Eplus Inc. Earnings Call: Mixed Sentiments and Future Outlook

Eplus Inc ((PLUS)) has held its Q3 earnings call. Read on for the main highlights of the call.

In the recent earnings call, Eplus Inc. presented a mixed sentiment about its financial performance. The company showcased significant growth in services and subscription orders, along with a robust performance in its finance segment. However, these positive developments were somewhat overshadowed by challenges such as flat overall revenue, a decline in adjusted EBITDA, and increased operating expenses. The sentiment, therefore, reflects both optimism for service growth and caution due to hardware sales difficulties and reduced net earnings.

Strong Growth in Services Revenue

Eplus Inc. reported an impressive 52% year-on-year growth in services revenue, reaching a new high of $114 million. This growth also led to a 45% increase in services gross profit, marking a significant achievement for the company in expanding its high-margin services segment.

Increase in Subscription Orders

Subscription orders surged by 51.4% year-over-year, now making up 46% of open orders compared to 31.7% the previous year. This shift highlights Eplus Inc.’s successful focus on increasing its subscription-based offerings.

Solid Performance in Finance Segment

The finance segment of Eplus Inc. demonstrated a solid performance with a 20% revenue increase. This growth was primarily driven by higher proceeds from equipment sales and portfolio earnings, underscoring the segment’s strategic importance.

Successful Integration of Bailiwick Acquisition

The integration of Bailiwick played a crucial role in boosting the company’s professional services growth. Notably, organic managed services revenue increased by 28% year-over-year, further solidifying Eplus Inc.’s service offerings.

Flat Overall Revenue

Despite faster-growing high-margin services, Eplus Inc. faced flat overall revenue year-over-year. This stagnation was attributed to lower product sales, demonstrating a challenge in balancing between product and service revenue streams.

Decrease in Adjusted EBITDA

Eplus Inc. experienced a 15% decrease in adjusted EBITDA, as increased finance segment earnings were overshadowed by a decline in technology business adjusted EBITDA, reflecting operational challenges.

Challenges with Hardware Sales

The company faced softer-than-expected hardware sales and reduced demand from some enterprise customers, impacting overall performance and highlighting a key area for improvement.

Higher Operating Expenses

Operating expenses saw a 17.3% increase, driven by additional headcount from acquisitions and ongoing business investments, which contributed to the pressure on profitability.

Decline in Net Earnings

Net earnings fell to $24.1 million or $0.91 per share, down from $27.3 million or $1.02 per share in the previous year, reflecting the impact of increased expenses and flat revenue on the bottom line.

Forward-Looking Guidance

Looking ahead, Eplus Inc. adjusted its fiscal 2025 revenue guidance to a range of $2.07 billion to $2.11 billion, with expectations for adjusted EBITDA between $165 million and $171 million. The company anticipates continued growth in service revenue but remains cautious about potential tariff impacts and higher gross to net adjustments.

In summary, Eplus Inc.’s recent earnings call highlighted a mixed financial performance, with strong service growth and subscription orders being offset by challenges in hardware sales and increased operating costs. The forward-looking guidance suggests cautious optimism as the company aims to navigate these hurdles while capitalizing on its strengths in the service sector.