ePlus inc. Q3 FY2026 earnings call

• Momentum in AI, cloud, networking, and security is driving growth and market share gain.
• Growth across all customer size segments, particularly mid-market and enterprise.
• Achieved operating leverage with workforce alignment and expense management.
• Board approved a quarterly dividend of $0.25 per common share; repurchased over 200,000 shares during the quarter.
• Fiscal year 2026 net sales up 22%, adjusted EBITDA up 55% year-to-date.
• Services play an important role, with continued investment in managed services for recurring revenue.
• Strong balance sheet provides flexibility for organic growth, acquisitions, and shareholder returns.

Net sales grew 24.6% to $615 million. Product sales increased 32.2% year over year to $501.9 million (81.6% of net sales), led by data center, cloud, networking, and security. Services were flat, with managed services up 10.5% and professional services down 7.8% due to retail customer project delays. Third quarter consolidated gross profit was $158.7 million, up 26.8%, with consolidated gross margin at 25.8%. Product segment gross margin expanded to 23.8%, professional services margin was 39.2%, and managed services margin was 29%.

• Raised full-year net sales guidance to 20%-22% growth from prior mid-teens.
• Gross profit guidance increased to 19%-21% growth from prior mid-teens.
• Adjusted EBITDA guidance raised to 41%-43% growth from prior levels.
• Noted industry-wide memory shortage as a near-term risk, but positioned to manage through it with diversified suppliers.

• Industry-wide memory shortage causing supply squeeze and rapid price increases, which could impact customer deployments or timing.

Q: Could you fill in on the nature of outsized projects from enterprise customers and their impact on future quarters?

A: There were a few large enterprise customers with big quarters in Q3; not expecting major slowdown in Q4 but won't replicate, which is reflected in guidance.

Q: On professional services delays from retail customers, are these push outs to fiscal 2027 and is it widespread?

A: Expect delays to materialize in fiscal 2027, due to a few retail customers, not widespread, and managed services are growing.

Q: On inventory build, when to expect delivery against inventory?

A: Inventory increased due to demand, projects fluctuating, expect inventory level to be higher in next several quarters, and AI and inventory pick up at year-end.

Q: How important is integrated solutions across AI, cloud, networking for growth and market share?

A: It's a differentiator, as customers look for strategic partners to provide integrated solutions, similar to past convergent solutions success.