Investor Presentation February eplus inc.

Transcription

1 Investor Presentation February eplus inc. I 1

2 Safe Harbor Statement Statements in this presentation that are not historical facts may be deemed to be "forward-looking statements." Actual and anticipated future results may vary materially due to certain risks and uncertainties, including, without limitation, possible adverse effects resulting from financial market disruption and fluctuations in foreign currency rates, and general slowdown of the U.S. economy such as our current and potential customers' delaying or reducing technology purchases or put downward pressure on prices, increasing credit risk associated with our customers and vendors, reduction of vendor incentive programs, the possibility of additional goodwill impairment charges, and restrictions on our access to capital necessary to fund our operations; significant adverse changes in, reductions in, or losses of relationships with major customers or vendors; our ability to implement comprehensive plans to achieve customer account coverage, cost containment, asset rationalization, systems integration and other key strategies; our ability to secure our electronic and other confidential information or that of our customers or partners; changes to our senior management team and/or failure to implement succession plans; the demand for and acceptance of, our products and services; our ability to adapt our services to meet changes in market developments; our ability to adapt to changes in the IT industry and/or rapid change in product standards; our ability to hire and retain sufficient personnel; our ability to realize our investment in leased equipment; our ability to protect our intellectual property; our ability to consummate and integrate acquisitions; the creditworthiness of our customers; our ability to raise capital and obtain non-recourse financing for our transactions; our ability to reserve adequately for credit losses; the impact of competition in our markets; the possibility of defects in our products or catalog content data; and other risks or uncertainties detailed in the Company s Annual Report on Form 10-K for the fiscal year ended March 31, 2016 and other periodic filings with the Securities and Exchange Commission and available at the SEC s website at We wish to caution you that these factors could affect our financial performance and could cause actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements. All information set forth in this presentation is current as of the date of this presentation and eplus undertakes no duty or obligation to update this information eplus inc. I 2

3 Mark Marron Chief Executive Officer 2017 eplus inc. I 3

4 eplus at a Glance + Leading provider of technology solutions focused on cloud, data center, security, infrastructure, and collaboration solutions + Technology partners include Cisco, HPE, NetApp, Dell/EMC and VMware + FY16 net sales: $1.2 billion 10% CAGR FY12-FY16 + FY16 non-gaap earnings per share: $6.33 * 22% CAGR on Non-GAAP EPS FY12-FY16 + Headquarters: Herndon, Virginia + Presence in 32 states and the U.K. + 1,164 employees as of 12/31/2016 * See Non-GAAP Financial Information eplus inc. I 4

5 Experienced Leadership Team, Strong Alignment of Interest Phil Norton Executive Chairman 22 Years with eplus + 45 Years of Experience Mark Marron Chief Executive Officer 11 Years with eplus + 31 Years of Experience Elaine Marion Chief Financial Officer 18 Years with eplus + 25 Years of Experience Dan Farrell Senior Vice President of National Professional Services 6 Years with eplus + 31 Years of Experience Kley Parkhurst Senior Vice President, Corporate Development 25 Years with eplus + 29 Years of Experience Darren Raiguel Executive Vice President, Technology Sales 19 Years with eplus + 24 Years of Experience Mark Melvin Chief Technology Officer 10 Years with eplus + 33 Years of Experience Steve Mencarini Senior Vice President of Business Operations 19 Years with eplus + 36 Years of Experience Erica Stoecker General Counsel 15 Years with eplus + 20 Years of Experience 2017 eplus inc. I 5

6 Well Positioned within the IT Ecosystem eplus range of complex solutions and services place it at the high end of the IT market Vendors 25 65% GM Distributors VARs IT Solutions Services/Integrators 5-13% GM 13-16% GM 17 23% GM 29 32% GM GROSS MARGIN 1 INCREASING CUSTOMER VALUE AND VENDOR MARGINS 1 Based on approximate LTM GAAP gross margin DISTRIBUTION FOCUSED SERVICE ORIENTED 2017 eplus inc. I 6

7 Our footprint means we are never far away. 30+ office locations across the U.S. and in London Six integration centers throughout the U.S. Three Managed Service Centers 300+ technical resources certified by the top IT manufacturers in the world 2017ePlus eplusinc. inc. I

8 Targeted M&A Strategy with Track Records of Success + December 2015 ($16.6 million) + August 2014 ($10.5 million) + November 2013 ($2.8 million) + December 2016, division of CCI ($13.1 million) + Expand security offerings + UK location to serve UK and global customers + Sacramento Cisco VAR, largest Cisco VAR to State + Grow western SLED business + Rochester area reseller with storage expertise + Strengthened position as leading US FlexPod reseller + Minneapolis Cisco VAR + New geography and customers + February 2012 ($7.0 million) + January 2012 ($2.2 million) + June 2011 ($5.0 million) + SoCal Cisco reseller + Northern New England + Security expertise and Security Operations Center (SOC) + Acquired new customers and west coast NOC + Gained state contracts and Cisco Call Center Express expertise + Acquired nationwide security sales capabilities Note: amounts in parenthesis represent purchase price eplus inc. I 8

9 The End Goal: Driving Business Outcomes From legacy IT to transformational technologies, our consultative approach focuses on driving costeffective outcomes to move your business forward, securely. We are vendor agnostic and have a broad range of engineering credentials in all requisite technologies eplus inc. I 9

10 We re experts in the most End-to-End Suite of Customized Solutions critical technologies that run our customers business. CLOUD MOBILITY & COLLABORATION + Private, Hybrid, and Public + Mobility and Wireless + Cloud as a Service + Unified Communications and + Co-location and Interconnection Web Conferencing + Connectivity & Mobility + Advanced Audio & Video Optimization + Workstream Communications and Collaboration SECURITY + Strategy & Risk Management IT INFRASTRUCTURE + Architecture & Design + Network and SDN + Managed Security Services + End User Computing + Internet of Things DATA CENTER + Client Devices, Peripherals and + Hybrid Cloud Accessories + Virtualization & Compute + Storage & Converged Infrastructure 2017 eplus 2017 eplus inc. inc. I 10

11 Expanding Professional and Managed Services Assessment Led, Consultative Approach: Focus on Customer Business Outcomes SERVICE HIGHLIGHTS + Expanded services headcount and offerings + Grew managed service center locations from 1 to 3 + Drove consistent growth in services revenue + Generated recurring revenue KEY SERVICES + Enhanced Maintenance Support + Managed Services + Staffing + Executive Services Portfolio SERVICES REVENUE GENERATES A HIGHER GROSS MARGIN 2017 eplus inc. I 11

12 Independent Provider with Deep Strategic Relationships SELECTED STRATEGIC PARTNERS + COMPLEMENTED BY EMERGING ADDITIONAL VENDORS RELATIONSHIPS + Excellent channel partner for eplus, representing 49% of technology sales 1 + Networking, security, converged infrastructure + eplus engineers are trained in 26 different Cisco product lines + Converged infrastructure, enterprise storage, networking and virtualization + Cloud, server and storage solutions + NetApp Star Partner and Professional Services Partner + Network storage (including All Flash Data Storage arrays) and services focused applications, file server consolidation, private and public cloud SECURITY STORAGE + eplus professionals maintain a variety of EMC engineering certifications + Networking storage and services + Virtual infrastructure solutions BIG DATA NETWORK 1 Based on the year ended 3/31/ eplus inc. I 12

13 STATE & LOCAL GOVERNMENT, EDUCATION TECHNOLOGY HEALTHCARE FINANCIAL SERVICES TELECOM, MEDIA & ENTERTAINMENT OTHER 2017 eplus inc. I 13

14 Broad and Diverse Customer Base Net Sales TTM 3QFY Focused on enterprise and middle-market customers Other 18% Technology 22% + > 3,100 existing customers (As of 3/31/2016) + No customers in excess of 10% of net sales in FY16 Healthcare 11% Financial Services 12% Telecom, Media & Entertainment 16% State & Local Government & Educational Institutions 21% + Broad-based services capabilities and multi-vendor relationships driving customer acquisition + Trusted IT advisor with vendor-agnostic approach + Acquisitions to further broad customer base and solutions offerings 1 Trailing twelve months ended 12/31/ eplus inc. I 14

15 Elaine Marion Chief Financial Officer 2017 eplus inc. I 15

16 Annual Financial Results: FYE March 31 / Trailing twelve months ended December 31, unaudited / : Technology : Financing Net Sales ($mm) + Operations are conducted through two segments. The technology segment sells information technology products, software and services, while the financing segment provides lease and financing solutions. + Over the last five years, net sales and adjusted gross billings of product and services have increased at a compound annual rate of 10% and 12%, respectively. + The majority of our net sales are derived from our technology segment, representing 97% of revenues in FY16. $1,400 $1,200 $1,000 $800 $600 $1,800 $1,500 $1,200 $900 $600 $1,296 $1,204 $31 $1,172 $1,143 $35 $36 $1,058 $35 $983 $36 $40 $1,265 $826 $1,169 $1,108 $1,136 $33 $1,022 $943 $793 FY12 FY13 FY14 FY15 FY16 TTM 3Q16 TTM 3Q17 Adjusted Gross Billings of Product and Services * ($mm) $1,716 $1,556 $1,435 $1,497 $1,276 $1,164 $978 FY12 FY13 FY14 FY15 FY16 TTM 3Q16 TTM 3Q17 * See Non-GAAP Financial Information 2017 eplus inc. I 16

17 Annual Financial Results: FYE March 31 / Trailing twelve months ended December 31, unaudited / : Technology : Financing Gross Profit ($mm) + Consolidated gross profit increased at a compounded annual rate of 11% from FY12 to FY16, driven by our technology segment, which represented 91% of our total gross profit in FY16. + Gross margin on the sale of product and services $300 $250 $200 $150 $100 $290 $262 $26 $254 $245 $25 $25 $217 $24 $205 $23 $172 $29 $264 $25 $221 $237 $229 $176 $194 $147 FY12 FY13 FY14 FY15 FY16 TTM 3Q16 TTM 3Q17 has increased from 17.9% in FY12 to 19.9% in Gross Margin, Product and Services FY16, as services capabilities continued to expand. 21.0% 20.0% 19.4% 19.9% 19.7% 20.6% 19.0% 18.0% 17.9% 18.0% 18.3% 17.0% FY12 FY13 FY14 FY15 FY16 TTM 3Q16 TTM 3Q eplus inc. I 17

18 Annual Financial Results: FYE March 31 / Trailing twelve months ended December 31, unaudited Net Earnings ($mm) + From FY 12 to FY16, net earnings increased at a compounded annual rate of 18% as a result of focusing on revenue growth and controlling overhead expenses. $55 $45 $35 $35 $35 $46 $45 $44 $50 + Diluted net earnings per share increased 22% over the last four years. + FY15 included $7.2 million in other income from the retirement of a liability and a claim in a class action lawsuit. $25 $15 $7.50 $6.00 $4.50 $3.00 $23 FY12 FY13 FY14 FY15 FY16 TTM 3Q16 TTM 3Q17 Net Earnings Per Common Share - Diluted $7.09 $6.19 $6.09 $5.98 $4.32 $4.37 $2.79 $1.50 FY12 FY13 FY14 FY15 FY16 TTM 3Q16 TTM 3Q eplus inc. I 18

19 Annual Financial Results (cont): FYE March 31 / Trailing twelve months ended December 31, unaudited Adjusted EBITDA * ($mm) + Adjusted EBITDA represents net earnings before interest expense, depreciation and amortization, provision for income taxes, and other income. Interest on notes payable and depreciation expense presented within cost of sales represent operating expenses of financing segment, as such they are not added back to net earnings. + Non-GAAP net earnings per common share diluted excluded acquisition related amortization expense and other income, net of tax. + Over the last four years, adjusted EBITDA increased at a compounded annual rate of 19%, and non-gaap net earnings per share increased 22%. $100 $80 $60 $40 $20 $7.50 $6.00 $4.50 $3.00 $91 $75 $81 $79 $61 $63 $41 FY12 FY13 FY14 FY15 FY16 TTM 3Q16 TTM 3Q17 Non-GAAP Net Earnings Per Common Share - Diluted * $7.38 $6.33 $6.17 $5.75 $4.40 $4.45 $2.82 $1.50 FY12 FY13 FY14 FY15 FY16 TTM 3Q16 TTM 3Q17 * See Non-GAAP Financial Information 2017 eplus inc. I 19

20 Results for Q3 FY17: Net Sales ($mm) : Technology : Financing Gross Profit ($mm) $340.0 $326.7 $80.0 $73.8 $320.0 $8.4 $70.0 $64.1 $7.2 $300.0 $280.0 $298.6 $9.3 $289.3 $318.3 $60.0 $50.0 $6.2 $57.9 $66.6 $ Q16 3Q17 Adjusted Gross Billings of Product and Services * ($mm) $40.0 3Q16 3Q17 Gross Margin, Product and Services $450.0 $ % 20.7% $400.0 $ % 19.6% $ % $ % $ Q16 3Q % 3Q16 3Q17 * See Non-GAAP Financial Information 2017 eplus inc. I 20

21 Results for Q3 FY17: Net Earnings ($mm) Net Earnings Per Common Share - Diluted $14.0 $12.0 $10.0 $10.3 $12.6 $2.00 $1.75 $1.50 $1.40 $1.81 $8.0 $1.25 $6.0 3Q16 Adjusted EBITDA * ($mm) 3Q17 $1.00 3Q16 3Q17 Non-GAAP Net Earnings Per Common Share - Diluted * $25.0 $23.2 $2.00 $1.91 $20.0 $19.0 $1.75 $15.0 $1.50 $1.46 $10.0 $1.25 $5.0 3Q16 3Q17 $1.00 3Q16 3Q17 * See Non-GAAP Financial Information 2017 eplus inc. I 21

22 Results for Q3 FY17 YTD: Net Sales ($mm) : Technology : Financing Gross Profit ($mm) $1,100.0 $950.0 $800.0 $650.0 $904.8 $27.9 $876.9 $996.6 $24.1 $972.5 $240.0 $210.0 $180.0 $150.0 $195.1 $18.7 $176.4 $223.4 $20.7 $202.7 $ Q16 YTD 3Q17 YTD $ Q16 YTD 3Q17 YTD Adjusted Gross Billings of Product and Services * ($mm) Gross Margin, Product and Services $1,500.0 $1,300.0 $1,157.3 $1, % 20.0% 19.7% 20.5% $1, % $ % $ Q16 YTD 3Q17 YTD 17.0% 3Q16 YTD 3Q17 YTD * See Non-GAAP Financial Information 2017 eplus inc. I 22

23 Results for Q3 FY17 YTD: Net Earnings ($mm) Net Earnings Per Common Share - Diluted $45.0 $40.0 $40.1 $6.00 $5.00 $4.74 $5.71 $35.0 $34.8 $4.00 $30.0 $3.00 $25.0 $75.0 3Q16 YTD 3Q17 YTD Adjusted EBITDA * ($mm) $72.4 $2.00 3Q16 YTD 3Q17 YTD Non-GAAP Net Earnings Per Common Share - Diluted * $5.90 $6.00 $65.0 $63.1 $5.00 $4.89 $55.0 $4.00 $45.0 $3.00 $35.0 3Q16 YTD 3Q17 YTD $2.00 3Q16 YTD 3Q17 YTD * See Non-GAAP Financial Information 2017 eplus inc. I 23

24 Growing Productivity While Strategically Expanding Workforce Employee Headcount Growth by Function Net Sales Per Sales & Marketing Employee ($mm) 1,200 1, , $2.8 $2.6 $2.4 $2.2 $2.3 $ $2.0 FY12 FY Net Sales Per Employee ($mm) $ $1.2 $ /31/2012 3/31/2016 $1.0 $1.0 Sales & Marketing Professional Services Administration $0.8 IT & Development Executive $0.6 FY12 FY eplus inc. I 24

25 Strong Balance Sheet: + $70 million in cash and equivalents + $250 million financing facility with Wells Fargo Commercial Distribution Finance, LLC + Financing portfolio of $140 million as of 12/31/2016, representing investments in leases and notes + Portfolio monetization can be utilized to raise additional cash + Minimal capex + ROIC 12.9% for the trailing twelve months ended 12/31/ $ in millions Assets December 31, 2016 March 31, 2016 Cash and equivalents $ 70 $ 95 Accounts receivable Inventory Financing investments Goodwill & other intangibles Property & equipment, deferred costs and other Total assets $ 736 $ 616 Liabilities Accounts payable $ 242 $ 199 Recourse notes payable 2 3 Non-recourse notes payable Other liabilities Total liabilities $ 402 $ 297 Shareholders' Equity Equity Total liabilities & equity $ 736 $ ROIC = Operating Income x (1-40%) / (BV of debt + equity) 2017 eplus inc. I 25

26 Appendix eplus. Where Technology Means More eplus inc. I 26

27 Non-GAAP Financial Information: $ in thousands, except per share information Year Ended March 31, TTM Ended December 31, Sales of product and services, as reported $ 1,163,337 $ 1,100,884 $ 1,013,374 $ 936,228 $ 784,951 $ 1,260,322 $ 1,129,079 Costs incurred related to sales of third party services 393, , , , , , ,329 Adjusted gross billings of product and services $ 1,556,463 $ 1,435,039 $ 1,276,133 $ 1,163,577 $ 978,180 $ 1,716,324 $ 1,497,408 GAAP: Net earnings $ 44,747 $ 45,840 $ 35,273 $ 34,830 $ 23,367 $ 50,023 $ 43,700 Plus: Provision for income taxes 31,004 32,473 24,825 23,915 16,207 33,732 30,752 Plus: Depreciation and amortization [1] 5,548 4,333 2,792 2,389 1,665 7,217 4,934 Less: Other income [2] - (7,603) (380) - Non-GAAP: Adjusted EBITDA $ 81,299 $ 75,043 $ 62,890 $ 61,134 $ 41,239 $ 90,592 $ 79,386 Non-GAAP: Adjusted EBITDA margin 6.8% 6.6% 5.9% 6.2% 5.0% 7.0% 6.8% GAAP: Earnings before tax $ 75,751 $ 78,313 $ 60,098 $ 58,745 $ 39,574 $ 83,755 $ 74,452 Plus: Acquisition related amortizatoin expense [3] 2,917 1,888 1,100 1, ,222 2,361 Less: Other income [2] - (7,603) (380) - Non-GAAP: Earnings before provision for income taxes 78,668 72,598 61,198 59,745 39,914 87,597 76,813 Non-GAAP: Provision for income taxes [4] 32,188 30,069 25,283 24,322 16,346 35,574 31,728 Non-GAAP: Net earnings $ 46,480 $ 42,529 $ 35,915 $ 35,423 $ 23,568 $ 52,023 $ 45,085 GAAP: Net earnings per common share diluted $6.09 $6.19 $4.37 $4.32 $2.79 $7.09 $5.98 Non-GAAP: Net earnings per common share diluted $6.33 $5.75 $4.45 $4.40 $2.82 $7.38 $6.17 [1] Amount consists of depreciation and amortization for assets used internally. [3] Amounts consists of amortization of intangible assets from acquired businesses. [2] Gain on retirement of a liability and class action claims. [4] Non-GAAP provision for income taxes is calculated at the same effective tax rate as GAAP earnings eplus inc. I 27

28 Non-GAAP Financial Information: $ in thousands, except per share information Three Months Ended December 31, Nine Months Ended December 31, Sales of product and services, as reported $ 317,391 $ 287,859 $ 968,799 $ 871,814 Costs incurred related to sales of third party services 115, , , ,513 Adjusted gross billings of product and services $ 432,407 $ 393,922 $ 1,317,188 $ 1,157,327 GAAP: Net earnings $ 12,620 $ 10,297 $ 40,066 $ 34,790 Plus: Provision for income taxes 8,687 7,348 27,310 24,582 Plus: Depreciation and amortization [1] 1,910 1,331 5,408 3,739 Less: Other income [2] - - (380) - Non-GAAP: Adjusted EBITDA $ 23,217 $ 18,976 $ 72,404 $ 63,111 Non-GAAP: Adjusted EBITDA margin 7.1% 6.4% 7.3% 7.0% GAAP: Earnings before tax $ 21,307 $ 17,645 $ 67,376 $ 59,372 Plus: Acquisition related amortizatoin expense [3] 1, ,098 1,793 Less: Other income [2] - - (380) - Non-GAAP: Earnings before provision for income taxes 22,342 18,325 70,094 61,165 Non-GAAP: Provision for income taxes [4] 9,048 7,631 28,711 25,325 Non-GAAP: Net earnings $ 13,294 $ 10,694 $ 41,383 $ 35,840 GAAP: Net earnings per common share diluted $1.81 $1.40 $5.71 $4.74 Non-GAAP: Net earnings per common share diluted $1.91 $1.46 $5.90 $4.89 [1] Amount consists of depreciation and amortization for assets used internally. [4] Non-GAAP provision for income taxes is calculated based on the effective tax rate for the non-gaap adjustments. [2] Gain on a class action claim during the nine months ended December 31, For comparative purpose, the non-gaap provision for income taxes for the three and nine months ended December 31, [3] Amounts consists of amortization of intangible assets from acquired businesses excludes the tax benefit of $6 thousand and $514 thousand, respectively, associated with adopting the stock-based compensation accounting standard eplus inc. I 28

29 The image part with relationship ID rid10 was not found in the file. Investor Relations Kley Parkhurst, SVP (703) eplus inc Dulles Technology Drive, Herndon, VA (703) / eplus.com 2017 eplus inc. All rights reserved. eplus, the eplus logo, and all referenced product names are trademarks or registered trademarks of eplus inc eplus inc. I 29 All other company names, product images and products mentioned herein are trademarks or registered trademarks of their respective companies.