ePlus inc. (PLUS) Earnings

Management highlights

### Strategic Transformation - Completed the divestiture of its domestic financing business earlier in FY26, transforming into a pure-play technology solutions and services provider to reallocate all resources to faster-growing IT markets and capture AI and digital transformation market share. - Maintained a strong balance sheet with $410.8 million in ending cash, providing flexibility for organic investment, strategic acquisitions, and shareholder capital return. - The board approved an 8% increase in the quarterly dividend to 27 cents per share, reflecting long-term confidence in the business. 90,000 shares were repurchased in Q4 as part of the capital return program. Financial Performance - Full year FY26 delivered 22.1% net sales growth to $2.4 billion and 49.5% adjusted EBITDA growth to $204.8 million, with strong operating leverage: headcount remained flat while operating expenses grew only 9.1% YoY. Diluted EPS from continuing operations grew 64% YoY for the full year, and 53% YoY in Q4. - Record full year gross billings of $3.8 billion, with growth being largely organic and broad-based across core focus areas (AI, cloud, data center, networking, security) and all customer segments from mid-market to large enterprise. - Achieved a world-class net promoter score of 74, placing E-plus in the top quartile of the IT services industry (average industry score is 55), reflecting strong customer loyalty and satisfaction. Operational Milestones - Received two industry awards: Dell Channel Strategic Impact Partner of the Year and Digital Realty 2025 America's Partner of the Year, the latter catalyzed by the company's AI experience center inside Digital Realty's Innovation Lab that enables hands-on demonstrations of full advanced AI infrastructure stacks. - Expanded service offerings, adding new managed collaboration capabilities for Cisco, Zoom, and Microsoft, and growing storage as a service and backup as a service managed offerings with multi-year customer wins. - Continued to broaden core portfolio offerings by adding professional and managed services, and building out higher-margin consultative services to support customers with holistic AI and digital transformation initiatives.

Guidance

• Management introduced FY2027 guidance expecting net sales, gross profit, and adjusted EBITDA to all grow in the mid-single digit range. The guidance incorporates a conservative outlook given the very strong 22% top-line and nearly 50% adjusted EBITDA growth comparison from FY2026. • Management expects delayed professional services projects from Q4 FY26 to normalize in FY2027, with early positive progress already observed.

Segment performance

Product Segment: Q4 FY26 product revenue grew 25% year-over-year to $466.2 million, and full year product sales grew 23.7% to nearly $2 billion. Product segment gross margin was 22.2% in Q4, down from 24.7% YoY due to a lower proportion of net-basis revenue and competitive margins on large enterprise sales. Product revenue made up 80.9% of Q4 consolidated net sales, and 75% of full year FY26 net sales. Security, a product sub-segment, achieved full year gross billings of $842 million, growing 23.1% YoY, and accounted for 22% of total FY26 gross billings. Services Segment: Q4 FY26 services revenue grew 4.9% YoY to $110 million, and full year services revenue grew 15.6% YoY. Services made up 19.1% of Q4 consolidated net sales, and 25% of full year FY26 net sales. - Professional Services: Q4 revenue grew 2% YoY to $61.3 million, with project timing delays among retail customers dragging down growth. Full year revenue grew 19% YoY, supported by the acquisition of Bailiwick services. Q4 gross margin was 38.3%, up 240 basis points YoY from improved project mix, while full year margins were modestly lower due to Bailiwick's different margin profile. - Managed Services: Q4 revenue grew 9.3% YoY to $48.7 million, and full year revenue grew approximately 11% YoY. Q4 gross margin was 30.5%, up from 29.1% YoY, reflecting continued growth in recurring revenue from multi-year customer engagements.

Risks & headwinds

• Ongoing worldwide memory chip shortage creates uncertainty around order fulfillment timelines, as lead times are outside of the company's control, even as open orders remain up. • Geopolitical instability creates unquantifiable headwinds that are outside of the company's control, factored into conservative guidance. • Current competitive pricing for large enterprise sales is pressuring product margins in the near term. There is uncertainty around the persistence of this competitive environment, though management expects margin expansion over time. • The fair value adjustment on contingent consideration from the domestic financing business divestiture created a $3 million one-time charge in Q4 FY26, representing residual financial risk from the completed transaction.

Analyst Q&A

• Q: The guidance assumes a conservative outlook amid noted potential headwinds. What framework was used to set guidance, and where are the conservative vs ambitious assumptions? /

  A: Management built in caution primarily because FY2026 posted very strong 20%+ top-line growth and nearly 50% bottom-line growth, creating a difficult year-over-year comparison. Memory chip shortages and uncertain lead times (which the company cannot control) also contributed to a conservative stance. Open orders are actually up, an indicator of healthy underlying demand, but the unpredictable supply landscape and ongoing geopolitical unrest justified a more tempered outlook. The company's AI strategy is already delivering visible progress on new opportunities, but near-term external risks pushed management to guide for more modest growth.

• Q: The Q4 margin impact from competitive pricing on large enterprise sales – is this a permanent shift, or can margins expand with these customers over time? /

  A: Management expects there is significant opportunity for margin expansion over time, following the company's core 'land and expand' strategy. As E-plus delivers tangible value and adds higher-margin service engagements to large enterprise clients, margins are expected to improve. Management is optimistic that current compressed margins will not persist indefinitely as relationships deepen.