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ePlus (PLUS) 6 Aug 24 2025 Q1 Earnings call transcript

AInvestWednesday, Aug 7, 2024 7:08 pm ET
2min read

ePlus Inc., a leading IT solutions provider, recently held its first quarter earnings call for fiscal year 2025, discussing the company's performance and future outlook. The call, led by CEO and President Mark Marron, provided insight into the company's strategic initiatives, financial highlights, and plans for growth.

Strategic Initiatives and Financial Performance

The call began with an overview of the company's strategic initiatives, which included a focus on AI, cloud security, and related advisory and annuity services. ePlus reported a net sales decline of 5.2% for the first quarter fiscal year 2025 compared to last year. This decline was attributed to a tough compare from the previous year, which saw a nearly 30% increase in product sales in the technology business.

Despite the decline in net sales, ePlus reported a 15.8% increase in overall service revenues, with managed services up 28% year-over-year. This growth in managed services is a significant positive sign for the company, as these services provide recurring revenue streams that contribute to predictability and more consistent profitability in future years.

ePlus also highlighted its success in the security sector, which continues to be a key area of focus for the company. Security accounted for over 20% of the company's gross billings in the trailing 12 months and was up over 9% quarter-over-quarter.

Financial Results and Outlook

The financial results for the first quarter were mixed, with a decline in consolidated net sales to $544.5 million from $574.2 million in the previous year. This decline was due to lower product sales in the technology business, primarily in cloud and networking products. However, the services business saw double-digit top line growth, with net sales up 15.8% to $78.2 million.

Operating expenses grew 3.2% year-over-year, primarily due to higher salaries and benefits from additional headcount. However, the company was able to maintain discipline with its SG&A costs, which contributed to an increase in operating income and operating margin.

Looking ahead, ePlus reiterated its full-year financial outlook, maintaining its guidance for net sales growth over the prior fiscal year of between 3% and 6% and an adjusted EBITDA range of $200 million to $215 million. The company remains committed to making the required investments in its business to position itself for long-term success, while also returning value to shareholders through share repurchase programs.

Challenges and Opportunities

During the call, analysts asked about the company's outlook for the second quarter and the impact of the customer product backlog on sales. ePlus expressed confidence in its strategy and growth plans, but acknowledged that the second quarter will be a positive one, but with a tough compare to the previous year.

The company also discussed the opportunities in the rapidly evolving AI market, with a focus on helping customers navigate the complexities of AI implementation. ePlus sees significant potential in this area, as many customers are still in the formative stages of their AI journeys and require guidance in areas such as data governance, infrastructure readiness, and skills gap training.

Conclusion

Overall, ePlus' first quarter earnings call provided valuable insight into the company's strategic initiatives, financial performance, and future outlook. Despite the challenges of a tough compare to the previous year, ePlus remains optimistic about its position in the IT solutions market and its ability to capitalize on emerging trends such as AI and cloud security. With a focus on customer-facing personnel, strategic investments, and a solid balance sheet, ePlus is well-positioned for growth in the coming quarters.

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