ePlus(US:PLUS)2022-02-03 16:00Part I. Financial Information Financial Statements ePlus inc.'s unaudited consolidated financial statements as of December 31, 2021, show total assets of $1.26 billion and nine-month net earnings of $81.4 million Consolidated Balance Sheet Highlights (in thousands) | Account | Dec 31, 2021 (in thousands) | Mar 31, 2021 (in thousands) | | :--- | :--- | :--- | | Total Current Assets | $960,551 | $777,594 | | Total Assets | $1,255,146 | $1,076,775 | | Total Current Liabilities | $567,413 | $459,364 | | Total Liabilities | $615,850 | $514,365 | | Total Stockholders' Equity | $639,296 | $562,410 | Consolidated Statement of Operations Highlights (in thousands, except per share data) | Metric | Nine Months Ended Dec 31, 2021 (in thousands) | Nine Months Ended Dec 31, 2020 (in thousands) | | :--- | :--- | :--- | | Total Net Sales | $1,369,500 | $1,215,716 | | Gross Profit | $345,631 | $295,670 | | Operating Income | $112,840 | $82,745 | | Net Earnings | $81,355 | $58,844 | | Diluted EPS | $3.03 | $2.20 | Consolidated Statement of Cash Flows Highlights (in thousands) | Cash Flow Activity | Nine Months Ended Dec 31, 2021 (in thousands) | Nine Months Ended Dec 31, 2020 (in thousands) | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | ($121,542) | $5,244 | | Net cash used in investing activities | ($18,448) | ($30,659) | | Net cash provided by financing activities | $115,996 | $26,382 | | Net (decrease) increase in cash | ($23,996) | $232 | | Cash and cash equivalents, end of period | $105,566 | $86,463 | - On December 13, 2021, the company completed a two-for-one stock split, with all share and per-share amounts in the financial statements retroactively adjusted to reflect this split35 Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management highlights 12.6% net sales growth to $1.37 billion for the nine months ended December 31, 2021, driven by strong demand, confirming sufficient liquidity for the next year Executive Overview and Business Trends ePlus provides integrated IT solutions, with its technology segment generating 96% of net sales, facing ongoing IT product shortages and rising inflation - The technology segment accounts for 96% of net sales and 73% of operating income, while the financing segment accounts for 4% of net sales and 27% of operating income for the nine months ended December 31, 2021109 - The company is experiencing ongoing supply constraints affecting product lead times and costs, which are expected to persist for at least the next few quarters115 - Inflation has led to price increases from suppliers and rising wages, but the company has generally been able to pass these costs to customers, though future material impact is not assured116 Consolidated Results of Operations Consolidated net sales grew 12.6% to $1.37 billion and net earnings increased 38.3% to $81.4 million for the nine months ended December 31, 2021 Consolidated Performance (Nine Months Ended Dec 31) | Metric | 2021 (in millions) | 2020 (in millions) | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $1,369.5M | $1,215.7M | +12.6% | | Gross Profit | $345.6M | $295.7M | +16.9% | | Operating Income | $112.8M | $82.7M | +36.4% | | Net Earnings | $81.4M | $58.8M | +38.3% | | Diluted EPS | $3.03 | $2.20 | +37.7% | Consolidated Performance (Q3 Ended Dec 31) | Metric | 2021 (in millions) | 2020 (in millions) | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $494.8M | $427.6M | +15.7% | | Gross Profit | $117.1M | $98.2M | +19.3% | | Net Earnings | $26.4M | $21.6M | +22.1% | | Diluted EPS | $0.98 | $0.81 | +21.0% | - Adjusted gross billings, a non-GAAP measure, increased 14.2% to $1.982 billion for the nine-month period, driven by the SMP acquisition and higher demand from customers in telecom, media, entertainment, and healthcare128 Segment Results of Operations Technology segment net sales grew 11.7% to $1.31 billion and operating income rose 34.0%, while Financing segment net sales increased 41.2% with operating income up 43.2% Technology Segment Performance (Nine Months Ended Dec 31) | Metric | 2021 (in millions) | 2020 (in millions) | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $1,313.6M | $1,176.2M | +11.7% | | Gross Profit | $305.0M | $262.4M | +16.2% | | Operating Income | $82.6M | $61.7M | +34.0% | | Adjusted Gross Billings | $1,982.2M | $1,735.3M | +14.2% | Financing Segment Performance (Nine Months Ended Dec 31) | Metric | 2021 (in millions) | 2020 (in millions) | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $55.9M | $39.6M | +41.2% | | Gross Profit | $40.6M | $33.3M | +22.0% | | Operating Income | $30.2M | $21.1M | +43.2% | - In the Technology segment, open orders increased to $852.9 million as of Dec 31, 2021, from $413.9 million a year prior, indicating strong future demand but also reflecting supply chain delays153 Liquidity and Capital Resources Cash and cash equivalents decreased by $24.0 million to $105.6 million due to operating activities, largely offset by financing, with management confirming sufficient liquidity Cash Flow Summary (Nine Months Ended Dec 31, in thousands) | Cash Flow Activity | 2021 (in thousands) | 2020 (in thousands) | | :--- | :--- | :--- | | Net cash from operating activities | ($121,542) | $5,244 | | Net cash from investing activities | ($18,448) | ($30,659) | | Net cash from financing activities | $115,996 | $26,382 | - The cash conversion cycle for the technology segment increased to 47 days from 24 days year-over-year, driven by higher Days Sales Outstanding (DSO) and Days Inventory Outstanding (DIO)187189 - On October 13, 2021, the company amended its credit facility, increasing the senior secured floorplan facility from $275 million to $375 million and maintaining a revolving credit sublimit of $100 million69197 Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks are interest rate fluctuations on its variable-rate credit facility and foreign currency exchange rates, with foreign operations not expected to have a material impact - The company's primary market risks are related to interest rate fluctuations on its variable-rate credit facility and foreign currency exchange risk from international operations213214 - Foreign operations in the UK, Europe, and Canada are considered insignificant in relation to total consolidated operations, and currency fluctuations are not expected to have a material impact214215216 Controls and Procedures Management, including the CEO and CFO, concluded disclosure controls and procedures were effective as of December 31, 2021, with no material changes in internal control over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of December 31, 2021217 - No changes occurred in the company's internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, these controls218 Part II. Other Information Legal Proceedings The company is involved in various legal proceedings in the normal course of business, with no currently expected material adverse effects - The company is involved in various legal proceedings in the normal course of business and expenses legal costs as incurred, with outcomes not expected to have a material adverse effect76220 Risk Factors No material changes have been reported in the company's risk factors since the last Annual Report on Form 10-K and subsequent quarterly report - No material changes have been reported in the company's risk factors since the last Annual Report on Form 10-K and subsequent quarterly report221 Unregistered Sales of Equity Securities and Use of Proceeds During the nine months ended December 31, 2021, the company repurchased 203,429 shares, with 852,001 shares remaining authorized under the plan expiring May 27, 2022 Share Repurchase Activity (Nine Months Ended Dec 31, 2021) | Description | Shares | | :--- | :--- | | Total shares purchased | 203,429 | | Shares purchased as part of public plan | 147,999 | | Shares repurchased to satisfy tax withholding | 55,430 | | Remaining authorization as of Dec 31, 2021 | 852,001 | - On March 18, 2021, the board authorized the repurchase of up to 1,000,000 shares of common stock, effective from May 28, 2021, to May 27, 202282225 Exhibits Key exhibits filed with the Form 10-Q include credit agreements and CEO/CFO certifications - Key exhibits filed include the First Amended and Restated Credit Agreement dated October 13, 2021, and certifications by the CEO and CFO pursuant to SEC rules233