SOURCE: ePlus inc.

November 13, 2008 08:30 ET

ePlus Reports September 30, 2008 Quarter Results

Company Generates Total Revenues of $196.9 Million and Net Income of $6.4 Million

HERNDON, VA--(Marketwire - November 13, 2008) - ePlus inc. (NASDAQ: PLUS) today announced financial results for its second quarter of fiscal year 2009, which ended September 30, 2008. Revenues totaled $196.9 million, a decrease of 12.5% from $225.0 million in the prior year quarter. Net income totaled $6.4 million, an increase of 32.3% compared to $4.9 million in the prior year quarter. Earnings per diluted share totaled $0.74, an increase of 25.4% over $0.59 per diluted share in the prior year quarter.

"ePlus was able to achieve significant earnings growth this quarter through gross margin improvement and our continued focus on reducing costs and increasing efficiencies," said Phillip G. Norton, chairman, president and CEO. "While we expect current economic conditions will continue to affect our customers' purchasing decisions, the challenges in the credit markets also present us with an opportunity to grow our business with existing customers and expand our client base through lease financing. We believe that our differentiated business model, which offers solutions and services throughout the entire IT lifecycle, makes us well positioned to gain market share."

Sales of product and services decreased 5.4% to $179.5 million, from $189.7 million in the prior year quarter, primarily due to reduced or delayed customer purchases in the soft economy. Gross margins improved to 14.0%, compared to 12.4% in the prior year quarter, reflecting changes in the mix of products and services and manufacturer incentives. The improvement in gross margin during the quarter related to manufacturer incentives may not be sustainable as manufacturers may begin tightening these programs due to current market conditions.

Revenues generated from the leasing segment, which includes lease revenues, sales of equipment, fee and other income, and the sale of leased equipment, decreased 52.5% to $15.3 million, compared to $32.3 million the prior year quarter. Sales of leased equipment totaled $2.2 million, or 14.2% of leasing segment revenues, compared to $18.2 million, or 56.4% of leasing segment revenues, in the prior year quarter. Leased equipment sales fluctuate from quarter to quarter and are a component of ePlus' risk mitigation process, which the Company conducts to diversify its portfolio by customer, equipment type, and residual value investments. Lease revenues totaled $12.2 million, or 79.6% of leasing segment revenues, compared to $12.5 million, or 38.6% of leasing segment revenues, in the prior year quarter.

Selling, general and administrative expenses, which includes professional and other fees, salaries and benefits, and general and administrative expenses, totaled $24.3 million, or 12.3% of revenue, compared to $24.6 million, or 10.9% of revenue in the prior year quarter. Salaries and benefits expenses increased 8.5% to $18.7 million, primarily related to an increase in the number of employees due to the Company's recently established telesales unit, as well as additions to professional services staff and support personnel. Those increased expenses were partially offset by lower commissions and the previously disclosed recognition of $1.5 million stock-based compensation expense from the cancellation of options during the prior year quarter. General and administrative expenses decreased 2.3% to $3.8 million due to cost containment and productivity enhancement initiatives. Professional and other fees decreased 48.4% to $1.8 million from $3.5 million in the prior year quarter due to expenses incurred in fiscal 2008 related to the previously disclosed investigation of stock option grants.

Interest and financing costs decreased 35.5% to $1.5 million primarily due to lower interest rates and lower debt levels. As of September 30, 2008, the Company's non-recourse debt totaled $86.7 million, compared to $117.0 million as of September 30, 2007 and $93.8 million as of March 31, 2008. Under ePlus' non-recourse debt transactions, third parties provide funding for the leased asset, in exchange for an assignment of the lease payments and an interest in the asset. This funding is non-recourse to ePlus.

As of September 30, 2008, the Company's cash and cash equivalents balance was $75.2 million, compared to $58.4 million at March 31, 2008. The Company had no long-term recourse debt obligations as of September 30, 2008 or March 31, 2008. Shareholders' equity was $174.9 million as of September 30, 2008, compared to $163.7 million as of March 31, 2008.

Year-to-Date Results

Total revenues for the six months ended September 30, 2008 decreased 18.2% to $379.1 million from $463.7 million in the comparable six-month period last year. This decline was primarily due to lower sales of leased equipment, in addition to a 12.9% decline in sales of products and services to $345.3 million compared to $396.2 million in the prior year period. Leasing segment revenue totaled $30.1 million, compared to $61.2 million in the prior year period, primarily due to higher sales of leased equipment in the prior year.

Net earnings totaled $10.1 million, or $1.18 per diluted share, compared to $9.9 million, or $1.18 per diluted share, for the comparable period in the prior year.

Selling, general and administrative expenses totaled $50.1 million, or 13.2% of revenues, compared to $52.4 million, or 11.3% of revenues last year. Salaries and benefits increased $1.2 million, largely due to the Company's planned staff additions, which are intended to support its long-term growth plans.

Percentage changes stated throughout this press release are calculated on actual numbers from the Company's financial statements, not on the rounded numbers used herein. Investors are encouraged to read the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2008 and the Company's Form 10-Q for the quarter ended September 30, 2008. Copies are available via the Company's Web site at: http://www.eplus.com, via the EDGAR database at: http://www.sec.gov, or by contacting the Company.

Forward-Looking Statements

Statements in this press release that are not historical facts may be deemed to be "forward-looking statements." Actual and anticipated future results may vary materially due to certain risks and uncertainties, including, without limitation, possible adverse effects resulting from the recent financial crisis in the credit markets and general slowdown of the U.S. economy such as our current and potential customers delaying or reducing technology purchases, increasing credit risk associated with our customers and vendors, reduction of vendor incentive programs, and restrictions on our access to capital necessary to fund our operations; the demand for and acceptance of, our products and services; our ability to adapt our services to meet changes in market developments; the impact of competition in our markets; the possibility of defects in our products or catalog content data; our ability to hire and retain sufficient personnel; our ability to protect our intellectual property; a decrease in the capital spending budgets of our customers; our ability to consummate and integrate acquisitions; the creditworthiness of our customers; our ability to raise capital and obtain non-recourse financing for our transactions; our ability to reserve adequately for credit losses; and other risks or uncertainties detailed in our reports filed with the Securities and Exchange Commission. All information set forth in this press release is current as of the date of this release and ePlus undertakes no duty or obligation to update this information.

About ePlus inc.

ePlus is a leading provider of technology solutions. ePlus enables organizations to optimize their IT infrastructure and supply chain processes by delivering world-class IT products from top manufacturers, professional services, flexible lease financing, proprietary software, and patented business methods. Founded in 1990, ePlus has more than 650 associates in 30+ locations serving more than 2,500 customers. The Company is headquartered in Herndon, VA. For more information, visit http://www.eplus.com, call 888-482-1122, or email info@eplus.com.

ePlus® and ePlus products referenced herein are either registered trademarks or trademarks of ePlus inc. in the United States and/or other countries.

ePlus inc. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
                                                     As of        As of
                                                 September 30,   March 31,
                                                     2008          2008
                                                  -----------  -----------
                                                       (in thousands)
ASSETS

Cash and cash equivalents                         $    75,176  $    58,423

Accounts receivable - net                             113,359      109,706

Notes receivable                                        2,252          726

Inventories - net                                       9,598        9,192

Investment in leases and leased equipment - net       141,149      157,382

Property and equipment - net                            4,019        4,680

Other assets                                           18,591       13,514

Goodwill                                               26,245       26,125
                                                  -----------  -----------

TOTAL ASSETS                                      $   390,389  $   379,748
                                                  ===========  ===========

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES

Accounts payable - equipment                      $     8,698  $     6,744

Accounts payable - trade                               21,711       22,016

Accounts payable - floor plan                          59,586       55,634

Salaries and commissions payable                        4,874        4,788

Accrued expenses and other liabilities                 30,571       30,372

Income taxes payable                                      703            -

Non-recourse notes payable                             86,678       93,814

Deferred tax liability                                  2,677        2,677
                                                  -----------  -----------
Total Liabilities                                     215,498      216,045

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY

Preferred stock, $.01 par value; 2,000,000 shares
 authorized; none issued or outstanding                     -            -
Common stock, $.01 par value; 25,000,000 shares
 authorized; 11,378,588 issued and 8,399,598
 outstanding at September 30, 2008 and 11,210,731
 issued and 8,231,741 outstanding at March 31,
 2008                                             $       113  $       112

Additional paid-in capital                             78,456       77,287

Treasury stock, at cost, 2,978,990 and 2,978,990
 shares, respectively                                 (32,884)     (32,884)

Retained earnings                                     128,736      118,623
Accumulated other comprehensive income - foreign
 currency translation adjustment                          470          564
                                                  -----------  -----------

Total Stockholders' Equity                            174,891      163,702
                                                  -----------  -----------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY        $   390,389  $   379,747
                                                  ===========  ===========




ePlus inc. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)
                                 Three Months Ended     Six Months Ended
                                    September 30,         September 30,
                                  2008       2007       2008       2007
                                ---------- ---------- ---------- ----------
                               (in thousands, except for per share amounts)

REVENUES

Sales of product and services   $  179,491 $  189,680 $  345,250 $  396,234

Sales of leased equipment            2,182     18,218      3,447     26,804
                                ---------- ---------- ---------- ----------
                                   181,673    207,898    348,697    423,038

Lease revenues                      12,211     12,470     23,836     31,616

Fee and other income                 2,974      4,633      6,611      9,013

                                ---------- ---------- ---------- ----------

TOTAL REVENUES                     196,858    225,001    379,144    463,667
                                ---------- ---------- ---------- ----------

COSTS AND EXPENSES

Cost of sales, product and
 services                          154,414    166,193    298,131    351,400

Cost of leased equipment             2,034     17,429      3,260     25,611
                                ---------- ---------- ---------- ----------
                                   156,448    183,622    301,391    377,011

Direct lease costs                   3,833      5,870      7,627     11,893

Professional and other fees          1,808      3,504      4,353      7,171

Salaries and benefits               18,672     17,208     38,136     36,902

General and administrative
 expenses                            3,801      3,892      7,589      8,375

Interest and financing costs         1,467      2,276      2,952      4,772

                                ---------- ---------- ---------- ----------
TOTAL COSTS AND EXPENSES           186,029    216,372    362,048    446,124
                                ---------- ---------- ---------- ----------

EARNINGS BEFORE PROVISION FOR
 INCOME TAXES                       10,829      8,629     17,096     17,543
                                ---------- ---------- ---------- ----------

PROVISION FOR INCOME TAXES           4,409      3,775      6,983      7,679
                                ---------- ---------- ---------- ----------

NET EARNINGS                    $    6,420 $    4,854 $   10,113 $    9,864
                                ========== ========== ========== ==========

NET EARNINGS PER COMMON SHARE -
 BASIC                          $     0.77 $     0.59 $     1.22 $     1.20
                                ========== ========== ========== ==========

NET EARNINGS PER COMMON SHARE -
 DILUTED                        $     0.74 $     0.59 $     1.18 $     1.18
                                ========== ========== ========== ==========


WEIGHTED AVERAGE SHARES
 OUTSTANDING - BASIC             8,299,496  8,231,741  8,276,650  8,231,741
WEIGHTED AVERAGE SHARES
 OUTSTANDING - DILUTED           8,622,562  8,331,044  8,597,896  8,363,348


Contact Information

  • Contact:
    Kleyton Parkhurst
    SVP
    ePlus inc.
    Email Contact
    703-984-8150