EPS of $0.82 decreased by 33.1% from previous year
Gross margin of 22.2%
Net income of 21.98M
""We are pleased that our annuity service backlog is up approximately 50% and giving us line of sight to future annuity service revenue streams."" - Mark Marron
ePlus Inc. (PLUS) QQ4 2024 Results Analysis: Solid 2024 Performance with Margin Normalization and AI-led Growth Outlook
Executive Summary
ePlus delivered a solid fiscal 2024, with full-year net sales of $2.23 billion, up 7.6% YoY, and gross profit of $550.8 million (gross margin 24.8%). In Q4 2024, net sales rose 12.7% YoY to $551.8 million, and gross billings increased 13.8%, driven by double-digit growth in Technology and Services, alongside a 15.5% uptick in Financing segment revenue. However, Q4 margins and near-term profitability were pressured by a higher mix of low-margin enterprise product sales and elevated headcount/related amortization as management stepped up growth investments. Management signaled a normalization path: gross margins are expected to stabilize in the 24%–26% range for fiscal 2025, with total revenue growth projected at 3%–6% and adjusted EBITDA of $200–$215 million. The company maintains a robust balance sheet, with over $250 million of cash and cash equivalents and a new share repurchase authorization of 1.25 million shares, supporting an active capital allocation strategy (organic investment + acquisitions + buybacks). The AI-focused AI Ignite program represents a meaningful, early-stage growth vector, leveraging ePlus’ core infrastructure, security, and services capabilities to build recurring revenue as customers progress along their AI journeys.
Key Performance Indicators
Revenue
551.76M
QoQ: 8.39% | YoY:12.11%
Gross Profit
122.44M
22.19% margin
QoQ: -8.50% | YoY:-7.47%
Operating Income
27.04M
QoQ: -28.94% | YoY:-36.25%
Net Income
21.98M
QoQ: -19.42% | YoY:-33.09%
EPS
0.83
QoQ: -18.63% | YoY:-33.06%
Revenue Trend
Margin Analysis
Key Insights
Q4 2024 revenue: $551.761 million, up 12.11% YoY; QoQ not available in quarterly table, but Q3 2024 revenue was $509.055 million (implying stronger sequential demand into Q4).
Q4 2024 gross profit: $122.441 million; gross margin 22.19%; YoY decline of 7.47%, QoQ decline of 8.50% driven by mix shifts toward lower-margin enterprise product sales.
Q4 2024 operating income: $27.038 million; operating margin 4.90%; YoY decline of ~36.25%, QoQ down ~28.94%.
Q4 2024 net income: $21.983 million; net margin 3.98%; YoY decline of ~33.09%, QoQ decline of ~19.42%.
- Q4 2024 revenue: $551.761 million, up 12.11% YoY; QoQ not available in quarterly table, but Q3 2024 revenue was $509.055 million (implying stronger sequential demand into Q4).
- Q4 2024 gross profit: $122.441 million; gross margin 22.19%; YoY decline of 7.47%, QoQ decline of 8.50% driven by mix shifts toward lower-margin enterprise product sales.
- Q4 2024 operating income: $27.038 million; operating margin 4.90%; YoY decline of ~36.25%, QoQ down ~28.94%.
- Q4 2024 net income: $21.983 million; net margin 3.98%; YoY decline of ~33.09%, QoQ decline of ~19.42%.
- Q4 2024 EPS (diluted): $0.82–0.83; YoY change ~-33.06%, QoQ ~-18.63%.
- Full-year FY2024: Net sales $2.23 billion, up 7.6%; gross profit $550.8 million, gross margin 24.8%; operating income $158.3 million; net earnings $115.8 million; diluted EPS $4.33; Adjusted EBITDA $190.4 million.
- Balance sheet: cash and cash equivalents $253 million; total assets $1.668 billion; total liabilities $766.7 million; stockholders’ equity $901.8 million.
- Cash flow: operating cash flow $248.4 million for the year; free cash flow ~$190.2 million (approx. from disclosed FCF). End-of-year cash >$250 million supports M&A and buybacks.
- Backlog and customers: annuity service backlog up ~50%, customer base grew by ~300 in the year.
- Capital allocation: new buyback authorization for 1.25 million shares; FY2025 guidance for revenue growth 3%–6% and adjusted EBITDA $200–$215 million.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
551.76M
12.11%
8.39%
Gross Profit
122.44M
-7.47%
-8.50%
Operating Income
27.04M
-36.25%
-28.94%
Net Income
21.98M
-33.09%
-19.42%
EPS
0.83
-33.06%
-18.63%
Key Financial Ratios
currentRatio
1.85
grossProfitMargin
22.2%
operatingProfitMargin
4.9%
netProfitMargin
3.98%
returnOnAssets
1.32%
returnOnEquity
2.44%
debtEquityRatio
0.06
operatingCashFlowPerShare
$3.94
freeCashFlowPerShare
$3.91
priceToBookRatio
2.27
priceEarningsRatio
23.27
Net Income vs. Revenue
Expense Breakdown
Management Commentary
- Strategy and growth engines: Management emphasized a continued shift toward Services, with managed services growth of 22% in both the quarterly and annual comparisons and Services gross margin expansion of +270 bp to 40.6% in Q4 2024 (Elaine Marion). This underpins a shift toward a recurring revenue model and higher lifetime value from enterprise relationships.
- AI acceleration: CEO Mark Marron highlighted strong interest in the AI Ignite program, framing it as an early-stage growth driver that aligns with ePlus’ core capabilities (infrastructure, security, network modernization, and related services). Envisioning sessions and data governance dialogue were cited as critical steps for customers transitioning to AI, with several use cases identified as potentially monetizable over time.
- Backlog and visibility: Annuity service backlog was up ~50%, providing line of sight to future annuity revenue streams, supporting revenue visibility and recurring profitability.
- Financing segment: Financing revenue rose 15.5% in Q4, aided by portfolio gains and transactional activity, illustrating the value of flexible payment solutions and vendor partnerships.
- Margin dynamics and mix: Q4 gross margins declined, largely due to a higher proportion of lower-margin enterprise product sales and mix shifts, while services margins improved (Professional services up 580 bp, Managed services up 30 bp). Management expects gross margins to normalize in fiscal 2025, targeting a ~24%–26% range.
- Cash generation and capital allocation: Year-end cash over $250 million, continued balance-sheet strength, and an expanded buyback plan (1.25 million shares) reflect a disciplined capital allocation framework.
- Cadence and seasonality: Management indicated Q2–Q3 should be stronger in revenue, with a back-loaded cadence typical of the segment, and noted that larger enterprise deals are being pursued, which may have longer sales cycles but potentially higher long-term margins.
- AI readiness and bookings: While AI opportunities are real, executives signaled early-stage monetization potential and acknowledged AI-related decision delays as customers assess governance, data readiness, and infrastructure requirements.
"We are pleased that our annuity service backlog is up approximately 50% and giving us line of sight to future annuity service revenue streams."
— Mark Marron
"Early innings for many in their AI journey, but it will be a growth driver for ePlus as it fits in our wheelhouse of infrastructure, security, network modernization, and the services required to implement these solutions."
— Mark Marron
Forward Guidance
ePlus released FY2025 guidance calling for net sales growth of 3%–6% and adjusted EBITDA of $200–$215 million. The company underscores several catalysts that could support this trajectory: (1) a normalization of gross margins back toward the historical 24%–26% range as the product mix stabilizes and inventory levels normalize; (2) continued strength in services (as evidenced by the 22% YoY growth in managed services in Q4 and a sizable annuity backlog), which should bolster recurring revenue and operating leverage; (3) AI Ignite and related AI-enabled solutions enterprises, which, although in early stages, offer a path to higher-margin services and cross-sell opportunities across the technology, security, and networking stack; (4) a substantial cash balance and a dedicated buyback program, plus ongoing acquisition opportunities to accelerate growth. Key risks include: a slower-than-expected enterprise IT capex cycle, potential margin pressure from further land-and-expand activity, ongoing integration costs from recent acquisitions, and macroeconomic headwinds impacting government and enterprise IT budgets. Investors should monitor: (i) the quarterly cadence of revenue and margins (Q2–Q4 normalization versus Q1 weakness), (ii) the progression and monetization of the AI Ignite initiatives, including any early wins or service engagements, (iii) backlog conversion rates and annuity service backlog trajectory, and (iv) success in M&A integration and the impact on operating leverage as scale increases.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
PLUS Focus
22.19%
4.90%
2.44%
23.27%
MODN
57.70%
-0.59%
0.55%
374.50%
PRGS
81.00%
12.70%
3.34%
38.40%
AGYS
59.70%
8.39%
1.25%
192.80%
SPNS
42.80%
15.40%
3.79%
23.76%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
With FY2025 guidance calling for 3%–6% net sales growth and $200–$215 million in adjusted EBITDA, ePlus appears positioned for modest topline expansion complemented by improving profitability as gross margins normalize and services scale. The company’s balance sheet strength, cash generation, and buyback program provide downside protection and optionality for M&A. The AI Ignite program represents a meaningful strategic growth option, potentially enabling higher-margin services and deeper cross-sell in enterprise accounts as customers navigate AI governance, data strategy, and implementation. The main catalysts are the continuation of service backlog conversion, stabilization of product margins, and disciplined capital allocation. Key monitoring points include the pace of AI-related revenue contribution, the cadence of enterprise deals affecting margins, and the effectiveness of cost control in supporting operating leverage. Overall, the combination of durable services traction, current liquidity, and an improving AI narrative supports a cautiously constructive long-term investment thesis, contingent on a stable macro environment and successful monetization of AI initiatives.
Key Investment Factors
Growth Potential
AI Ignite and broader AI initiatives, coupled with cloud, security, and networking modernization, position ePlus to expand high-margin services and cross-sell into large enterprise accounts. The 300-new-customer in 2024 figure suggests successful expansion and customer base diversification, enabling longer-term annuity revenue streams and improved lifetime value per account.
Profitability Risk
Key risks include a potential deceleration in enterprise IT demand, especially in high-margin product categories; integration risks from acquisitions; pressure on gross margins if enterprise deals continue to carry lower margins; execution risk in monetizing AI initiatives; competition from larger IT distributors and MSPs; macroeconomic volatility affecting government and corporate IT budgets.
Financial Position
Strong balance sheet with cash and cash equivalents around $253 million, a negative net debt position (net cash), and a robust cash flow profile (operating cash flow $248.4 million for FY2024). The company also maintains a sizable repurchase authorization and an ongoing capital allocation framework focused on growth investments and acquisitions, which supports value creation for shareholders.
SWOT Analysis
Strengths
Strong Services backlog with 50% growth signaling durable recurring revenue
Robust cash generation and balance sheet health (cash >$250M, net cash position)
Managed Services and Professional Services margins expanding (Service margins up 270 bp)
Strategic outperformance in a challenging demand environment with growth momentum in AI-related higher-value services
Solid capital allocation (buyback plan: up to 1.25M shares) and M&A flexibility
Weaknesses
Q4 2024 margins pressured by higher mix of lower-margin enterprise product sales
Near-term profitability pressure from higher headcount and acquisition-related amortization
Revenue mix sensitivity to enterprise land-and-expand cycles and longer sales cycles for large AI-enabled deals
Opportunities
AI Ignite program as a driver for cross-sell and expansion within large accounts
Growing annuity services backlog providing visibility into sustainable profitability
Expansion opportunities through acquisitions and targeted investments in AI, cloud, networking, and security
M&A flexibility supported by strong cash flow and buyback authorization
Threats
Macro demand volatility affecting IT budgets, especially in the enterprise and government sectors
Competition from larger distributors and MSPs potentially pressuring margins
Execution risk in monetizing AI initiatives and achieving projected service mix
Supply chain constraints or renewed constraints impacting inventory turns and working capital