ePlus Inc. — FY2022 Form 10-K
Reporting period: Fiscal year ended March 31, 2022 (not calendar-year Q4). ePlus provides IT products, software, professional and managed services, and equipment financing through its technology and financing segments.
Financial performance
| Metric | FY2022 | FY2021 | Change |
|---|---|---|---|
| Net sales | $1,821.0 million | $1,568.3 million | +16.1% |
| Gross profit / margin | $461.0 million / 25.3% | $393.6 million / 25.1% | Profit +17.1%; margin +20 bps |
| Operating income / margin | $147.3 million / 8.1% | $106.3 million / 6.8% | Income +38.5%; margin +130 bps |
| Net earnings / diluted EPS | $105.6 million / $3.93 | $74.4 million / $2.77 | Both +41.9% |
| Adjusted EBITDA / margin | $170.0 million / 9.3% | $128.2 million / 8.2% | EBITDA +32.6%; margin +110 bps |
| Operating cash flow | $(20.6) million | $129.5 million | Down $150.1 million |
Technology segment sales rose 14.9% to $1,733.0 million; operating income increased 44.1% to $109.0 million. Financing segment sales grew 45.7% to $88.0 million and operating income rose 24.9% to $38.3 million. Financing revenue included higher proceeds from early lease buyouts and off-lease equipment sales, as well as $18.2 million in gains on sales of financing receivables.
Cash, debt and liquidity
- Cash and cash equivalents were $155.4 million at year-end, up $25.8 million. Operating cash use reflected working-capital investment, notably inventory and receivables; inventory rose 121.6% to $155.1 million.
- The technology segment cash conversion cycle lengthened to 48 days from 37 days, primarily as inventory days increased from 15 to 25.
- The WFCDF floor-plan balance was $145.3 million, versus $98.7 million a year earlier. The revolving facility had no borrowings. The amended facility provides a discretionary floor-plan facility up to $375 million and a revolving-credit sublimit up to $100 million, subject to borrowing-base terms.
- Recourse and non-recourse notes payable totaled $34.3 million at March 31, 2022, versus $74.2 million a year earlier. Management said cash, operating funds and credit availability were sufficient for expected needs for at least the next year.
- Total assets were $1,166.2 million, total liabilities $505.5 million, and stockholders’ equity $660.7 million. No cash dividends were paid; $13.6 million was spent on share repurchases and related withholding-share purchases.
Material changes and business trends
- Product sales increased 15.7% and services sales 19.0%. Adjusted gross billings rose 15.8% to $2,620.6 million, reflecting customer demand and a higher mix of services, subscriptions and other offerings recognized net or over time.
- Technology gross margin expanded with a richer mix of value-added services and subscription-related offerings. Consolidated SG&A rose 9.5% to $297.1 million, mainly from salaries, benefits and variable compensation.
- Verizon represented 24% of net sales, up from 19% in FY2021; it accounted for 14% of trade receivables at year-end, down from 20%. Cisco products represented 39% of technology-segment sales.
- Open customer orders reached $973.0 million, versus $476.8 million, while deferred revenue was $116.9 million, versus $99.1 million. Management attributed the order backlog increase largely to product shortages and delayed fulfillment.
Outlook, risks and other notable matters
- The filing provides no specific quantified revenue or earnings guidance. Management described ongoing investment in services, managed offerings, geographic reach, hiring and acquisitions as strategic priorities.
- Management expected supply-chain constraints and extended product lead times to persist for at least the next few quarters; elsewhere the filing says constraints could continue through at least the end of calendar 2022. Delays may defer revenue, raise costs, or lead to cancellations.
- Inflation, wage and interest-rate increases may pressure costs and margins, particularly on fixed-price services and financing transactions. Management said it had generally passed supplier price increases to customers, but not all costs may be recoverable.
- Key exposures include customer and vendor concentration, dependence on Cisco and a small group of suppliers, cybersecurity and privacy events, competition for skilled employees, customer credit quality, access to credit facilities, and residual values on leased equipment. COVID-19 and broader economic uncertainty may affect demand, operations and collections.
- The company reported effective disclosure controls and internal control over financial reporting; Deloitte issued unqualified opinions on the financial statements and internal controls. The filing notes ordinary-course legal proceedings but gives no clear quantified exposure in the supplied text.
Investor verification priorities
- Assess whether backlog converts to revenue on schedule and whether supply constraints, order cancellations or inventory growth create margin or cash-flow pressure.
- Review the sustainability of FY2022 financing gains and equipment-sale proceeds, and distinguish these items from recurring portfolio income.
- Track working-capital trends, especially inventory, receivables, the cash conversion cycle and dependence on the discretionary floor-plan facility.
- Evaluate customer and supplier concentration, particularly Verizon’s 24% sales share and Cisco’s 39% of technology-segment sales.
- Read the full credit-facility covenants and Note 9 legal-contingency disclosures; confirm how rising rates, credit availability and leased-asset residual values affect financing returns.