ePlus Inc. (NASDAQ:PLUS) is a leading provider of information technology (IT) solutions that enable organizations to optimize their IT environment and supply chain processes. The company's expertise spans across various technology domains, including security, cloud, networking, collaboration, and emerging technologies such as artificial intelligence (AI). With a rich history spanning more than three decades, ePlus has established itself as a trusted advisor, delivering innovative and tailored solutions to customers across diverse industries.
Company History and Evolution
Founded in 1990 as a Delaware corporation, ePlus has evolved from a computer products reseller to a comprehensive technology solutions provider. The company's journey began in Herndon, Virginia, where it primarily focused on selling hardware and software products. Over the years, ePlus has strategically expanded its offerings, adding a range of professional and managed services, as well as flexible financing solutions, to its portfolio. Initially targeting medium and large enterprises and state and local government and educational institutions (SLED) in the United States, ePlus has since expanded its reach to select international markets, including the United Kingdom, the European Union, India, and Singapore.
Technological Expertise and Differentiation
One of the key pillars of ePlus' success has been its ability to stay at the forefront of technological advancements. The company has consistently invested in engineering and technology resources, enabling it to develop specialized expertise and deliver cutting-edge solutions to its customers. ePlus' multi-vendor approach, which allows it to offer a broad range of industry-leading technologies, has been a significant differentiator in the market. This approach was established early on, as ePlus became an authorized reseller for thousands of IT vendors, enabling the company to provide customers with new and evolving IT solutions. Furthermore, ePlus employees have obtained top-level engineering certifications with a broad range of leading IT vendors, allowing the company to offer multi-vendor IT solutions customized to each customer's requirements.
Business Model Adaptation
As the IT landscape has rapidly transformed, ePlus has proactively adapted its business model to cater to the evolving needs of its customers. The company has bolstered its services-led approach, with a focus on delivering integrated solutions that address complex business challenges. This shift has enabled ePlus to enhance its customer relationships and provide more strategic value-add beyond just product sales.
Financials
ePlus' financial performance has shown resilience and adaptability in the face of changing market conditions. In the most recent quarter (Q2 2025), the company reported revenue of $515.17 million and net income of $31.31 million. Operating cash flow for the quarter was -$21.63 million, with free cash flow at -$22.92 million. The company experienced a 12.3% decrease in net sales compared to the prior year quarter, primarily driven by a 13.8% decrease in technology business net sales, partially offset by a 46.0% increase in service revenues.
Despite the decrease in net sales, ePlus demonstrated strength in its gross profit performance. Consolidated gross profit increased 2.5% year-over-year, led by a solid quarter from the financing segment and continued strength in services. Notably, the consolidated gross margin expanded 410 basis points to 28.7%, reflecting the company's ability to maintain profitability even in challenging market conditions.
Operating expenses increased 5.8% due to higher salaries, benefits, and acquisition-related costs, indicating the company's continued investment in its workforce and growth initiatives. The technology business segments (product, professional services, and managed services) accounted for 97% of net sales and 77% of operating income, while the financing business segment accounted for 3% of net sales and 23% of operating income.
ePlus operates primarily in the United States, with some international operations in the United Kingdom, Europe, India, and Singapore. This geographic diversification helps mitigate risks associated with regional economic fluctuations.
Liquidity
ePlus maintains a strong liquidity position, which provides financial flexibility to support its operations and growth initiatives. As of September 30, 2024, the company reported cash and cash equivalents of $187.5 million. The company's debt-to-equity ratio stands at 0.16, indicating a conservative capital structure with relatively low leverage.
ePlus has access to a $500 million credit facility, which includes a $200 million revolving credit component. As of September 30, 2024, the company had no outstanding balance on the revolving credit facility, providing additional financial flexibility if needed. The company's current ratio of 1.85 and quick ratio of 1.71 further underscore its strong liquidity position and ability to meet short-term obligations.
Product Segments and Performance
ePlus operates through three main product segments: Product, Professional Services, and Managed Services.
The Product segment, which includes the sale of third-party hardware, software, and maintenance services, experienced a decrease in net sales compared to the prior year periods. This decline was driven by lower demand for networking, cloud, collaboration, and security products, reflecting the challenging market conditions and difficult year-over-year comparisons.
The Professional Services segment reported increased net sales, primarily due to the addition of Bailiwick's projects. This segment includes advanced professional services such as consulting, assessments, configuration, logistics, training, staff augmentation, and project management. The acquisition of Bailiwick has expanded ePlus' capabilities in areas such as digital signage, EV charging solutions, loss prevention and security, and store openings and closings.
The Managed Services segment also saw net sales growth, driven by the expansion of service offerings related to maintenance support, cloud services, and service desk. This segment typically involves multi-year contracts for managing various aspects of customers' IT environments.
Growth Strategy and Acquisitions
ePlus' growth strategy continues to focus on both organic expansion and strategic acquisitions. The recent acquisition of Bailiwick Services, LLC has strengthened ePlus' IT integration and deployment capabilities, particularly in the retail, financial services, and hospitality verticals. This acquisition is expected to contribute approximately $85 million in revenue in the second half of fiscal 2025, primarily in the professional services segment.
Future Outlook and Guidance
Looking ahead, ePlus has modified its guidance for fiscal year 2025, expecting adjusted EBITDA to be in the range of $195 million to $205 million. The company anticipates net sales to be similar to the last fiscal year, reflecting a difficult comparison for product sales, higher gross to net adjustments due to industry transitions, and economic uncertainty. However, ePlus expects positive comparisons for both sales and earnings for the full fiscal year 2025.
The company expects operating expenses to increase in Q3 FY 2025 due to the full quarter impact of the Bailiwick acquisition. Gross margins are anticipated to see some sequential decline over the next two quarters as product sales increase.
Conclusion
ePlus Inc. continues to demonstrate its ability to navigate the dynamic IT solutions landscape, leveraging its diverse portfolio of products and services to address evolving customer needs. While facing some headwinds in product sales, the company's strong performance in services and strategic acquisitions position it well for future growth. With a solid financial foundation and a clear focus on high-growth areas like AI, security, and cloud solutions, ePlus remains a compelling player in the IT solutions market.