ePlus Q3 Earnings Call Highlights

Core Insights - ePlus reported a strong fiscal third quarter with net sales growth of 24.6% to approximately $615 million, driven by a 32.2% increase in product sales, particularly in data center, cloud, networking, and security sectors [3][7][4] - The company raised its full-year guidance for net sales growth to 20-22%, gross profit growth to 19-21%, and adjusted EBITDA growth to 41-43% [19][7] Financial Performance - Consolidated net sales were $614.8 million, with product revenue at $501.9 million and services revenue at $112.8 million [2] - Gross billings increased by 15.6% in the quarter to $982.1 million, with year-to-date gross billings rising 18.7% to nearly $3 billion [1] - Net earnings from continuing operations surged 129% to $33.4 million, while adjusted EBITDA rose 97% to $53.4 million, resulting in an adjusted EBITDA margin of 8.7% [8][7] Demand Drivers - The demand for AI-driven infrastructure modernization and cybersecurity is accelerating, contributing to growth in data center, cloud, networking, and security products [4][11] - Security gross billings grew 16.4% quarter-over-quarter and 27.6% year-over-year, reflecting heightened customer priorities due to rising threat levels [12][6] Customer Trends - Growth was broad-based across customer sizes and sectors, with notable strength in mid-market and enterprise segments [14] - Telecom, media, and entertainment accounted for 27% of net sales, while technology, SLED, and healthcare each represented 13% [14] Operational Insights - Managed services revenue grew 10.5%, while professional services revenue declined 7.8% due to project delays in the retail sector [2][16] - The company emphasized expense discipline and alignment of workforce towards higher-growth areas, resulting in improved profitability [8] Balance Sheet and Capital Allocation - Cash and cash equivalents totaled $326.3 million, down from $389.4 million, while inventory rose to $241.0 million, attributed to increased projects in process [17] - The board approved a quarterly dividend of $0.25 per share and repurchased over 200,000 shares during the quarter [19] Future Outlook - The company anticipates a potential near-term memory shortage that could impact AI deployment timing, but believes it is well-positioned to manage this through diversified supplier relationships [20]