Executive Summary
ePlus reported a challenging Q2 FY2025 on a revenue basis, with consolidated net sales of $515.2 million, down 12.3% year over year from $587.6 million, as hardware product demand softened. The drop was partly offset by a pronounced shift toward higher-margin services, with service revenues up 46% year over year to $104 million and managed services bookings up 28%, supporting stronger gross profit growth and margin expansion. The quarter featured meaningful transition dynamics including a higher mix of netted-down revenues (net revenues recognized on a net basis) and ongoing investments in AI, cloud, and security capabilities, complemented by the Bailiwick acquisition completed near quarter-end. Gross profit rose 2.5% YoY to $148 million, driving a consolidated gross margin of 28.7% (up 410 basis points from the prior year). Operating income declined modestly to $42.7 million (-4.8% YoY), and net earnings were $31.3 million ($1.17 per share), down 4.1% YoY. Non-GAAP diluted EPS decreased to $1.36. Consolidated adjusted EBITDA totaled $52.1 million, marginally below the prior-year period. Management reiterated disciplined capital allocation, signaling continued share repurchases and accretive organic and inorganic growth, with a 2025 adjusted EBITDA target range of $195–$205 million and net sales expected to be similar to the prior year, reflecting a difficult year-over-year product sales comparison and ongoing gross-to-net transition. Management cautioned that AI initiatives can elongate sales cycles but view AI as a long‑term growth driver, and noted Bailiwick’s contribution would be primarily to professional services revenue with some incremental amortization in the near term.
Key Performance Indicators
QoQ: -72.76% | YoY:-74.81%
Key Insights
Revenue: $515.2M (Q2 2025) vs $587.6M (Q2 2024); YoY change: -12.3%. QoQ data not disclosed for the quarter.
Gross profit: $148.0M, up 2.5% YoY; Gross margin: 28.7% (vs 24.6% prior year) — margin expansion driven by services mix, higher product margins, and Bailiwick financing contributions.
Operating income: $42.7M, down 4.8% YoY.
Net income: $31.3M, down 4.1% YoY; diluted EPS: $1.17.
Non-GAAP diluted EPS: $1.36.
Adjusted EBITDA: $52.1M (vs $53.6M prior year).
Service revenue: up 46% YoY to $...
Financial Highlights
Revenue: $515.2M (Q2 2025) vs $587.6M (Q2 2024); YoY change: -12.3%. QoQ data not disclosed for the quarter.
Gross profit: $148.0M, up 2.5% YoY; Gross margin: 28.7% (vs 24.6% prior year) — margin expansion driven by services mix, higher product margins, and Bailiwick financing contributions.
Operating income: $42.7M, down 4.8% YoY.
Net income: $31.3M, down 4.1% YoY; diluted EPS: $1.17.
Non-GAAP diluted EPS: $1.36.
Adjusted EBITDA: $52.1M (vs $53.6M prior year).
Service revenue: up 46% YoY to $104M; managed services: up 28% YoY; trailing 12-month managed services gross billings up 48%.
Financing net sales: $21.9M (vs $15.7M prior year).
Headcount: 2,323 at quarter end (up 446 YoY, including Bailiwick and PEAK acquisitions).
Cash flow: operating cash flow for the quarter was negative $21.6M; year-to-date OCF was $75.5M; cash position end of quarter $187.5M; inventory $93.9M; cash conversion cycle 32 days (vs 51 days prior year).
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
147.99M |
-74.81% |
-72.76% |
| Gross Profit |
147.99M |
2.51% |
15.29% |
| Operating Income |
42.72M |
-4.78% |
20.44% |
| Net Income |
31.31M |
-4.15% |
14.53% |
| EPS |
1.18 |
-4.07% |
14.56% |
Key Financial Ratios
operatingProfitMargin
28.9%
operatingCashFlowPerShare
$-0.81
freeCashFlowPerShare
$-0.86
Management Commentary
Strategic execution and AI focus: Management highlighted the Bailiwick acquisition expanding AI-enabled IT integration, digital signage, and edge-focused services, plus the AI Ignite program and the AI experience center with Digital Realty to demonstrate AI use cases and accelerate customer AI journeys.
Operational shifts and market conditions: Management noted a broader IT market transformation toward ratable revenues and netted-down revenues, with a softening demand backdrop affecting hardware/product sales, despite strong services growth. The company cited a tough comparison from the prior year’s supply-chain easing and a higher gross-to-net adjustment for product billings (≈940 basis points denoting roughly $60M of product revenue impact).
Acquisition integration and near-term profitability: Bailiwick contributed modestly in Q2 (post-acquisition), with OpEx expected to rise in Q3 due to full-quarter headcount and acquisition-related expenses; the company expects Bailiwick to mainly lift professional services revenue and to contribute to margin expansion over time as cross-selling grows.
Outlook and guidance: The company reaffirmed a 2025 adjusted EBITDA range of $195–$205 million and guided net sales to be “similar to last fiscal year,” acknowledging the macro and product-pressured environment while emphasizing organic and inorganic growth levers and capital returns.
"We are encouraged by the progress we have made against our artificial intelligence initiatives and the interest we are seeing from customers for our AI Ignite program."
— Mark Marron
"It's important to note for modeling purposes, our acquisition of Bailiwick will primarily contribute to professional services revenue, not product sales, and will also increase acquisition-related amortization expense for the second half of the fiscal year."
— Elaine Marion
Forward Guidance
Management is guiding for: 1) Adjusted EBITDA in the range of $195–$205 million for fiscal 2025; 2) Net sales expected to be in line with the prior year, reflecting the difficult hardware cycle and ongoing gross-to-net normalization; 3) Continued growth in services and higher-margin offerings (AI, security, cloud, data and services) supported by Bailiwick integration and the AI Ignite initiatives. 4) OpEx will rise in the near term, particularly in Q3, due to the full-quarter Bailiwick headcount and integration costs. 5) Investors should monitor: AI-related sales cycle durations,ability to cross-sell Bailiwick services into existing customer bases, the pace of enterprise IT refresh cycles, gross-to-net normalization, procurement and tariff dynamics, and the company’s ability to sustain higher services mix without pressuring profitability. Overall, the midpoint of the EBITDA guidance implies a cautious but stable profitability trajectory amid a multiyear AI and security services ramp.