Latest news with #MarkMarron
Yahoo
28-05-2025
- Business
- Yahoo
PLUS Q1 Earnings Call: Services Growth Offsets Product Decline, Management Cautious on Outlook
IT solutions provider ePlus (NASDAQ:PLUS) missed Wall Street's revenue expectations in Q1 CY2025, with sales falling 10.2% year on year to $498.1 million. Its non-GAAP EPS of $1.11 per share was 28.3% above analysts' consensus estimates. Is now the time to buy PLUS? Find out in our full research report (it's free). Operating Margin: 6.8%, up from 5.3% in the same quarter last year Market Capitalization: $1.85 billion ePlus' latest quarter reflected a shift in its revenue mix, as a decline in product sales was partially offset by robust growth in services. Management highlighted that demand for security, AI, and cloud offerings drove increased gross profit and margin expansion. CEO Mark Marron noted that the company's services-led approach, supported by strategic investments and acquisitions such as Bailiwick, resulted in higher gross margins and deeper customer relationships. While product sales faced headwinds from industry-wide shifts to subscription models and lingering macroeconomic uncertainty, services revenue—including managed and professional services—continued to grow rapidly. The company's focus on high-margin solution areas contributed to improved profitability, despite a challenging sales environment. Looking ahead, ePlus is positioning itself for further growth by expanding its capabilities in AI, security, and cloud services. Management remains cautious, citing persistent economic uncertainty and the ongoing customer transition to subscription-based revenue models. CEO Mark Marron stated, 'We are cautiously optimistic... but want to be prudent when considering the entire year and the trends we are experiencing with regard to ratable and netted down revenue.' The company expects continued strong demand for services, particularly as enterprise customers explore AI adoption through workshops and proof-of-concept offerings. However, management does not anticipate a significant acceleration in AI-driven infrastructure spending until later in the year or next year, and its forward guidance assumes some ongoing impact from economic headwinds. Management attributed the quarter's performance to the ongoing shift from product to services revenue, a more profitable business mix, and investments in high-growth technology areas. Economic uncertainty and the transition to subscription models also affected top-line results. Services revenue momentum: ePlus' services revenue, including professional and managed services, continued to grow at a rapid pace, with professional services benefiting from the Bailiwick acquisition and managed services bookings remaining strong. This shift is central to the company's strategy of deepening customer engagement and generating more predictable revenue streams. Product sales softness: The decline in product sales was largely attributed to industry-wide shifts toward subscription and ratable revenue models, as well as tough year-over-year comparisons given last year's supply chain-driven product deliveries. Management noted that some customers are still digesting prior networking equipment purchases, delaying new orders. Security and AI demand: Security-related offerings now represent a growing share of gross billings, reflecting heightened enterprise focus on digital risk mitigation. AI-driven workshops and envisioning sessions have received positive customer feedback, positioning ePlus for future growth as enterprise adoption of AI expands. Margin expansion: Gross margin improved significantly due to a higher mix of services revenue and products recognized on a net basis, as well as disciplined expense management. The company's operating margin also increased, helped by the more profitable business mix. Strategic investments and partnerships: ePlus has invested in AI expertise and infrastructure, including achieving NVIDIA DGX Ready SuperPOD and managed service provider specializations. These credentials support the company's capabilities in deploying enterprise-grade AI solutions and managing complex workloads. Management expects trends like services growth and AI adoption to shape revenue and profitability, while macroeconomic uncertainty and slower product spending remain key considerations. Enterprise AI adoption timing: While management sees long-term potential in AI, they believe most investment is currently concentrated with hyperscaler data centers, not enterprises. Broader enterprise spending on AI infrastructure is expected to pick up later this year or next, with current demand focused on workshops and pilot programs. Subscription model transition: ePlus anticipates continued headwinds from the industry shift toward ratable and subscription-based revenue models, which could dampen near-term product sales but support future growth and margin expansion as services become a larger part of the business. Economic and customer demand uncertainty: Management remains cautious due to ongoing macroeconomic uncertainty and slower decision-making among enterprise customers, especially in networking. Guidance assumes some continued impact from these headwinds, without factoring in a full recession scenario. In the coming quarters, the StockStory team will be watching (1) whether services revenue maintains its growth trajectory as enterprises continue to shift spending, (2) signs of recovery in networking product demand as customers complete equipment digestion, and (3) the pace at which enterprise AI adoption translates into infrastructure and consulting revenue. The company's ability to leverage its new AI partnerships and manage economic uncertainty will also be key for future performance. ePlus currently trades at a forward P/E ratio of 15.3×. In the wake of earnings, is it a buy or sell? Find out in our full research report (it's free). Market indices reached historic highs following Donald Trump's presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth. While this has caused many investors to adopt a "fearful" wait-and-see approach, we're leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market by checking out our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025). Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.
Yahoo
23-05-2025
- Business
- Yahoo
Q4 2025 ePlus inc Earnings Call
Kley Parkhurst; Senior Vice President and Assistant Secretary; ePlus inc Mark Marron; President, Chief Executive Officer, Director; ePlus inc Elaine Marion; Chief Financial Officer; ePlus inc Gregory Burns; Analyst; Sidoti & Company Operator Good day, ladies and gentlemen. Welcome to the ePlus fourth quarter and full year 2025 earnings results conference call. As a reminder, this conference call is being recorded. (Operator Instructions) And I would now like to introduce your host for today's conference, Mr. Kley Parkhurst, Senior Vice President. Sir, you may begin. Kley Parkhurst Thank you for joining us today. On the call is Mark Marron, CEO and President; Elaine Marion, CFO; and Erica Stoecker, 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-K, quarterly reports on Form 10-Q and in other documents we may 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. In addition, we will be using certain non-GAAP measures during the call, and we have included a GAAP financial reconciliation in our earnings release, which is posted on the Investor Information section of our website at I'd now like to turn the call over to Mark. Mark? Mark Marron Thank you, Kley. Good afternoon, everyone, and thank you for joining our fourth quarter and fiscal year 2025 earnings call. Our financial results continue to reflect the ongoing industry-wide shift towards ratable and subscription-based revenue models, which impacts how we recognize product revenue. In fiscal year 2025, we delivered higher gross profitability and margin expansion on lower net sales and gross billings. In our fourth quarter, operating metrics were strong with double-digit increases in gross profit, operating income, adjusted EBITDA and diluted earnings per share. We also saw continued improvement in our gross margin, which increased 270 basis points since fiscal year 2024. During the quarter, we believe sales were slightly impacted by business uncertainty surrounding the tariffs and government spending. With our strong focus on services-led solutions, continuing to build out our security and AI capabilities that are in high demand by our customers and holding the line on expenses, we believe we are well positioned for future growth. Q4 net sales declined 10.2% year-over-year, driven primarily by a reduction in product sales due in part to economic uncertainty as well as a tough compared to the prior year when Q4 last year benefited from supply chain easing of networking product orders. Despite an increased gross to net adjustment caused by the industry-wide shift towards ratable and subscription-based revenue models, we saw strength in several areas. Gross profit rose by nearly 12% and gross margin expanded 580 basis points year-over-year to 29.3% in the fourth quarter due to a more profitable business mix between product and services and a higher proportion of netted down revenue. Gross profit increased and margin expanded in the full year for the same reasons. Our services revenue continued its rapid growth, increasing 33% in the quarter and 37% for the year. This is a key component of our trusted adviser status to our customers, which deepens the relationship and results in long-term customer loyalty. Our managed services continue to grow nicely, up 16.6% for the quarter and 24.6% in the year, which provides predictable long-term revenue and profitability. Let me take a moment to discuss our long-term strategy, which is centered on delivering solutions across 4 key growth focus areas: AI, cloud, security and networking, of which we expect to drive related consultative, professional and managed services growth. We are making strategic investments in the most promising opportunities, both organic and inorganic to expand our capabilities and meet evolving customer needs. AI adoption continues to be a significant potential business driver, and we are particularly well positioned to capitalize on its transformative growth across our expanding suite of products. Throughout the past year, we have discussed the positive reception from our customers of our AI Ignite workshops and Envisioning sessions. These are designed to share the latest AI trends and insights and demonstrate how this revolutionary technology can empower our customers' businesses. We combine these AI Ignite offerings with our AI Experience Center and our Generative AI Accelerator solution that helps customers navigate and rapidly test use cases in a secure private instance. We also believe ePlus is the only NVIDIA partner in North America that has achieved both the NVIDIA DGX ready SuperPOD specialization and DGX ready Managed Service Provider specializations. This achievement demonstrates our engineering expertise for enterprise-grade AI infrastructure deployments and capabilities to provide end-to-end life cycle services from initial design through implementation and management of AI workloads. And finally, as the capabilities and benefits of AI become more clear, we have stepped up our AI investments to meet our internal business needs as well. We have seen how AI can support our customers better, automate some internal processes and provide real-time information for our sales teams to leverage and provide value to their customers. Security remains a standout for ePlus. On a trailing 12-month basis, it now represents 22% of gross billings, underscoring our success in aligning with enterprise priorities around digital risk mitigation and will only be more relevant as AI becomes more prevalent in the market. In conclusion, we have a very strong balance sheet, which gives us the opportunity to make strategic investments, both organically and through acquisitions. We exited the year with a record cash position of approximately $389 million. This financial flexibility provides a solid foundation as we navigate macroeconomic uncertainty and supports our growth initiatives. As always, we remain committed to disciplined capital allocation and driving long-term shareholder value. I will now turn the call over to Elaine to discuss our financial results in more detail. Elaine Marion Thank you, Mark, and thank you, everyone, for joining us today. I will provide additional details about our financial performance in the fourth quarter of fiscal 2025 and review our full fiscal year results, which ended March 31, 2025. Consolidated net sales in the fiscal 2025 fourth quarter were $498.1 million, down from $554.5 million in the fourth quarter of fiscal 2024. And our consolidated adjusted EBITDA was $43.8 million, up from $36.8 million in the prior year, which exceeded our expectations as we captured increased gross profit from the sales of product. Technology business net sales declined 10.4% year-over-year to $487.2 million, reflecting lower product sales, which continue to be impacted by the industry-wide shift towards ratable and subscription-based services, resulting in more netted down revenues. Product sales also faced a tough year-over-year comparison as the fourth quarter of fiscal 2024 benefited from elevated deliveries of networking products. Partially offsetting the decline in product sales with strong demand for our services offerings, which we have strategically emphasized and grown. ePlus' services-led approach is evident in our results as our service revenues increased 33% year-over-year. Professional services revenues were up 48% as the segment continues to benefit from the Bailiwick acquisition, while revenues for our managed services rose 17%, led by sustained growth in enhanced maintenance support, or EMS, and cloud-managed services. Managed services bookings remain strong, underscoring our confidence in the segment. Technology business gross billings declined 5.4% in the quarter due to softer demand from enterprise customers as well as a challenging comparable in the prior period. Telecom, Media & Entertainment and SLED were our 2 largest customer end markets, accounting for 23% and 17% of technology business net sales on a trailing 12-month basis. Technology, health care and financial services accounted for 15%, 14% and 9%, respectively, with the remaining 22% from other end markets. In our financing segment, net sales rose 4.9% to $10.9 million, primarily due to higher transaction gains and portfolio earnings. Fourth quarter 2025 consolidated gross profit increased 11.8% to $145.8 million, representing a gross margin of 29.3%, comparing favorably to gross profit of $130.3 million and gross margin of 23.5% in the prior year fourth quarter. The increase in gross margin was led by our technology business, which saw product margin expand from 19.3% to 26.6%, reflecting more profitable mix and a larger proportion of sales of product that were recognized on a net basis as well as additional gross profit from our services business. In our services business, professional services gross margin was 35.9% versus 50% in the comparable prior year period. Bailiwick, which we acquired in August of 2024, has lower professional services gross margin due to a higher concentration of third-party costs in the business model, contributing to the year-over-year decline. Managed services gross margin of 29.1% declined modestly from the 30.5% reported in the prior year due to an expanded mix of services provided. Fourth quarter 2025 operating expenses of $111 million increased 9.6% from the prior year quarter as we recognized costs related to increased headcount from the Bailiwick acquisition. Our headcount at the end of the quarter increased to 2,199 from 1,900 a year ago, reflecting an increase of 299 employees, of which 272 were customer-facing. Sequentially, our headcount decreased from 2,291 at December 31, 2024. Benefiting from our strong margin performance, consolidated operating income and earnings before taxes rose 19.6% and 14.9%, respectively. Other income totaled $1.1 million, driven by interest income of $2 million, partially offset by foreign exchange losses. Our effective tax rate in the fourth quarter was 29.7%, slightly higher than the 29.5% reported in the prior year quarter. Consolidated net earnings were up 14.6% to $25.2 million or $0.95 per diluted share versus net income of $22 million or $0.82 per diluted share a year ago. Non-GAAP diluted earnings per share was $1.11, representing an increase of 19.4% year-over-year and weighted average diluted share count decreased slightly from the prior year's fourth quarter. Consolidated adjusted EBITDA increased 19.1% to $43.8 million, with 97% of the increase from our technology business. Moving on to our results for the full year of fiscal 2025. Consolidated net sales for the fiscal year were $2.07 billion, down from $2.23 billion in fiscal 2024. The decline was driven by a 13.7% decline in product sales, partially offset by 37.1% growth in services and strong performance in the financing segment. Technology business gross billings of $3.3 billion were down slightly year-over-year. Fiscal 2025 consolidated gross profit rose 3.3% to $569.1 million, led by growth in both the technology business and financing segment. Gross margin expanded 270 basis points to 27.5%, reflecting favorable product mix, a larger proportion of netted down revenues and additional services revenue in the technology business. Operating income was $141.4 million versus $158.3 million a year ago. The decline was primarily a function of lower product sales and increased operating expenses, which rose 9% year-over-year due to the Bailiwick and PEAK acquisitions as well as continued investments in technology and customer-facing headcount. Our effective tax rate for the full year was 27.5% below the 28.1% reported in the prior year due to lower state taxes. Consolidated net earnings were $108 million or $4.05 per diluted share in fiscal 2025, this compares to $115.8 million or $4.33 per diluted share in the year ago period. Non-GAAP diluted EPS amounted to $4.67 per share, down from $4.92. Fiscal 2025 adjusted EBITDA decreased 6.4% to $178.2 million. Our balance sheet remains solid with assets over $1.8 billion, highlighted by our cash position of $389.4 million at the end of fiscal 2025, well above $253 million at the end of fiscal 2024, reflecting strong operating cash flows of $302.1 million compared to $248.4 million in fiscal 2024. As of March 31, 2025, our inventories were $120.4 million. While inventories were higher sequentially, they were below $139.7 million reported at the end of fiscal 2024. Stockholders' equity was $977.6 million compared to $901.8 million at the end of fiscal 2024. During fiscal 2025, we repurchased more than 557,000 shares under our repurchase program, leaving 26.5 million shares outstanding at March 31, 2025. Our cash conversion cycle was 29 days compared to 46 days a year ago as inventory days outstanding declined from 23 days in fiscal 2024 to 14 days at the end of March 2025, highlighting a more normalized supply chain. Our strategy of focusing on high-growth areas and anticipating our customers' needs continues to position us well for the future. We remain focused on strategic capital allocation with an eye toward organic and inorganic investments in an effort to add geographies and increase our service offerings. With that, I will turn the call back over to Mark. Mark? Mark Marron Thank you, Elaine. Our core business is solid, and our team is executing well. This is reflected in our financial results with solid gross profit growth and margin expansion. We continue to review our portfolio of products and services, identifying new sources of growth in our core markets. Our strong balance sheet provides us the opportunity to invest organically and make acquisitions when the right opportunity comes along. As always, we will continue to take a balanced and disciplined approach to building our company and evolving our business model for the future. Moving next to a comment about guidance. We are cautiously optimistic as we head into fiscal year 2026 but want to be prudent when considering the entire year and the trends we are experiencing with regard to ratable and netted down revenue. Today, we are initiating fiscal year 2026 guidance for net sales growth of low single digits, while we expect gross profit and adjusted EBITDA to grow at mid-single digits over the prior fiscal year. This guidance assumes some level of impact from economic uncertainty but does not factor in recessionary conditions or other unexpected developments. To sum up, our strategic pivot towards services, subscriptions and high-growth technology areas is gaining traction. We believe these foundations, combined with our financial strength and customer-first approach position us well to support our customers' evolving and growing business needs. We believe we are well positioned for the opportunities ahead and remain committed to delivering value for all of our shareholders. Operator, please open the call for questions. Thank you. Operator (Operator Instructions) Greg Burns, Sidoti & Company. Gregory Burns Where do you -- where is the demand environment currently? Like did you see any improvement throughout the quarter? Are you still seeing soft demand on the product side of the business. Can you just maybe give us an update on what you saw during the quarter, how it evolved and kind of where we are currently? Mark Marron Greg, a couple of different things we're seeing in the market. We are seeing pickup in the data center, cloud and security space. That's not surprising. When you think about some of the AI initiatives that are going on, some of the things that folks have to think through is security in terms of governance and risk, data readiness and things along those lines. They also make a lot of times the simple choices to move to the cloud. So we saw some nice pick up there. We did not see a pickup in networking year-over-year. So networking was down pretty big still for us. And then if I look at net sales just overall generically, what we kind of saw was, as we looked over the last couple of years, a few things. For this quarter, it was a big gross to net that affected our net sales. We had a tough compare, no excuses. We were up 12% last year. So that was another -- and we had a few customers that are digesting some of the supply chain, specifically in the networking space. We think they'll start to come back into play in the coming quarters. So overall, data center cloud, security, nice pickup. Networking still needs to improve. Gregory Burns Okay. And then when you look at the AI opportunity, most of the investment has been going into like the hyperscaler data center environment. Where does like enterprise AI adoption, enterprise investment stand? And do you think that -- I guess, maybe in your guidance for next year, does that contemplate any kind of acceleration in maybe AI demand? Mark Marron Yes. Not yet, Greg. Maybe towards the end of the year, beginning of next year. So you're right, most of the spend with NVIDIA and the bigger players is going towards the hyperscalers. What we're seeing is customers are taking advantage of some of our workshops and envisioning sessions. We've got a hosted proof of concept, basically a private GenAI chatbot that we -- that gives customers the ability to kind of test and play around with their data to come up with use cases. So we think a lot of that will be on the services side that will drive for us, which is a good thing. It's our most profitable business. And then we think the infrastructure stuff will start to pick up. We've made investments with the training of our sales teams. We also just got the NVIDIA SuperPOD specialization, which is their high-end computing. So over time, we think that infrastructure spend will pick up, but it will take a little bit of time. Operator And there are no further questions. So I will now turn the conference back over to Mr. Mark Marron for closing remarks. Mark Marron Okay. Thanks, Abby. Thank you, everyone, for attending our Q4 and full year earnings call. I hope everybody gets to enjoy the long Memorial Day holiday, and we look forward to speaking with you again on our next earnings call. Take care and be safe. Operator And ladies and gentlemen, this concludes today's call, and we thank you for your participation. You may now disconnect.
Yahoo
23-05-2025
- Business
- Yahoo
ePlus Inc (PLUS) Q4 2025 Earnings Call Highlights: Strong Profitability Amid Sales Decline
Q4 Net Sales: $498.1 million, down 10.2% year-over-year. Q4 Gross Profit: $145.8 million, up 11.8% year-over-year. Q4 Gross Margin: 29.3%, up 580 basis points year-over-year. Q4 Adjusted EBITDA: $43.8 million, up 19.1% year-over-year. Q4 Net Earnings: $25.2 million, up 14.6% year-over-year. Q4 Diluted EPS: $0.95, up from $0.82 year-over-year. Q4 Non-GAAP Diluted EPS: $1.11, up 19.4% year-over-year. Full Year Net Sales: $2.07 billion, down from $2.23 billion in fiscal 2024. Full Year Gross Profit: $569.1 million, up 3.3% year-over-year. Full Year Gross Margin: 27.5%, up 270 basis points year-over-year. Full Year Net Earnings: $108 million, down from $115.8 million in fiscal 2024. Full Year Diluted EPS: $4.05, down from $4.33 year-over-year. Full Year Non-GAAP Diluted EPS: $4.67, down from $4.92 year-over-year. Cash Position: $389.4 million at the end of fiscal 2025, up from $253 million in fiscal 2024. Operating Cash Flows: $302.1 million, up from $248.4 million in fiscal 2024. Services Revenue Growth: 33% in Q4 and 37% for the year. Managed Services Growth: 16.6% in Q4 and 24.6% for the year. Headcount: Increased to 2,199 from 1,900 year-over-year. Warning! GuruFocus has detected 2 Warning Sign with PLUS. Release Date: May 22, 2025 For the complete transcript of the earnings call, please refer to the full earnings call transcript. ePlus Inc (NASDAQ:PLUS) achieved higher gross profitability and margin expansion despite lower net sales and gross billings. Gross profit increased by nearly 12% and gross margin expanded by 580 basis points year-over-year to 29.3% in the fourth quarter. Services revenue grew significantly, with a 33% increase in the quarter and 37% for the year, highlighting the success of their services-led approach. Managed services experienced strong growth, up 16.6% for the quarter and 24.6% for the year, providing predictable long-term revenue. The company has a strong balance sheet with a record cash position of approximately $389 million, allowing for strategic investments and acquisitions. Net sales declined by 10.2% year-over-year in Q4, primarily due to a reduction in product sales and economic uncertainty. Technology business net sales decreased by 10.4% year-over-year, reflecting lower product sales impacted by the shift towards subscription-based services. Operating expenses increased by 9.6% from the prior year quarter, partly due to costs related to increased headcount from acquisitions. Professional services gross margin declined from 50% to 35.9% year-over-year, affected by the Bailiwick acquisition's lower margin. Networking sales were down significantly year-over-year, indicating a need for improvement in this area. Q: Where is the demand environment currently? Did you see any improvement throughout the quarter, and are you still seeing soft demand on the product side of the business? A: Mark Marron, CEO and President: We are seeing a pickup in the data center, cloud, and security spaces, driven by AI initiatives and the need for security in governance and risk. However, networking sales were down significantly year-over-year. Overall, we had a tough comparison due to a strong previous year, and some customers are still digesting supply chain issues, particularly in networking. We expect improvement in the coming quarters. Q: Regarding the AI opportunity, most investment has been in the hyperscaler data center environment. Where does enterprise AI adoption stand, and does your guidance for next year include any acceleration in AI demand? A: Mark Marron, CEO and President: Most AI spending is currently directed towards hyperscalers. We are facilitating customer engagement through workshops and envisioning sessions, which we expect to drive service-related growth. Infrastructure spending on AI is anticipated to increase over time, but it will take a while to materialize. Our guidance does not yet factor in significant AI demand acceleration. Q: Can you provide more details on the impact of the industry-wide shift towards ratable and subscription-based revenue models on your financials? A: Elaine Marion, CFO: The shift towards ratable and subscription-based models has led to lower product sales and more netted down revenues, impacting net sales figures. However, this transition has also resulted in increased gross profit and margin expansion due to a more profitable business mix and higher services revenue. Q: How is the company positioned in terms of strategic investments and growth opportunities? A: Mark Marron, CEO and President: We are strategically investing in AI, cloud, security, and networking to expand our capabilities and meet customer needs. Our strong balance sheet, with a record cash position of approximately $389 million, allows us to make both organic and inorganic investments to support growth initiatives. Q: What are the expectations for fiscal year 2026 in terms of financial performance? A: Mark Marron, CEO and President: We are cautiously optimistic and expect net sales growth in the low single digits, with gross profit and adjusted EBITDA growing at mid-single digits. This guidance considers economic uncertainty but does not account for potential recessionary conditions or unexpected developments. For the complete transcript of the earnings call, please refer to the full earnings call transcript. This article first appeared on GuruFocus. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
23-05-2025
- Business
- Yahoo
ePlus Inc (PLUS) Q4 2025 Earnings Call Highlights: Strong Profitability Amid Sales Decline
Q4 Net Sales: $498.1 million, down 10.2% year-over-year. Q4 Gross Profit: $145.8 million, up 11.8% year-over-year. Q4 Gross Margin: 29.3%, up 580 basis points year-over-year. Q4 Adjusted EBITDA: $43.8 million, up 19.1% year-over-year. Q4 Net Earnings: $25.2 million, up 14.6% year-over-year. Q4 Diluted EPS: $0.95, up from $0.82 year-over-year. Q4 Non-GAAP Diluted EPS: $1.11, up 19.4% year-over-year. Full Year Net Sales: $2.07 billion, down from $2.23 billion in fiscal 2024. Full Year Gross Profit: $569.1 million, up 3.3% year-over-year. Full Year Gross Margin: 27.5%, up 270 basis points year-over-year. Full Year Net Earnings: $108 million, down from $115.8 million in fiscal 2024. Full Year Diluted EPS: $4.05, down from $4.33 year-over-year. Full Year Non-GAAP Diluted EPS: $4.67, down from $4.92 year-over-year. Cash Position: $389.4 million at the end of fiscal 2025, up from $253 million in fiscal 2024. Operating Cash Flows: $302.1 million, up from $248.4 million in fiscal 2024. Services Revenue Growth: 33% in Q4 and 37% for the year. Managed Services Growth: 16.6% in Q4 and 24.6% for the year. Headcount: Increased to 2,199 from 1,900 year-over-year. Warning! GuruFocus has detected 2 Warning Sign with PLUS. Release Date: May 22, 2025 For the complete transcript of the earnings call, please refer to the full earnings call transcript. ePlus Inc (NASDAQ:PLUS) achieved higher gross profitability and margin expansion despite lower net sales and gross billings. Gross profit increased by nearly 12% and gross margin expanded by 580 basis points year-over-year to 29.3% in the fourth quarter. Services revenue grew significantly, with a 33% increase in the quarter and 37% for the year, highlighting the success of their services-led approach. Managed services experienced strong growth, up 16.6% for the quarter and 24.6% for the year, providing predictable long-term revenue. The company has a strong balance sheet with a record cash position of approximately $389 million, allowing for strategic investments and acquisitions. Net sales declined by 10.2% year-over-year in Q4, primarily due to a reduction in product sales and economic uncertainty. Technology business net sales decreased by 10.4% year-over-year, reflecting lower product sales impacted by the shift towards subscription-based services. Operating expenses increased by 9.6% from the prior year quarter, partly due to costs related to increased headcount from acquisitions. Professional services gross margin declined from 50% to 35.9% year-over-year, affected by the Bailiwick acquisition's lower margin. Networking sales were down significantly year-over-year, indicating a need for improvement in this area. Q: Where is the demand environment currently? Did you see any improvement throughout the quarter, and are you still seeing soft demand on the product side of the business? A: Mark Marron, CEO and President: We are seeing a pickup in the data center, cloud, and security spaces, driven by AI initiatives and the need for security in governance and risk. However, networking sales were down significantly year-over-year. Overall, we had a tough comparison due to a strong previous year, and some customers are still digesting supply chain issues, particularly in networking. We expect improvement in the coming quarters. Q: Regarding the AI opportunity, most investment has been in the hyperscaler data center environment. Where does enterprise AI adoption stand, and does your guidance for next year include any acceleration in AI demand? A: Mark Marron, CEO and President: Most AI spending is currently directed towards hyperscalers. We are facilitating customer engagement through workshops and envisioning sessions, which we expect to drive service-related growth. Infrastructure spending on AI is anticipated to increase over time, but it will take a while to materialize. Our guidance does not yet factor in significant AI demand acceleration. Q: Can you provide more details on the impact of the industry-wide shift towards ratable and subscription-based revenue models on your financials? A: Elaine Marion, CFO: The shift towards ratable and subscription-based models has led to lower product sales and more netted down revenues, impacting net sales figures. However, this transition has also resulted in increased gross profit and margin expansion due to a more profitable business mix and higher services revenue. Q: How is the company positioned in terms of strategic investments and growth opportunities? A: Mark Marron, CEO and President: We are strategically investing in AI, cloud, security, and networking to expand our capabilities and meet customer needs. Our strong balance sheet, with a record cash position of approximately $389 million, allows us to make both organic and inorganic investments to support growth initiatives. Q: What are the expectations for fiscal year 2026 in terms of financial performance? A: Mark Marron, CEO and President: We are cautiously optimistic and expect net sales growth in the low single digits, with gross profit and adjusted EBITDA growing at mid-single digits. This guidance considers economic uncertainty but does not account for potential recessionary conditions or unexpected developments. For the complete transcript of the earnings call, please refer to the full earnings call transcript. This article first appeared on GuruFocus.
Yahoo
22-05-2025
- Business
- Yahoo
ePlus (NASDAQ:PLUS) Reports Sales Below Analyst Estimates In Q1 Earnings
IT solutions provider ePlus (NASDAQ:PLUS) fell short of the market's revenue expectations in Q1 CY2025, with sales falling 10.2% year on year to $498.1 million. Its non-GAAP profit of $1.11 per share was 28.3% above analysts' consensus estimates. Is now the time to buy ePlus? Find out in our full research report. Revenue: $498.1 million vs analyst estimates of $523.9 million (10.2% year-on-year decline, 4.9% miss) Adjusted EPS: $1.11 vs analyst estimates of $0.87 (28.3% beat) Initiating fiscal 2026 guidance (the company's fiscal year ends in March): "net sales growth of low single digits, and gross profit and adjusted EBITDA in the mid single digits" (below expectations) Operating Margin: 7%, up from 5.3% in the same quarter last year Market Capitalization: $1.72 billion "During the fourth quarter, we delivered double digit growth across several key metrics, including gross profit, net earnings and EPS," commented Mark Marron, president and CEO of ePlus. Starting as a financing company in 1990 before evolving into a full-service technology provider, ePlus (NASDAQ:PLUS) provides comprehensive IT solutions, professional services, and financing options to help organizations optimize their technology infrastructure and supply chain processes. Reviewing a company's long-term sales performance reveals insights into its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. With $2.07 billion in revenue over the past 12 months, ePlus is a mid-sized business services company, which sometimes brings disadvantages compared to larger competitors benefiting from better economies of scale. As you can see below, ePlus's 4.9% annualized revenue growth over the last five years was mediocre. This shows it couldn't generate demand in any major way and is a tough starting point for our analysis. Long-term growth is the most important, but within business services, a half-decade historical view may miss new innovations or demand cycles. ePlus's recent performance shows its demand has slowed as its revenue was flat over the last two years. This quarter, ePlus missed Wall Street's estimates and reported a rather uninspiring 10.2% year-on-year revenue decline, generating $498.1 million of revenue. Looking ahead, sell-side analysts expect revenue to grow 5.1% over the next 12 months, an improvement versus the last two years. This projection is above the sector average and implies its newer products and services will fuel better top-line performance. Here at StockStory, we certainly understand the potential of thematic investing. Diverse winners from Microsoft (MSFT) to Alphabet (GOOG), Coca-Cola (KO) to Monster Beverage (MNST) could all have been identified as promising growth stories with a megatrend driving the growth. So, in that spirit, we've identified a relatively under-the-radar profitable growth stock benefiting from the rise of AI, available to you FREE via this link. ePlus was profitable over the last five years but held back by its large cost base. Its average operating margin of 7.5% was weak for a business services business. Analyzing the trend in its profitability, ePlus's operating margin might fluctuated slightly but has generally stayed the same over the last five years. This raises questions about the company's expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability. This quarter, ePlus generated an operating profit margin of 7%, up 1.7 percentage points year on year. This increase was a welcome development, especially since its revenue fell, showing it was more efficient because it scaled down its expenses. We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company's growth is profitable. ePlus's EPS grew at a decent 8.7% compounded annual growth rate over the last five years, higher than its 4.9% annualized revenue growth. However, this alone doesn't tell us much about its business quality because its operating margin didn't expand. We can take a deeper look into ePlus's earnings to better understand the drivers of its performance. A five-year view shows that ePlus has repurchased its stock, shrinking its share count by 1.3%. This tells us its EPS outperformed its revenue not because of increased operational efficiency but financial engineering, as buybacks boost per share earnings. In Q1, ePlus reported EPS at $1.11, up from $0.93 in the same quarter last year. This print easily cleared analysts' estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects ePlus's full-year EPS of $4.66 to shrink by 1.4%. Revenue missed, but EPS managed to beat. Looking ahead, the company initiated full-year fiscal 2026 guidance (since fiscal year 2025 ended in March), guiding to "net sales growth of low single digits, and gross profit and adjusted EBITDA in the mid single digits". This is below expectations of mid single digit revenue growth and double digit EBITDA growth. Shares traded down 3.2% to $63.76 immediately following the results. Is ePlus an attractive investment opportunity at the current price? What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here, it's free. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
