In This Article:
Release Date: November 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
-
ePlus Inc (NASDAQ:PLUS) expanded its solution and service offerings with the acquisition of Bailiwick, enhancing its IT integration services.
-
Service revenues grew significantly by 46% year-on-year, reaching a new high of $104 million in the quarter.
-
Managed services revenue increased by 28% year-over-year, contributing to predictable and consistent revenue streams.
-
Gross profit increased by 2.5% despite a decline in net sales, driven by higher product margins and strong services performance.
-
The company's security practice saw growth, with security gross billings up 15.8% for the quarter.
Negative Points
-
Total net sales decreased by 12.3% due to a decline in product sales, which offset the growth in services revenues.
-
SG&A expenses rose year-on-year, primarily due to increased headcount and acquisition-related costs.
-
The company faced a tough comparison against the prior year, which benefited from an easing supply chain.
-
There was a delay or pause in rolling out new technologies for certain enterprise customers, impacting demand.
-
Consolidated net earnings decreased by 4.1% from the prior year quarter, reflecting challenges in product sales.
Q & A Highlights
Q: Can you provide insights on the product demand and the impact of last year's technology flush on your business? A: Mark Maron, CEO, explained that there is ongoing economic uncertainty affecting product demand. The company faced a tough comparison with last year's high product sales, which were up over 23% in Q2. Additionally, there is a pause in enterprise segment demand, partly due to customers evaluating AI solutions. The gross to net adjustment also impacted product sales significantly.
Q: How much revenue is expected from the Bailiwick acquisition, and how does its growth rate and margin profile compare to ePlus? A: Mark Maron, CEO, stated that Bailiwick's margin profile aligns with ePlus. It was immaterial in Q2, but approximately $85 million is expected in the second half. Bailiwick expands offerings in the core to edge space and brings enterprise customers for potential cross-selling.
Q: What is the expected impact of the Bailiwick acquisition on operating expenses? A: Mark Maron, CEO, indicated that operating expenses will increase in Q3 due to the full quarter of headcount and acquisition-related expenses from Bailiwick.
Q: How should we think about gross margin trends in the upcoming quarters? A: Mark Maron, CEO, noted that gross margins were up significantly this quarter, but they are expected to be tighter in the second half as both product sales and services increase.