ePlus inc. (NASDAQ: PLUS) has demonstrated its ability to navigate a challenging industry landscape, delivering solid financial results in fiscal year 2024. Despite facing headwinds, the company has remained focused on its strategic priorities, investing in key growth areas and enhancing its comprehensive solutions and services portfolio.

Financials

For the fiscal year 2024, ePlus reported annual net income of $115,776,000 and annual revenue of $2,206,302,000. The company's annual operating cash flow reached $248,449,000, while its annual free cash flow stood at $239,946,000. These figures underscore ePlus' financial strength and its ability to generate substantial cash flows to fuel its growth initiatives.

In the fourth quarter of fiscal 2024, ePlus delivered a mixed performance. Consolidated net sales increased by 12.7% year-over-year to $554.5 million, driven by a 12.6% increase in the Technology business segment. This growth was primarily attributable to strong demand for networking equipment and cloud products, as well as a 14.8% increase in Service revenue. However, consolidated gross profit declined to $130.3 million, with a gross margin of 23.5%, compared to 26.9% in the prior-year quarter. This margin compression was largely due to a higher percentage of sales to enterprise customers and a shift in product mix.

The company's Financing segment also contributed to the quarterly results, with net sales increasing by 15.5% to $10.4 million, driven by higher transactional gains and portfolio earnings, partially offset by a decline in month-to-month rents.

Business Overview

On the operational front, ePlus continued to invest in its customer-facing sales and engineering teams, expanding its headcount by 146 employees during the fiscal year, the majority of which were in customer-facing roles. This strategic investment reflects the company's commitment to supporting its growth initiatives and enhancing its ability to deliver comprehensive solutions to its customers.

One of the key focus areas for ePlus has been the expansion of its Services business, which includes Managed Services and Professional Services. In the fourth quarter, the Services business revenue increased by 14.8%, with Managed Services growing by 22% for both the quarter and the full year. This growth in the Services business has been a crucial component of ePlus' long-term strategy, as it helps to build a solid recurring revenue base and enhance the company's profitability and predictability.

ePlus has also been actively investing in emerging technologies, such as Artificial Intelligence (AI). The company's "AI Ignite" program is designed to help customers navigate their AI journeys, providing consultative services and workshops to identify use cases and optimize their data ecosystems. While the company believes AI has the potential to be a significant growth driver, it has also observed that the technology has lengthened some customer decision-making processes as they evaluate the benefits and costs.

Outlook

Looking ahead, ePlus is initiating fiscal year 2025 guidance, projecting net sales growth of 3% to 6% over the prior fiscal year and adjusted EBITDA in the range of $200 million to $215 million. The company expects gross margins to return to more normalized levels in fiscal year 2025, as it continues to manage its cost structure and attain operating leverage over time.

ePlus' geographic footprint spans the United States, the United Kingdom, Europe, and the Asia-Pacific region, allowing the company to serve a diverse customer base across various industries. The company's top customer verticals include Telecom, Media and Entertainment, Technology, State and Local Government and Educational Institutions (SLED), Healthcare, and Financial Services.

Liquidity

From a liquidity perspective, ePlus' balance sheet remains strong, with cash and cash equivalents totaling $253 million at the end of fiscal 2024, a significant increase from the $103.1 million reported at the end of the prior fiscal year. This robust cash position provides the company with the flexibility to pursue strategic acquisitions, invest in growth initiatives, and enhance shareholder returns, as evidenced by the board's approval of a new $1.25 million share repurchase authorization.

Conclusion

Despite the challenges faced in the fourth quarter, ePlus has demonstrated its resilience and ability to adapt to changing market conditions. The company's focus on high-growth areas, such as cloud, security, and managed services, as well as its strategic investments in customer-facing personnel and emerging technologies, position it well to capitalize on future opportunities and drive long-term shareholder value.

As ePlus navigates the evolving IT landscape, the company's comprehensive solutions, strong customer relationships, and financial discipline will be crucial in maintaining its competitive edge and delivering sustainable growth in the years ahead.