Shares of enterprise IT company ePlus (PLUS 0.53%) fell as much as 28% in trading on Wednesday after reporting earnings for the fiscal third quarter of 2024. Shares closed the day down 13%.
From bad to worse
Quarterly sales fell 18.4% to $509.1 million, and technology gross billings fell 11.3% to $797 million. Gross profit fell 3.3% to $133.8 million as margins improved from 22.2% a year ago to 26.3%.
Net income was down 23.6% to $27.3 million, and earnings per share fell a similar amount to $1.02. On a non-GAAP (generally accepted accounting principles) basis, earnings were $1.18 per share.
Management said technology business demand slowed as larger customers focused on completing previously delayed projects and sales cycle times lengthened. But backlog improved later in the quarter, and management thinks they'll still hit the low end of fiscal 2024 financial guidance.
That guidance is for revenue of $2.23 billion to $2.33 billion and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $200 million to $215 million.
The macro environment is getting tough
After years of IT spending during the pandemic, companies are scrutinizing every dollar spent on infrastructure. That's putting pressure on companies like ePlus, and it doesn't look like that's going to subside. While management says bookings are starting to stabilize, investors are more skeptical.
ePlus has a market cap of $1.8 billion and low debt, so the valuation is reasonable, given the adjusted EBITDA guidance. But until revenue turns around, I am taking a cautious approach with shares.
