ePlus inc. (PLUS) Q2 2027 Earnings Call Transcript

ePlus reported fiscal Q2 2027 net sales of $667.9 million, up 9.7% year over year, adjusted EBITDA of $67.1 million, up 14.3%, and non-GAAP diluted EPS of $1.82, up 19%. Gross margin expanded 40 basis points to 27.0%, while open orders rose nearly $750 million year over year to more than $1.8 billion; management raised FY2027 guidance to upper-single-digit net sales and gross-profit growth and low-double-digit adjusted EBITDA growth. Product and data-center demand, including AI-related activity, was strong, though professional services revenue fell 11.3% amid large retail project delays and high-end compute supply constraints remained. The company repurchased about 400,000 shares for nearly $34 million in the first half and declared a $0.27-per-share dividend.

Analysis

The key underwriting issue is conversion, not whether AI demand exists. Management’s raised FY27 outlook implies a material second-half step-up: first-half adjusted EBITDA growth was only 3.2%, while the full-year target is low double digits. The backlog supports that bridge, but management also expects some orders to slip into FY28, and backlog is not equivalent to executable, margin-accretive revenue. Watch shipment conversion and gross profit, not order growth alone.

The inventory build is the balance-sheet mirror of that bet. If large projects ship on schedule, working capital should unwind and reported growth can accelerate; if GPU-memory or high-end networking delays persist, cash remains tied up while project timing and customer acceptance push out. Product margin improvement offers a buffer, but services margins are under pressure from third-party delivery mix. Delayed retail projects are a separate warning: implementation capacity and customer timing can constrain services even when product demand is strong.

Near term, results and guidance are supportive, but avoid chasing a sharp opening move without valuation and price context. Over 1–3 months, shipment cadence, inventory reduction, and professional-services stabilization are the tests. Over 6–18 months, a larger managed-services base and Daymark’s capabilities could improve customer stickiness, but that remains an execution opportunity, not yet proof of a recurring-revenue re-rating. The contrarian risk is treating a large backlog as durable earnings visibility despite supply and timing slippage.

Key Decisions for Investors

• PLUS: Consider a small, staged long on post-earnings weakness rather than chasing strength; the upside case is second-half shipment conversion and operating leverage. Reassess after the next results on revenue/gross-profit delivery, inventory normalization, and cash conversion.
• Set a clear thesis check: trim or exit if second-half product shipments fail to convert the backlog, inventory stays elevated without corresponding revenue, or management reduces FY27 guidance. Persistent high-end memory constraints or further retail project delays would strengthen that downside case.
• No standalone trade in Anthropic from this call: the partner-network mention does not establish material revenue, economics, or customer adoption for Anthropic.