EPS of $1.02 decreased by 18.9% from previous year
Gross margin of 23.6%
Net income of 27.34M
""We continue to see strong customer interest for our AI Ignite program and discovery assessments."" - Mark Marron
ePlus Inc. (PLUS) QQ1 2025 Results — AI-Driven Services Momentum, Margin Discipline, and a Path to 3%-6% FY25 Revenue Growth
Executive Summary
- QQ1 2025 total net sales were $543.2 million, down 5.3% year over year and 1.5% quarter over quarter, reflecting a difficult year-on-year comparison and prior supply-chain easing that benefited the prior-year period. The gross margin was 23.63%, and the company reported a net income of $27.3 million ($1.02 per diluted share). These results sit within a backdrop of deliberate SG&A investments to support AI, security, and services offerings, including the Peak acquisition, with higher hiring and ramp costs that temporarily pressured near-term profitability.
- The services business remained a strong growth pillar, advancing 15.8% year over year with managed services up 28% and bookings up ~70%, underscoring the shift toward recurring revenue and higher visibility. AI-related initiatives (AI Ignite, NVIDIA DGX managed services, and related advisory services) are gaining traction in pipeline discussions across verticals, signaling a potential acceleration in annuity-like revenues as customers mature their AI journeys.
- Management reaffirmed fiscal 2025 guidance: net sales growth of 3%-6% and adjusted EBITDA of $200–$215 million. With a cash balance of roughly $351 million and a notably improved working-capital posture (inventory at a multi-year low, inventory turns ~14 days, CCC ~37 days), ePlus has ample liquidity to fund investments, opportunistic acquisitions, and continued share repurchases. The near-term challenge remains a tougher second-quarter comparison, but the ramp in services, AI-related engagements, and ongoing cost discipline are expected to support a stronger back-half performance and margin expansion over time.
Key Performance Indicators
Revenue
543.24M
QoQ: -1.54% | YoY:-5.39%
Gross Profit
128.36M
23.63% margin
QoQ: 4.84% | YoY:-9.78%
Operating Income
35.47M
QoQ: 31.18% | YoY:-23.45%
Net Income
27.34M
QoQ: 24.36% | YoY:-19.23%
EPS
1.03
QoQ: 24.10% | YoY:-18.90%
Revenue Trend
Margin Analysis
Key Insights
Revenue and profitability: Revenue $543.2m; gross profit $128.362m; gross margin 23.63%; operating income $35.469m; operating margin 6.53%; net income $27.339m; net margin 5.03%; EPS diluted $1.02. YoY changes: revenue down 5.3%; net income down 19.0%; EPS down 18.9%. QoQ changes: net income up 24.4%; EPS up 24.1%.
Cash flow and liquidity: Net cash provided by operating activities $97.1m; free cash flow $95.16m; cash and cash equivalents $349.9m; cash at end of period up from $253.0m YoY. CCC 37 days; DSO ~122.8 days; DIO ~19.3 days; DPO ~58.7 days; inventory turns 14 days.
Balance sheet health: Total assets $1.651B; total liabilities $729.0m; total stockholders’ equity $921.9m; no significant near-term debt maturities; net debt negative ~$(309.2)m, reflecting substantial cash overhang versus modest debt.
Segment and margin dynamics: Technology gross margin declined modestly (product margin down ~90 bps in Technology) but managed services margin expanded ~70 bps; financing net sales $9.0m; SG&A pressures from AI-related hiring and Peak acquisition partially offset by disciplined cost management and gross-margin expansion of 120 bps sequentially.
Financial Highlights
- Revenue and profitability: Revenue $543.2m; gross profit $128.362m; gross margin 23.63%; operating income $35.469m; operating margin 6.53%; net income $27.339m; net margin 5.03%; EPS diluted $1.02. YoY changes: revenue down 5.3%; net income down 19.0%; EPS down 18.9%. QoQ changes: net income up 24.4%; EPS up 24.1%.
- Cash flow and liquidity: Net cash provided by operating activities $97.1m; free cash flow $95.16m; cash and cash equivalents $349.9m; cash at end of period up from $253.0m YoY. CCC 37 days; DSO ~122.8 days; DIO ~19.3 days; DPO ~58.7 days; inventory turns 14 days.
- Balance sheet health: Total assets $1.651B; total liabilities $729.0m; total stockholders’ equity $921.9m; no significant near-term debt maturities; net debt negative ~$(309.2)m, reflecting substantial cash overhang versus modest debt.
- Segment and margin dynamics: Technology gross margin declined modestly (product margin down ~90 bps in Technology) but managed services margin expanded ~70 bps; financing net sales $9.0m; SG&A pressures from AI-related hiring and Peak acquisition partially offset by disciplined cost management and gross-margin expansion of 120 bps sequentially.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
543.24M
-5.39%
-1.54%
Gross Profit
128.36M
-9.78%
4.84%
Operating Income
35.47M
-23.45%
31.18%
Net Income
27.34M
-19.23%
24.36%
EPS
1.03
-18.90%
24.10%
Key Financial Ratios
currentRatio
2.01
grossProfitMargin
23.6%
operatingProfitMargin
6.53%
netProfitMargin
5.03%
returnOnAssets
1.66%
returnOnEquity
2.97%
debtEquityRatio
0.04
operatingCashFlowPerShare
$3.65
freeCashFlowPerShare
$3.57
priceToBookRatio
2.13
priceEarningsRatio
17.94
Net Income vs. Revenue
Expense Breakdown
Management Commentary
- AI and strategic focus: Management highlighted ongoing investment in AI, cloud security, and advisory services, with strong customer interest in the AI Ignite program and discovery assessments. Quote: AI initiatives are a core growth vector and are driving services demand across verticals. (Theme: Strategy and product/market focus)
- Backlog and supply-chain normalization: Executives noted that gross billings are stabilizing as supply chains normalize, with backlog digestion largely complete and a return to a more normal order cadence in Q2/Q3. Quote: “we do think that our gross billings have started to normalize. The supply chain has stabilized.” (Theme: Operations and supply chain)
- Operating leverage and cost discipline: The company achieved a 120 bps gross-margin expansion QoQ and more than 20% increase in operating income QoQ, supported by disciplined SG&A management despite higher HCM costs related to AI and the Peak acquisition. Quote: “Sequentially, this discipline and gross margin expansion of 120 basis points contributed to our operating income, which increased more than 20% and operating margin was up 130 basis points.” (Theme: Profitability and efficiency)
- Cash generation and capital allocation: Cash conversion improved driven by working-capital improvements; the company repurchased 162,319 shares in the quarter and maintains a robust balance sheet to fund growth and shareholder returns. (Theme: Capital allocation)
- AI ecosystem and partnerships: The transcript underscored the breadth of AI conversations, including NVIDIA DGX-managed services, data-copilot readiness, and the broader opportunity of AI across compute, networking, storage, and security. (Theme: Growth opportunities)
"We continue to see strong customer interest for our AI Ignite program and discovery assessments."
— Mark Marron
"Sequentially, this discipline and gross margin expansion of 120 basis points contributed to our operating income, which increased more than 20% and operating margin was up 130 basis points."
— Mark Marron
Forward Guidance
- View on FY2025: Management reaffirmed net sales growth of 3%-6% and adjusted EBITDA of $200–$215 million. This implies a modest top-line expansion with a complementary improvement in profitability if the services and AI initiatives scale, while continued discipline in SG&A supports margin resilience.
- Assessment of achievability: The Q1 results show a positive momentum in services and AI-related offerings, but Q2 will be a tougher YoY comparison given Q1’s 25% YoY growth in the prior year. The back-half recovery appears plausible if AI engagements convert to services revenue and if the company sustains gross-margin discipline.
- Key drivers to monitor: (1) velocity and monetization of the AI Ignite and NVIDIA DGX-related services; (2) managed services bookings and the transition of customers from project-based engagements to recurring revenue; (3) continued supply-chain normalization translating into higher project execution and utilization; (4) SG&A discipline and ramp timing for new hires; (5) pipeline quality and potential accretive acquisitions that expand service reach.
- Risks to guidance: macro IT spending cycles, AI adoption timing, competitive pricing pressures in the IT solutions space, and integration risks from Peak acquisition could derate upside. Investors should monitor quarterly cadence in services growth, gross margin stability, and cash-flow generation as leading indicators of FY2025 progress.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
PLUS Focus
23.63%
6.53%
2.97%
17.94%
MODN
56.10%
-4.20%
-1.45%
-145.66%
PRGS
72.80%
21.10%
4.90%
25.81%
AGYS
61.10%
9.05%
5.55%
49.74%
SPNS
44.00%
15.30%
3.91%
25.57%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Overall, ePlus presents a measured, albeit modest, growth trajectory for FY2025 anchored by a clearly expanding services portfolio and AI-enabled offerings. The QQ1 2025 results demonstrate solid cash generation, improving working capital efficiency, and meaningful progress toward recurring revenue via managed services and AI-enabled engagements. The reiterated FY2025 guidance of 3%-6% net sales growth and $200–$215 million in adjusted EBITDA reflects confidence in the back-half recovery and the earnings impact of operating leverage as volumes return and the AI initiatives scale. The primary catalysts for upside include: (1) accelerated monetization of the AI Ignite program and NVIDIA DGX-related services, (2) further expansion of storage-as-a-service and Azure recovery offerings, (3) stronger execution of cross-sell within the existing customer base and the 300+ new customers added in the prior year, and (4) continued balance-sheet strength enabling buybacks and strategic investments. Key factors investors should monitor are the pace of AI-related revenue conversion, the trajectory of managed services bookings, gross margin stability as the product mix normalizes, and the effectiveness of SG&A containment as the company scales its AI and security franchises. In a competitive landscape, ePlus’s emphasis on high-growth, high-margin services and its strong liquidity position position it favorably for a 2025 investment horizon, with potential outperformance if AI demand translates into meaningful annuity revenue in the second half of the year.
Key Investment Factors
Growth Potential
AI Ignite program and NVIDIA DGX-based services create a scalable platform for recurring revenue, with management highlighting broad customer interest and a growing services backlog. Expect continued expansion in managed services, cloud/security advisory, and storage-as-a-service offerings to lift annualized margins and drag-along revenue in the back half of FY25.
Profitability Risk
Short-term AI-related hiring costs and integration costs from Peak acquisition; cyclical IT demand; potential margin compression if product mix deteriorates or if pricing competition intensifies; dependency on customers’ AI adoption timelines and data governance readiness.
Financial Position
Strong liquidity position with cash and equivalents around $350 million, robust cash-flow generation (operating cash flow of $97.1 million and free cash flow of $95.16 million), low inventory (3-year low at $89.1 million) and a net cash position (net debt = approximately $(309) million). This affords flexibility for buybacks, investments in growth initiatives, and potential opportunistic acquisitions.
SWOT Analysis
Strengths
Diversified IT solutions portfolio: Technology and Financing segments provide mix flexibility.
Strong services engine with double-digit growth in services (15.8% YoY) and managed services (up 28%).
Recurring revenue traction via AI-related advisory and managed services.