12/31/2024, consolidated net earnings were $82,800,000 or $3.1 per diluted share compared to $93,800,000 or $3.52 per diluted share in the comparable period last year. And non GAAP earnings per share were $3.56 versus $3.99 Adjusted EBITDA was $134,400,000 down from $153,600,000 in the comparable period last year.

[Elaine Marion, Chief Financial Officer at ePlus]

We ended the quarter with cash and cash equivalents of $253,100,000 consistent with the balance at the close of fiscal twenty twenty four. Operating cash flow for the first nine months was 141,200,000 compared to $143,500,000 last year and included cash used to fund working capital, the Bailiwick acquisition and share repurchases. We ended the quarter with $99,000,000 in inventory, down from $139,700,000 at the end of fiscal twenty twenty four. Inventory turns were thirteen days, down significantly from twenty seven days in the third quarter of fiscal twenty twenty four. As a result, our cash conversion cycle improved to thirty two days, down meaningfully from fifty four days in the prior year.

[Elaine Marion, Chief Financial Officer at ePlus]

During the first nine months of the year, we repurchased approximately 380,000 shares under our repurchase plan at a cost of $30,000,000 Our strategy continues to focus on our core priorities, driving organic growth, expanding through accretive acquisitions and returning capital to shareholders through our repurchase program. With that, I will turn the call back over to Mark. Mark?

[Mark Marron, CEO, President & Director at ePlus]

Thank you, Elaine. We are investing both organically and inorganically to develop a portfolio that provides us with multiple levers for growth across a broad range of verticals to drive growth and diversification. Growth of our gross profit and services are key indicators of the success of our go to market plans and being a trusted advisor for our customers. Our recent results reflect both the fast growth of our services led business model and the accelerating shift towards ratable subscription and as a service revenue recognition models. This has resulted in mixed results for the quarter and we'll continue to adapt and adjust as the market transitions.

[Mark Marron, CEO, President & Director at ePlus]

As a result, we are adjusting our fiscal twenty twenty five financial outlook. Turning to guidance, we now forecast revenue range of $2,070,000,000 to $2,110,000,000 for fiscal year twenty twenty five and an adjusted EBITDA range of $165,000,000 to $171,000,000 Our guidance reflects higher gross to net adjustments than previously expected and also factors in the near term potential of tariffs and how this might affect short term decisions. We will continue to monitor this closely and expect to share more insight at the time of our year end conference call. We are making investments in the business focusing on high growth areas where we seek the best return opportunities and we are confident this will support our commitment to growth in 2025 and beyond. Our balance sheet and financial condition are healthy, which gives us a solid foundation for expansion.

[Mark Marron, CEO, President & Director at ePlus]

In conclusion, we remain confident in the growth opportunities for our business moving forward and our ability to execute. Operator, please open the line for questions.

[Operator]

Thank Your first question comes from the line of Maggie Nolan with William Blair. Please go ahead.

[Maggie Nolan, Research Analyst - Technology, Media & Communications at William Blair & Company, L.L.C]

Hi. Thank you. Can you talk a little bit about your expectations for product sales that are included in the guide and maybe a couple of quarters beyond that?

[Mark Marron, CEO, President & Director at ePlus]

Sorry, Maggie. Did you say, we didn't hear you, expectation for product sales in the quarter and then going forward or?

[Maggie Nolan, Research Analyst - Technology, Media & Communications at William Blair & Company, L.L.C]

Yes, the fiscal fourth quarter and if you can go a couple of quarters beyond that kind of flush out the trends you're seeing given that it's been a weak spot?

[Mark Marron, CEO, President & Director at ePlus]

Yes, it's actually I think we noted it on the last earnings call as well, Maggie, that there's a softening in the market around some of the hardware or product demands, if you will. We specifically saw it with some select enterprise accounts in this quarter. We would expect it to continue into next quarter. The other things that affected are, I'll say bottom line, not so much top line, was some of the upfront gross margins on product sales that was more of an anomaly, but that was offset by the netted down revenues. The other interesting thing in play here, Maggie, is the market is really changing.

[Mark Marron, CEO, President & Director at ePlus]

The OEMs are going more to as a service consumption subscription model, so they're recognized on a net and ratable basis. I think you may have seen our netted down revenues product sales were actually affected by eight forty basis points. To put that in perspective, that's about $60,000,000 in net sales that would have went to our top line if it were flat to last year. So it's a moving target. I would expect that they'd continue to be a soft demand for Q4 and then would expect it to start to pick up a little bit as we move into our Q1.

[Maggie Nolan, Research Analyst - Technology, Media & Communications at William Blair & Company, L.L.C]

So on that last point, Mark,

[Maggie Nolan, Research Analyst - Technology, Media & Communications at William Blair & Company, L.L.C]

I mean, we've talked about this shift toward netted on product revenues. Are you calling an acceleration? Do you have an idea of maybe what might be driving that trends to accelerate at this moment in time?

[Mark Marron, CEO, President & Director at ePlus]

Yes. We've seen a couple of different things, Maggie. One, we still don't know if it's a new trend. If you look at just the last two quarters, last quarters are netted down revenues for product sales was affected by nine forty basis points. This quarter was eight forty basis points.

[Mark Marron, CEO, President & Director at ePlus]

That's significantly higher than last year and higher than what we were projecting in the beginning of the year. So there is that play. What's really happening here is the OEMs are changing how they're going to market. As we sell more software, that subscription normally recognized on a net or maybe an annual basis. So it's really the product mix and solutions that we're selling that's affecting this right now.

[Maggie Nolan, Research Analyst - Technology, Media & Communications at William Blair & Company, L.L.C]

Okay. Thank you.

[Mark Marron, CEO, President & Director at ePlus]

No problem. Good hearing

[Mark Marron, CEO, President & Director at ePlus]

from you, Maggie. We'll talk to you soon.

[Operator]

Your next question comes from the line of Greg Burns with Sidoti. Please go ahead.

[Gregory Burns, Analyst at Sidoti & Company, LLC]

Good afternoon. So I just wanted to talk, I guess, a

[Gregory Burns, Analyst at Sidoti & Company, LLC]

little bit more about the demand environment. I know you've been kind of calling out this digestion of some of the product that's in the channel from the supply chain kind of improving over the last year. That seems to be lingering longer than probably we would have expected. So is there anything else going on? What are you hearing from your customers?

[Gregory Burns, Analyst at Sidoti & Company, LLC]

Is it beyond that at this point? Is there other things driving the soft demand? Or is it really just kind of this digestion of product in the channel?

[Mark Marron, CEO, President & Director at ePlus]

Yes, it's the digestion, Greg. We can see it specifically in the networking space and a few select enterprise customers. So, it is around supply chain for the most part. There are things going on overall in the industry. I think as with tariffs and Doge and everything else that's going on, I do think the election actually slowed things down a little bit for us in the beginning of the quarter.

[Mark Marron, CEO, President & Director at ePlus]

We did see our billings were flat to down in the October, November timeframe and picked up in December. But we didn't pick up a lot of what I call the year end flush or what we normally expect in this quarter. So those are still the cases there. We still from a, I'll say, a customer set standpoint, both size and by vertical. We're pretty diversified.

[Mark Marron, CEO, President & Director at ePlus]

In fact, we've actually diversified more with the Bailiwick acquisition with some of their customers or expanded the verticals we were in, in some cases. So we feel somewhat protected long term, but there are some things going on that are affecting decisions right now.

[Gregory Burns, Analyst at Sidoti & Company, LLC]

Okay. And then in terms of this ongoing shift towards more software subscription ratable models, Could you just talk about like what the value proposition for a VAR is in that type of model? Is there an increased risk of maybe disintermediation over time? Can they go more easily direct to customers with that model?

[Mark Marron, CEO, President & Director at ePlus]

No, no, Greg. In fact, it's actually an opportunity for us to build up our services. So in a lot of cases with the subscription, there's add on services, there's renewals, there's what they call lifecycle management. So you try to get them to adopt the technology or software, if you will, upsell additional features, add in incremental services, maybe provide some type of staffing and or managed service. So no, it's not it's no different in terms of with the subscription versus hardware.

[Mark Marron, CEO, President & Director at ePlus]

I believe that would affect the channel.

[Gregory Burns, Analyst at Sidoti & Company, LLC]

Okay, great. Thank you.

[Mark Marron, CEO, President & Director at ePlus]

No problem. Thanks, Greg.

[Operator]

As there are no further questions at this time, I would like to turn the call back over to Mr. Mark Myron for closing remarks.

[Mark Marron, CEO, President & Director at ePlus]

All right. Thank you, everybody. Hey, look, I will reiterate. We still feel very strongly about our strategy and our focus areas that we're in. We're going to continue to build out our services led model.

[Mark Marron, CEO, President & Director at ePlus]

Our services were up 52%. They were approximately 23% of our net sales this quarter. We'll continue to leverage our customer base and customer segments. Our strong balance sheet gives us flexibility to make inorganic and organic moves. So we feel good where we're positioned and we've been in business for a long time.

[Mark Marron, CEO, President & Director at ePlus]

So we will adapt and adjust to this new norm short term and be able to make the moves that we need to make. So I want to thank everybody for joining us today and look forward to seeing or hearing you on

[Mark Marron, CEO, President & Director at ePlus]

the next call. Thank you.

[Operator]

That concludes today's meeting. Thank you for your participation. You may now disconnect.

Participants

Executives

• Kleyton Parkhurst, Senior Vice President
• Mark Marron, CEO, President & Director
• Elaine Marion, Chief Financial Officer

Analysts

• Maggie Nolan, Research Analyst - Technology, Media & Communications at William Blair & Company, L.L.C
• Gregory Burns, Analyst at Sidoti & Company, LLC