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Solution Providers Start 2018 With Growth Plans Following Steady Revenue, Earnings Gains

CDW, Cognizant, ePlus and CSRA, which together serve customers from small businesses to enterprises to huge government entities, reported strong revenue and earnings gains in the last quarter, and they expect growth to continue in 2018.

A broad mix of the IT industry's top solution providers all reported higher earnings and revenues for the most recent quarter, including CDW, CRSA, ePlus and Cognizant Technology Solutions.

The companies reported on Wednesday and, taken together, show a picture of continued strength for the IT channel. Many of their privately-held peers in the channel saw similar growth toward the end of 2017 – and the momentum has continued this year.

"We’re already at more than 50 percent of our Q1 goal in bookings as of the end of January, and expect to outperform our goal for Q1 again," said Mike Carter, founder and principal of eGroup, a Mt. Pleasant, S.C.-based solution provider. he said. "We’re beginning to re-adjust our new customer acquisition goals and sales targets around a 2x, or 100 percent, growth multiplier as opposed to the more conservative '15 percent and outperform' model we’ve historically used."

[Related: Synnex Reports Revenue, Income Growth As CEO Kevin Murai Prepares To Leave On A High Note]

Carter said eGroup sees strong demand for its Microsoft-based managed Azure service offerings when bundled with technologies from storage-focused software vendors like Rubrik or Zerto, or with Cisco.
The big solution provider earnings reports were similarly upbeat.
CDW, the Lincolnshire, Ill.-based solution provider, reported almost double-digit revenue growth for its fourth fiscal quarter 2017, which ended December 21. The company's total revenue for the quarter was $3.84 billion, up 9.9 percent over the $3.49 billion the company reported for its fourth fiscal 2016 quarter. That includes corporate sales of $1.64 billion, up 8.1 percent year-over-year; small business sales of $314.8 million, up 7.9 percent; and public entity sales of $1.45 billion, up 9.1 percent.

Within its public sales, CDW reported government sales up 19.0 percent, education sales up 9.5 percent, and healthcare sales down 3.1 percent.

CDW's GAAP net income in the fourth quarter was $195 million, or $1.26 per share, up from the $103 million, or $0.63 per share, it reported last year. On a non-GAAP basis, income was $153 million, or $0.99 per share, up from last year's $140 million, $0.86 per share.

For all of 2017, CDW sales reached $15.19 billion, up 8.7 percent compared to the $13.98 billion the company reported for fiscal 2016. GAAP net income for the whole year was $523 million, or $3.31 per share, up from last year's $424 million, or $3.43 per share.

For fiscal 2018, CDW expects its non-GAAP net income per share growth to be in the low to mid 20 percent range, with part of that growth coming from a reduction in the corporate tax rate from the 2017 Tax Cuts and Jobs Act.

ePlus, a Herndon, Va provider of IT solutions to commercial and government clients, reported revenue for its third fiscal quarter of 2018, which ended December 31, of $342.6 million. That was up 4.9 percent over its third fiscal 2017 quarter revenue.

For the quarter, ePlus also reported net earnings on a GAAP basis of $15.6 million, or $1.11 per share, up from last year's $12.6 million, or $0.91 per share. On a non-GAAP basis, the company reported net earnings of $13.6 million, or $0.97 per share, down from last year's $15.6 million, or $1.12 per share.

The company said it expects to see continued growth for fiscal 2018, although it did not provide specific guidance.

CSRA, a Falls Church, Va.-based provider of IT solutions and professional services to government organizations, on Wednesday reported financial results for its third fiscal quarter 2018, which ended December 29.

Revenue for the quarter was reported at $1.31 billion, up 7.4 percent from the $1.22 billion the company reported for its third fiscal 2017 quarter.

That included sales of $605 million to the government's Department of Defense and its intelligence community, up 8.8 percent year over year, and sales of $704 million to other government agencies including certain state and local agencies, up 5.7 percent.

CSRA also reported GAAP net income of $188 million, or $1.44 per share, up from last year's $12 million, or $0.76 per share. On a non-GAAP basis, the company reported net income of $201 million, or $0.56 per share, up year-over-year from $188 million, or $0.44 per share.

Because of improved financial performance, CSRA improved its full fiscal 2018 guidance. The company now expects revenue in the range of $5.15 billion and $5.20 billion, up from fiscal 2017's revenue of $4.99 billion.

Full year income on a non-GAAP basis is expected to be in the range of $805 million and $825 million, or $2.00 to $2.05 per share, up over the $792 million, or $1.91 per share, that CSRA reported last year.

Cognizant, a Teaneck, N.J.-based solution provider with a strong professional services business, reported that revenue for its fourth fiscal 2017 quarter, which ended December 31, rose 10.6 percent over that of its fourth fiscal 2016 quarter to $3.83 billion.

That included a 5.4 percent rise in financial services revenue to $1.43 billion; an 11.9 percent rise in healthcare revenue to $1.13 billion; a 13.7 percent rise in products and resources revenue to $782 million; and a 19.0 percent rise in communications, media, and technology revenue to $494 million.

Cognizant reported a fourth fiscal quarter GAAP net loss of $18 million, or $0.03 per share, compared to last year's GAAP net income of $416 million, or $0.68 per share. However, that loss included a one-time incremental income tax expense of $617 million related to the U.S. Tax Cuts and Jobs Act, the company said. On a non-GAAP basis, Cognizant reported earnings of $1.03 per share, up from $0.87 per share last year.

Cognizant's revenue for all of 2017 rose 9.8 percent year-over-year to $14.81 billion. Its GAAP net income for 2017 was $1.50 billion, or $2.53 per share, compared to $1.55 billion, or $2.55 per share, for 2016. Non-GAAP earnings per share were $3.77 in 2017, compared to $3.39 in 2016.

For the first fiscal quarter 2018, Cognizant guided revenue in the range of $3.88 billion to $3.92 billion, which is up from first fiscal quarter 2017's revenue of $3.55 billion.

"Digital technologies have become so integral to remaking business models and core processes that no enterprise can ignore them and so remain competitive," said Cognizant CEO Francisco D'Souza on the company's earnings conference call. "That’s why the rate of digitization across industries and countries continues to rise, and why digital now accounts for a substantial and growing percentage of new enterprise IT spending."

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