AP NEWS

ePlus Reports First Quarter Financial Results

August 8, 2018

Quarterly Highlights:

-- Net sales decreased 4.5% to $356.5 million; technology segment net sales decreased 4.4% to $346.9 million. -- Adjusted gross billings decreased 1.1% to $482.3 million. -- Consolidated gross profit increased 4.0% to $80.7 million; consolidated gross margin was 22.6%, an increase of 180 basis points. -- Net earnings increased 13.8% to $15.3 million. -- Adjusted EBITDA increased 3.9% to $25.4 million. -- Diluted earnings per share increased 16.7% to $1.12. Non-GAAP diluted earnings per share increased 6.7% to $1.28.

HERNDON, Va., Aug. 08, 2018 (GLOBE NEWSWIRE) -- ePlus inc. (NASDAQ:PLUS - news), a leading provider of technology solutions, today announced financial results for the three months ended June 30, 2018.

Management Comment

“First quarter results reflected higher gross profit performance due primarily to product mix and the expansion of our consultative and annuity services. Our focus on providing customers with solutions around the high growth areas of Cloud, Security and Digital Infrastructure enabled us to report 4% growth in gross profit and a 180-basis point expansion in gross margin to 22.6%. This growth was achieved despite lower year-on-year sales comparisons, due to a large project that benefitted sales primarily in last fiscal year’s first and second quarters. On a sequential basis, sales increased by approximately 8%, reflecting broad-based demand across our customer set, particularly within the mid-market, where we are offering a full range of services and focusing on generating annuity revenue streams,” said Mark Marron, Chief Executive Officer and President.

“We delivered a strong quarter of profitability, while continuing to invest in our future to support our key strategic areas. This includes investing in emerging technologies, while realigning and retraining existing sales and technical personnel to address the technology demands of today and the future.”

First Quarter Fiscal 2018 Results

For the first quarter ended June 30, 2018 as compared to the first quarter of the prior fiscal year ended June 30, 2017:

Consolidated net sales decreased 4.5% to $356.5 million, from $373.4 million.

Technology segment net sales decreased 4.4% to $346.9 million, from $362.9 million.

Adjusted gross billings decreased 1.1% to $482.3 million. Adjusted gross billings are technology segment net sales adjusted to exclude the costs incurred of applicable third-party maintenance, software assurance and subscription/Saas licenses, and services.

Financing segment net sales decreased 7.5% to $9.7 million, from $10.5 million.

Consolidated gross profit rose 4.0% to $80.7 million, from $77.6 million. Consolidated gross margin improved 180 basis points to 22.6%, compared with 20.8% last year, due to a shift in mix towards third-party maintenance, software assurance and subscription/SaaS licenses, and services. Also contributing were higher product margins and service revenues.

Operating expenses increased 5.5% to $60.2 million, from $57.1 million, due, in part to an increase in variable compensation as a result of the increase in gross profit, as well as an increase of 26 personnel, or 2.1%, to 1,249 from 1,223 as of June 30, 2017.

Consolidated operating income decreased 0.2% to $20.5 million.

Our effective tax rate for the current quarter was 25.7%, compared with 35.4% in the prior year quarter. The lower effective tax rate was due to the change in the U.S federal statutory rate to 21% from legislation that was enacted on December 22, 2017. As a result, the U.S. statutory tax rate for the quarter ended June 30, 2018 was 21.0%, as compared to 35.0% for the same period last year.

Net earnings rose 13.8% to $15.3 million.

Adjusted EBITDA rose 3.9% to $25.4 million, from $24.4 million.

Diluted earnings per share was $1.12, compared with $0.96 in the prior year quarter. Non-GAAP diluted earnings per share was $1.28, compared with $1.20 last year. Non-GAAP diluted earnings per share is based on net earnings calculated in accordance with GAAP, adjusted to exclude other income (expense), share based compensation, and acquisition and integration expenses, and the related tax effects, and an adjustment to our tax expense in the prior year assuming a 21.0% statutory income tax rate for U.S. operations.

Balance Sheet Highlights

As of June 30, 2018, ePlus had cash and cash equivalents of $57.5 million, compared with $118.2 million as of March 31, 2018. The decrease in cash and cash equivalents was primarily due to increases in working capital in the technology segment and share repurchases. Total stockholders’ equity was $379.9 million, compared with $372.6 million as of March 31, 2018. Total shares outstanding were 13.7 million and 13.8 million on June 30, 2018 and March 31, 2018, respectively.

Summary and Outlook

“Market dynamics remain favorable, and our customers continue to look for solutions and service offerings in our key focus areas of Cloud, Security and Digital Infrastructure. Sales of security products and services increased to 18.6% of adjusted gross billings, a 160-basis point increase, for the trailing twelve months ended June 30, 2018. Our go-to-market strategy has been effective in differentiating ePlus as a provider of complex solutions to a broad and increasingly diversified customer base. Additionally, the shift toward ratably recognized revenue over time will provide us with improved visibility and create opportunities to upsell and cross-sell products and services to existing clients.

“We continue to optimize our cost structure while making investments in customer-facing headcount which are aligned with our strategic focus areas. Given our strong balance sheet, we will continue to seek out strategic acquisitions that can expand our solutions offerings and geographic footprint. All of this sets the stage for another year of progress for ePlus in fiscal 2019,” Mr. Marron concluded.

Recent Corporate Developments/Recognitions

-- On July 31, ePlus announced that Douglas King has joined as its Chief Information Officer. -- On June 14, ePlus announced Maureen F. Morrison had been appointed to the Board of Directors, filling a newly created board seat. -- On June 5, ePlus announced that its subsidiary, ePlus Technology, inc. had been promoted to the Elite Level as a Deep Learning Partner with NVIDIA. Additionally, ePlus announced that it was named to CRN®’s 2018 Solution Provider 500 list. The list is CRN’s annual ranking of the largest technology integrators, solution providers and IT consultants in North America by revenue. -- On May 9, ePlus announced that Darren Raiguel had been promoted to Chief Operating Officer of ePlus inc. and President of ePlus Technology, inc.

Conference Call Information

ePlus will hold a conference call and webcast at 4:30 p.m. ET on August 8, 2018:

Date: Wednesday, August 8, 2018 Time: 4:30 p.m. ET Live Call: (877) 870-9226, domestic, (973) 890-8320, international Replay: (855) 859-2056, domestic, (404) 537-3406, international Passcode: 7483596 (live and replay) Webcast: http://www.eplus.com/investors (live and replay)

The replay of this webcast will be available approximately two hours after the call and be available through August 16, 2018.

About ePlus inc.

ePlus is a leading consultative technology solutions provider that helps customers imagine, implement, and achieve more from their technology. With the highest certifications from top technology partners and expertise in key technologies from data center to security, cloud, and collaboration, ePlus transforms IT from a cost center to a business enabler. Founded in 1990, ePlus has more than 1,200 associates serving a diverse set of customers in the U.S., Europe, and Asia-Pac. The Company is headquartered at 13595 Dulles Technology Drive, Herndon, VA, 20171. For more information, visit www.eplus.com, call 888-482-1122, or email info@eplus.com. Connect with ePlus on Facebook at www.facebook.com/ePlusinc and on Twitter at www.twitter.com/ePlus.

ePlus. Where Technology Means More®.

ePlus® and ePlus products referenced herein are either registered trademarks or trademarks of ePlus inc. in the United States and/or other countries. The names of other companies and products mentioned herein may be the trademarks of their respective owners.

Forward-looking statements

Statements in this press release 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 volatility in the U.S. economy such as our current and potential customers delaying or reducing technology purchases, increasing credit risk associated with our customers and vendors, reduction of vendor incentive programs, and restrictions on our access to capital necessary to fund our operations; our ability to successfully perform due diligence and integrate acquired businesses; disruptions or a security breach in our or our vendors IT systems and data and audio communication networks; the possibility of goodwill impairment charges in the future; significant adverse changes in, reductions in, or losses of relationships with major customers or vendors; 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 implement comprehensive plans for the integration of sales forces, cost containment, asset rationalization, systems integration and other key strategies; our ability to reserve adequately for credit losses; our ability to secure our customers’ electronic and other confidential information and remain secure during a cyber-security attack; future growth rates in our core businesses; the impact of competition in our markets; the possibility of defects in our products or catalog content data; our ability to adapt to changes in the IT industry and/or rapid changes in product offerings, including the proliferation of the cloud, infrastructure as a service and software as a service; our ability to realize our investment in leased equipment; our ability to hire and retain sufficient qualified personnel; and other risks or uncertainties detailed in our reports filed with the Securities and Exchange Commission. All information set forth in this press release is current as of the date of this release and ePlus undertakes no duty or obligation to update this information.

Contact: Kleyton Parkhurst, SVPePlus inc. kparkhurst@eplus.com 703-984-8150

ePlus inc. AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except per shares amounts) June 30, 2018 March 31, 2018 ------------- -------------- ASSETS (unaudited) (as adjusted) Current assets: Cash and cash equivalents $ 57,480 $ 118,198 Accounts receivable—trade, net 321,033 268,287 Accounts receivable—other, net 37,628 28,401 Inventories 52,127 39,855 Financing receivables—net, current 70,619 69,936 Deferred costs 14,389 16,589 Other current assets 18,319 23,625 - --------- - - ----------- Total current assets 571,595 564,891 Financing receivables and operating leases—net 70,054 68,511 Property, equipment and other assets 17,592 19,143 Goodwill 76,484 76,624 Other intangible assets—net 24,674 26,302 TOTAL ASSETS $ 760,399 $ 755,471 - --------- - - ----------- LIABILITIES AND STOCKHOLDERS’ EQUITY LIABILITIES Current liabilities: Accounts payable $ 98,672 $ 106,933 Accounts payable—floor plan 129,577 112,109 Salaries and commissions payable 17,528 19,801 Deferred revenue 36,012 35,648 Recourse notes payable—current - 1,343 Non-recourse notes payable—current 42,121 40,863 Other current liabilities 22,480 33,370 Total current liabilities 346,390 350,067 Non-recourse notes payable—long term 12,477 10,072 Deferred tax liability—net 1,648 1,662 Other liabilities 20,030 21,067 TOTAL LIABILITIES 380,545 382,868 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS’ EQUITY Preferred stock, $.01 per share par value; 2,000 shares authorized; none - - outstanding Common stock, $.01 per share par value; 25,000 shares authorized; 13,723 143 142 outstanding at June 30, 2018 and 13,761 outstanding at March 31, 2018 Additional paid-in capital 131,693 130,000 Treasury stock, at cost, 575 shares at June 30, 2018 and 467 shares at March (45,075) (36,016) 31, 2018 Retained earnings 293,218 277,945 Accumulated other comprehensive income—foreign currency translation adjustment (125) 532 Total Stockholders’ Equity 379,854 372,603 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 760,399 $ 755,471 - --------- - - -----------

ePlus inc. AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) Three Months Ended June 30, --------------------------- 2018 2017 ----------- -------------- (unaudited) (as adjusted) Net sales $ 356,532 $ 373,356 Cost of sales 275,829 295,763 - --------- - ------------ Gross profit 80,703 77,593 Selling, general and administrative expenses 56,966 54,664 Depreciation and amortization 2,790 2,063 Interest and financing costs 476 359 - --------- - ------------ Operating expenses 60,232 57,086 OPERATING INCOME 20,471 20,507 Other income 97 271 - --------- - ------------ EARNINGS BEFORE PROVISION FOR INCOME TAXES 20,568 20,778 PROVISION FOR INCOME TAXES 5,295 7,355 - --------- - ------------ NET EARNINGS $ 15,273 $ 13,423 - --------- - ------------ NET EARNINGS PER COMMON SHARE—BASIC $ 1.14 $ 0.97 - --------- - ------------ NET EARNINGS PER COMMON SHARE—DILUTED $ 1.12 $ 0.96 - --------- - ------------ WEIGHTED AVERAGE COMMON SHARES OUTSTANDING—BASIC 13,434 13,806 WEIGHTED AVERAGE COMMON SHARES OUTSTANDING—DILUTED 13,597 14,019

Technology Segment Three months ended June 30, 2018 2017 % Change --------- --------- -------- (in thousands) Net sales $ 346,864 $ 362,899 (4.4%) Cost of sales 274,081 293,266 (6.5%) - ------- - ------- ------ - Gross profit 72,783 69,633 4.5% Selling, general and administrative 54,454 51,501 5.7% Depreciation and amortization 2,789 2,062 35.3% - ------- - ------- ------ - Operating expenses 57,243 53,563 6.9% Operating income $ 15,540 $ 16,070 (3.3%) - ------- - ------- ------ - Key Business Metrics Adjusted gross billings $ 482,301 $ 487,504 (1.1%) - ------- - ------- ------ - Adjusted EBITDA $ 20,341 $ 19,886 2.3% - ------- - ------- ------ -

Technology Segment Net Sales by Customer-end Market Twelve Months Ended June 30, 2018 2017 Change ---- ---- ------ 24% 25% (1%) Technology State & Local Government & Educational Institutions 17% 19% (2%) Telecom, Media, and Entertainment 14% 15% (1%) Financial Services 15% 13% 2% ​Healthcare 14% 11% 3% ​All others 16% 17% (1%) ---- ---- Total 100% 100%

Financing Segment Three months ended June 30, 2018 2017 % Change ------- -------- -------- (in thousands) Net sales $ 9,668 $ 10,457 (7.5%) Cost of sales 1,748 2,497 (30.0%) - ----- - ------ ------- Gross profit 7,920 7,960 (0.5%) Selling, general and administrative 2,512 3,163 (20.6%) Depreciation and amortization 1 1 0.0% Interest and financing costs 476 359 32.6 - ----- - ------ ------- Operating expenses 2,989 3,523 (15.2%) Operating income $ 4,931 $ 4,437 11.1% - ----- - ------ ------- Key Business Metrics Adjusted EBITDA $ 5,029 $ 4,521 11.2% - ----- - ------ -------

ePlus inc. AND SUBSIDIARIESRECONCILIATION OF NON-GAAP INFORMATION

We included reconciliations below for the following non-GAAP information: (i) Adjusted Gross Billings, (ii) Adjusted EBITDA, (iii) Segment Adjusted EBITDA, and (iv) non-GAAP Net Earnings per Common Share - Diluted.

We define adjusted gross billings as our technology segment net sales calculated in accordance with GAAP, adjusted to exclude the costs incurred related to sales of third-party maintenance, software assurance and subscription/SaaS licenses, and services. The presentation of adjusted gross billings has been updated from prior period presentations to align with net sales within our technology segment.

We define Adjusted EBITDA as net earnings calculated in accordance with GAAP, adjusted for the following: interest expense, depreciation and amortization, share based compensation, acquisition and integration expenses, provision for income taxes, and other income. Segment Adjusted EBITDA is defined as operating income calculated in accordance with GAAP, adjusted for interest expense, share based compensation, acquisition and integration expenses, and depreciation and amortization. We consider the interest on notes payable from our financing segment and depreciation expense presented within cost of sales, which includes depreciation on assets financed as operating leases, to be operating expenses.

Non-GAAP net earnings per common share are based on net earnings calculated in accordance with GAAP, adjusted to exclude other income, share based compensation, and acquisition related amortization expense, and the related tax effects. The presentation of non-GAAP net earnings and non-GAAP net earnings per common share – diluted have been changed from prior period presentations to adjust our tax expense assuming a statutory income tax rate of 21.0% for U.S. operations.

Our use of non-GAAP information as analytical tools has limitations, and you should not consider them in isolation or as substitutes for analysis of our financial results as reported under GAAP. In addition, other companies, including companies in our industry, might calculate similar non-GAAP Adjusted Gross Billings, Adjusted EBITDA, and non-GAAP Net Earnings per Common Share - Diluted or similarly titled measures differently, which may reduce their usefulness as comparative measures.

-------------------- Three Months Ended June 30, -------------------- 2018 2017 --------- --------- (in thousands) Technology segment net sales $ 346,864 $ 362,899 Costs incurred related to sales of third party software assurance, maintenance and services 135,437 124,605 - ------- - ------- Adjusted gross billings $ 482,301 $ 487,504 - ------- - -------

Three Months Ended June 30, --------------------------- 2018 2017 -------- -------- ------- (in thousands) Consolidated Net earnings $ 15,273 $ 13,423 Provision for income taxes 5,295 7,355 Share based compensation 1,693 1,507 Acquisition related expenses 416 330 Depreciation and amortization [1] 2,790 2,063 Other (income) expense [2] (97) (271) - ------ - ------ ------- Adjusted EBITDA $ 25,370 $ 24,407 - ------ - ------ ------- Three Months Ended June 30, --------------------------- 2018 2017 -------- -------- ------- (in thousands) Technology Segment Operating income $ 15,540 $ 16,070 Depreciation and amortization [1] 2,789 2,062 Share based compensation 1,596 1,424 Acquisition and integration expenses 416 330 - ------ - ------ ------- Segment Adjusted EBITDA $ 20,341 $ 19,886 - ------ - ------ ------- Financing Segment Operating income $ 4,931 $ 4,437 Depreciation and amortization [1] 1 1 Share based compensation 97 83 - ------ - ------ ------- Segment Adjusted EBITDA $ 5,029 $ 4,521 - ------ - ------ -------

Three Months Ended June 30, ------------------------------------ 2018 2017 -------- --------- --------------- (in thousands, except per share data) GAAP: Earnings before provision for income taxes $ 20,568 $ 20,778 Share based compensation 1,693 1,507 Acquisition related expenses 416 330 Acquisition related amortization expense [3] 1,764 1,121 Other (income) expense [2] (97) (271) Non-GAAP: Earnings before provision for income taxes 24,344 23,465 GAAP: Provision for income taxes 5,295 7,355 Share based compensation 483 435 Acquisition related expenses 119 95 Acquisition related amortization expense [3] 474 291 Other (income) expense [2] (28) (78) Adjustment to US Federal tax rate to 21% - (2,722) Tax benefit on restricted stock 569 1,255 - ------ - ------- --------------- Non-GAAP: Provision for income taxes 6,912 6,631 --------- ------------------------- Non-GAAP: Net earnings $ 17,432 $ 16,834 - ------ - ------- --------------- GAAP: Net earnings per common share – diluted $ 1.12 $ 0.96 - ------ - ------- --------------- Non-GAAP: Net earnings per common share – diluted $ 1.28 $ 1.20 - ------ - ------- ---------------

[1] Amount consists of depreciation and amortization for assets used internally. [2] Interest income and foreign currency transaction gain. [3] Amount consists of amortization of intangible assets from acquired businesses.

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