```markdown [Front Matter](index=1&type=section&id=Front%20Matter) [Registrant Information](index=1&type=section&id=Registrant%20Information) This section provides the basic identification details for ePlus inc.'s Form 10-Q filing for the quarterly period ended June 30, 2025, confirming its status as a large accelerated filer and the number of common shares outstanding as of August 4, 2025 - ePlus inc. is a Delaware corporation, identified by Commission file number **1-34167**, with its principal executive offices in Herndon, VA[3](index=3&type=chunk)[4](index=4&type=chunk)[5](index=5&type=chunk) - The company is a **large accelerated filer** and has filed all required reports and interactive data files during the preceding 12 months[6](index=6&type=chunk)[7](index=7&type=chunk)[8](index=8&type=chunk) - As of August 4, 2025, the number of common stock shares outstanding was **26,625,574**[10](index=10&type=chunk) [Table of Contents](index=3&type=section&id=TABLE%20OF%20CONTENTS) The Table of Contents outlines the structure of the Form 10-Q, detailing the sections for Financial Information (Part I) and Other Information (Part II), along with their respective items and starting page numbers [Cautionary Language About Forward-Looking Statements](index=4&type=section&id=CAUTIONARY%20LANGUAGE%20ABOUT%20FORWARD-LOOKING%20STATEMENTS) This section warns readers about forward-looking statements within the report, emphasizing that actual results may differ materially due to various risks and uncertainties, including economic instability, customer/vendor relationships, cost increases, cybersecurity, and rapid changes in IT and AI technologies - Forward-looking statements are subject to risks and uncertainties, and actual results may materially differ from anticipated events[13](index=13&type=chunk) - Key risks include financial losses from political instability, changes in interest rates, tariffs, and inflation[13](index=13&type=chunk)[15](index=15&type=chunk) - Significant adverse changes in relationships with major customers or vendors, including decreased profitability or loss of relationships[13](index=13&type=chunk)[15](index=15&type=chunk) - Increases in costs (e.g., wages) and the ability to adjust prices, or negative financial impacts from existing pricing arrangements[13](index=13&type=chunk)[15](index=15&type=chunk) - Reliance on third parties for service obligations and a small number of key vendors in the supply chain[13](index=13&type=chunk)[15](index=15&type=chunk) - Cybersecurity attacks, IT outages, and the ability to secure confidential information while complying with data privacy regulations[13](index=13&type=chunk)[15](index=15&type=chunk) - Dependence on key personnel and the ability to hire, train, and retain qualified staff[13](index=13&type=chunk)[15](index=15&type=chunk) - Risks related to Artificial Intelligence (AI), including its use, capabilities, and emerging regulations[13](index=13&type=chunk)[15](index=15&type=chunk) - Supply chain issues, including component shortages, which may increase costs, delay orders, or impact working capital[13](index=13&type=chunk)[15](index=15&type=chunk) - Exposure to changes in legislation and regulatory matters, and potential non-compliance with public sector contracts[13](index=13&type=chunk)[15](index=15&type=chunk) [Part I. Financial Information](index=5&type=section&id=Part%20I.%20Financial%20Information) [Item 1. Financial Statements](index=6&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements for ePlus inc. and its subsidiaries, including balance sheets, statements of operations, comprehensive income, cash flows, and stockholders' equity, along with detailed notes explaining significant accounting policies, recent pronouncements, and specific financial items [Unaudited Consolidated Balance Sheets](index=6&type=section&id=Unaudited%20Consolidated%20Balance%20Sheets) The unaudited consolidated balance sheets show a decrease in total assets from $1,884,805 thousand as of March 31, 2025, to $1,799,135 thousand as of June 30, 2025, primarily due to the divestiture of discontinued operations. Total liabilities also decreased, while total stockholders' equity increased Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2025 | March 31, 2025 | | :--------------------------------- | :------------ | :------------- | | Total Assets | $1,799,135 | $1,884,805 | | Total Liabilities | $778,704 | $907,182 | | Total Stockholders' Equity | $1,020,431 | $977,623 | | Cash and cash equivalents | $480,178 | $389,375 | | Accounts receivable—trade, net | $700,873 | $516,925 | | Current assets of discontinued operations | $- | $222,399 | | Current liabilities of discontinued operations | $- | $166,463 | - The decrease in **total assets** and **liabilities** is largely attributable to the reclassification and sale of discontinued operations[16](index=16&type=chunk)[29](index=29&type=chunk) [Unaudited Consolidated Statements of Operations](index=8&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Operations) For the three months ended June 30, 2025, net sales increased to $637,315 thousand from $535,652 thousand in the prior year. Net earnings also saw a significant increase, reaching $37,697 thousand, up from $27,339 thousand, driven by growth in both continuing and discontinued operations Consolidated Statements of Operations Highlights (in thousands, except per share amounts) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | | Net sales | $637,315 | $535,652 | | Gross profit | $148,216 | $126,874 | | Operating income | $36,200 | $31,459 | | Net earnings from continuing operations | $27,128 | $24,193 | | Earnings from discontinued operations, net of tax | $10,569 | $3,146 | | Net earnings | $37,697 | $27,339 | | Diluted EPS (Continuing Operations) | $1.03 | $0.90 | | Diluted EPS (Total) | $1.43 | $1.02 | - **Net sales** increased by **$101.7 million** (**19.0%**) year-over-year, with product sales up **13.9%** and services up **48.8%**[17](index=17&type=chunk) - **Net earnings from discontinued operations** significantly increased from **$3,146 thousand** in 2024 to **$10,569 thousand** in 2025[17](index=17&type=chunk) [Unaudited Consolidated Statements of Comprehensive Income](index=9&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Comprehensive%20Income) Total comprehensive income for the three months ended June 30, 2025, increased to $40,855 thousand from $27,407 thousand in the prior year, primarily due to higher net earnings and a substantial increase in foreign currency translation adjustments Consolidated Statements of Comprehensive Income Highlights (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | | Net Earnings | $37,697 | $27,339 | | Foreign currency translation adjustments | $3,158 | $68 | | Total Comprehensive Income | $40,855 | $27,407 | - **Foreign currency translation adjustments** contributed significantly to the increase in **comprehensive income**, rising from **$68 thousand** in 2024 to **$3,158 thousand** in 2025[19](index=19&type=chunk) [Unaudited Consolidated Statements of Cash Flows](index=10&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Cash%20Flows) For the three months ended June 30, 2025, the company experienced a net cash outflow from operating activities of $98,967 thousand, a significant shift from a $97,127 thousand inflow in the prior year. This was largely offset by a substantial cash inflow from investing activities, primarily due to the sale of discontinued operations, resulting in a net increase in cash and cash equivalents of $90,803 thousand Consolidated Statements of Cash Flows Highlights (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | | Net cash provided by (used in) operating activities | $(98,967) | $97,127 | | Net cash provided by (used in) investing activities | $155,857 | $(1,906) | | Net cash provided by financing activities | $31,924 | $1,612 | | Net increase in cash and cash equivalents | $90,803 | $96,888 | | Cash and cash equivalents, end of period | $480,178 | $349,909 | - **Operating activities** of continuing operations used **$106,003 thousand** in cash in 2025, compared to providing **$110,145 thousand** in 2024, mainly due to an increase in **accounts receivable**[21](index=21&type=chunk)[139](index=139&type=chunk) - **Investing activities** provided **$155,857 thousand** in 2025, primarily from **$156,681 thousand** in net cash from discontinued operations, including **$180.1 million** in proceeds from the sale of HoldCo[21](index=21&type=chunk)[144](index=144&type=chunk) - **Financing activities** provided **$31,924 thousand** in 2025, driven by **$39,888 thousand** in net borrowings on the **floor plan facility**, partially offset by common stock repurchases[21](index=21&type=chunk)[146](index=146&type=chunk) [Unaudited Consolidated Statements of Stockholders' Equity](index=12&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Stockholders'%20Equity) Total stockholders' equity increased to $1,020,431 thousand as of June 30, 2025, from $977,623 thousand as of March 31, 2025. This increase was primarily driven by net earnings and foreign currency translation adjustments, partially offset by common stock repurchases Consolidated Statements of Stockholders' Equity Highlights (in thousands) | Metric | June 30, 2025 | March 31, 2025 | | :--------------------------------- | :------------ | :------------- | | Total Stockholders' Equity | $1,020,431 | $977,623 | | Retained Earnings | $888,653 | $850,956 | | Accumulated Other Comprehensive Income | $6,599 | $3,441 | | Treasury Stock | $(74,052) | $(70,748) | - **Net earnings** of **$37,697 thousand** and **foreign currency translation adjustments** of **$3,158 thousand** contributed positively to equity[24](index=24&type=chunk) - Repurchase of common stock amounted to **$3,304 thousand** for the three months ended June 30, 2025[24](index=24&type=chunk) [Notes to Unaudited Consolidated Financial Statements](index=13&type=section&id=Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) These notes provide detailed explanations of the company's financial statements, covering significant accounting policies, the impact of the financing business divestiture, revenue recognition, goodwill, credit facilities, and other financial instruments. They clarify the retrospective presentation of discontinued operations and the accounting for recent acquisitions [Note 1. Organization and Summary of Significant Accounting Policies](index=13&type=section&id=1.%20ORGANIZATION%20AND%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) ePlus inc. is an IT solutions provider focusing on medium to large enterprises and SLED markets in the US and select international regions. The company completed the sale of its domestic financing business on June 30, 2025, transitioning to a pure-play technology solutions provider, with the financing business retrospectively presented as discontinued operations - ePlus provides **IT solutions**, consulting, professional, and managed services, focusing on optimizing IT environments and supply chain processes[27](index=27&type=chunk) - On June 30, 2025, ePlus sold its domestic financing business (Expo Holdings, LLC), becoming a **pure-play technology solutions provider**. Financial results for the domestic financing business are retrospectively presented as discontinued operations[29](index=29&type=chunk)[41](index=41&type=chunk) - A substantial portion of sales (**26%** in Q1 2025, **36%** in Q1 2024) are products from Cisco Systems, indicating a concentration of risk[32](index=32&type=chunk) [Note 2. Recent Accounting Pronouncements](index=14&type=section&id=2.%20RECENT%20ACCOUNTING%20PRONOUNCEMENTS) ePlus is evaluating the impact of recently issued FASB ASUs: ASU 2023-09 (Income Taxes) effective for fiscal year ending March 31, 2026, requiring disaggregated tax information, and ASU 2024-03 (Income Statement—Reporting Comprehensive Income) effective for fiscal year ending March 31, 2028, requiring detailed expense disclosures - **ASU 2023-09 (Income Taxes)** requires disaggregated effective tax rate reconciliation and income taxes paid, effective for fiscal year ending March 31, 2026[33](index=33&type=chunk) - **ASU 2024-03 (Income Statement—Reporting Comprehensive Income)** requires detailed expense disclosures, effective for fiscal year ending March 31, 2028[34](index=34&type=chunk) [Note 3. Revenues](index=14&type=section&id=3.%20REVENUES) This note details the composition of accounts receivable and contract liabilities, and outlines future revenue expected from unsatisfied performance obligations, primarily for non-cancelable managed services contracts Accounts Receivable—Trade, Net (in thousands) | Metric | June 30, 2025 | March 31, 2025 | | :-------------------------- | :------------ | :------------- | | Accounts receivable | $687,904 | $507,052 | | Contract assets | $16,288 | $13,775 | | Allowance for credit losses | $(3,319) | $(3,902) | | Total accounts receivable—trade, net | $700,873 | $516,925 | - Revenues recognized from beginning **contract liability** balance were **$42.8 million** for Q1 2025, up from **$40.5 million** for Q1 2024[37](index=37&type=chunk) Total Remaining Performance Obligations (in thousands) | Period | Amount | | :--------------------------------- | :------- | | Remainder of the year ending March 31, 2026 | $74,913 | | Year ending March 31, 2027 | $50,250 | | Year ending March 31, 2028 | $25,546 | | Year ending March 31, 2029 | $13,538 | | Year ending March 31, 2030 and thereafter | $4,369 | | Total remaining performance obligations | $168,616 | [Note 4. Discontinued Operations](index=15&type=section&id=4.%20DISCONTINUED%20OPERATIONS) On June 30, 2025, ePlus completed the sale of its domestic financing business (HoldCo) for net cash proceeds of $156.7 million, recognizing a gain on sale of $4.4 million before income taxes. This divestiture marks a strategic shift to a pure-play technology solutions provider, with the financing business results retrospectively presented as discontinued operations - Sale of domestic financing business (HoldCo) completed on June 30, 2025, for **net cash proceeds** of **$156.7 million**[40](index=40&type=chunk) - Recognized a **gain from sale of HoldCo** before income taxes of **$4,368 thousand** for the three months ended June 30, 2025[43](index=43&type=chunk) Operating Results of Discontinued Operations (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | | Net sales | $15,811 | $8,886 | | Gross profit | $14,077 | $7,607 | | Operating income | $10,028 | $4,010 | | Earnings from discontinued operations, net of tax | $10,569 | $3,146 | [Note 5. Goodwill and Other Intangible Assets](index=17&type=section&id=5.%20GOODWILL%20AND%20OTHER%20INTANGIBLE%20ASSETS) Goodwill remained stable at $202,979 thousand as of June 30, 2025, with only minor foreign currency translation adjustments. Other intangible assets, primarily customer relationships and trade names, decreased slightly due to amortization, with total amortization expense for other intangible assets at $5.5 million for Q1 2025 Goodwill by Segment (in thousands) | Segment | March 31, 2025 | June 30, 2025 | | :---------------- | :------------- | :------------ | | Product | $129,177 | $129,271 | | Professional Services | $63,779 | $63,797 | | Managed Services | $9,902 | $9,911 | | Total | $202,858 | $202,979 | - The only activity in **goodwill** for the quarter was foreign currency translation adjustments[47](index=47&type=chunk) Purchased Intangible Assets (Net, in thousands) | Asset Type | June 30, 2025 | March 31, 2025 | | :-------------------- | :------------ | :------------- | | Customer relationships | $68,781 | $74,008 | | Trade names and other | $7,640 | $7,959 | | Total | $76,421 | $81,967 | - Total **amortization expense** for other **intangible assets** was **$5.5 million** for Q1 2025, up from **$3.8 million** in Q1 2024[51](index=51&type=chunk) [Note 6. Allowance for Credit Losses](index=18&type=section&id=6.%20ALLOWANCE%20FOR%20CREDIT%20LOSSES) The allowance for credit losses within accounts receivable—trade decreased to $3,319 thousand as of June 30, 2025, from $3,902 thousand at the beginning of the period, despite an increase in the provision for credit losses due to higher exposure to accounts with elevated credit risk Allowance for Credit Losses Activity (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | | Beginning balance | $3,902 | $2,549 | | Provision for credit losses | $596 | $75 | | Write-offs and other | $(1,179) | $(12) | | Ending balance | $3,319 | $2,612 | - The **provision for credit losses** increased significantly to **$596 thousand** in Q1 2025 from **$75 thousand** in Q1 2024, driven by increased exposure to higher credit risk accounts[52](index=52&type=chunk)[117](index=117&type=chunk) [Note 7. Credit Facility](index=18&type=section&id=7.%20CREDIT%20FACILITY) ePlus utilizes a $500.0 million floor plan facility and a $200.0 million revolving credit facility with Wells Fargo Commercial Distribution Finance, LLC. The floor plan facility had an outstanding balance of $129.4 million as of June 30, 2025, used for inventory purchases, while the revolving credit facility had no outstanding balance. The facility was amended in anticipation of the financing business sale, but substantive terms remained unchanged - The WFCDF **Credit Facility** includes a **$500.0 million floor plan facility** and a **$200.0 million revolving credit facility**[54](index=54&type=chunk) - Outstanding balance on the **floor plan facility** was **$129.4 million** as of June 30, 2025, up from **$89.5 million** as of March 31, 2025[55](index=55&type=chunk) - No outstanding balances were reported under the **revolving credit facility** as of June 30, 2025, or March 31, 2025[57](index=57&type=chunk) - The WFCDF **Credit Facility** was amended on June 20, 2025, in anticipation of the financing business sale, but its substantive terms were not materially changed[54](index=54&type=chunk) [Note 8. Commitments and Contingencies](index=19&type=section&id=8.%20COMMITMENTS%20AND%20CONTINGENCIES) ePlus is subject to various legal proceedings and claims in the normal course of business. As of June 30, 2025, the company does not believe there is a reasonable possibility of material losses exceeding recognized amounts, but acknowledges that outcomes are uncertain and could adversely affect financial condition - ePlus is involved in various legal proceedings and claims arising in the normal course of business[62](index=62&type=chunk) - As of June 30, 2025, management does not believe there is a reasonable possibility of material losses exceeding already recognized amounts[62](index=62&type=chunk) [Note 9. Earnings Per Share](index=20&type=section&id=9.%20EARNINGS%20PER%20SHARE) Basic and diluted earnings per common share for continuing operations increased to $1.03 for the three months ended June 30, 2025, from $0.91 (basic) and $0.90 (diluted) in the prior year. Total basic and diluted EPS, including discontinued operations, rose to $1.43 from $1.03 and $1.02, respectively Earnings Per Common Share (EPS) (except per share data) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | | Net earnings (Continuing operations) | $27,128 | $24,193 | | Net earnings (Discontinued operations) | $10,569 | $3,146 | | Total Net earnings | $37,697 | $27,339 | | Basic EPS (Continuing operations) | $1.03 | $0.91 | | Basic EPS (Total) | $1.43 | $1.03 | | Diluted EPS (Continuing operations) | $1.03 | $0.90 | | Diluted EPS (Total) | $1.43 | $1.02 | - **Weighted average common shares outstanding (diluted)** decreased to **26,381 thousand** in Q1 2025 from **26,801 thousand** in Q1 2024[65](index=65&type=chunk) [Note 10. Stockholders' Equity](index=20&type=section&id=10.%20STOCKHOLDERS'%20EQUITY) ePlus repurchased 47,488 shares of common stock for $3.3 million in Q1 2025 to satisfy tax withholding obligations. The board authorized a new share repurchase program on August 7, 2025, for up to 1,500,000 shares over a 12-month period - During Q1 2025, ePlus repurchased **47,488 shares** of common stock for **$3.3 million** to satisfy tax withholding obligations[67](index=67&type=chunk) - On August 7, 2025, the board authorized a new **share repurchase program** for up to **1,500,000 shares** over a 12-month period starting August 11, 2025[69](index=69&type=chunk) - In Q1 2024, **109,869 shares** were repurchased for **$8.1 million** under the then-current plan, and **52,450 shares** for **$3.8 million** for tax withholding[68](index=68&type=chunk) [Note 11. Share-Based Compensation](index=21&type=section&id=11.%20SHARE-BASED%20COMPENSATION) ePlus granted 122,195 restricted shares in Q1 2025 under its Director and Employee LTIPs. Total share-based compensation expense for the quarter was $3.44 million, with $17.1 million in unrecognized compensation expense remaining, expected to be recognized over 36 months - Granted **122,195 restricted shares** in Q1 2025 (**351** under 2024 Director LTIP, **121,844** under 2021 Employee LTIP)[72](index=72&type=chunk) Share-Based Compensation Expense (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | | Equity-based compensation expense | $3,440 | $2,791 | | Income tax benefit | $(905) | $(756) | - Total **unrecognized compensation expense** related to unvested restricted stock was **$17.1 million** as of June 30, 2025, with a weighted-average recognition period of **36 months**[76](index=76&type=chunk) - Issued **28,665 shares** under the ESPP at **$61.29** per share in Q1 2025, with **2.34 million shares** remaining under the plan[75](index=75&type=chunk) [Note 12. Income Taxes](index=22&type=section&id=12.%20INCOME%20TAXES) The provision for income tax expense for Q1 2025 was $9.7 million, up from $9.0 million in Q1 2024. The effective income tax rate decreased to 26.3% from 27.1% year-over-year, primarily due to lower state taxes. The company is assessing the impact of the recently enacted One Big Beautiful Bill Act (OBBBA) Income Tax Provision and Effective Rate (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | | Provision for income tax expense | $9,684 | $8,977 | | Effective income tax rate | 26.3% | 27.1% | - The **effective tax rate** decreased primarily due to lower state taxes[78](index=78&type=chunk) - ePlus is currently assessing the impact of the One Big Beautiful Bill Act (OBBBA), enacted July 4, 2025, which permanently extends many 2017 tax provisions and introduces modifications to corporate tax provisions[79](index=79&type=chunk) [Note 13. Fair Value of Financial Instruments](index=22&type=section&id=13.%20FAIR%20VALUE%20OF%20FINANCIAL%20INSTRUMENTS) ePlus holds money market funds as Level 1 assets and a contingent consideration asset of $13.5 million as a Level 3 asset as of June 30, 2025. This contingent consideration stems from the sale of HoldCo and includes potential Holdback Premium and Earn-Out payments based on post-closing performance, valued using a Monte Carlo simulation model Fair Value Hierarchy of Financial Instruments (in thousands) | Asset | June 30, 2025 (Recorded Amount) | Level 1 | Level 2 | Level 3 | | :------------------------ | :------------------------------ | :------ | :------ | :------ | | Money market funds | $392,717 | $392,717 | $- | $- | | Contingent Consideration | $13,502 | $- | $- | $13,502 | - The **contingent consideration asset** of **$13.5 million** is related to the sale of HoldCo and includes potential Holdback Premium (up to **$3.0 million**) and two types of Earn-Outs (Lease Originations Earn-Out capped at **$10.0 million**, Transaction Gains Earn-Out uncapped)[81](index=81&type=chunk)[82](index=82&type=chunk)[83](index=83&type=chunk) - The fair value of the **contingent consideration** was estimated using a Monte Carlo simulation model[81](index=81&type=chunk) [Note 14. Business Combinations](index=23&type=section&id=14.%20BUSINESS%20COMBINATIONS) On August 19, 2024, ePlus acquired Bailiwick Services, LLC for a preliminary consideration of $124.9 million. This acquisition added $41.3 million in goodwill, assigned to the professional services and product segments, and $58.0 million in identified intangible assets, primarily customer relationships and trade names - ePlus acquired Bailiwick Services, LLC on August 19, 2024, for a preliminary consideration of **$124.9 million**[84](index=84&type=chunk)[85](index=85&type=chunk) - The acquisition resulted in **$41.3 million** in **goodwill**, assigned to **professional services** and **product segments**, attributable to the acquired workforce and expected synergies[86](index=86&type=chunk) - Identified **intangible assets** totaled **$58.0 million**, comprising **$49.3 million** in **customer relationships** (10-year useful life) and **$8.7 million** in **trade names** (7-year useful life)[85](index=85&type=chunk) [Note 15. Segment Reporting](index=24&type=section&id=15.%20SEGMENT%20REPORTING) ePlus manages its operations through three reportable segments: Product, Professional Services, and Managed Services, with performance evaluated based on gross profit. The 'Other' category includes retained international financing entities. Revenue disaggregation is provided by timing, principal/agent position, customer end market, and type - ePlus operates with three reportable segments: **Product**, **Professional Services**, and **Managed Services**, with performance measured by **gross profit**[88](index=88&type=chunk)[90](index=90&type=chunk) Net Sales by Segment (in thousands) | Segment | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | | Product | $520,895 | $457,312 | | Professional Services | $71,729 | $37,279 | | Managed Services | $44,580 | $40,910 | | Total Reportable Segments | $637,204 | $535,501 | Gross Profit by Segment (in thousands) | Segment | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | | Product | $106,482 | $98,505 | | Professional Services | $28,153 | $15,455 | | Managed Services | $13,534 | $12,834 | | Total Reportable Segments | $148,169 | $126,794 | Gross Margin by Segment | Segment | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | | Product | 20.4% | 21.5% | | Professional Services | 39.2% | 41.5% | | Managed Services | 30.4% | 31.4% | - The 'Other' category consists of the international entities of the financing business retained after the domestic sale[126](index=126&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=27&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial performance and condition for the quarter, highlighting the strategic shift to a pure-play technology solutions provider following the divestiture of the financing business. It details key financial metrics, operational trends, and segment-specific results, emphasizing growth in net sales and earnings despite some margin pressures [Executive Overview](index=27&type=section&id=EXECUTIVE%20OVERVIEW) ePlus is a leading IT solutions provider specializing in security, cloud, networking, collaboration, AI, and emerging technologies. Following the sale of its domestic financing business on June 30, 2025, the company is now a pure-play technology solutions provider, focusing on advisory consulting, design, deployment, and management of integrated solutions for middle market to large enterprises and SLED customers - ePlus is a leading solutions provider in **security**, **cloud**, **networking**, **collaboration**, **AI**, and emerging technologies, delivering IT and consulting solutions[95](index=95&type=chunk) - The company offers consulting, professional services, managed services, IT staff augmentation, and complete lifecycle management[96](index=96&type=chunk) - The sale of the domestic financing business on June 30, 2025, positions ePlus as a **pure-play technology solutions provider** with three reportable segments: **Product**, **Professional Services**, and **Managed Services**[100](index=100&type=chunk) [Business Trends](index=28&type=section&id=BUSINESS%20TRENDS) ePlus monitors key financial and non-financial metrics, including GAAP and non-GAAP measures like Adjusted EBITDA, and operational metrics like gross billings. Current business trends indicate customer focus on AI, security, and cloud solutions, driving demand for digital transformation and modernization, while general economic concerns and pricing pressures impact gross profit - Customers' top focus areas include AI, security, cloud solutions, digital transformation, and modernization[104](index=104&type=chunk) - Modernizing legacy applications, data modernization, reducing operational complexity, and securing workloads are fueling deployments on cloud, managed services, and hybrid platforms[104](index=104&type=chunk) - Rapid cloud adoption presents challenges in cost, security, and skillset gaps, addressed by ePlus's Cloud Managed Services portfolio[104](index=104&type=chunk) Key Business Metrics (in thousands, except per share amounts) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | | Net sales | $637,315 | $535,652 | | Gross profit margin | 23.3% | 23.7% | | Operating income margin | 5.7% | 5.9% | | Non-GAAP: Net earnings from continuing operations | $33,164 | $27,366 | | Non-GAAP: Net earnings from continuing operations per common share - diluted | $1.26 | $1.01 | | Adjusted EBITDA | $46,709 | $39,069 | | Adjusted EBITDA margin | 7.3% | 7.3% | Gross Billings by Type (in thousands) | Type | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | | Cloud | $312,017 | $241,274 | | Networking | $268,732 | $281,528 | | Security | $190,045 | $151,883 | | Collaboration | $22,777 | $32,976 | | Other | $51,446 | $44,592 | | Product segment total | $845,017 | $752,253 | | Services | $107,748 | $81,455 | | Total Gross Billings | $952,765 | $833,708 | [Results of Operations](index=31&type=section&id=RESULTS%20OF%20OPERATIONS) Net sales increased by $101.7 million year-over-year, driven by growth in telecom, media, and entertainment, despite declines in other sectors. Gross profit rose by $21.3 million, but overall gross margin decreased by 40 basis points to 23.3% due to product mix shifts and lower services margins. Operating income increased by $4.7 million, while net earnings from continuing operations grew by $2.9 million, and total net earnings increased by $10.4 million, significantly boosted by discontinued operations - **Net sales** increased by **$101.7 million**, primarily due to increased sales in telecom, media, and entertainment industries[112](index=112&type=chunk) - Consolidated **gross profit** increased by **$21.3 million**, but **gross margins** decreased by **40 basis points** to **23.3%** due to a shift in product mix and lower services margins[113](index=113&type=chunk) - Selling, general, and administrative expenses increased by **$14.4 million**, mainly due to higher salaries and benefits (up **$11.8 million** from increased headcount, including Bailiwick acquisition) and general and administrative costs[114](index=114&type=chunk)[115](index=115&type=chunk)[116](index=116&type=chunk) - **Operating income** increased by **$4.7 million**, but **operating margin** decreased by **20 basis points** to **5.7%**[118](index=118&type=chunk) - **Net earnings from discontinued operations**, net of tax, increased by **$7.5 million** to **$10.6 million**, including a **$4.4 million gain on sale** of the domestic financing business[122](index=122&type=chunk) - Total **net earnings** increased by **$10.4 million** to **$37.7 million**[123](index=123&type=chunk) [Segment Overview](index=32&type=section&id=SEGMENT%20OVERVIEW) Following the divestiture of its domestic financing business, ePlus now operates with three reportable segments: Product, Professional Services, and Managed Services. The Product segment focuses on IT hardware and software sales, Professional Services offers advanced consulting and deployment, and Managed Services provides ongoing management and support for customer environments - **Product segment**: Sales of third-party hardware, software (perpetual and subscription), and maintenance/assurance services[124](index=124&type=chunk)[128](index=128&type=chunk) - **Professional services segment**: Advanced professional services including consulting, architecture, deployment, logistics, training, staff augmentation, and project management[124](index=124&type=chunk)[128](index=128&type=chunk) - **Managed services segment**: Advanced managed services, security solutions, storage-as-a-service, cloud hosted/managed services, and service desk, typically billed over 3-5 year contract terms[124](index=124&type=chunk)[128](index=128&type=chunk) - The 'Other' category consists of the international entities of the financing business retained after the domestic sale[126](index=126&type=chunk) [Segment Results of Operations](index=33&type=section&id=SEGMENT%20RESULTS%20OF%20OPERATIONS) Product segment sales increased due to demand and product mix shifts, while Professional Services sales grew significantly, primarily from the Bailiwick acquisition. Managed Services sales also increased due to expansion in enhanced maintenance and cloud services. However, gross margins for all three segments decreased, with Product margin down due to mix, Professional Services margin impacted by the lower-margin Bailiwick services, and Managed Services margin declining from reduced service desk revenue - **Product segment sales** increased due to demand and a shift in product mix, with less third-party maintenance and subscriptions recognized on a net basis[130](index=130&type=chunk) - **Professional services segment sales** increased significantly, primarily driven by revenues from the Bailiwick acquisition[131](index=131&type=chunk) - **Managed services segment sales** increased due to ongoing expansion of service offerings, particularly in enhanced maintenance support and cloud services[131](index=131&type=chunk) - **Product segment margin** decreased by **110 basis points** to **20.4%** due to a shift in product mix[132](index=132&type=chunk) - **Professional services segment margin** decreased by **230 basis points** to **39.2%**, primarily due to the Bailiwick acquisition, which has lower gross margins due to higher reliance on third-party delivery[133](index=133&type=chunk) - **Managed services segment margin** decreased by **100 basis points** to **30.4%** due to a decline in revenue from the service desk offering[134](index=134&type=chunk) [Liquidity and Capital Resources](index=36&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) ePlus finances operations through cash flow and borrowings, expecting current liquidity to cover needs for at least the next year. The cash conversion cycle improved to 26 days from 37 days, driven by a 10-day decrease in Days Sales Outstanding (DSO). The company relies on its WFCDF Credit Facility for working capital and has declared an initial quarterly cash dividend of $0.25 per common share - ePlus expects cash on hand, funds from operations, and available credit to finance **working capital**, capital expenditures, and other requirements for at least the next year[137](index=137&type=chunk) Cash Conversion Cycle (in days) | Metric | As of June 30, 2025 | As of June 30, 2024 | | :-------------------------- | :------------------ | :------------------ | | Days sales outstanding (DSO) | 58 | 68 | | Days inventory outstanding (DIO) | 14 | 14 | | Days payable outstanding (DPO) | (46) | (45) | | Cash conversion cycle | 26 | 37 | - The **cash conversion cycle** decreased to **26 days** from **37 days**, primarily due to a **10-day decrease** in **DSO**, reflecting higher sales to customers with shorter payment terms[143](index=143&type=chunk) - The WFCDF **Credit Facility**, with a **$500.0 million floor plan** and **$200.0 million revolving credit facility**, is crucial for daily **working capital**; its loss could materially affect future results[148](index=148&type=chunk)[150](index=150&type=chunk) - On August 7, 2025, the Board of Directors declared an **initial quarterly cash dividend** of **$0.25** per common share, payable September 17, 2025[155](index=155&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=39&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) ePlus is exposed to foreign currency risk from transactions not denominated in its subsidiaries' functional currency, including purchases, sales, and intercompany loans. While past exposure has not been significant, fluctuations in exchange rates could impact financial results - ePlus has **foreign currency exposure** from transactions not denominated in subsidiaries' functional currency, including product/service purchases and sales, and intercompany loans[165](index=165&type=chunk) - **Foreign currency exposure** from product/service transactions has not been significant to date, but fluctuations in exchange rates may impact results[165](index=165&type=chunk) [Item 4. Controls and Procedures](index=39&type=section&id=Item%204.%20Controls%20and%20Procedures) As of June 30, 2025, ePlus's CEO and CFO concluded that the company's disclosure controls and procedures were effective. The acquisition of Bailiwick Services, LLC on August 19, 2024, was excluded from the internal control over financial reporting evaluation for the quarter, with integration ongoing. Management acknowledges the inherent limitations of control systems - The CEO and CFO concluded that **disclosure controls and procedures** were effective as of June 30, 2025[166](index=166&type=chunk) - Bailiwick Services, LLC, acquired on August 19, 2024, was excluded from the evaluation of **internal control over financial reporting** for the quarter ended June 30, 2025, with integration in progress[167](index=167&type=chunk) - Management acknowledges that control systems have inherent limitations and cannot prevent or detect all errors or fraud[168](index=168&type=chunk) [Part II. Other Information](index=40&type=section&id=Part%20II.%20Other%20Information) [Item 1. Legal Proceedings](index=40&type=section&id=Item%201.%20Legal%20Proceedings) This section refers to Note 8 of the Consolidated Financial Statements for details on legal proceedings, commitments, and contingencies, indicating no new material information beyond what is already disclosed - Refer to Note 8, 'Commitment and Contingencies' for information on legal proceedings[169](index=169&type=chunk) [Item 1A. Risk Factors](index=40&type=section&id=Item%201A.%20Risk%20Factors) The sale of the financing business has altered ePlus's operational and financial profile, reducing revenue diversification and potentially increasing volatility. The company faces risks that anticipated benefits from the sale may not be realized, and the receipt of contingent consideration depends on the post-closing performance of the divested entity - The sale of the financing business reduces **revenue diversification** and may increase **volatility** in results of operations, cash flows, and working capital[171](index=171&type=chunk) - There is a risk that anticipated benefits from the sale may not be realized, adversely affecting the business[171](index=171&type=chunk) - The ability to receive **contingent consideration** from the sale depends on the post-closing performance of the divested HoldCo Group, which is operated by PEAC Solutions[171](index=171&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=41&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During the three months ended June 30, 2025, ePlus repurchased 47,488 shares of common stock in June 2025 at an average price of $69.58 per share to satisfy tax withholding obligations related to restricted stock vesting. The 2024 Repurchase Plan terminated on May 27, 2025 Common Stock Purchases (Three Months Ended June 30, 2025) | Period | Total shares purchased | Average price paid per share | | :--------------------------------- | :--------------------- | :--------------------------- | | April 1, 2025 through April 30, 2025 | - | $- | | May 1, 2025 through May 31, 2025 | - | $- | | June 1, 2025 through June 30, 2025 | 47,488 | $69.58 | | Total | 47,488 | | - The repurchases were made to satisfy tax withholding obligations related to the vesting of restricted stock[178](index=178&type=chunk) - The 2024 Repurchase Plan, which authorized the repurchase of up to **1,250,000 shares**, terminated on May 27, 2025[178](index=178&type=chunk) [Item 3. Defaults Upon Senior Securities](index=41&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item is marked as 'Not Applicable,' indicating no defaults upon senior securities during the reporting period [Item 4. Mine Safety Disclosures](index=41&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is marked as 'Not Applicable,' indicating no mine safety disclosures are relevant to the company [Item 5. Other Information](index=41&type=section&id=Item%205.%20Other%20Information) No director or officer adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement during the quarter ended June 30, 2025. Executive officers may participate in the employee stock purchase plan, which complies with Rule 10b5-1(c) - No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the quarter[177](index=177&type=chunk) - Executive officers may participate in the employee stock purchase plan, which is designed to comply with Rule 10b5-1(c)[177](index=177&type=chunk) [Item 6. Exhibits](index=42&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including the Membership Interest Purchase Agreement for the sale of Expo Holdings, LLC, amendments to the Credit Agreement, certifications from the CEO and CFO, and Inline XBRL documents - Key exhibits include the Membership Interest Purchase Agreement for Expo Holdings, LLC, and the Third Amendment to the First Amended and Restated Credit Agreement[179](index=179&type=chunk) - Certifications from the Chief Executive Officer and Chief Financial Officer are included, along with Inline XBRL documents for financial data[179](index=179&type=chunk) [Signatures](index=43&type=section&id=SIGNATURES) This section contains the signatures of ePlus inc.'s Chief Executive Officer and President, Mark P. Marron, and Chief Financial Officer, Elaine D. Marion, certifying the filing of the report on August 7, 2025 - The report was signed by Mark P. Marron, Chief Executive Officer and President, and Elaine D. Marion, Chief Financial Officer, on August 7, 2025[182](index=182&type=chunk)[183](index=183&type=chunk) ```

[Executive Summary & Highlights](index=1&type=section&id=Executive%20Summary%20%26%20Highlights) This section provides an overview of ePlus's strong Q1 FY26 performance, strategic initiatives, and key financial achievements [Management Commentary](index=1&type=section&id=Management%20Comment) ePlus's CEO, Mark Marron, reported a strong start to fiscal year 2026 with double-digit growth in key financial metrics, including revenue, gross profit, and EPS. The services business saw nearly 50% growth, contributing to the strongest gross billings and net sales quarter in company history. Strategic initiatives included the sale of the domestic financing business to become a pure-play technology company, and new capital allocation strategies like the first-ever quarterly dividend and a new share repurchase program - Fiscal 2026 started strong with **double-digit growth** across key financial metrics, including revenue, gross profit, and earnings per share. The services business increased nearly **50%** in the quarter[3](index=3&type=chunk) - ePlus implemented strategic initiatives, including the sale of its domestic financing business, to become a pure-play technology company, increasing capital position and flexibility[4](index=4&type=chunk) - The Board of Directors declared a quarterly dividend of **$0.25 per common share** (the first in company history) and approved a new share buyback program authorizing the repurchase of up to **1.5 million shares**[5](index=5&type=chunk) [First Quarter Fiscal Year 2026 Highlights](index=1&type=section&id=First%20Quarter%20Fiscal%20Year%202026%20Highlights) ePlus reported significant growth in Q1 FY26, with consolidated net sales up 19.0% to $637.3 million, driven by a 48.8% increase in services revenues. Gross billings rose 14.3% to $952.8 million, and consolidated gross profit increased 16.8% to $148.2 million. Net earnings from continuing operations grew 12.1% to $27.1 million, and diluted EPS from continuing operations increased 14.4% to $1.03 Q1 FY26 Key Financial Metrics | Metric | Q1 FY26 (Millions) | YoY Change | | :-------------------------------- | :----------------- | :--------- | | Consolidated Net Sales | $637.3 | +19.0% | | Services Revenues | $116.3 | +48.8% | | Gross Billings | $952.8 | +14.3% | | Consolidated Gross Profit | $148.2 | +16.8% | | Consolidated Gross Margin | 23.3% | -0.4 pp | | Net Earnings from Continuing Operations | $27.1 | +12.1% | | Adjusted EBITDA | $46.7 | +19.6% | | Diluted EPS from Continuing Operations | $1.03 | +14.4% | | Non-GAAP Diluted Net Earnings per Common Share | $1.26 | +24.8% | [First Quarter Fiscal Year 2026 Financial Results](index=2&type=section&id=First%20Quarter%20Fiscal%20Year%202026%20Financial%20Results) This section details ePlus's Q1 FY26 financial performance, including consolidated and segment-specific results, operating expenses, and discontinued operations [Consolidated Performance](index=2&type=section&id=Consolidated%20Performance) For Q1 FY26, ePlus's consolidated net sales increased 19.0% to $637.3 million, driven by higher product and service revenue. Gross billings also saw a substantial increase of 14.3% to $952.8 million. Consolidated gross profit grew 16.8% to $148.2 million, though the consolidated gross margin slightly decreased to 23.3% from 23.7% in the prior year Consolidated Financial Performance (Q1 FY26 vs Q1 FY25) | Metric | Q1 FY26 (Millions) | Q1 FY25 (Millions) | YoY Change | | :--------------------- | :----------------- | :----------------- | :--------- | | Consolidated Net Sales | $637.3 | $535.7 | +19.0% | | Gross Billings | $952.8 | $833.7 | +14.3% | | Consolidated Gross Profit | $148.2 | $126.9 | +16.8% | | Consolidated Gross Margin | 23.3% | 23.7% | -0.4 pp | [Segment Performance](index=2&type=section&id=Segment%20Performance) ePlus's segments showed varied performance in Q1 FY26. Product segment sales increased due to cloud and security, while professional services saw significant growth primarily from the Bailiwick Services acquisition. Managed services also grew, though gross margins for both product and professional services declined due to mix changes and acquisition impact [Product Segment](index=2&type=section&id=Product%20segment%20sales) Product segment sales increased due to higher cloud and security products net sales, offset by decreases in networking and collaboration products. Product segment margin declined due to a lower proportion of third-party maintenance and services sold, which are recorded on a net basis Product Segment Performance (Q1 FY26 vs Q1 FY25) | Metric | Q1 FY26 (Millions) | Q1 FY25 (Millions) | YoY Change | | :------------------ | :----------------- | :----------------- | :--------- | | Product Segment Sales | $521.0 | $457.5 | +13.9% | | Product Segment Margin | 20.4% | 21.5% | -1.1 pp | - Product segment sales increased due to higher cloud and security products net sales, offset by decreases in networking and collaboration products[9](index=9&type=chunk) - Product segment margin declined due to a lower proportion of third-party maintenance and services sold, which are recorded on a net basis[9](index=9&type=chunk) [Professional Services Segment](index=2&type=section&id=Professional%20services%20segment%20revenues) Professional services segment revenue increased primarily due to the acquisition of Bailiwick Services, LLC. Gross margin declined due to the addition of Bailiwick Services, LLC, whose services are generally at a lower margin than core professional services Professional Services Segment Performance (Q1 FY26 vs Q1 FY25) | Metric | Q1 FY26 (Millions) | Q1 FY25 (Millions) | YoY Change | | :-------------------------- | :----------------- | :----------------- | :--------- | | Professional Services Revenue | $71.7 | $37.3 | +92.4% | | Professional Services Gross Margin | 39.2% | 41.5% | -2.3 pp | - Professional services segment revenue increase primarily due to the acquisition of Bailiwick Services, LLC[10](index=10&type=chunk) - Gross margin declined due to the addition of Bailiwick Services, LLC, whose services are generally at a lower margin than core professional services[10](index=10&type=chunk) [Managed Services Segment](index=2&type=section&id=Managed%20services%20segment%20revenue) Managed services segment revenue increased primarily due to additional sales of enhanced maintenance support and cloud services Managed Services Segment Performance (Q1 FY26 vs Q1 FY25) | Metric | Q1 FY26 (Millions) | Q1 FY25 (Millions) | YoY Change | | :--------------------- | :----------------- | :----------------- | :--------- | | Managed Services Revenue | $44.6 | $40.9 | +9.0% | | Managed Services Gross Profit | N/A | N/A | +5.5% | | Managed Services Gross Margin | 30.4% | 31.4% | -1.0 pp | - Managed services segment revenue increased primarily due to additional sales of enhanced maintenance support and cloud services[11](index=11&type=chunk) [Operating Expenses & Income](index=2&type=section&id=Consolidated%20operating%20expenses) Consolidated operating expenses increased 17.4% to $112.0 million, mainly due to higher salaries and benefits from increased headcount, largely driven by the Bailiwick Services acquisition. Despite this, consolidated operating income from continuing operations grew 15.1% to $36.2 million. The effective tax rate for the quarter was 26.3%, slightly lower than the prior year Operating Expenses and Income (Q1 FY26 vs Q1 FY25) | Metric | Q1 FY26 (Millions) | Q1 FY25 (Millions) | YoY Change | | :------------------------------------ | :----------------- | :----------------- | :--------- | | Consolidated Operating Expenses | $112.0 | $95.4 | +17.4% | | Consolidated Operating Income (Continuing Ops) | $36.2 | $31.5 | +15.1% | | Effective Tax Rate | 26.3% | 27.1% | -0.8 pp | - Operating expenses increased primarily due to increases in salaries and benefits from additional headcount (**2,182 total**, up **275** from a year ago, with **249 customer-facing**, largely due to the acquisition of Bailiwick Services, LLC)[12](index=12&type=chunk) [Discontinued Operations](index=2&type=section&id=Net%20earnings%20from%20discontinued%20operations) ePlus retrospectively presented its domestic financing business as discontinued operations following its sale. Net earnings from discontinued operations significantly increased to $10.6 million in Q1 FY26, up from $3.1 million in the prior year, primarily due to a $4.4 million gain on the sale of the business and increased operating income - Results of the domestic financing business are retrospectively presented as discontinued operations for all prior periods due to its sale[7](index=7&type=chunk) Net Earnings from Discontinued Operations (Q1 FY26 vs Q1 FY25) | Metric | Q1 FY26 (Millions) | Q1 FY25 (Millions) | YoY Change | | :------------------------------------ | :----------------- | :----------------- | :--------- | | Net Earnings from Discontinued Operations | $10.6 | $3.1 | +$7.5M | | Diluted EPS from Discontinued Operations | $0.40 | $0.12 | +$0.28 | - The increase in net earnings from discontinued operations was primarily due to a **$4.4 million gain** on sale of the domestic financing business before income taxes and an increase in operating income[17](index=17&type=chunk) [Financial Position & Capital Allocation](index=3&type=section&id=Financial%20Position%20%26%20Capital%20Allocation) This section outlines ePlus's balance sheet, fiscal year 2026 guidance, and new capital allocation strategies, including dividends and share repurchases [Balance Sheet Highlights](index=3&type=section&id=Balance%20Sheet%20Highlights) As of June 30, 2025, ePlus reported a strong cash position of $480.2 million, significantly up from March 31, 2025, largely due to proceeds from the financing business sale. Inventory decreased, while accounts receivable—trade, net, increased. Total stockholders' equity grew to $1,020.4 million Balance Sheet Summary (June 30, 2025 vs March 31, 2025) | Metric | June 30, 2025 (Millions) | March 31, 2025 (Millions) | Change | | :-------------------------- | :----------------------- | :------------------------ | :------- | | Cash and Cash Equivalents | $480.2 | $389.4 | +$90.8M | | Inventory | $101.1 | $120.4 | -16.1% | | Accounts Receivable—Trade, Net | $700.9 | $516.9 | +35.6% | | Total Stockholders' Equity | $1,020.4 | $977.6 | +$42.8M | - Cash and cash equivalents increased primarily due to cash proceeds from the sale of the domestic financing business[19](index=19&type=chunk) [Fiscal Year 2026 Guidance](index=3&type=section&id=Fiscal%20Year%20Guidance) ePlus has increased its fiscal year 2026 guidance, now expecting net sales growth in the upper single digits over FY25's $2.01 billion from continuing operations. Gross profit growth is also projected in the upper single-digit range, and adjusted EBITDA growth is forecasted in the mid-teens over FY25's $141 million from continuing operations. This guidance excludes potential recessionary conditions or unexpected developments - Fiscal year 2026 net sales growth over the prior fiscal year is now expected to be in the **upper single digits** above fiscal year 2025's **$2.01 billion** from continuing operations[20](index=20&type=chunk) - Gross profit growth is expected in the **upper single-digit range** from fiscal year 2025's **$515.5 million** from continuing operations[20](index=20&type=chunk) - Adjusted EBITDA growth is forecasted in the **mid-teens** over fiscal year 2025's **$141 million** from continuing operations[20](index=20&type=chunk) [Capital Allocation Strategy](index=4&type=section&id=Capital%20Allocation%20Strategy) ePlus is enhancing shareholder returns through new capital allocation initiatives. The Board of Directors declared the company's first-ever quarterly cash dividend of $0.25 per common share and authorized a new stock repurchase program to buy back up to 1.5 million shares over 12 months, replacing the expired previous plan [Quarterly Dividend Announcement](index=4&type=section&id=ePlus%20Announces%20Quarterly%20Dividend) ePlus announced its first quarterly cash dividend of $0.25 per common share, payable on September 17, 2025, to shareholders of record as of August 26, 2025 - ePlus announced its first quarterly cash dividend of **$0.25 per common share**[24](index=24&type=chunk) - The dividend will be paid on **September 17, 2025**, to shareholders of record as of **August 26, 2025**[24](index=24&type=chunk) [New Stock Repurchase Program](index=4&type=section&id=ePlus%20Announces%20New%20Stock%20Repurchase%20Program) ePlus's Board of Directors authorized the repurchase of up to 1,500,000 shares of outstanding common stock over a 12-month period commencing August 11, 2025. Purchases may be made in the open market or privately negotiated transactions, subject to management's discretion, and may be suspended or discontinued at any time - ePlus's Board of Directors authorized the repurchase of up to **1,500,000 shares** of outstanding common stock over a **12-month period** commencing **August 11, 2025**[25](index=25&type=chunk) - Purchases may be made in the open market or privately negotiated transactions, subject to management's discretion, and may be suspended or discontinued at any time[26](index=26&type=chunk) [Corporate Updates & Strategic Outlook](index=3&type=section&id=Corporate%20Updates%20%26%20Strategic%20Outlook) This section covers ePlus's strategic outlook, recent corporate developments, and company information, highlighting growth areas and shareholder value initiatives [Summary and Strategic Outlook](index=3&type=section&id=Summary%20and%20Outlook) ePlus is confident in its business momentum and outlook, leading to increased FY26 guidance. The company is well-positioned to capitalize on strategic opportunities in AI, cloud, security, and related services, as well as geographic expansion, supported by a healthy balance sheet. The focus remains on organic growth and exploring new business opportunities to build long-term value for stakeholders - ePlus is pleased with its solid first-quarter performance and business momentum, leading to increased fiscal year 2026 guidance[21](index=21&type=chunk) - ePlus is in a strong position to capitalize on strategic opportunities across key growth areas: AI, cloud, security, related services, and geographic expansion, supported by a healthy balance sheet[22](index=22&type=chunk) - The company is committed to building long-term value by expanding organically and exploring new business opportunities for sustainable top and bottom-line growth[23](index=23&type=chunk) [Recent Corporate Developments/Recognitions](index=4&type=section&id=Recent%20Corporate%20Developments%2FRecognitions) ePlus achieved several recognitions and completed key corporate actions recently. In July, the sale of its Financing Business to Marlin Leasing Corporation was finalized. The company was also named Digital Realty's 2024 Rising Star Partner of the Year, received the Nutanix Portfolio Partner of the Year Award, and was recognized as Lenovo North American Infrastructure Partner of the Year. Other recognitions include Innovator Partner of the Year at Pure Storage and securing a spot on the CRN Solution Provider List for the 14th consecutive year - Announced the closing of the sale of the Financing Business to Marlin Leasing Corporation (dba PEAC Solutions), effective June 30, 2025[27](index=27&type=chunk) - Named Digital Realty's 2024 Rising Star Partner of the Year, received Nutanix Portfolio Partner of the Year Award, and recognized as Lenovo North American Infrastructure Partner of the Year[27](index=27&type=chunk) - Recognized as Innovator Partner of the Year at Pure Storage Annual Pure/Partner Forum and secured a spot on the CRN Solution Provider List for 14th Consecutive Year[27](index=27&type=chunk) [Conference Call Information](index=5&type=section&id=Conference%20Call%20Information) ePlus will host a conference call and webcast on August 7, 2025, at 4:30 p.m. ET to discuss its financial results. Details for live access and replay are provided, with a transcript available on the investor relations website - A conference call and webcast will be held on **August 7, 2025**, at **4:30 p.m. ET**[28](index=28&type=chunk) - Audio webcast (Live & Replay) available at https://events.q4inc.com/attendee/688930192[28](index=28&type=chunk) - A replay of the call will be available approximately two hours after the call through **August 14, 2025**, with a transcript on the ePlus Investor Relations website[28](index=28&type=chunk) [About ePlus inc.](index=5&type=section&id=About%20ePlus%20inc.) ePlus inc. is a customer-first, services-led technology solutions provider offering a full portfolio including AI, security, cloud, data center, networking, and collaboration, along with managed, consultative, and professional services. With approximately 2,200 employees and over three decades of experience, ePlus serves various industries globally, headquartered in Virginia with international locations - ePlus is a customer-first, services-led, and results-driven industry leader offering transformative technology solutions and services[29](index=29&type=chunk) - Offers a full portfolio of solutions, including artificial intelligence, security, cloud and data center, networking, and collaboration, as well as managed, consultative and professional services[29](index=29&type=chunk) - Has approximately **2,200 employees**, over **three decades of experience**, and is headquartered in Virginia with locations in the United States, United Kingdom, Europe, and Asia‐Pacific[29](index=29&type=chunk) [Financial Statements & Non-GAAP Reconciliations](index=7&type=section&id=Financial%20Statements%20%26%20Non-GAAP%20Reconciliations) This section presents ePlus's unaudited consolidated financial statements, including balance sheets and statements of operations, along with detailed segment results and reconciliations of non-GAAP financial measures [Unaudited Consolidated Balance Sheets](index=7&type=section&id=UNAUDITED%20CONSOLIDATED%20BALANCE%20SHEETS) The unaudited consolidated balance sheets show ePlus's financial position as of June 30, 2025, compared to March 31, 2025. Key changes include a significant increase in cash and cash equivalents, a rise in accounts receivable—trade, net, and a decrease in inventories. Total assets slightly decreased, while total stockholders' equity increased to $1,020.4 million Unaudited Consolidated Balance Sheets (in thousands) | ASSETS (in thousands) | June 30, 2025 | March 31, 2025 | | :-------------------------------- | :------------ | :------------- | | Cash and cash equivalents | $480,178 | $389,375 | | Accounts receivable—trade, net | 700,873 | 516,925 | | Inventories | 101,053 | 120,440 | | Total current assets | 1,402,316 | 1,363,790 | | TOTAL ASSETS | $1,799,135 | $1,884,805 | | LIABILITIES AND STOCKHOLDERS' EQUITY (in thousands) | | | | Accounts payable | $320,434 | $324,580 | | Accounts payable—floor plan | 129,415 | 89,527 | | Total current liabilities | 687,750 | 797,883 | | TOTAL LIABILITIES | 778,704 | 907,182 | | Total Stockholders' Equity | 1,020,431 | 977,623 | - Cash and cash equivalents increased primarily due to cash proceeds from the sale of the domestic financing business[19](index=19&type=chunk) [Unaudited Consolidated Statements of Operations](index=8&type=section&id=UNAUDITED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS) The unaudited consolidated statements of operations for Q1 FY26 show total net sales of $637.3 million, a significant increase from the prior year. Gross profit reached $148.2 million. Net earnings from continuing operations were $27.1 million, and including discontinued operations, total net earnings were $37.7 million. Diluted EPS from continuing operations was $1.03 Unaudited Consolidated Statements of Operations (in thousands) | Metric (in thousands, except per share) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :-------------------------------------- | :------------------------------- | :------------------------------- | | Net sales | $637,315 | $535,652 | | Cost of sales | 489,099 | 408,778 | | Gross profit | 148,216 | 126,874 | | Operating expenses | 112,016 | 95,415 | | Operating income | 36,200 | 31,459 | | Net earnings from continuing operations | 27,128 | 24,193 | | Earnings from discontinued operations, net of tax | 10,569 | 3,146 | | Net earnings | $37,697 | $27,339 | | Diluted earnings per common share—continuing operations | $1.03 | $0.90 | | Diluted earnings per common share—discontinued operations | $0.40 | $0.12 | | Diluted earnings per common share | $1.43 | $1.02 | [Segment Results (Detailed Tables)](index=9&type=section&id=Segment%20Results) Detailed segment results for Q1 FY26 highlight strong growth in professional services revenue (92.4%) and managed services revenue (9.0%). Product segment net sales increased 13.9%. Cloud and security products showed significant net sales growth, while networking and collaboration declined. Telecom, Media, & Entertainment and 'All other' customer end markets experienced substantial growth Net Sales and Gross Profit by Segment (in thousands) | Net Sales (in thousands) | 2025 | 2024 | Change | | :----------------------- | :----- | :----- | :----- | | Product segment | $520,895 | $457,312 | 13.9% | | Professional services segment | 71,729 | 37,279 | 92.4% | | Managed services segment | 44,580 | 40,910 | 9.0% | | Other | 111 | 151 | (26.5%) | | Total | $637,315 | $535,652 | 19.0% | | Gross Profit (in thousands) | 2025 | 2024 | Change | | :------------------------ | :----- | :----- | :----- | | Product segment | $106,482 | $98,505 | 8.1% | | Professional services segment | 28,153 | 15,455 | 82.2% | | Managed services segment | 13,534 | 12,834 | 5.5% | | Other | 47 | 80 | (41.3%) | | Total | $148,216 | $126,874 | 16.8% | Net Sales by Product Type (in thousands) | Net Sales by Type (in thousands) | 2025 | 2024 | Change | | :----------------------------- | :----- | :----- | :----- | | Networking | $218,202 | $234,740 | (7.0%) | | Cloud | 206,996 | 137,231 | 50.8% | | Security | 61,107 | 48,005 | 27.3% | | Collaboration | 11,757 | 20,899 | (43.7%) | | Other | 22,833 | 16,437 | 38.9% | | Total products segment | 520,895 | 457,312 | 13.9% | Net Sales by Customer End Market (in thousands) | Net Sales by Customer End Market (in thousands) | 2025 | 2024 | Change | | :-------------------------------------------- | :----- | :----- | :----- | | Telecom, Media, & Entertainment | $184,979 | $117,553 | 57.4% | | SLED | 90,562 | 92,096 | (1.7%) | | Technology | 82,747 | 109,106 | (24.2%) | | Healthcare | 74,291 | 75,280 | (1.3%) | | Financial Services | 47,500 | 49,725 | (4.5%) | | All other | 157,236 | 91,892 | 71.1% | | Total net sales | $637,315 | $535,652 | 19.0% | [Reconciliation of Non-GAAP Information](index=10&type=section&id=RECONCILIATION%20OF%20NON-GAAP%20INFORMATION) ePlus provides reconciliations for Adjusted EBITDA, non-GAAP Net Earnings, and non-GAAP Net Earnings per Common Share - Diluted. These non-GAAP measures are used to offer supplemental insight into operating performance by excluding items not reflective of underlying operations, such as interest expense, depreciation and amortization, share-based compensation, acquisition and integration expenses, and certain tax effects. The company acknowledges limitations and potential differences in calculation compared to other companies - Non-GAAP financial measures (Adjusted EBITDA, non-GAAP Net Earnings, and non-GAAP Net Earnings per Common Share - Diluted) are used as supplemental measures to gain insight into operating performance and trends[39](index=39&type=chunk) - Adjusted EBITDA is defined as net earnings from continuing operations adjusted for interest expense, depreciation and amortization, share-based compensation, acquisition and integration expenses, provision for income taxes, and other income (expense)[37](index=37&type=chunk) - Non-GAAP Net Earnings and diluted EPS are based on net earnings from continuing operations, adjusted to exclude other income (expense), share-based compensation, acquisition-related amortization and integration expenses, and related tax effects[38](index=38&type=chunk) [Adjusted EBITDA Reconciliation](index=10&type=section&id=(i)%20Reconciliation%20of%20Adjusted%20EBITDA) This section provides a detailed reconciliation of Adjusted EBITDA, starting from net earnings from continuing operations and adjusting for non-cash and non-operating items to offer a clearer view of core operational performance Adjusted EBITDA Reconciliation (in thousands) | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | | Net earnings from continuing operations | $27,128 | $24,193 | | Provision for income taxes | 9,684 | 8,977 | | Depreciation and amortization | 7,069 | 4,819 | | Share-based compensation | 3,440 | 2,791 | | Other (income) expense, net | (612) | (1,711) | | Adjusted EBITDA | $46,709 | $39,069 | [Non-GAAP Net Earnings Reconciliation](index=11&type=section&id=(ii)%20Reconciliation%20of%20non-GAAP%20Net%20Earnings) This section details the reconciliation of non-GAAP Net Earnings, adjusting GAAP earnings from continuing operations before taxes for share-based compensation, acquisition-related amortization, and other income/expense, along with their related tax effects Non-GAAP Net Earnings Reconciliation (in thousands) | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :-------------------------------------- | :------------------------------- | :------------------------------- | | GAAP: Earnings from continuing operations before taxes | $36,812 | $33,170 | | Share based compensation | 3,440 | 2,791 | | Acquisition related amortization expense [3] | 5,548 | 3,750 | | Other (income) expense, net [2] | (612) | (1,711) | | Non-GAAP: Earnings from continuing operations before taxes | 45,188 | 38,000 | | GAAP: Provision for income taxes | 9,684 | 8,977 | | Share-based compensation | 916 | 781 | | Acquisition related amortization expense [3] | 1,473 | 1,047 | | Other (income) expense, net [2] | (163) | (479) | | Tax benefit (expense) on restricted stock | 114 | 308 | | Non-GAAP: Provision for income taxes | 12,024 | 10,634 | | Non-GAAP: Net earnings from continuing operations | $33,164 | $27,366 | [Non-GAAP Net Earnings per Common Share - Diluted Reconciliation](index=11&type=section&id=(iii)%20Reconciliation%20of%20non-GAAP%20Net%20Earnings%20per%20Common%20Share%20-%20Diluted) This section presents the reconciliation of non-GAAP diluted net earnings per common share, adjusting GAAP diluted EPS from continuing operations for share-based compensation, acquisition-related amortization, and other income/expense, net of tax Non-GAAP Diluted EPS Reconciliation | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :---------------------------------------------------- | :------------------------------- | :------------------------------- | | GAAP: Net earnings per common share from continuing operations – diluted | $1.03 | $0.90 | | Share-based compensation | 0.10 | 0.07 | | Acquisition related amortization expense [3] | 0.15 | 0.10 | | Other (income) expense, net [2] | (0.02) | (0.05) | | Tax benefit (expense) on restricted stock | - | (0.01) | | Total non-GAAP adjustments – net of tax | 0.23 | 0.11 | | Non-GAAP: Net earnings per common share from continuing operations – diluted | $1.26 | $1.01 | [Forward-Looking Statements](index=6&type=section&id=Forward-looking%20statements) This section contains forward-looking statements regarding ePlus's future financial performance, which are subject to various risks and uncertainties. These include financial losses from global economic instability, changes in customer/vendor relationships, increased costs, credit quality issues, reduced vendor incentives, acquisition/disposition challenges, cybersecurity risks, dependence on key personnel, risks related to AI, competitive markets, supply chain issues, remote work trends, capital raising ability, and ability to meet investor expectations. The declaration of future dividends is at the Board's discretion, and ePlus undertakes no duty to update this information except as required by law - Statements regarding future financial performance are forward-looking and subject to risks and uncertainties[31](index=31&type=chunk) - Risks include financial losses from global instability, changes in customer/vendor relationships, increased costs, credit quality, reduced vendor incentives, acquisition/disposition challenges, cybersecurity attacks, dependence on key personnel, and risks related to AI[31](index=31&type=chunk) - The declaration and payment of future dividends are subject to the sole discretion of the Board of Directors[32](index=32&type=chunk)

Core Points - ePlus inc. has declared its first quarterly cash dividend of $0.25 per common share, to be paid on September 17, 2025, to shareholders of record as of August 26, 2025 [1] - The Board's approval of the dividend reflects the company's commitment to enhancing shareholder value and is supported by its cash generation capabilities [2] Financial Strategy - The company will continue its share repurchase program and consider organic investments and targeted M&A to drive additional shareholder value [2] - The declaration and payment of future dividends will be at the discretion of the Board of Directors [4]

Group 1 - ePlus inc. will release its earnings on August 7, 2025, after market close, and will host a conference call at 4:30 p.m. ET to discuss the financial results for the three months ended June 30, 2025 [1] - The conference call will be accessible via a live audio webcast and a toll-free domestic call-in number, with an international number also provided [2] - A replay of the conference call will be available approximately two hours after the call and will remain accessible until August 14, 2025 [2] Group 2 - ePlus is a customer-first, services-led industry leader that offers transformative technology solutions and services, including artificial intelligence, security, cloud and data center, networking, and collaboration [3] - The company has over 2,100 employees and has been in operation for more than three decades, providing specialized and broad levels of experience and knowledge [3] - ePlus is headquartered in Virginia and has locations in the United States, United Kingdom, Europe, and Asia-Pacific [3]

Core Viewpoint - ePlus reported quarterly earnings of $1.11 per share, exceeding the Zacks Consensus Estimate of $0.87 per share, marking a 27.59% earnings surprise [1]. Financial Performance - The company posted revenues of $498.11 million for the quarter ended March 2025, missing the Zacks Consensus Estimate by 4.91% and down from $554.46 million year-over-year [2]. - Over the last four quarters, ePlus has surpassed consensus EPS estimates only once [2]. Stock Performance - ePlus shares have declined approximately 11.5% since the beginning of the year, contrasting with the S&P 500's decline of -0.6% [3]. - The current Zacks Rank for ePlus is 4 (Sell), indicating expected underperformance in the near future [6]. Earnings Outlook - The consensus EPS estimate for the upcoming quarter is $1.01 on revenues of $527.4 million, and for the current fiscal year, it is $4.61 on revenues of $2.17 billion [7]. - The trend for estimate revisions ahead of the earnings release was unfavorable, which may impact future stock performance [6]. Industry Context - The Business - Software Services industry, to which ePlus belongs, is currently in the top 9% of over 250 Zacks industries, suggesting a favorable industry outlook [8].

Financial Data and Key Metrics Changes - In Q4 of fiscal year 2025, consolidated net sales were $498.1 million, down from $554.5 million in Q4 of fiscal year 2024, reflecting a decline of 10.2% year over year [12] - Consolidated adjusted EBITDA increased to $43.8 million from $36.8 million in the prior year, exceeding expectations [12] - Gross profit rose by nearly 12% to $145.8 million, with a gross margin of 29.3%, compared to 23.5% in the prior year [15][18] - For the full fiscal year, consolidated net sales were $2.07 billion, down from $2.23 billion in fiscal year 2024, driven by a 13.7% decline in product sales [19][20] Business Line Data and Key Metrics Changes - Services revenue grew 33% in Q4 and 37% for the full year, highlighting the company's focus on services-led solutions [7][13] - Managed services revenue increased by 16.6% in Q4 and 24.6% for the year, providing predictable long-term revenue [7] - Technology business net sales declined 10.4% year over year to $487.2 million, primarily due to lower product sales [12] Market Data and Key Metrics Changes - Telecom, Media and Entertainment, and SLED were the largest customer end markets, accounting for 23% of technology business net sales on a trailing twelve-month basis [14] - The financing segment saw net sales rise 4.9% to $10.9 million, driven by higher transaction gains [15] Company Strategy and Development Direction - The company is focusing on four key growth areas: AI, cloud, security, and networking, with strategic investments to expand capabilities [8] - AI adoption is seen as a significant business driver, with initiatives like AI Ignite workshops and a generative AI Accelerator solution to support customer needs [9] - The company aims to maintain a disciplined capital allocation strategy while exploring organic and inorganic growth opportunities [22] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism for fiscal year 2026, expecting low single-digit net sales growth and mid single-digit growth in gross profit and adjusted EBITDA [23] - The company acknowledged economic uncertainty impacting revenue but remains committed to its strategic pivot towards services and high-growth technology areas [24] Other Important Information - The company exited fiscal year 2025 with a record cash position of approximately $389 million, providing financial flexibility for future investments [10] - The cash conversion cycle improved to 29 days from 46 days a year ago, indicating a more normalized supply chain [21] Q&A Session Summary Question: Current demand environment and product side performance - Management noted a pickup in the data center, cloud, and security spaces, but networking demand remains weak [28][31] Question: AI opportunity and enterprise investment - Management indicated that while most AI investments are currently in hyperscaler environments, they expect infrastructure spending to pick up over time as enterprise adoption grows [32][34]

Financial Data and Key Metrics Changes - In Q4 fiscal year 2025, consolidated net sales were $498.1 million, down from $554.5 million in Q4 fiscal year 2024, reflecting a 10.2% year-over-year decline [12] - Consolidated adjusted EBITDA increased to $43.8 million from $36.8 million in the prior year, exceeding expectations [12] - Gross profit rose by nearly 12% to $145.8 million, with a gross margin of 29.3%, up from 23.5% in the prior year [14][18] - For the full fiscal year 2025, consolidated net sales were $2.07 billion, down from $2.23 billion in fiscal year 2024, driven by a 13.7% decline in product sales [18][20] Business Line Data and Key Metrics Changes - Services revenue grew 33% in Q4 and 37% for the full year, highlighting a strategic emphasis on services-led solutions [6][12] - Managed services revenue increased by 16.6% in Q4 and 24.6% for the year, providing predictable long-term revenue [6] - Technology business net sales declined 10.4% year-over-year to $487.2 million, primarily due to lower product sales [12] Market Data and Key Metrics Changes - Telecom, Media and Entertainment, and SLED accounted for 23% of technology business net sales on a trailing twelve-month basis, with Technology, Healthcare, and Financial Services contributing 15%, 14%, and 9% respectively [14] - The financing segment saw net sales rise 4.9% to $10.9 million, driven by higher transaction gains [14] Company Strategy and Development Direction - The company is focusing on four key growth areas: AI, cloud, security, and networking, with strategic investments to expand capabilities [7][8] - AI adoption is seen as a significant business driver, with initiatives like AI Ignite workshops and a generative AI Accelerator solution to support customer needs [8][9] - The company aims to maintain a disciplined capital allocation strategy while exploring organic and inorganic growth opportunities [10][22] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism for fiscal year 2026, anticipating low single-digit net sales growth and mid single-digit growth in gross profit and adjusted EBITDA [23] - The company acknowledged economic uncertainty impacting sales but remains committed to a services and subscription-based model [24] Other Important Information - The company ended fiscal year 2025 with a record cash position of approximately $389 million, up from $253 million at the end of fiscal year 2024 [10][20] - The cash conversion cycle improved to 29 days from 46 days a year ago, indicating a more normalized supply chain [21] Q&A Session Summary Question: Current demand environment and product side performance - Management noted a pickup in the data center, cloud, and security sectors, but networking demand remains weak [28][29] Question: AI opportunity and enterprise investment - Management indicated that while enterprise AI adoption is not accelerating yet, they expect infrastructure spending to pick up over time as customers engage with their AI workshops and services [34]

Financial Performance - Net sales for the year ended March 31, 2025, were $2,068,789, a decrease of 7.1% compared to $2,225,302 in 2024[169]. - Gross profit increased to $569,121 for the year ended March 31, 2025, up from $550,793 in 2024, resulting in a gross margin of 27.5%[169]. - Operating income margin decreased to 6.8% for the year ended March 31, 2025, compared to 7.1% in 2024[169]. - Net earnings for the year ended March 31, 2025, were $107,978, down from $115,776 in 2024, maintaining a net earnings margin of 5.2%[169]. - Non-GAAP net earnings for the year ended March 31, 2025, were $124,475, compared to $131,327 in 2024[169]. - Adjusted EBITDA for the year ended March 31, 2025, was $178,234, a decrease from $190,441 in 2024, with an adjusted EBITDA margin of 8.6%[169]. - Total gross billings for the year ended March 31, 2025, were $3,280,447, slightly down from $3,329,764 in 2024[169]. - For the year ended March 31, 2025, net sales decreased by $156.5 million compared to the prior fiscal year, driven by lower product revenues, although managed services and professional services revenue increased[177]. - Consolidated gross profit increased by $18.3 million year-over-year, with gross margins up by 270 basis points to 27.5%, primarily due to a shift in product mix towards higher-margin services[178]. - Operating income decreased by $16.8 million, with operating margin declining by 30 basis points to 6.8%[180]. - Adjusted EBITDA for the year ended March 31, 2025, decreased by $12.2 million, while the Adjusted EBITDA margin remained flat at 8.6%[181]. - GAAP net earnings per common share—diluted decreased by $0.28 to $4.05, while Non-GAAP net earnings per common share—diluted decreased by $0.25 to $4.67[182]. - Basic earnings per common share for the year ended March 31, 2025, were $4.07, a decrease of 6.4% compared to $4.35 for the year ended March 31, 2024[214]. - Diluted earnings per common share for the year ended March 31, 2025, were $4.05, a decrease of 6.5% compared to $4.33 for the year ended March 31, 2024[214]. - The effective income tax rate for the year ended March 31, 2025, was 27.5%, lower than 28.1% for the year ended March 31, 2024, primarily due to lower state taxes[212]. Business Segments - For the year ended March 31, 2025, technology business segments accounted for 97% of net sales, with 78% from the product segment, 11% from professional services, and 8% from managed services[25]. - The financing business segment accounted for 3% of net sales and 25% of operating income for the year ended March 31, 2025[25]. - The technology business segments include product, professional services, and managed services, with a focus on gross profit and operating expenses[183]. - The financing business segment offers solutions primarily to corporations and government contractors, with a focus on leasing IT and medical equipment[187]. - Net sales for the technology business segments decreased by 7.7% to $2,009,145, compared to $2,175,886 in the previous year[190]. - Product sales declined by 14.6% to $1,608,768, while professional services increased by 48.2% to $229,030, and managed services rose by 24.6% to $171,347[190]. - Gross profit for the technology business segments increased by 1.4% to $515,381, with a gross profit margin of 25.7%, up 230 basis points from the prior year[196]. - Portfolio earnings in the financing business segment increased by 30.8% to $18,229, while transactional gains rose by 51.8% to $28,866[206]. - Total proceeds from sales of financing receivables decreased to $634.9 million from $762.6 million in the previous year[206]. Customer and Market Insights - ePlus serves 4,600 customers, with revenue distribution by end market: 23% telecommunications, media and entertainment, 17% state and local education, 15% technology, 14% healthcare, and 9% financial services[23]. - Sales to Verizon Communications Inc. represented 16%, 19%, and 22% of net sales for the years ended March 31, 2025, 2024, and 2023, respectively[23]. - Approximately 17% of accounts receivable-trade balance was due from Verizon Communications Inc. as of March 31, 2025[58]. - The company is experiencing an increase in federal contract terminations, which may lead to claims and increased costs[125]. - Sales to SLED customers are highly regulated, and funding cuts from the federal government may decrease spending from these customers[127]. Employee and Operational Insights - ePlus employs 714 sales, marketing, and sales support personnel as of March 31, 2025, organized regionally across the US, UK, and India[36]. - As of March 31, 2025, the company employed a total of 2,199 employees, an increase of 299 from 1,900 in the previous year[48]. - The professional and managed services segment saw an increase of 277 employees from the previous year, totaling 1,093 as of March 31, 2025[51]. - The company added 300 employees, bringing the total to 2,166, with a focus on increasing customer-facing personnel[201]. - Operating expenses increased by $35.2 million, largely due to higher salaries, benefits, and acquisition-related expenses from the acquisition of Bailiwick, resulting in a total of 2,199 employees, a 15.7% increase from the previous year[179]. Risk Management and Compliance - The company has a conservative risk management approach, including credit quality analysis and monitoring of customer financial results[46]. - The company relies heavily on the accuracy and reliability of its IT, telecommunication, and cybersecurity platforms for various operational functions, and any inadequacies could materially affect its business and financial condition[98]. - A significant portion of employees working from home increases the risk of data loss and operational disruptions due to potential cybersecurity attacks or failures in information systems[74]. - The company may face challenges in hiring and retaining qualified personnel due to a competitive labor market, which could adversely impact its ability to serve customers and manage costs[79]. - The company is dependent on creditworthy customers to maintain its financial health, and any deterioration in customer credit quality could negatively affect its operating results[84]. - Vendor incentives and funding are crucial for offsetting costs, and any reduction or discontinuation of these incentives could materially impact the company's financial results[86]. - The company may incur significant expenses related to cybersecurity breaches, which could damage its reputation and financial condition[78]. - Advances in technology, particularly in AI and cybersecurity, present both opportunities and risks, and failure to address these could harm the company's competitive position[94]. - The evolving nature of cybersecurity threats makes it increasingly challenging for the company to adequately mitigate risks, potentially leading to significant operational disruptions[73]. - The company maintains cybersecurity insurance coverage deemed appropriate for its business size and complexity[141]. - The company is not aware of any cybersecurity threats that have materially affected its operations as of the report date[143]. - The company relies on the competency of its internal IT personnel, and failure to secure data could significantly interrupt business operations[102]. - The company is subject to numerous US and foreign laws and regulations, which may increase compliance costs and impact business operations[124]. - The company faces risks of claims for intellectual property infringement, which could lead to substantial costs in defending against such claims[128]. Strategic Initiatives - ePlus has invested in engineering and technology resources to stay at the forefront of technology trends, focusing on cloud and managed services[21]. - The company offers a wide portfolio of technology and capital asset financing solutions tailored to customer needs[22]. - The company focuses on automating the IT procurement process to reduce customers' costs and improve efficiency[34]. - Mergers and acquisitions are key to the company's growth strategy, and failure to identify suitable candidates or integrate them effectively could negatively impact earnings[88]. - The company plans to continue expanding by hiring additional staff in targeted market areas and pursuing acquisitions that align with strategic objectives[189]. - The company has a credit facility with an aggregate limit of $500 million, and any loss or reduction in this facility could adversely affect its operational capabilities[92]. Market Trends and Economic Factors - Key business trends indicate a focus on AI, security, and cloud solutions, with increasing customer demand for digital transformation and modernization[168]. - The company may face adverse effects on its business due to general economic weakness, including inflation and rising interest rates[114]. - The company anticipates that supply chain disruptions could adversely impact financial results due to reliance on vendor performance and shipping services[67][71]. - The company is exposed to financial losses due to fluctuations in foreign currency rates, although operations in foreign countries are not material[103]. - The company’s operations could be negatively impacted by natural disasters or adverse events at its configuration centers, warehouses, or data centers[105]. - The company’s ability to monetize financing receivables may be affected by changes in interest rates or the loss of key lenders[120].

Financial Performance - Consolidated net sales for Q4 FY 2025 decreased 10.2% to $498.1 million from $554.5 million, while service revenues increased 33.0% to $104.9 million[5]. - Consolidated gross profit increased 11.8% to $145.8 million, with a gross margin of 29.3%, up from 23.5% in the prior year[5]. - Net earnings for Q4 FY 2025 increased 14.6% to $25.2 million, with diluted earnings per share rising 15.9% to $0.95[5]. - For FY 2025, consolidated net sales decreased 7.0% to $2,068.8 million, while service revenues increased 37.1% to $400.4 million[5]. - Total net sales for the three months ended March 31, 2025, were $498,114, a decrease of 10.4% compared to $554,461 for the same period in 2024[40]. - Product net sales decreased by 17.8% to $382,371 for the three months ended March 31, 2025, compared to $465,228 in the prior year[41]. - Professional services net sales increased by 48.4% to $60,354 for the three months ended March 31, 2025, compared to $40,679 in the prior year[43]. - Operating income for the three months ended March 31, 2025, was $34,715, compared to $29,015 for the same period in 2024, reflecting an increase of 19.0%[40]. - Net earnings for the three months ended March 31, 2025, were $25,196, an increase of 14.0% from $21,983 in the same period of 2024[40]. - Adjusted EBITDA for the consolidated entity was $43,819 for the three months ended March 31, 2025, compared to $36,805 in 2024, reflecting a growth of 19.0%[51]. - Non-GAAP net earnings for the year ended March 31, 2025, were $124,475, a decrease of 5.2% from $131,327 in 2024[52]. - The diluted non-GAAP net earnings per common share for the year ended March 31, 2025, was $4.67, compared to $4.92 in 2024, reflecting a decrease of 5.1%[52]. Revenue Breakdown - Professional service revenues increased 48.4% to $60.4 million, primarily due to the acquisition of Bailiwick Services, LLC[8]. - Managed service revenues increased 24.6% to $171.3 million, driven by growth in Enhanced Maintenance Support and Cloud services[20]. - The Telecom, Media, & Entertainment segment saw a significant decline in sales, dropping 28.9% to $101,268 for the three months ended March 31, 2025, compared to $142,333 in 2024[44]. - The Healthcare segment experienced a 14.8% increase in sales, reaching $74,289 for the three months ended March 31, 2025, compared to $64,711 in 2024[44]. - The Financial Services segment's sales decreased by 36.3% to $44,097 for the three months ended March 31, 2025, down from $69,239 in 2024[44]. - The Financing Business Segment reported a 4.9% increase in net sales to $10,869 for the three months ended March 31, 2025, up from $10,361 in 2024[45]. - The company achieved a gross profit of $9,505 for the Financing Business Segment for the three months ended March 31, 2025, an increase of 8.2% from $8,783 in 2024[45]. Assets and Equity - Cash and cash equivalents as of March 31, 2025, were $389.4 million, up from $253.0 million a year ago[28]. - Total stockholders' equity increased to $977.6 million as of March 31, 2025, compared to $901.8 million a year earlier[28]. - Total assets increased to $1,884,805 as of March 31, 2025, from $1,653,469 as of March 31, 2024, representing a growth of 13.9%[39]. - Total liabilities rose to $907,182 as of March 31, 2025, compared to $751,690 as of March 31, 2024, an increase of 20.7%[39]. - Cash and cash equivalents increased to $389,375 as of March 31, 2025, from $253,021 as of March 31, 2024, a growth of 53.8%[39]. Future Outlook - ePlus is initiating FY 2026 guidance for net sales growth of low single digits and gross profit and adjusted EBITDA in the mid-single digits[29]. - The company remains focused on AI, cloud, security, and networking as key growth areas for the future[30].

Core Insights - ePlus inc. reported improved gross profit and gross margin for the fourth quarter and full year of fiscal year 2025, with double-digit growth in earnings per share (EPS) for the fourth quarter [3][4][13] Financial Performance - For the fourth quarter ended March 31, 2025, consolidated net sales decreased by 10.2% to $498.1 million from $554.5 million, while technology business net sales decreased by 10.4% to $487.2 million [5][8] - Consolidated gross profit increased by 11.8% to $145.8 million, with a gross margin of 29.3%, compared to 23.5% in the previous year [10][8] - Net earnings rose by 14.6% to $25.2 million, and diluted EPS increased by 15.9% to $0.95 [13][8] Yearly Overview - For the fiscal year ended March 31, 2025, consolidated net sales decreased by 7.0% to $2,068.8 million from $2,225.3 million, with technology business net sales down by 7.7% to $2,009.1 million [14][19] - Consolidated gross profit for the year increased by 3.3% to $569.1 million, with a gross margin of 27.5%, up from 24.8% in fiscal year 2024 [19][21] - Net earnings for the fiscal year decreased by 6.7% to $108.0 million, with diluted EPS down by 6.5% to $4.05 [21][22] Segment Performance - Professional service revenues increased by 48.4% in the fourth quarter to $60.4 million, primarily due to the acquisition of Bailiwick Services, LLC [7][4] - Managed service revenues grew by 16.6% to $44.5 million, driven by growth in Enhanced Maintenance Support and Cloud services [8][17] - The financing business segment saw net sales increase by 4.9% to $10.9 million, attributed to higher transactional gains and portfolio earnings [9][41] Operational Highlights - Operating expenses increased by 9.6% to $111.0 million, mainly due to higher salaries and benefits from increased headcount [11][20] - The company’s headcount rose to 2,199, up by 299 from the previous year, largely due to the acquisition of Bailiwick Services, LLC [11][20] - Cash and cash equivalents as of March 31, 2025, were $389.4 million, up from $253.0 million a year earlier [23][20] Strategic Outlook - ePlus is initiating fiscal year 2026 guidance for net sales growth in low single digits, with gross profit and adjusted EBITDA expected to grow in the mid-single digits [24][25] - The company remains focused on evolving its service and product offerings, particularly in fast-growing areas such as AI, cloud, security, and networking [25][4]