ePlus Growth Stalls as Margins Narrow
Managed-services revenue reached a record $51.3 million, its first quarter above $50 million.
ePlus Inc. (PLUS), the technology-solutions provider, posted 1.0% sales growth for its fiscal first quarter as gross profit and earnings declined. Net sales totaled $649.1 million, up 12.7% sequentially.
The quarter marked a sharp slowdown after three consecutive periods of growth above 20%. Gross billings rose 0.5% to $957.1 million, compared with an 11.7% increase in the preceding quarter, while gross margin narrowed for a fourth straight quarter to 23.3%.
Gross profit fell 1.5% to $151.3 million, reversing an 11.6% increase in the preceding quarter. Operating income declined 9.6% to $38.8 million as operating expenses rose 1.6%, and adjusted EBITDA fell 9.2% to $47.8 million. Net earnings from continuing operations decreased 5.4% to $30.3 million, with diluted earnings falling to $1.16 a share from $1.21. Adjusted earnings declined to $1.28 a share from $1.41.
Product sales edged up 0.6% to $529.6 million after rising 25.0% in the preceding quarter. Product gross margin slipped to 21.0% from 21.3% a year earlier, reflecting the sales mix and a lower proportion of net-reported third-party maintenance and subscription sales. Security and collaboration sales rose 28.1% and 31.8%, respectively, while cloud sales fell 12.7%.
Managed-services revenue grew 15.1%, accelerating from 9.3% growth in the prior quarter. Gross profit from the business rose 11.3%, while its margin narrowed to 29.4% from 30.4% a year earlier. Professional-services revenue fell 5.1% to $68.1 million, though it rebounded 11.1% sequentially, and segment gross profit declined 10.7%.
Demand varied widely across customer groups. Financial-services sales increased 54.5% and technology sales rose 42.6%, while telecom, media and entertainment sales dropped 25.0% and state, local and education sales declined 11.8%. Memory-chip shortages had extended lead times and delayed shipments. Booked and open orders increased significantly, and ePlus expects those orders to support a stronger second half.
ePlus reiterated its fiscal 2027 outlook for mid-single-digit growth in net sales, gross profit and adjusted EBITDA. The board also authorized a new 12-month program to repurchase as many as 1.5 million shares beginning Aug. 11, replacing the expiring authorization.