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01/10 16:06
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call highlights strong financial performance with record revenue growth driven by AI, cloud, and security demand. Despite risks in government budgets and AI infrastructure, the raised guidance and operating leverage indicate confidence in future growth. Shareholder returns through dividends and repurchases further support positive sentiment. Given the company's market cap, these factors suggest a positive stock price movement in the range of 2% to 8% over the next two weeks.
Gross Billings $1.02 billion in the quarter, a 26.5% increase year-over-year. Majority of this growth was organic, driven by strong demand in high-growth areas including AI consumption.
Consolidated Net Sales $608.8 million, up 23.4% year-over-year. Growth driven by sustained demand across security, networking, and cloud.
Product Sales $485.1 million, up 24.5% year-over-year. Growth led by robust demand in networking and security solutions, aided by increased AI adoption and growth in data center and cloud.
Service Revenue $123.8 million, up 19.4% year-over-year. Professional Services grew 23.3%, driven by the acquisition of Bailiwick, while Managed Services increased 13.5%, led by enhanced maintenance support and cloud offerings.
Gross Profit $162.1 million, up 27.4% year-over-year. Consolidated gross margin increased to 26.6% from 25.8%, driven by increased product margins.
Adjusted EBITDA $58.7 million, up 61.6% year-over-year. Growth reflects operating leverage and strategic alignment towards high-growth areas like AI, cloud, security, and networking.
Net Earnings from Continuing Operations $38.2 million, up from $19.8 million in the prior year quarter. Growth driven by increased gross profit and operating leverage.
Cash and Cash Equivalents $402.2 million at quarter end, up from $389.4 million at the end of the last fiscal year. Increase provides flexibility for organic and inorganic growth initiatives.
AI, Security, and Cloud Investments: ePlus continues to invest in AI, security, and cloud to deliver value-added products and solutions, enabling growth in customer base and sales to existing customers.
Realwave Acquisition: Acquired Realwave, a cloud-based AI-powered software, to expand capabilities in delivering real-time AI-driven insights.
Revenue Growth: Revenue increased over 20% year-to-date, with total gross billings of almost $2 billion in the 6-month period.
Customer Segments and Verticals: Broad-based growth across customer sizes and industries, with notable performance in mid-market and enterprise segments. Strong performance in all verticals except state and local government.
Operational Leverage: Adjusted EBITDA grew 62% in Q2 and 40% year-to-date, reflecting strategic alignment of headcount and internal automation initiatives.
AI-Driven Internal Efficiency: Leveraged AI internally for faster incident resolution and improved customer experience.
Focus on High-Growth Areas: Aligned resources towards AI, data center and cloud, security, and networking to capitalize on growth opportunities.
Simplified Business Model: Sale of domestic financing business to focus on being a pure technology player.
State and Local Government Budget Constraints: Persistent budget constraints in the state and local government vertical have negatively impacted performance in this segment, limiting growth opportunities.
Infrastructure Readiness for AI: 81% of surveyed leaders expressed concerns about whether their infrastructure can support advanced AI applications, posing a challenge for scaling AI solutions effectively.
Acquisition Integration Challenges: The acquisition of Bailiwick has resulted in lower gross margins in Professional Services, indicating potential challenges in integrating acquired businesses effectively.
Inventory Management: Inventory days outstanding increased slightly to 15 days from 12 days in the prior year, which could indicate inefficiencies in inventory management.
Dependence on High-Growth Areas: The company's strategic focus on high-growth areas like AI, cloud, and security may expose it to risks if these markets experience a slowdown or increased competition.
Foreign Exchange Risks: Foreign exchange gains of $700,000 were noted, but fluctuations in currency exchange rates could pose financial risks in the future.
Net Sales Growth: Net sales growth over the prior fiscal year is now expected to grow at a rate in the mid-teens from fiscal year 2025's $2.01 billion from continuing operations.
Gross Profit Growth: Gross profit is expected to grow at a rate in the mid-teens from fiscal year 2025's $515.5 million from continuing operations.
Adjusted EBITDA Growth: Adjusted EBITDA is expected to increase from fiscal year 2025's $140 million at approximately twice the rate of net sales growth for fiscal year 2026 as continuing operation results are expected to benefit from operating leverage.
Quarterly Dividend: The company announced a quarterly dividend of $0.25 per common share, payable on December 17, 2025, to shareholders of record on November 25, 2025.
Share Repurchase: The company repurchased 60,000 shares during the quarter under the stock repurchase plan authorization that began on August 11, 2025.
The earnings call highlights strong financial performance with record revenue growth driven by AI, cloud, and security demand. Despite risks in government budgets and AI infrastructure, the raised guidance and operating leverage indicate confidence in future growth. Shareholder returns through dividends and repurchases further support positive sentiment. Given the company's market cap, these factors suggest a positive stock price movement in the range of 2% to 8% over the next two weeks.
The strong financial performance, particularly the record high revenue, substantial growth in key areas like AI and security, and the initiation of dividends and share repurchase programs indicate a positive outlook. Despite some risks like economic uncertainty and margin pressures, the optimistic guidance and strategic investments in growth areas suggest a positive stock price movement. Considering the market cap, the stock is likely to experience a moderate positive reaction in the next two weeks.
The earnings call highlights strong financial performance with record revenue and growth in key areas like security and services, alongside a positive shareholder return plan with dividends and share repurchases. Despite some risks like foreign currency losses and margin impacts, the optimistic guidance and strategic investments in AI and security are promising. The Q&A session confirmed growth drivers and aligned strategic divestments with market trends. Given the mid-cap market cap, the stock is likely to react positively, falling in the 2% to 8% range.
The earnings call presents mixed signals. While there are positives such as increased gross profit, expanded margins, and strong cash position, there are notable negatives like declining net sales and product sales, economic uncertainty, and competitive pressures. The Q&A reveals some optimism in AI demand but lacks clear timelines. The shareholder repurchase program is a slight positive, but overall uncertainty and lack of strong guidance keep the sentiment neutral. Given the market cap, the stock price is likely to remain stable in the short term.
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