Quarterly Report (10-q)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2022

OR

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from____ to ____.

Commission file number: 001-34167

ePlus inc.

(Exact name of registrant as specified in its charter)

Delaware		54-1817218
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

13595 Dulles Technology Drive, Herndon, VA 20171-3413

(Address, including zip code, of principal executive offices)

Registrant’s telephone number, including area code: [phone]

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	PLUS	NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒   No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒   No ☐

 Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act (Check one):

Large accelerated filer ☒	Accelerated filer ☐
Non-accelerated filer ☐	Smaller reporting company ☐
	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐  No ☒

The number of shares of common stock outstanding as of February 3, 2023, was 26,908,101.

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TABLE OF CONTENTS

ePlus inc. AND SUBSIDIARIES

Part I. Financial Information:
Item 1.		Financial Statements
		Unaudited Consolidated Balance Sheets as of December 31, 2022, and March 31, 2022	5
		Unaudited Consolidated Statements of Operations for the Three and Nine Months Ended December 31, 2022, and 2021	6
		Unaudited Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended December 31, 2022, and 2021	7
		Unaudited Consolidated Statements of Cash Flows for the Nine Months Ended December 31, 2022, and 2021	8
		Unaudited Consolidated Statements of Stockholders’ Equity for the Three and Nine Months Ended December 31, 2022, and 2021	10
		Notes to Unaudited Consolidated Financial Statements	11
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3.		Quantitative and Qualitative Disclosures About Market Risk	44
Item 4.		Controls and Procedures	44
Part II. Other Information
Item 1.		Legal Proceedings	45
Item 1A.		Risk Factors	45
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds	45
Item 3.		Defaults Upon Senior Securities	46
Item 4.		Mine Safety Disclosures	46
Item 5.		Other Information	46
Item 6.		Exhibits	47
Signatures			48

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CAUTIONARY LANGUAGE ABOUT FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains certain statements that are, or may be deemed to be, “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, or “Exchange Act,” and are made in reliance upon the protections provided by such acts for forward-looking statements. Such statements are not based on historical fact but are based upon numerous assumptions about future conditions that may not occur. Forward-looking statements are generally identifiable by use of forward-looking words such as “may,” “should,” “would,” “intend,” “estimate,” “will,” “potential,” “possible,” “could,” “believe,” “expect,” “intend,” “plan,” “anticipate,” “project,” and similar expressions. Readers are cautioned not to place undue reliance on any forward-looking statements made by us or on our behalf. Forward-looking statements are made based upon information that is currently available or management’s current expectations and beliefs concerning future developments and their potential effects upon us, speak only as of the date hereof, and are subject to certain risks and uncertainties. We do not undertake any obligation to publicly update or correct any forward-looking statements to reflect events or circumstances that subsequently occur, or of which we hereafter become aware. Actual events, transactions and results may materially differ from the anticipated events, transactions, or results described in such statements. Our ability to consummate such transactions and achieve such events or results is subject to certain risks and uncertainties. Such risks and uncertainties include, but are not limited to, the matters set forth below:

•

national and international political instability fostering uncertainty and volatility in the global economy including exposure to fluctuation in foreign currency rates, interest rates, and inflation, including increases in our costs and our ability to increase prices to our customers which may result in adverse changes in our gross profit;

•

significant and rapid inflation may cause price, wage, and interest rate increases, as well as increases in operating costs that may impact the arrangements that have pricing commitments over the term of the agreement;

•

significant adverse changes in, reductions in, or loss of one or more of our larger volume customers or vendors;

•

supply chain issues, including a shortage of Information Technology (“IT”) products, may increase our costs or cause a delay in fulfilling customer orders, or increase our need for working capital, or completing professional services, or purchasing IT products or services needed to support our internal infrastructure or operations, resulting in an adverse impact on our financial results;

•

ongoing remote work trends, and the increase in cybersecurity attacks that have occurred while employees work remotely;

•

maintaining and increasing advanced professional services by recruiting and retaining highly skilled, competent personnel, and vendor certifications;

•

our dependence on key personnel to maintain certain customer relationships, and our ability to hire, train, and retain sufficient qualified personnel;

•

our ability to secure our own and our customers’ electronic and other confidential information, while maintaining compliance with evolving data privacy and regulatory laws and regulations;

•

our ability to remain secure during a cybersecurity attack, including both disruptions in our or our vendors’ IT systems and data and audio communication networks;

•

reliance on third-parties to perform some of our service obligations to our customers, and the reliance on a small number of key vendors in our supply chain with whom we do not have long-term supply agreements, guaranteed price agreements, or assurance of stock availability;

•

the creditworthiness of our customers and our ability to reserve adequately for credit losses;

•

loss of our credit facility or credit lines with our vendors may restrict our current and future operations;

•

a possible decrease in the capital spending budgets of our customers or a decrease in purchases from us;

•

our ability to raise capital, maintain or increase as needed our lines of credit with vendors or floor planning facility, obtain debt for our financing transactions, or the effect of those changes on our common stock price;

•

reduction of vendor incentives provided to us;

•

changes in the IT industry and/or rapid changes in product offerings, including the proliferation of the cloud, infrastructure as a service (“IaaS”), software as a service (“SaaS”) and platform as a service (“PaaS”);

•

our dependency on continued innovations in hardware, software, and services offerings by our vendors and our ability to partner with them;

•

future growth rates in our core businesses;

•

rising interest rates or the loss of key lenders or the constricting of credit markets;

•

the possibility of goodwill impairment charges in the future;

•

our ability to adapt to meet changes in markets and competitive developments;

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•

our ability to increase the total number of customers using integrated solutions by up-selling within our customer base and gaining new customers;

•

our ability to manage a diverse product set of solutions in highly competitive markets with a number of key vendors;

•

our ability to increase the total number of customers who use our managed services and professional services and continuing to enhance our managed services offerings to remain competitive in the marketplace;

•

our ability to perform professional and managed services competently;

•

our ability to implement comprehensive plans for the integration of sales forces, cost containment, asset rationalization, systems integration, and other key strategies;

•

exposure to changes in, interpretations of, or enforcement trends in, and customer and vendor actions in anticipation of or response to, legislation and regulatory matters;

•

domestic and international economic regulations uncertainty (e.g., tariffs, sanctions, and trade agreements);

•

our contracts may not be adequate to protect us, we are subject to audit which we may not pass, and our professional and liability insurance policies coverage may be insufficient to cover a claim;

•

failure to comply with public sector contracts, or applicable laws or regulations;

•

our ability to maintain our proprietary software and update our technology infrastructure to remain competitive in the marketplace;

•

our ability to realize our investment in leased equipment;

•

our ability to successfully perform due diligence and integrate acquired businesses; and

•

our ability to protect our intellectual property rights and successfully defend any challenges to the validity of our patents or allegations that we are infringing upon any third-party patents, and the costs associated with those actions, and, when appropriate, the costs associated with licensing required technology.

We cannot be certain that our business strategy will be successful or that we will successfully address these and other challenges, risks, and uncertainties. For a further list and description of various risks, relevant factors, and uncertainties that could cause future results or events to differ materially from those expressed or implied in our forward-looking statements, see Item 1A, “Risk Factors” and Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections contained elsewhere in this report, as well as other reports that we file with the Securities and Exchange Commission (“SEC”).

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PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements

e Plus inc. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

		December 31, 2022				March 31, 2022
ASSETS
Current assets:
Cash and cash equivalents		$	99,395			$	155,378
Accounts receivable—trade, net			674,935				430,380
Accounts receivable—other, net			70,589				48,673
Inventories			244,798				155,060
Financing receivables—net, current			105,823				61,492
Deferred costs			43,111				32,555
Other current assets			54,792				13,944
Total current assets			1,293,443				897,482
Financing receivables and operating leases—net			80,579				64,292
Deferred tax asset—net			4,859				5,050
Property, equipment, and other assets			55,371				45,586
Goodwill			136,057				126,543
Other intangible assets—net			27,556				27,250
TOTAL ASSETS		$	1,597,865			$	1,166,203
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES
Current liabilities:
Accounts payable		$	299,627			$	136,161
Accounts payable—floor plan			154,541				145,323
Salaries and commissions payable			41,152				39,602
Deferred revenue			125,570				86,469
Recourse notes payable—current			102,961				7,316
Non-recourse notes payable—current			41,293				17,070
Other current liabilities			28,433				28,095
Total current liabilities			793,577				460,036
Recourse notes payable - long-term			-				5,792
Non-recourse notes payable - long-term			7,172				4,108
Other liabilities			50,696				35,529
TOTAL LIABILITIES			851,445				505,465
COMMITMENTS AND CONTINGENCIES (Note 9)
STOCKHOLDERS’ EQUITY
Preferred stock, $0.01 per share par value; 2,000 shares authorized; none outstanding			-				-
Common stock, $0.01 per share par value; 50,000 shares authorized; 26,907 outstanding at December 31, 2022 and 26,886 outstanding at March 31, 2022			272				270
Additional paid-in capital			165,161				159,480
Treasury stock, at cost, 258 shares at December 31, 2022 and 130 shares at March 31, 2022			(13,958	)			(6,734	)
Retained earnings			594,348				507,846
Accumulated other comprehensive income—foreign currency translation adjustment			597				(124	)
Total Stockholders’ Equity			746,420				660,738
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	1,597,865			$	1,166,203

See Notes to Unaudited Consolidated Financial Statements.

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ePlus inc. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

		Three Months Ended December 31,								Nine Months Ended December 31,
		2022				2021				2022				2021
Net sales
Product		$	556,018			$	432,307			$	1,379,813			$	1,190,524
Services			67,458				62,527				195,728				178,976
Total			623,476				494,834				1,575,541				1,369,500
Cost of sales
Product			441,015				339,810				1,062,352				914,666
Services			44,089				37,907				127,990				109,203
Total			485,104				377,717				1,190,342				1,023,869
Gross profit			138,372				117,117				385,199				345,631
Selling, general, and administrative			86,730				76,874				248,201				220,153
Depreciation and amortization			3,609				3,597				10,387				11,376
Interest and financing costs			1,575				561				2,863				1,262
Operating expenses			91,914				81,032				261,451				232,791
Operating income			46,458				36,085				123,748				112,840
Other income (expense), net			2,907				(175	)			(3,112	)			(377	)
Earnings before tax			49,365				35,910				120,636				112,463
Provision for income taxes			13,671				9,486				34,134				31,108
Net earnings		$	35,694			$	26,424			$	86,502			$	81,355
Net earnings per common share—basic		$	1.34			$	0.99			$	3.26			$	3.05
Net earnings per common share—diluted		$	1.34			$	0.98			$	3.24			$	3.03
Weighted average common shares outstanding—basic			26,592				26,668				26,561				26,666
Weighted average common shares outstanding—diluted			26,648				26,930				26,688				26,887

See Notes to Unaudited Consolidated Financial Statements.

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ePlus inc. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

		Three Months Ended December 31,								Nine Months Ended December 31,
		2022				2021				2022				2021
NET EARNINGS		$	35,694			$	26,424			$	86,502			$	81,355
OTHER COMPREHENSIVE INCOME, NET OF TAX:
Foreign currency translation adjustments			3,131				81				721				(359	)
Other comprehensive income (loss)			3,131				81				721				(359	)
TOTAL COMPREHENSIVE INCOME		$	38,825			$	26,505			$	87,223			$	80,996

See Notes to Unaudited Consolidated Financial Statements.

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ePlus inc. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

		Nine Months Ended December 31,
		2022				2021
Cash flows from operating activities:
Net earnings		$	86,502			$	81,355
Adjustments to reconcile net earnings to net cash used in operating activities:
Depreciation and amortization			14,248				18,620
Provision for credit losses			2,846				77
Share-based compensation expense			5,681				5,355
Deferred taxes			195				(504	)
Payments from lessees directly to lenders—operating leases			-				(32	)
Gain on disposal of property, equipment, and operating lease equipment			(3,201	)			(855	)
Changes in:
Accounts receivable			(266,470	)			(132,228	)
Inventories-net			(90,205	)			(77,921	)
Financing receivables—net			(47,442	)			(20,296	)
Deferred costs and other assets			(60,804	)			(12,432	)
Accounts payable-trade			156,283				526
Salaries and commissions payable, deferred revenue, and other liabilities			55,329				16,793
Net cash used in operating activities			(147,038	)			(121,542	)
Cash flows from investing activities:
Proceeds from sale of property, equipment, and operating lease equipment			3,325				2,927
Purchases of property, equipment and operating lease equipment			(5,661	)			(21,375	)
Cash used in acquisitions, net of cash acquired			(13,288	)			-
Net cash used in investing activities			(15,624	)			(18,448	)
Cash flows from financing activities:
Borrowings of non-recourse and recourse notes payable			189,063				98,547
Repayments of non-recourse and recourse notes payable			(87,502	)			(32,099	)
Repurchase of common stock			(7,224	)			(9,466	)
Net borrowings on floor plan facility			9,218				59,014
Net cash provided by financing activities			103,555				115,996
Effect of exchange rate changes on cash			3,124				(2	)
Net decrease in cash and cash equivalents			(55,983	)			(23,996	)
Cash and cash equivalents, beginning of period			155,378				129,562
Cash and cash equivalents, end of period		$	99,395			$	105,566

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UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS - continued

(in thousands)

		Nine Months Ended December 31,
		2022				2021
Supplemental disclosures of cash flow information:
Cash paid for interest		$	2,402			$	1,182
Cash paid for income taxes		$	39,693			$	35,676
Cash paid for amounts included in the measurement of lease liabilities		$	3,374			$	3,420
Schedule of non-cash investing and financing activities:
Proceeds from sale of property, equipment, and leased equipment		$	34			$	87
Purchases of property, equipment, and operating lease equipment		$	(125	)		$	(16	)
Borrowing of non-recourse and recourse notes payable		$	38,267			$	56,240
Repayments of non-recourse and recourse notes payable		$	-			$	(32	)
Vesting of share-based compensation		$	9,854			$	8,439
New operating lease assets obtained in exchange for lease obligations		$	3,348			$	2,489

See Notes to Unaudited Consolidated Financial Statements.

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ePlus inc. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)

		Nine Months Ended December 31, 2022
																						Accumulated
										Additional												Other
		Common Stock								Paid-In				Treasury				Retained				Comprehensive
		Shares				Par Value				Capital				Stock				Earnings				Income				Total
Balance, March 31, 2022			26,886			$	270			$	159,480			$	(6,734	)		$	507,846			$	(124	)		$	660,738
Issuance of restricted stock awards			135				1				-				-				-				-				1
Share-based compensation			-				-				1,773				-				-				-				1,773
Repurchase of common stock			(128	)			-				-				(7,224	)			-				-				(7,224	)
Net earnings			-				-				-				-				22,339				-				22,339
Foreign currency translation adjustment			-				-				-				-				-				(1,339	)			(1,339	)
Balance, June 30, 2022			26,893			$	271			$	161,253			$	(13,958	)		$	530,185			$	(1,463	)		$	676,288
Issuance of restricted stock awards			13				1				-				-				-				-				1
Share-based compensation			-				-				1,958				-				-				-				1,958
Net earnings			-				-				-				-				28,469				-				28,469
Foreign currency translation adjustment			-				-				-				-				-				(1,071	)			(1,071	)
Balance, September 30, 2022			26,906			$	272			$	163,211			$	(13,958	)		$	558,654			$	(2,534	)		$	705,645
Issuance of restricted stock awards			1				-				-				-				-				-				-
Share-based compensation			-				-				1,950				-				-				-				1,950
Net earnings			-				-				-				-				35,694				-				35,694
Foreign currency translation adjustment			-				-				-				-				-				3,131				3,131
Balance, December 31, 2022			26,907			$	272			$	165,161			$	(13,958	)		$	594,348			$	597			$	746,420

		Nine Months Ended December 31, 2021
																						Accumulated
										Additional												Other
		Common Stock								Paid-In				Treasury				Retained				Comprehensive
		Shares				Par Value				Capital				Stock				Earnings				Income				Total
Balance, March 31, 2021			27,006			$	145			$	152,366			$	(75,372	)		$	484,616			$	655			$	562,410
Issuance of restricted stock awards			156				1				-				-				-				-				1
Share-based compensation			-				-				1,735				-				-				-				1,735
Repurchase of common stock			(90	)			-				-				(4,111	)			-				-				(4,111	)
Net earnings			-				-				-				-				23,518				-				23,518
Foreign currency translation adjustment			-				-				-				-				-				66				66
Balance, June 30, 2021			27,072			$	146			$	154,101			$	(79,483	)		$	508,134			$	721			$	583,619
Issuance of restricted stock awards			12				-				-				-				-				-				-
Share-based compensation			-				-				1,840				-				-				-				1,840
Repurchase of common stock			(63	)			-				-				(2,763	)			-				-				(2,763	)
Net earnings			-				-				-				-				31,413				-				31,413
Foreign currency translation adjustment			-				-				-				-				-				(506	)			(506	)
Balance, September 30, 2021			27,021			$	146			$	155,941			$	(82,246	)		$	539,547			$	215			$	613,603
Issuance of restricted stock awards			(5	)			-				-				-				-				-				-
Share-based compensation			-				-				1,780				-				-				-				1,780
Repurchase of common stock			(50	)			-				-				(2,592	)			-				-				(2,592	)
Stock split effected in the form of a dividend			-				135				-				-				(135	)			-				-
Retirement of treasury stock			-				(11	)			-				82,246				(82,235	)			-				-
Net earnings			-				-				-				-				26,424				-				26,424
Foreign currency translation adjustment			-				-				-				-				-				81				81
Balance, December 31, 2021			26,966			$	270			$	157,721			$	(2,592	)		$	483,601			$	296			$	639,296

See Notes to Unaudited Consolidated Financial Statements.

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ePlus inc. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1.	ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS — Our company was founded in 1990 and is a Delaware corporation. ePlus inc. is sometimes referred to in this Quarterly Report on Form 10-Q as “we,” “our,” “us,” “ourselves,” or “ePlus.” ePlus inc. is a holding company that through its subsidiaries provides information technology solutions that enable organizations to optimize their IT environment and supply chain processes. We also provide consulting, professional, and managed services and complete lifecycle management services including flexible financing solutions. We focus on selling to medium and large enterprises in North America, the United Kingdom (“UK”), and other European countries.

BASIS OF PRESENTATION — The unaudited consolidated financial statements include the accounts of ePlus inc. and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. The accounts of businesses acquired are included in the unaudited consolidated financial statements from the dates of acquisition.

INTERIM FINANCIAL STATEMENTS — The unaudited consolidated financial statements for the nine months ended December 31, 2022, and 2021, were prepared by us and include all normal and recurring adjustments that, in the opinion of management, are necessary for a fair presentation of our financial position, results of operations, changes in comprehensive income, and cash flows for such periods. Operating results for the nine months ended December 31, 2022, and 2021, are not necessarily indicative of results that may be expected for any other interim period or for the full fiscal year ended March 31, 2023, or any other future period. These unaudited consolidated financial statements do not include all disclosures required by the accounting principles generally accepted in the United States (“US GAAP”) for annual financial statements. Our audited consolidated financial statements are contained in our annual report on Form 10-K for the year ended March 31, 2022 (“2022 Annual Report”), which should be read in conjunction with these interim consolidated financial statements.

USE OF ESTIMATES — The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Estimates are used when accounting for items and matters including, but not limited to, revenue recognition, residual values, vendor consideration, lease classification, goodwill and intangible assets, allowance for credit losses, inventory obsolescence, and the recognition and measurement of income tax assets and other provisions and contingencies. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from these estimates.

CONCENTRATIONS OF RISK — A substantial portion of our sales are products from Cisco Systems, which were 39% and 38% of our technology segment’s net sales for the three months ended December 31, 2022, and 2021, respectively, and 38% and 40% of our technology segment’s net sales for the nine months ended December 31, 2022, and 2021, respectively.

SIGNIFICANT ACCOUNTING POLICIES — The significant accounting policies used in preparing these Consolidated Financial Statements were applied on a basis consistent with those reflected in our Consolidated Financial Statements for the year ended March 31, 2022, except for the changes provided in Note 2, “Recent Accounting Pronouncements.”

2.	RECENT ACCOUNTING PRONOUNCEMENTS

RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS — In October 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, that requires companies to apply Accounting Standards Codification Topic 606, Contracts with Customers, to recognize and measure contract assets and contract liabilities from contracts with customers acquired in a business combination. We early adopted this update beginning in the second quarter of our fiscal year ending March 31, 2023, and it did not have a material impact on our Consolidated Financial Statements. The ongoing impact of this standard will be fact dependent on the transactions within its scope.

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RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED — In September 2022, the FASB issued ASU 2022-04, Liabilities—Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations. This update requires buyers in a supplier finance program to disclose certain qualitative and quantitative information about the program. This update is effective for us beginning in our fiscal year ending March 31, 2024, including interim periods within that fiscal year, except for a requirement to provide a roll forward of our obligations during the annual period, which is effective for us beginning in our fiscal year ending March 31, 2025. We are currently evaluating the impact this update will have on our disclosures.

3.

REVENUES

CONTRACT BALANCES

Accounts receivable – trade consists entirely of amounts due from contracts with customers. In addition, we had $62.1 million and $47.5 million of receivables from contracts with customers included within financing receivables as of December 31, 2022, and March 31, 2022, respectively. The following table provides the balance of contract liabilities from contracts with customers (in thousands):

		December 31, 2022				March 31, 2022
Current (included in deferred revenue)		$	125,532			$	85,826
Non-current (included in other liabilities)		$	42,634			$	30,086

Revenue recognized from the beginning contract liability balance was $15.0 million and $57.4 million for the three and nine months ended December 31, 2022, respectively, and $11.7 million and $47.9 million for the three and nine months ended December 31, 2021, respectively.

PERFORMANCE OBLIGATIONS

The following table includes revenue expected to be recognized in the future related to performance obligations, primarily non-cancelable contracts for ePlus managed services, that are unsatisfied or partially unsatisfied at the end of the reporting period (in thousands):

Remainder of the year ending March 31, 2023		$	24,466
Year ending March 31, 2024			45,891
Year ending March 31, 2025			21,815
Year ending March 31, 2026			8,191
Year ending March 31, 2027 and thereafter			4,741
Total remaining performance obligations		$	105,104

The table does not include the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less, and (ii) contracts where we recognize revenue at the amount that we have the right to invoice for services performed.

4.	FINANCING RECEIVABLES AND OPERATING LEASES

Our financing receivables and operating leases consist primarily of leases of IT and communication equipment and notes receivable from financing customer purchases of third-party software, maintenance, and services. Our leases often include elections for the lessee to purchase the underlying asset at the end of the lease term. Often, our leases provide the lessee a bargain purchase option.

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The following table provides the profit recognized for sales-type leases at their commencement date, including modifications that are recognized on a net basis, for the three and nine months ended December 31, 2022, and 2021 (in thousands):

		Three Months Ended December 31,								Nine Months Ended December 31,
		2022				2021				2022				2021
Net sales		$	5,916			$	3,212			$	15,405			$	12,991
Cost of sales			4,949				2,645				12,785				10,936
Gross profit		$	967			$	567			$	2,620			$	2,055

The following table provides interest income in aggregate on our sales-type leases and lease income on our operating leases for the three and nine months ended December 31, 2022, and 2021 (in thousands):

		Three Months Ended December 31,								Nine Months Ended December 31,
		2022				2021				2022				2021
Interest income on sales-type leases		$	996			$	786			$	2,677			$	3,076
Lease income on operating leases		$	4,030			$	7,356			$	13,271			$	19,200

FINANCING RECEIVABLES—NET

The following tables provide a disaggregation of our financing receivables – net (in thousands):

		Notes				Lease				Financing
December 31, 2022		Receivable				Receivables				Receivables
Gross receivables		$	136,293			$	55,413			$	191,706
Unguaranteed residual value (1)			-				7,969				7,969
Unearned income			(7,720	)			(7,815	)			(15,535	)
Allowance for credit losses (2)			(1,252	)			(1,397	)			(2,649	)
Total, net		$	127,321			$	54,170			$	181,491
Reported as:
Current		$	84,729			$	21,094			$	105,823
Long-term			42,592				33,076				75,668
Total, net		$	127,321			$	54,170			$	181,491

(1)	Includes unguaranteed residual values of $4,130 that we retained after selling the related lease receivable.

(2)	Refer to Note 7, “Allowance for Credit Losses” for details.

		Notes				Lease				Financing
March 31, 2022		Receivable				Receivables				Receivables
Gross receivables		$	80,517			$	38,788			$	119,305
Unguaranteed residual value (1)			-				9,141				9,141
Unearned income			(2,728	)			(3,604	)			(6,332	)
Allowance for credit losses (2)			(708	)			(681	)			(1,389	)
Total, net		$	77,081			$	43,644			$	120,725
Reported as:
Current		$	45,415			$	16,077			$	61,492
Long-term			31,666				27,567				59,233
Total, net		$	77,081			$	43,644			$	120,725

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(1)	Includes unguaranteed residual values of $6,424 that we retained after selling the related lease receivable.

(2)	Refer to Note 7, “Allowance for Credit Losses” for details.

OPERATING LEASES—NET

Operating leases—net represents leases that do not qualify as sales-type leases. The components of the operating leases—net are as follows (in thousands):

		December 31,				March 31,
		2022				2022
Cost of equipment under operating leases		$	15,253			$	13,044
Accumulated depreciation			(10,342	)			(7,985	)
Operating lease equipment—net		$	4,911			$	5,059

TRANSFERS OF FINANCIAL ASSETS

We enter into arrangements to transfer the contractual payments due under financing receivables and operating lease agreements, which are accounted for as sales or secured borrowings.

For transfers accounted for as a secured borrowing, the corresponding investments serve as collateral for non-recourse notes payable. As of December 31, 2022, and March 31, 2022, we had financing receivables of $58.1 million and $21.1 million, respectively, and operating leases of $1.4 million and $2.0 million, respectively, which were collateral for non-recourse notes payable. See Note 8, ‘‘Credit Facility and Notes Payable.’’

For transfers accounted for as a sale, we derecognize the carrying value of the asset transferred plus any liability and recognize a net gain or loss on the sale, which are presented within net sales in the consolidated statement of operations. During the three months ended December 31, 2022, and 2021, we recognized net gains of $5.2 million and $2.3 million, respectively, and total proceeds from these sales were $157.2 million and $63.5 million, respectively. For the year to date periods ended December 31, 2022, and 2021, we recognized net gains of $15.1 million and $15.6 million, respectively, and total proceeds from these sales were $586.1 million and $753.9 million, respectively.

When we retain servicing obligations in transfers accounted for as sales, we allocate a portion of the proceeds to deferred revenue, which is recognized as we perform the services. As of both December 31, 2022, and March 31, 2022, we had deferred revenue of $0.5 million, for servicing obligations.

In a limited number of transfers accounted for as sales, we indemnified the assignee if the lessee elects to early terminate the lease. As of December 31, 2022, and March 31, 2022, the total potential payments that could result from these indemnities is immaterial.

5.	LESSEE ACCOUNTING

We lease office and warehouse space for periods generally between one to five years and, in some instances, for longer periods up to ten years. We recognize our right-of-use assets as part of property, equipment, and other assets. We recognize the current and long-term portions of our lease liability as part of other current liabilities and other liabilities, respectively. We recognized rent expense as part of selling, general and administrative expenses. We recognized rent expense of $1.3 million as part of selling, general and administrative expenses for the three months ended December 31, 2022, and $1.4 million for the three months ending December 31, 2021, and $3.8 million and $4.0 million for the nine months ended December 31, 2022, and 2021, respectively.

6.	GOODWILL AND OTHER INTANGIBLE ASSETS

GOODWILL

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The following table summarizes the changes in the carrying amount of goodwill for the nine months ended December 31, 2022 (in thousands):

		Nine Months Ended December 31,
		Goodwill				Accumulated Impairment Loss				Net Carrying Amount
Beginning balance		$	135,216			$	(8,673	)		$	126,543
Acquisitions			9,694				-				9,694
Foreign currency translations			(180	)			-				(180	)
Ending balance		$	144,730			$	(8,673	)		$	136,057

Goodwill represents the premium paid over the fair value of the net tangible and intangible assets that are individually identified and separately recognized in business combinations. Our entire balance as of December 31, 2022, relates to our technology segment, which we also determined to be one reporting unit. The carrying value of goodwill was $136.1 million and $126.5 million as of December 31, 2022, and March 31, 2022, respectively. Our goodwill balance increased by $9.5 million over the nine months ended December 31, 2022, due to $9.7 million in goodwill additions from our acquisition of Future Com, Ltd., offset by foreign currency translation of $0.2 million. Please refer to Note 15, “Business Combinations” for details of our acquisition.

We test goodwill for impairment on an annual basis, as of the first day of our third fiscal quarter, and between annual tests if an event occurs, or circumstances change, that would more likely than not reduce the fair value of a reporting unit below its carrying value. In our annual test as of October 1, 2022, we performed a quantitative assessment of goodwill and concluded that the fair value of our technology reporting unit exceeded its carrying value. Our conclusions would not be impacted by a ten percent change in our estimate of the fair value of the reporting unit.

OTHER INTANGIBLE ASSETS

Our other intangible assets consisted of the following on December 31, 2022, and March 31, 2022 (in thousands):

		December 31, 2022												March 31, 2022
		Gross Carrying Amount				Accumulated Amortization				Net Carrying Amount				Gross Carrying Amount				Accumulated Amortization				Net Carrying Amount
Purchased intangibles		$	85,394			$	(59,095	)		$	26,299			$	77,224			$	(52,087	)		$	25,137
Capitalized software development			10,516				(9,259	)			1,257				10,517				(8,404	)			2,113
Total		$	95,910			$	(68,354	)		$	27,556			$	87,741			$	(60,491	)		$	27,250

Purchased intangibles, consisting mainly of customer relationships, are generally amortized between 5 to 10 years. Capitalized software development is generally amortized over five years.

Total amortization expense for purchased intangibles was $2.5 million for both the three months ended December 31, 2022 and December 31, 2021, and $7.2 million and $7.9 million for the nine months ended December 31, 2022, and December 31, 2021, respectively.

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7.	ALLOWANCE FOR CREDIT LOSSES

The following table provides the activity in our allowance for credit losses for the nine months ended December 31, 2022, and 2021 (in thousands):

		Accounts Receivable				Notes Receivable				Lease Receivables				Total
Balance April 1, 2022		$	2,411			$	708			$	681			$	3,800
Provision for credit losses			1,584				546				716				2,846
Write-offs and other			(102	)			(2	)			-				(104	)
Balance December 31, 2022		$	3,893			$	1,252			$	1,397			$	6,542

		Accounts Receivable				Notes Receivable				Lease Receivables				Total
Balance April 1, 2021		$	2,064			$	1,212			$	1,171			$	4,447
Provision for credit losses			330				60				(313	)			77
Write-offs and other			(129	)			(112	)			(212	)			(453	)
Balance December 31, 2021		$	2,265			$	1,160			$	646			$	4,071

We evaluate our customers using an internally assigned credit quality rating “CQR”. The CQR categories of our financing receivables are:

•	High CQR: This rating includes accounts with excellent to good business credit, asset quality and capacity to meet financial obligations. Loss rates in this category are generally up to 1%.

•	Average CQR: This rating includes accounts with average credit risk that are more susceptible to loss in the event of adverse business or economic conditions. Loss rates in this category are generally in the range of 2% to 10%.

•	Low CQR: This rating includes accounts that have marginal credit risk such that the customer’s ability to make repayment is impaired or may likely become impaired. The loss rates in this category in the normal course are generally greater than 10% and up to 100%.

 

The following table provides the amortized cost basis of our financing receivables by CQR and by credit origination year as of December 31, 2022 (in thousands):

		Amortized cost basis by origination year ending March 31,
		2023				2022				2021				2020				2019				2018				Total				Non-recourse debt (2)				Net credit exposure
Notes receivable:
High CQR		$	81,348			$	11,930			$	14,385			$	541			$	38			$	-			$	108,242			$	-			$	108,242
Average CQR			16,107				2,899				1,107				176				41				1				20,331				(45	)			20,286
Low CQR			-				-				-				-				-				-				-				-				-
Total		$	97,455			$	14,829			$	15,492			$	717			$	79			$	1			$	128,573			$	(45	)		$	128,528
Lease receivables:
High CQR		$	14,794			$	5,037			$	2,445			$	1,269			$	175			$	20			$	23,740			$	(35,202	)		$	(11,462	)
Average CQR			19,471				6,898				1,122				175				15				16				27,697				(1,084	)			26,613
Low CQR			-				-				-				-				-				-				-				-				-
Total		$	34,265			$	11,935			$	3,567			$	1,444			$	190			$	36			$	51,437			$	(36,286	)		$	15,151
Total amortized cost (1)		$	131,720			$	26,764			$	19,059			$	2,161			$	269			$	37			$	180,010			$	(36,331	)		$	143,679

(1)	Unguaranteed residual values of $4,130 that we retained after selling the related lease receivable is excluded from amortized cost.

(2)	Transfers consist of receivables that have been transferred to third-party financial institutions on a non-recourse basis.

The following table provides the amortized cost basis of our financing receivables by CQR and by credit origination year as of March 31, 2022 (in thousands):

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		Amortized cost basis by origination year ending March 31,
		2022				2021				2020				2019				2018				2017				Total				Transfers (2)				Net credit exposure
Notes receivable:
High CQR		$	35,264			$	28,005			$	1,297			$	345			$	2			$	4			$	64,917			$	(30,274	)		$	34,643
Average CQR			8,922				2,976				758				213				3				-				12,872				(4,763	)			8,109
Low CQR			-				-				-				-				-				-				-				-				-
Total		$	44,186			$	30,981			$	2,055			$	558			$	5			$	4			$	77,789			$	(35,037	)		$	42,752
Lease receivables:
High CQR		$	14,549			$	5,002			$	2,499			$	902			$	50			$	11			$	23,013			$	(3,385	)		$	19,628
Average CQR			10,936				3,092				741				47				72				-				14,888				(347	)			14,541
Low CQR			-				-				-				-				-				-				-				-				-
Total		$	25,485			$	8,094			$	3,240			$	949			$	122			$	11			$	37,901			$	(3,732	)		$	34,169
Total amortized cost (1)		$	69,671			$	39,075			$	5,295			$	1,507			$	127			$	15			$	115,690			$	(38,769	)		$	76,921

(1)	Unguaranteed residual values of $6,424 that we retained after selling the related lease receivable is excluded from amortized cost.

(2)

Transfers consist of receivables that have been transferred to third-party financial institutions on a non-recourse basis and receivables that are in the process of being transferred to third-party financial institutions.

The following table provides an aging analysis of our financing receivables as of December 31, 2022 (in thousands):

		31-60 Days Past Due				61-90 Days Past Due				> 90 Days Past Due				Total Past Due				Current				Total Billed				Unbilled				Amortized Cost
Notes receivable		$	899			$	215			$	1,310			$	2,424			$	7,303			$	9,727			$	118,846			$	128,573
Lease receivables			280				370				423				1,073				5,968				7,041				44,396				51,437
Total		$	1,179			$	585			$	1,733			$	3,497			$	13,271			$	16,768			$	163,242			$	180,010

The following table provides an aging analysis of our financing receivables as of March 31, 2022 (in thousands):

		31-60 Days Past Due				61-90 Days Past Due				> 90 Days Past Due				Total Past Due				Current				Total Billed				Unbilled				Amortized Cost
Notes receivable		$	187			$	37			$	23			$	247			$	5,307			$	5,554			$	72,235			$	77,789
Lease receivables			115				325				430				870				639				1,509				36,392				37,901
Total		$	302			$	362			$	453			$	1,117			$	5,946			$	7,063			$	108,627			$	115,690

Our financial assets on nonaccrual status were not significant as of December 31, 2022, and March 31, 2022.

8.	CREDIT FACILITY AND NOTES PAYABLE

CREDIT FACILITY

We finance the operations of our subsidiaries ePlus Technology, inc., ePlus Technology Services, inc., and SLAIT Consulting, LLC (collectively, the “Borrowers”) in our technology segment through a credit facility with Wells Fargo Commercial Distribution Finance, LLC (“WFCDF”). The WFCDF credit facility has an accounts payable floor plan facility component and a revolving credit facility component.

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On October 13, 2021, the Borrowers amended, restated, and replaced in entirety their then-existing credit agreements with WFCDF. On October 31, 2022, the Borrowers entered into the First Amendment to the Credit Agreement. Under this agreement and its amendment (collectively, the “WFCDF Credit Facility”), the credit facility is provided by a syndicate of banks for which WFCDF acts as administrative agent and consists of a discretionary senior secured floorplan facility in favor of the Borrowers in the aggregate principal amount of up to $425.0 million, together with a sublimit for a revolving credit facility for up to $150.0 million.

Under the accounts payable floor plan facility, we had an outstanding balance of $154.5 million and $145.3 million as of December 31, 2022, and March 31, 2022, respectively. On our balance sheet, our liability under the accounts payable floor plan facility is presented as accounts payable – floor plan.

Under the revolving credit facility, we had $95.0 million outstanding as of December 31, 2022, and no balance outstanding as of March 31, 2022. On our balance sheet, our liability under the revolving credit facility is presented as part of recourse notes payable – current.

The fair value of the outstanding balances under the WFCDF Credit Facility were approximately equal to their carrying value as of December 31, 2022, and March 31, 2022.

The amount of principal available is subject to a borrowing base determined by, among other things, the Borrowers’ accounts receivable and inventory, each pursuant to a formula and subject to certain reserves. Loans accrue interest at a rate per annum equal to Term SOFR Rate plus a Term SOFR Adjustment of 0.10% plus an Applicable Margin of 1.75%.

Our borrowings under the WFCDF Credit Facility are secured by the assets of the Borrowers. Additionally, the WFCDF Credit Facility requires a guaranty of $10.5 million by ePlus inc.

Under the WFCDF Credit Facility, the Borrowers are restricted in their ability to pay dividends to ePlus inc. unless their available borrowing meets or met certain thresholds. As of December 31, 2022, and March 31, 2022, their available borrowing met the thresholds such that there were no restrictions on their ability to pay dividends.

The WFCDF Credit Facility has an initial one-year term, which automatically renews for successive one-year terms thereafter. However, either the Borrowers or WFCDF may terminate the WFCDF Credit Facility at any time by providing a written termination notice to the other party no less than 90 days prior to such termination.

RECOURSE NOTES PAYABLE

Recourse notes payable consisted of borrowings for which the lender has recourse against us. As of December 31, 2022, we had $103.0 million in recourse notes payable consisting of $95.0 million outstanding under the revolving credit facility component of our WFCDF Credit Facility, and $8.0 million arising from one installment payment arrangement within our technology segment. As of March 31, 2022, we had $13.1 million in recourse notes payable arising entirely from one installment payment arrangement within our technology segment. Our payments under this installment agreement are due quarterly in amounts that are correlated to the payments due to us from a customer under a related notes receivable. We discounted our payments due under this installment agreement to calculate our payable balance using an interest rate of 3.50% as of both December 31, 2022, and March 31, 2022.

NON-RECOURSE NOTES PAYABLE

Non-recourse notes payable consist of borrowings that, in the event of a default by a customer, the lender generally only has recourse against the customer, and the assets serving as collateral, but not against us. As of December 31, 2022, and March 31, 2022, we had $48.5 million and $21.2 million, respectively, of non-recourse borrowings that were collateralized by investments in notes and leases. Principal and interest payments are generally due in amounts that are approximately equal to the total payments due from the customer under the leases or notes receivable that collateralize the notes payable. The weighted average interest rate for our non-recourse notes payable was 5.05% and 3.59%, as of December 31, 2022, and March 31, 2022, respectively.

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9.	COMMITMENTS AND CONTINGENCIES

LEGAL PROCEEDINGS

We are subject to various legal proceedings, as well as demands, claims and threatened litigation, that arise in the normal course of our business and have not been fully resolved. The ultimate outcome of any litigation or any other legal dispute is uncertain. When a loss related to a legal proceeding or claim is probable and reasonably estimable, we accrue our best estimate for the ultimate resolution of the matter. If one or more legal matters are resolved against us in a reporting period for amounts above management’s expectations, our financial condition and operating results for that period could be adversely affected. As of December 31, 2022, we do not believe that there is a reasonable possibility that any material loss exceeding the amounts already recognized for these proceedings and matters, if any, has been incurred. Any outcome, whether favorable or unfavorable, may materially and adversely affect us due to legal costs and expenses, diversion of management attention and other factors. We expense legal costs in the period incurred. We cannot assure that additional contingencies of a legal nature or contingencies having legal aspects will not be asserted against us in the future, and these matters could relate to prior, current, or future transactions or events.

10.	EARNINGS PER SHARE

Basic earnings per share is calculated by dividing net earnings available to common shareholders by the basic weighted average number of shares of common stock outstanding during each period. Diluted earnings per share is calculated by dividing net earnings available to common shareholders by the basic weighted average number of shares of common stock outstanding plus common stock equivalents during each period.

The following table provides a reconciliation of the numerators and denominators used to calculate basic and diluted net income per common share as disclosed on our unaudited consolidated statements of operations for the three and nine months ended December 31, 2022, and 2021, respectively (in thousands, except per share data).

 

		Three Months Ended December 31,								Nine Months Ended December 31,
		2022				2021				2022				2021
Net earnings attributable to common shareholders - basic and diluted		$	35,694			$	26,424			$	86,502			$	81,355
Basic and diluted common shares outstanding:
Weighted average common shares outstanding — basic			26,592				26,668				26,561				26,666
Effect of dilutive shares			56				262				127				221
Weighted average shares common outstanding — diluted			26,648				26,930				26,688				26,887
Earnings per common share - basic		$	1.34			$	0.99			$	3.26			$	3.05
Earnings per common share - diluted		$	1.34			$	0.98			$	3.24			$	3.03

11.	STOCKHOLDERS’ EQUITY

 

SHARE REPURCHASE PLAN

On March 24, 2022, our board of directors authorized the repurchase of up to 1,000,000 shares of our outstanding common stock, over a 12-month period beginning May 28, 2022. On March 18, 2021, our board of directors authorized the repurchase of up to 1,000,000 shares of our outstanding common stock, over a 12-month period beginning May 28, 2021. Under both authorized programs, purchases may be made from time to time in the open market, or in privately negotiated transactions, subject to availability. Any repurchased shares will have the status of treasury shares and may be used, when needed, for general corporate purposes.

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During the nine months ended December 31, 2022, we purchased 70,473 shares of our outstanding common stock at a value of $3.9 million under the share repurchase plan; we also purchased 58,080 shares of common stock at a value of $3.3 million to satisfy tax withholding obligations relating to the vesting of employees’ restricted stock.

During the nine months ended December 31, 2021, we purchased 147,999 shares of our outstanding common stock at a value of $6.9 million under the share repurchase plan; we also purchased 55,430 shares of common stock at a value of $2.6 million to satisfy tax withholding obligations relating to the vesting of employees’ restricted stock.

12.	SHARE-BASED COMPENSATION

SHARE-BASED PLANS

As of December 31, 2022, we had share-based awards outstanding under the following plans: (1) the 2017 Non-Employee Director Long-Term Incentive Plan (“2017 Director LTIP”), (2) the 2012 Employee Long-Term Incentive Plan (“2012 Employee LTIP”), and (3) the 2021 Employee Long-Term Incentive Plan (“2021 Employee LTIP”).

The 2021 Employee LTIP was approved by our shareholders on September 16, 2021, and became effective October 1, 2021. The 2021 Employee LTIP replaced the 2012 Employee LTIP that had previously been approved by our stockholders on September 13, 2012. Beginning September 16, 2021, we permanently ceased granting any additional shares under the 2012 Employee LTIP.

These share-based plans define fair market value as the closing sales price of a share of common stock as quoted on any established stock exchange for such date or the most recent trading day preceding such date if there were no trades on such date.

RESTRICTED STOCK ACTIVITY

For the nine months ended December 31, 2022, we granted 18,842 shares of our stock under the 2017 Director LTIP, and 138,643 restricted shares of our stock under the 2021 Employee LTIP. For the nine months ended December 31, 2021, we granted 13,562 shares of our stock under the 2017 Director LTIP, and 155,722 restricted shares of our stock under the 2012 Employee LTIP, and no shares under the 2021 Employee LTIP. A summary of our restricted stock activity, is as follows:

		Number of Shares				Weighted Average Grant-date Fair Value
Nonvested April 1, 2022			343,806			$	41.01
Granted			157,485			$	56.57
Vested			(178,374	)		$	39.46
Forfeited			(7,843	)		$	41.91
Nonvested December 31, 2022			315,074			$	49.57

EMPLOYEE STOCK PURCHASE PLAN

On September 15, 2022, our shareholders approved the 2022 Employee Stock Purchase Plan (“2022 ESPP”) through which eligible employees may purchase shares of our stock at a purchase price of the lesser of the closing price on the offering date or purchase date, discounted by up to 15%. As of December 31, 2022, we had not yet issued any shares under the 2022 ESPP.

COMPENSATION EXPENSE

We recognize compensation cost for awards of restricted stock with graded vesting on a straight-line basis over the requisite service period. There are no additional conditions for vesting other than service conditions. During the three months ended December 31, 2022, and 2021, we recognized $2.0 million and $1.8 million of total share-based compensation expense, respectively. During the nine months ended December 31, 2022, and 2021, we recognized $5.7 million and $5.4 million of total share-based compensation expense, respectively. Unrecognized compensation expense related to unvested restricted stock was $11.6 million as of December 31, 2022, which will be fully recognized over the next 30 months.

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We also provide our employees with a contributory 401(k) profit sharing plan, to which we may contribute from time to time at our sole discretion. Employer contributions to the plan are always fully vested. For the three months ended December 31, 2022, our estimated contribution expense to the plan was $1.1 million, as compared to $0.8 million for the same period in the prior year. For the nine months ended December 31, 2022, our estimated contribution expense to the plan was $3.2 million, as compared to $2.6 million for the same period in the prior year.

13.	INCOME TAXES

Our provision for income tax expense was $13.7 million and $34.1 million for the three and nine months ended December 31, 2022, as compared to $9.5 million and $31.1 million for the same period in the prior year. Our effective tax rate for the three and nine months ended December 31, 2022, was 27.7% and 28.3% respectively, compared with 26.4% and 27.7%, respectively, for the same periods in the prior year. Our effective tax rate for the three and nine months ended December 31, 2022, and December 31, 2021, differed from the US federal statutory rate of 21.0% primarily due to state and local income taxes. Our effective tax rate was higher for the three months ended December 31, 2022, than for the same period in the prior year due to a tax benefit from restricted stock in the prior year. Our effective tax rate was higher for the nine months ended December 31, 2022, than for the same period in the prior year due to foreign currency transaction losses incurred in lower tax jurisdictions.

14.	FAIR VALUE OF FINANCIAL INSTRUMENTS

The following table summarizes the fair value hierarchy of our financial instruments as of December 31, 2022, and March 31, 2022 (in thousands):

						Fair Value Measurement Using
		Recorded Amount				Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs(Level 3)
December 31, 2022
Assets:
Money market funds		$	255			$	255			$	-			$	-
March 31, 2022
Assets:
Money market funds		$	18,138			$	18,138			$	-			$	-

15.	BUSINESS COMBINATIONS

FUTURE COM

On July 15, 2022, our subsidiary, ePlus Technology, inc., acquired certain assets and liabilities of Future Com, Ltd., a Texas-based provider of cybersecurity solutions, cloud security and security consulting services throughout the US. Our acquisition provides access to enhanced engineering, sales, and services delivery capabilities in the South-Central region of the United States, as well as bolstering the skills and expertise surrounding ePlus’ growing cybersecurity practice.

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Our sum for consideration transferred is $13.3 million consisting of $13.0 million paid in cash at closing plus an additional $0.3 million that was subsequently paid to the sellers based on adjustments to our determination of the total net assets delivered. Our allocation of the purchase consideration to the assets acquired and liabilities assumed is presented below (in thousands):

		Acquisition Date Amount
Accounts receivable		$	4,033
Other assets			129
Identified intangible assets			8,360
Accounts payable and other liabilities			(8,714	)
Contract liabilities			(214	)
Total identifiable net assets			3,594
Goodwill			9,694
Total purchase consideration		$	13,288

The identified intangible assets of $8.4 million consists of customer relationships with an estimated useful life of seven years. The fair value of acquired receivables equals the gross contractual amounts receivable. We expect to collect all acquired receivables.

We recognized goodwill related to this transaction of $9.7 million, which was assigned to our technology reporting unit. The goodwill recognized in the acquisition is attributable to the acquired assembled workforce and expected synergies, none of which qualify for recognition as a separate intangible asset. The total amount of goodwill is expected to be deductible for tax purposes. The amount of revenues and earnings of the acquiree since the acquisition date are not material. Likewise, the impact to the revenue and earnings of the combined entity for the current reporting period as though the acquisition date had been April 1, 2022, is not material.

16.	SEGMENT REPORTING

Our operations are conducted through two operating segments that are also both reportable segments. Our technology segment includes sales of IT products, third-party software, third-party maintenance, advanced professional and managed services, and our proprietary software to commercial enterprises, state and local governments, and government contractors. Our financing segment consists of the financing of IT equipment, software, and related services to commercial enterprises, state and local governments, and government contractors. We measure the performance of the segments based on operating income.

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Our reportable segment information for the three-and nine-month periods ended December 31, 2022, and 2021 are summarized in the following table (in thousands):

		Three Months Ended
		December 31, 2022												December 31, 2021
		Technology				Financing				Total				Technology				Financing				Total
Net Sales
Product		$	544,316			$	11,702			$	556,018			$	414,448			$	17,859			$	432,307
Service			67,458				-				67,458				62,527				-				62,527
Total			611,774				11,702				623,476				476,975				17,859				494,834
Cost of Sales
Product			439,831				1,184				441,015				334,585				5,225				339,810
Service			44,089				-				44,089				37,907				-				37,907
Total			483,920				1,184				485,104				372,492				5,225				377,717
Gross Profit			127,854				10,518				138,372				104,483				12,634				117,117
Selling, general, and administrative			81,874				4,856				86,730				73,413				3,461				76,874
Depreciation and amortization			3,582				27				3,609				3,569				28				3,597
Interest and financing costs			1,308				267				1,575				335				226				561
Operating expenses			86,764				5,150				91,914				77,317				3,715				81,032
Operating income			41,090				5,368				46,458				27,166				8,919				36,085
Other income (expense), net											2,907												(175	)
Earnings before tax										$	49,365											$	35,910
Net Sales
Contracts with customers		$	605,858			$	560			$	606,418			$	473,763			$	5,840			$	479,603
Financing and other			5,916				11,142				17,058				3,212				12,019				15,231
Total		$	611,774			$	11,702			$	623,476			$	476,975			$	17,859			$	494,834
Selected Financial Data - Statement of Cash Flow
Depreciation and amortization		$	3,926			$	783			$	4,709			$	3,846			$	2,730			$	6,576
Purchases of property, equipment and operating lease equipment		$	2,225			$	1,026			$	3,251			$	1,339			$	3,793			$	5,132
Selected Financial Data - Balance Sheet
Total assets		$	1,301,459			$	296,406			$	1,597,865			$	998,594			$	256,552			$	1,255,146

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		Nine Months Ended
		December 31, 2022												December 31, 2021
		Technology				Financing				Total				Technology				Financing				Total
Net Sales
Product		$	1,336,309			$	43,504			$	1,379,813			$	1,134,658			$	55,866			$	1,190,524
Service			195,728				-				195,728				178,976				-				178,976
Total			1,532,037				43,504				1,575,541				1,313,634				55,866				1,369,500
Cost of Sales
Product			1,054,267				8,085				1,062,352				899,437				15,229				914,666
Service			127,990				-				127,990				109,203				-				109,203
Total			1,182,257				8,085				1,190,342				1,008,640				15,229				1,023,869
Gross Profit			349,780				35,419				385,199				304,994				40,637				345,631
Selling, general, and administrative			235,147				13,054				248,201				210,369				9,784				220,153
Depreciation and amortization			10,304				83				10,387				11,292				84				11,376
Interest and financing costs			2,117				746				2,863				693				569				1,262
Operating expenses			247,568				13,883				261,451				222,354				10,437				232,791
Operating income			102,212				21,536				123,748				82,640				30,200				112,840
Other income (expense), net											(3,112	)											(377	)
Earnings before tax										$	120,636											$	112,463
Net Sales
Contracts with customers		$	1,516,632			$	8,428			$	1,525,060			$	1,300,643			$	13,034			$	1,313,677
Financing and other			15,405				35,076				50,481				12,991				42,832				55,823
Total		$	1,532,037			$	43,504			$	1,575,541			$	1,313,634			$	55,866			$	1,369,500
Selected Financial Data - Statement of Cash Flow
Depreciation and amortization		$	11,312			$	2,936			$	14,248			$	12,023			$	6,597			$	18,620
Purchases of property, equipment and operating lease equipment		$	4,122			$	1,539			$	5,661			$	3,594			$	17,781			$	21,375
Selected Financial Data - Balance Sheet
Total assets		$	1,301,459			$	296,406			$	1,597,865			$	998,594			$	256,552			$	1,255,146

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TECHNOLOGY SEGMENT DISAGGREGATION OF REVENUE

We analyze net sales for our technology segment by customer end market and by vendor, as opposed to discrete product and service categories, which are summarized for the three- and nine-month periods ended December 31, 2022, and 2021 in the tables below (in thousands):

		Three Months Ended December 31,								Nine Months Ended December 31,
		2022				2021				2022				2021
Customer end market:
Telecom, media & entertainment		$	184,539			$	152,584			$	431,269			$	380,560
Technology			133,067				67,959				299,088				190,851
Healthcare			69,825				64,775				205,297				207,700
State and local government and educational institutions			72,730				59,449				207,823				193,526
Financial services			48,008				39,182				118,917				106,229
All others			103,605				93,026				269,643				234,768
Net sales			611,774				476,975				1,532,037				1,313,634
Less: Revenue from financing and other			(5,916	)			(3,212	)			(15,405	)			(12,991	)
Revenue from contracts with customers		$	605,858			$	473,763			$	1,516,632			$	1,300,643

		Three Months Ended December 31,								Nine Months Ended December 31,
		2022				2021				2022				2021
Vendor:
Cisco systems		$	237,334			$	183,195			$	579,530			$	524,169
Juniper networks			50,937				28,792				113,026				71,944
Dell EMC			33,636				40,254				110,730				110,092
HPE			22,981				8,293				62,110				29,594
NetApp			21,987				30,261				52,682				70,254
Arista networks			21,423				13,484				41,528				33,029
All others			223,476				172,696				572,431				474,552
Net sales			611,774				476,975				1,532,037				1,313,634
Less: Revenue from financing and other			(5,916	)			(3,212	)			(15,405	)			(12,991	)
Revenue from contracts with customers		$	605,858			$	473,763			$	1,516,632			$	1,300,643

FINANCING SEGMENT DISAGGREGATION OF REVENUE

We analyze our revenues within our financing segment based on the nature of the arrangement. Our financing revenue generally consists of portfolio income, transactional gains, and post-contract earnings including month-to-month rents and the sales of off-lease equipment. All of our revenues from contracts with customers within our financing segment is from the sales of off-lease equipment.

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Item 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This discussion is intended to further the reader’s understanding of our consolidated financial condition and results of operations. It should be read in conjunction with the unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q and the audited consolidated financial statements included in our 2022 Annual Report. These historical financial statements may not be indicative of our future performance. This Management’s Discussion and Analysis of Financial Condition and Results of Operations may contain forward-looking statements, all of which are based on our current expectations and could be affected by the uncertainties and risks described in Part I, Item 1A, “Risk Factors,” in our 2022 Annual Report, as well as in our other filings with the SEC.

EXECUTIVE OVERVIEW

BUSINESS DESCRIPTION

We are a leading solutions provider in the areas of security, cloud, networking, data center, collaboration, and emerging technologies. We deliver actionable outcomes for organizations by using information technology (“IT”) and consulting solutions to drive business agility and innovation. Leveraging our engineering talent, we assess, plan, deliver, and secure solutions comprised of leading technologies and consumption models aligned with our customers’ needs. Our expertise and experience enable us to craft optimized solutions that take advantage of the cost, scale, and efficiency of private, public and hybrid cloud in an evolving market. As part of our solutions, we provide consulting, professional services, managed services, IT staff augmentation, and complete lifecycle management. Additionally, we offer flexible financing for purchases from us and from third-parties. We have been in the business of selling, leasing, financing, and managing IT and other assets for more than 30 years.

Our primary focus is to deliver integrated solutions that address our customers’ business needs, leveraging the appropriate technologies, both on-premise and in the cloud. Our approach is to lead with advisory consulting to understand our customers’ needs, and then design, deploy, and manage solutions aligned to their objectives. Underpinning the broader areas of Cloud, Security, Networking, Data Center, and Collaboration are specific skills in orchestration and automation, application modernization, DevOps, data management, data visualization, analytics, network modernization, edge compute and other advanced and emerging technologies. These solutions are comprised of class-leading technologies from partners such as Amazon Web Services, Arista Networks, Check Point, Cisco Systems, Citrix, Commvault, Dell EMC, F5 Networks, Fortinet, Gigamon, HPE, Juniper Networks, Lenovo, Microsoft, NetApp, Nutanix, NVIDIA, Oracle, Palo Alto Networks, Pure Storage, Rubrik, Splunk, Varonis, and VMware, among many others. We possess top-level engineering certifications with a broad range of leading IT vendors that enable us to offer multi-vendor IT solutions that are optimized for each of our customers’ specific requirements. Our hosted, proprietary software solutions are focused on giving our customers more control over their IT supply chain, by automating and optimizing the procurement and management of their owned, leased, and consumption-based assets.

Our scale and financial resources have enabled us to continue investing in engineering and technology resources to stay at the forefront of technology trends. Our expertise in core and emerging technologies, buttressed by our robust portfolio of consulting, professional, and managed services, has enabled us to remain a trusted advisor for our customers. In addition, we offer a wide range of consumption options including leasing and financing for technology and other capital assets. We believe our lifecycle approach offering of integrated solutions, services and financing, asset management and our proprietary supply chain software, is unique in the industry. This broad portfolio enables us to deliver a customized customer experience that spans the continuum from fast delivery of competitively priced products and services to subsequent management and maintenance, and through to end-of-life disposal services. This approach permits us to deploy sophisticated solutions to enable our customers’ business outcomes.

Our go-to-market strategy focuses primarily on diverse end-markets for middle market to large enterprises. We serve customers in markets including telecom, media and entertainment, technology, state and local government and educational institutions (“SLED”), healthcare, and financial services. We sell to customers in the United States (“US”), which account for most of our sales, and to customers in select international markets including the United Kingdom (“UK”), the European Union (“EU”), India, and Singapore. Our technology segment accounted for 97% of our net sales and 83% of our operating income, while our financing segment accounted for 3% of our net sales and 17% of our operating income, for the nine months ended December 31, 2022.

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BUSINESS TRENDS

We believe the following key factors are impacting our business performance and our ability to achieve business results:

•

General economic concerns including inflation, rising interest rates, staffing shortages, remote work trends, and global unrest may impact our customers’ willingness to spend on technology and services.

•

A worldwide shortage of certain IT products is resulting from, among other things, shortages in semiconductors and other product components. Like others, we are experiencing ongoing supply constraints that have affected, and could continue to further affect, lead times for delivery of products, our having to carry more inventory for longer periods, the costs of products, vendor return and cancellation policies, and our ability to meet customer demands. We continue to work closely with our suppliers to further mitigate disruptions outside our control. Despite these actions, we believe extended lead times will likely persist for at least the next few quarters.

•

We are experiencing increases in prices from our suppliers, as well as rising wages and interest rates. We generally have been able to pass price increases to our customers. Our labor costs related to services we perform will take longer to pass to customers that have service engagements where prices may be set. Our financing quotes are generally indexed to market changes to enable us to change rates from time of quote to funding. Financing transactions funded with our cash flows, not debt, are subject to interest rate risk. If the market interest rate exceeds our internal rate of return, we may not fund the transaction to obtain the proceeds and lock in our profit on the transaction. Accordingly, inflation could have a material impact on our sales, gross profit, or operating costs in the future.

•

Customers’ top focus areas include security, cloud solutions, hybrid work environments (work from home and return to office), as well as digital transformation and modernization. We have developed advisory services, solutions, and professional and managed services to meet these priorities and help our customers attain and maintain their desired state.

•

Modernizing legacy applications, data modernization, reducing operational complexity, securing workloads, the cost and performance of IT operations, and agility are changing the way companies are purchasing and consuming technology. These are fueling deployments of solutions on cloud, managed services and hybrid platforms and licensing models, which may include invoicing over the term of the agreement.

KEY BUSINESS METRICS

Our management monitors several financial and non-financial measures and ratios on a regular basis to track the progress of our business. We believe that the most important of these measures and ratios include net sales, gross margin, operating income margin, net earnings, net earnings per common share, in each case based on information prepared in accordance with US GAAP, as well as the non-GAAP financial measures and ratios, including Adjusted EBITDA, Adjusted EBITDA margin, Adjusted gross billings, Non-GAAP: Net earnings and Non-GAAP: Net earnings per common share. We use a variety of operating and other information to evaluate the operating performance of our business, develop financial forecasts, make strategic decisions, and prepare and approve annual budgets.

These key indicators include financial information that is prepared in accordance with US GAAP and presented in our unaudited consolidated financial statements, as well as non-GAAP performance measurement tools. Generally, a non-GAAP financial measure is a numerical measure of a company’s performance or financial position that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with US GAAP. 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 reported under non-GAAP, as these measures used by management may differ from similar measures used by other companies, even when similar terms are used to identify such measures.

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Set forth in footnotes (1), (2) and (3) of the tables that immediately follow this paragraph, we set forth our reasons for using and presenting Adjusted EBITDA, Adjusted EBITDA margin, Adjusted gross billings, Non-GAAP: Net earnings and Non-GAAP: Net earnings per common share-diluted in the tables and discussion that follow.

Our key business metrics for the three- and nine-month periods ended December 31, 2022, and 2021 are summarized in the following tables (dollars in thousands, except per share amounts):

		Three Months Ended December 31,								Nine Months Ended December 31,
Consolidated		2022				2021				2022				2021
Net sales		$	623,476			$	494,834			$	1,575,541			$	1,369,500
Gross profit		$	138,372			$	117,117			$	385,199			$	345,631
Gross margin			22.2	%			23.7	%			24.4	%			25.2	%
Operating income margin			7.5	%			7.3	%			7.9	%			8.2	%
Net earnings		$	35,694			$	26,424			$	86,502			$	81,355
Net earnings margin			5.7	%			5.3	%			5.5	%			5.9	%
Net earnings per common share - diluted		$	1.34			$	0.98			$	3.24			$	3.03
Non-GAAP: Net earnings (1)		$	36,714			$	29,711			$	97,623			$	90,870
Non-GAAP: Net earnings per common share - diluted (1)		$	1.38			$	1.10			$	3.66			$	3.38
Adjusted EBITDA (2)		$	53,325			$	41,797			$	141,933			$	130,264
Adjusted EBITDA margin			8.6	%			8.4	%			9.0	%			9.5	%
Technology Segment
Net sales		$	611,774			$	476,975			$	1,532,037			$	1,313,634
Adjusted gross billings (3)		$	888,621			$	685,031			$	2,356,326			$	1,982,162
Gross profit		$	127,854			$	104,483			$	349,780			$	304,994
Gross margin			20.9	%			21.9	%			22.8	%			23.2	%
Operating income		$	41,090			$	27,166			$	102,212			$	82,640
Adjusted EBITDA (2)		$	47,869			$	32,794			$	120,135			$	99,811
Financing Segment
Net sales		$	11,702			$	17,859			$	43,504			$	55,866
Gross profit		$	10,518			$	12,634			$	35,419			$	40,637
Operating income		$	5,368			$	8,919			$	21,536			$	30,200
Adjusted EBITDA (2)		$	5,456			$	9,003			$	21,798			$	30,453

(1)	Non-GAAP: Net earnings and Non-GAAP: Net earnings per common share – diluted are based on net earnings calculated in accordance with US GAAP, adjusted to exclude other income (expense), share-based compensation, and acquisition and integration expenses, and the related tax effects.

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We use Non-GAAP: Net earnings and Non-GAAP: Net earnings per common share diluted as supplemental measures of our performance to gain insight into our operating performance and performance trends. We believe that the exclusion of other income and acquisition-related amortization expense in calculating Non-GAAP: Net earnings and Non-GAAP: Net earnings per common share diluted provides management and investors a useful measure for period-to-period comparisons of our business and operating results by excluding items that management believes are not reflective of our underlying operating performance. Accordingly, we believe that Non-GAAP: Net earnings and Non-GAAP: Net earnings per common share diluted provide useful information to investors and others in understanding and evaluating our operating results. However, 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 US GAAP. In addition, other companies, including companies in our industry, might calculate similar Non-GAAP: Net earnings and Non-GAAP: Net earnings per common share or similarly titled measures differently, which may reduce their usefulness as comparative measures.

		Three Months Ended December 31,								Nine Months Ended December 31,
		2022				2021				2022				2021
GAAP: Earnings before tax		$	49,365			$	35,910			$	120,636			$	112,463
Share based compensation			1,950				1,780				5,681				5,355
Acquisition related amortization expense			2,505				2,497				7,182				7,854
Other (income) expense			(2,907	)			175				3,112				377
Non-GAAP: Earnings before provision for income taxes			50,913				40,362				136,611				126,049
GAAP: Provision for income taxes			13,671				9,486				34,134				31,108
Share based compensation			544				470				1,624				1,494
Acquisition related amortization expense			693				649				2,030				2,156
Other (income) expense			(811	)			46				933				104
Tax benefit (expense) on restricted stock			102				-				267				317
Non-GAAP: Provision for income taxes			14,199				10,651				38,988				35,179
Non-GAAP: Net earnings		$	36,714			$	29,711			$	97,623			$	90,870

		Three Months Ended December 31,								Nine Months Ended December 31,
		2022				2021				2022				2021
GAAP: Net earnings per common share - diluted		$	1.34			$	0.98			$	3.24			$	3.03
Share based compensation			0.05				0.05				0.15				0.14
Acquisition related amortization expense			0.07				0.07				0.20				0.21
Other (income) expense			(0.08	)			-				0.08				0.01
Tax benefit (expense) on restricted stock			-				-				(0.01	)			(0.01	)
Total non-GAAP adjustments - net of tax			0.04				0.12				0.42				0.35
Non-GAAP: Net earnings per common share - diluted		$	1.38			$	1.10			$	3.66			$	3.38

(2)

We define Adjusted EBITDA as net earnings calculated in accordance with US 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 US 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. As such, they are not included in the amounts added back to net earnings in the Adjusted EBITDA calculation. In the table below, we provide a reconciliation of Adjusted EBITDA to net earnings, which is the most directly comparable financial measure to this non-GAAP financial measure. Adjusted EBITDA margin is our calculation of Adjusted EBITDA divided by net sales.

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We use Adjusted EBITDA as a supplemental measure of our performance to gain insight into our operating performance and performance trends. We believe that the exclusion of other income in calculating Adjusted EBITDA and Adjusted EBITDA margin provides management and investors a useful measure for period-to-period comparisons of our business and operating results by excluding items that management believes are not reflective of our underlying operating performance. Accordingly, we believe that Adjusted EBITDA and Adjusted EBITDA margin provide useful information to investors and others in understanding and evaluating our operating results. However, our use of Adjusted EBITDA and Adjusted EBITDA margin 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 US GAAP. In addition, other companies, including companies in our industry, might calculate Adjusted EBITDA and Adjusted EBITDA margin or similarly titled measures differently, which may reduce their usefulness as comparative measures.

		Three Months Ended December 31,								Nine Months Ended December 31,
Consolidated		2022				2021				2022				2021
Net earnings		$	35,694			$	26,424			$	86,502			$	81,355
Provision for income taxes			13,671				9,486				34,134				31,108
Share based compensation			1,950				1,780				5,681				5,355
Interest and financing costs			1,308				335				2,117				693
Depreciation and amortization			3,609				3,597				10,387				11,376
Other income (expense)			(2,907	)			175				3,112				377
Adjusted EBITDA		$	53,325			$	41,797			$	141,933			$	130,264
Technology Segment
Operating income		$	41,090			$	27,166			$	102,212			$	82,640
Depreciation and amortization			3,582				3,569				10,304				11,292
Share based compensation			1,889				1,724				5,502				5,186
Interest and financing costs			1,308				335				2,117				693
Adjusted EBITDA		$	47,869			$	32,794			$	120,135			$	99,811
Financing Segment
Operating income		$	5,368			$	8,919			$	21,536			$	30,200
Depreciation and amortization			27				28				83				84
Share based compensation			61				56				179				169
Adjusted EBITDA		$	5,456			$	9,003			$	21,798			$	30,453

(3)

We define Adjusted gross billings as our technology segment net sales calculated in accordance with US GAAP, adjusted to exclude the costs incurred related to sales of third-party maintenance, software assurance, subscription/SaaS licenses, and services. We have provided below a reconciliation of Adjusted gross billings to technology segment net sales, which is the most directly comparable financial measure to this non-GAAP financial measure.

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		Three Months Ended December 31,								Nine Months Ended December 31,
		2022				2021				2022				2021
Technology segment net sales		$	611,774			$	476,975			$	1,532,037			$	1,313,634
Costs incurred related to sales of third party maintenance, software assurance and subscription/SaaS licenses, and services			276,847				208,056				824,289			$	668,528
Adjusted gross billings		$	888,621			$	685,031			$	2,356,326			$	1,982,162

We use Adjusted gross billings as a supplemental measure of our performance to gain insight into the volume of business generated by our technology segment, and to analyze the changes to our accounts receivable and accounts payable. Our use of Adjusted gross billings as an analytical tool has limitations, and you should not consider them in isolation or as substitutes for analysis of our financial results as reported under US GAAP. In addition, other companies, including companies in our industry, might calculate Adjusted gross billings or a similarly titled measure differently, which may reduce its usefulness as a comparative measure.

CONSOLIDATED RESULTS OF OPERATIONS

Net sales: Net sales for the three months ended December 31, 2022, increased $128.7 million, or 26.0%, to $623.5 million, as compared to $494.8 million for the same period in the prior year. Product sales for the three months ended December 31, 2022, increased $123.7 million, or 28.6% to $556.0 million, as compared to $432.3 million for the same period in the prior year, due to increased demand and higher prices for some products in our technology segment. Service sales for the three months ended December 31, 2022, increased $5.0 million, or 7.9%, to $67.5 million, as compared to $62.5 million for the same period in the prior year, primarily due to growth in managed services volume. In the technology segment, we had increases in net sales to customers in technology, telecom, media, and entertainment, professional services, financial services, SLED, and healthcare due to increases in demand from existing customers.

Net sales for the nine months ended December 31, 2022, increased $206.0 million, or 15.0%, to $1,575.5 million, as compared to $1,369.5 million for the same period in the prior year. Product sales for the nine months ended December 31, 2022, increased $189.3 million, or 15.9%, to $1,379.8 million, as compared to $1,190.5 million for the same period in the prior year, due to increased demand and higher prices for some products in our technology segment. Service sales for the nine months ended December 31, 2022, increased $16.7 million, or 9.4%, to $195.7 million, as compared to $179.0 million for the same period in the prior year, primarily due to growth in managed services volume and increases in professional services volume and rates. In the technology segment, we had increases in net sales to customers in technology, telecom, media, and entertainment, professional services, financial services, and SLED due to increases in demand and the timing of fulfilling orders from existing customers, which were partially offset by decreases in net sales to customers in manufacturing due to the timing of fulfilling orders from existing customers during the nine months ended December 31, 2022, compared to the same period in the prior year.

Withing our technology segment, Adjusted gross billings for the three months for the three months ended December 31, 2022, increased $203.6 million, or 29.7%, to $888.6 million, as compared to $685.0 million for the same period in the prior year. We had increases in adjusted gross billings to customers in technology, telecom, media, and entertainment, professional services, financial services, SLED, and healthcare.

Adjusted gross billings for the nine months ended December 31, 2022, increased $374.1 million, or 18.9%, to $2,356.3 million, as compared to $1,982.2 million for the same period in the prior year. We had increases in adjusted gross billings to customers in technology, telecom, media and entertainment, professional services, financial services, SLED, and healthcare, which were partially offset by decreases in adjusted gross billings to customers in the manufacturing market.

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Gross profit: Consolidated gross profit for the three months ended December 31, 2022, increased $21.3 million, or 18.1%, to $138.4 million, as compared to $117.1 million for the same period in the prior year. While gross profit increased during the three month period ended December 31, 2022, our overall gross margin decreased, primarily due to lower service margins. We also had a decrease in product margins during this period, driven by a lower volume of sales of third party maintenance, software assurance and subscription/SaaS licenses, and services. Consolidated gross margins for the three months ended December 31, 2022, decreased 150 basis points to 22.2%, as compared to 23.7% for the same period in the prior year.

Consolidated gross profit for the nine months ended December 31, 2022, increased $39.6 million, or 11.4%, to $385.2 million, as compared to $345.6 million for the same period in the prior year. While gross profit increased during the nine month period ended December 31, 2022, our overall gross margin decreased, primarily due to lower service margins. We also had a decrease in product margins during this period, driven by a lower volume of sales of third party maintenance, software assurance and subscription/SaaS licenses, and services. Consolidated gross margins for the nine months ended December 31, 2022, decreased 80 basis points to 24.4%, as compared to 25.2% for the same period in the prior year.

Operating expenses: Operating expenses for the three months ended December 31, 2022, increased $10.9 million, or 13.4%, to $91.9 million, as compared to $81.0 million for the same period in the prior year. Our increase in operating expenses was primarily due to an increase in salaries and benefits of $6.8 million, an increase in general and administrative expenses of $2.0 million including higher software, subscription, and maintenance fees, professional service fees, and travel and entertainment costs, an increase in our provision for credit losses of $1.1 million caused by an increase in our receivables over this period compared to the same period in the prior year, and an increase in interest and financing costs of $1.0 million. As of December 31, 2022, we had 1,745 employees, an increase of 191 from 1,554 as of December 31, 2021.

Operating expenses for the nine months ended December 31, 2022, increased $28.7 million, or 12.3%, to $261.5 million, as compared to $232.8 million for the same period in the prior year. Our increase in operating expenses was primarily due to an increase of $16.5 million in salaries and benefits, an increase of $8.8 million in general and administrative expenses including higher advertising and marketing fees, software, subscription and maintenance fees, professional service fees, and travel and entertainment costs, an increase of $2.8 million in our provision for credit losses caused by an increase in our receivables over this period compared to the same period in the prior year, an increase of $1.6 million in interest and financing costs, and partially offset by a $1.0 million decrease in depreciation and amortization.

Operating income: As a result of the foregoing, operating income for the three months ended December 31, 2022, increased $10.4 million, or 28.7%, to $46.5 million, as compared to $36.1 million for the same period in the prior year. Operating income for the nine months ended December 31, 2022, increased $10.9 million, or 9.7%, to $123.7 million, as compared to $112.8 million for the same period in the prior year.

Provision for income taxes: Our effective tax rate for the three and nine months ended December 31, 2022, was 27.7% and 28.3% respectively, compared with 26.4% and 27.7%, respectively, for the same periods in the prior year. Our effective tax rate was higher for the three months ended December 31, 2022, than for the same period in the prior year due to a tax benefit from restricted stock in the prior year. Our effective tax rate was higher for the nine months ended December 31, 2022, than for the same period in the prior year due to foreign currency transaction losses incurred in lower tax jurisdictions.

Net earnings: Consolidated net earnings for the three months ended December 31, 2022, increased $9.3 million, or 35.1%, to $35.7 million, as compared to $26.4 million for the same period in the prior year, due to an increase in gross profit and other income (expense), net. The increase in other income (expense), net was driven by the receipt of $1.9 million related to our claim in a class action lawsuit, which was received in December 2022, and foreign exchange gains. These increases were partially offset by an increase in operating expenses. Consolidated net earnings for the nine months ended December 31, 2022, increased $5.1 million, or 6.3%, to $86.5 million, as compared to $81.4 million for the same period in the prior year, due to an increase in gross profit, offset by an increase in operating expenses and foreign exchange losses.

Adjusted EBITDA for the three months ended December 31, 2022, increased $11.5 million, or 27.6%, to $53.3 million, as compared to $41.8 million for the same period in the prior year. Adjusted EBITDA margin for the three months ended December 31, 2022, increased 20 basis points to 8.6%, as compared to the prior year period of 8.4%.

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Adjusted EBITDA for the nine months ended December 31, 2022, increased $11.7 million, or 9.0%, to $142.0 million, as compared to $130.3 million for the same period in the prior year. Adjusted EBITDA margin for the nine months ended December 31, 2022, decreased 50 basis points to 9.0%, as compared to the prior year period of 9.5%.

Net earnings per common share diluted for the three months ended December 31, 2022, increased $0.36, or 36.7%, to $1.34 per share, as compared to $0.98 per share for the same period in the prior year. Non-GAAP net earnings per common share diluted for the three months ended December 31, 2022, increased $0.28, or 25.5%, to $1.38, as compared to $1.10 for the same period in the prior year.

Net earnings per common share diluted for the nine months ended December 31, 2022, increased $0.21, or 6.9%, to $3.24 per share, as compared to $3.03 per share for the same period in the prior year. Non-GAAP net earnings per common share diluted for the nine months ended December 31, 2022, increased $0.28, or 8.3%, to $3.66 per share, as compared to $3.38 per share for the same period in the prior year.

SEGMENT OVERVIEW

Our operations are conducted through two segments: technology and financing.

TECHNOLOGY SEGMENT

Our technology segment earns revenues from sales of IT products, professional services, managed services, and staff augmentation. Our technology segment sells primarily to corporations, state and local governments, and higher education institutions. We sell across the US, which accounts for most of our sales, and in select international markets. Our technology segment also provides business-to-business supply chain management solutions for IT products.

Our customers generally purchase IT products and services from us under the terms and conditions of a customer master agreement (“CMA”). Our customers generally place orders for IT products using purchase orders. Customer orders from state and local governments may involve public bids and our written bid responses. Our customers generally purchase services from us under the terms of statements of work. Our charges for services may be fixed price or determined on time and materials.

We purchase IT products for resale from vendors and distributors. Our relationships with vendors are generally governed by our reseller authorization level. We achieve these authorization levels through purchase volume, certifications held by sales executives or engineers, and though contractual commitments. Our authorization level determines the types of products we can resell, variable discounts applied against the list price, funds provided for the marketing, and other special promotions.

We endeavor to minimize our cost of sales through vendor incentive programs. Our benefit from these programs is also determined by our reseller authorization level. These authorization levels are costly to maintain and vendors often change their incentive programs. As such, our ability to continue to reduce our costs of sales through participating in these programs is not guaranteed.

FINANCING SEGMENT

Our financing segment offers financing solutions to corporations, state and local governments, and higher education institutions. We provide financing across the US, which accounts for most of our sales, and in select international markets. Our financing segment earns revenues from leasing IT equipment, from financing purchases of third-party software licenses, software assurance, maintenance, and other services, and from selling IT equipment at the end of a lease.

Our financing revenue is generally earned from the following three sources:

•

Portfolio income: Interest income from financing receivables and rents due under operating leases

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•

Transactional gains: Net gains on the sale of financial assets; and

•

Post-contract earnings: Month-to-month rents; early termination, prepayment, make-whole, or buyout fees; and sales of off-lease equipment

FLUCTUATIONS IN OPERATING RESULTS

Our operating results may fluctuate due to customer demand for our products and services, supplier costs, wage costs, product availability, changes in vendor incentive programs, interest rate fluctuations, the timing of sales of financial assets, general economic conditions, and differences between estimated residual values and actual amounts realized for leased equipment. We expect to continue to expand by hiring additional staff for specific targeted market areas and roles whenever we can find both experienced personnel and desirable geographic areas over the longer term, which may impact our operating results.

SEGMENT RESULTS OF OPERATIONS

The three and nine months ended December 31, 2022, compared to the three and nine months ended December 31, 2021

TECHNOLOGY SEGMENT

The results of operations for our technology segment were as follows (dollars in thousands):

		Three Months Ended December 31,								Nine Months Ended December 31,
		2022				2021				2022				2021
Net sales
Product		$	544,316			$	414,448			$	1,336,309			$	1,134,658
Services			67,458				62,527				195,728				178,976
Total			611,774				476,975				1,532,037				1,313,634
Cost of sales
Product			439,831				334,585				1,054,267				899,437
Services			44,089				37,907				127,990				109,203
Total			483,920				372,492				1,182,257				1,008,640
Gross profit			127,854				104,483				349,780				304,994
Selling, general, and administrative			81,874				73,413				235,147				210,369
Depreciation and amortization			3,582				3,569				10,304				11,292
Interest and financing costs			1,308				335				2,117				693
Operating expenses			86,764				77,317				247,568				222,354
Operating income		$	41,090			$	27,166			$	102,212			$	82,640
Adjusted gross billings		$	888,621			$	685,031			$	2,356,326			$	1,982,162
Adjusted EBITDA		$	47,869			$	32,794			$	120,135			$	99,811

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Net sales: Net sales for the three months ended December 31, 2022, increased $134.8 million, or 28.3%, to $611.8 million, as compared to $477.0 million for the same period in the prior year, due to increases in net sales from customers in technology, telecom, media, and entertainment, financial services, SLED, and healthcare. Product sales for the three months ended December 31, 2022, increased $129.9 million, or 31.3%, to $544.3 million, as compared to $414.4 million for the same period in the prior year. Service sales for the three months ended December 31, 2022, increased $5.0 million, or 7.9%, to $67.5 million, as compared to $62.5 million for the same period in the prior year, due to an increase in managed services.

Net sales for the nine months ended December 31, 2022, increased $218.4 million, or 16.6%, to $1,532.0 million, as compared to $1,313.6 million for the same period in the prior year, due to increases in net sales from customers in technology, telecom, media, and entertainment, financial services, SLED, and healthcare. Product sales for the nine months ended December 31, 2022, increased 17.8%, or $201.7 million to $1,336.3 million, as compared to $1,134.7 million for the same period in the prior year, and service revenue increased by 9.4%, or $16.7 million, to $195.7 million, as compared to $179.0 million during the same period in the prior year.

Adjusted gross billings for the three months ended December 31, 2022, increased $203.6 million, or 29.7%, to $888.6 million, as compared to $685.0 million for the same period in the prior year. Our increase in adjusted gross billings was due to higher demand from our current customers and higher prices for some products.

Adjusted gross billings for the nine months ended December 31, 2022, increased $374.2 million, or 18.9%, to $2,356.3 million, as compared to $1,982.2 million for the same period in the prior year. The increase in adjusted gross billings is due to higher demand from the same customer end markets that were previously identified for the increase in net sales.

We rely on our vendors to fulfill a large majority of shipments to our customers. As of December 31, 2022, we had open orders of $957.3 million and deferred revenue of $168.6 million. As of December 31, 2021, we had open orders of $852.9 million and deferred revenue of $121.0 million.

We analyze net sales by customer end market and by vendor, as opposed to discrete product and service categories. The percentage of net sales by industry and vendor for the twelve month periods ended December 31, 2022, and 2021 are summarized below:

		Twelve Months Ended December 31,
Net sales by customer end market:		2022				2021				Change
Telecom, Media & Entertainment			28	%			29	%			(1	%)
Technology			18	%			15	%			3	%
Healthcare			14	%			16	%			(2	%)
SLED			13	%			15	%			(2	%)
Financial Services			9	%			9	%			0	%
All others			18	%			16	%			2	%
Total			100	%			100	%

		Twelve Months Ended December 31,
Net sales by vendor:		2022				2021				Change
Cisco Systems			37	%			38	%			(1	%)
Dell EMC			8	%			8	%			0	%
Juniper Networks			7	%			6	%			1	%
NetApp			4	%			5	%			(1	%)
HPE			4	%			2	%			2	%
Arista Networks			3	%			3	%			0	%
All others			37	%			38	%			(1	%)
Total			100	%			100	%

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Our revenues by customer end market have remained consistent over the twelve-month period, with over 80% of our revenues generated from customers within the five end markets identified above. During the trailing twelve month period ended December 31, 2022, we had an increase in the percentage of total revenues from customers in the technology industry, and decreases in the percentage of total revenues in the telecom, media and entertainment, healthcare, and SLED, industries. These changes were driven by changes in customer buying cycles and the timing of specific IT-related initiatives, rather than the acquisition or loss of a customer or set of customers.

The majority of our revenues by vendor is derived from our top six suppliers. None of the vendors included within the “All others” category individually exceeded 5% of total net sales.

Cost of sales: Cost of sales for the three months ended December 31, 2022, increased $111.4 million, or 29.9%, to $483.9 million, as compared to $372.5 million for the same period in the prior year. Our gross margin decreased 100 basis points to 20.9% for the three months ended December 31, 2022, compared to 21.9% for the same period in the prior year. Our decrease in gross margins was primarily due to lower service gross margin from a change in services mix. We also had a decrease in product margins, of 10 basis points to 19.2%.

Cost of sales for the nine months ended December 31, 2022, increased $173.6 million, or 17.2%, to $1,182.3 million, as compared to $1,008.6 million, which is in-line with the increase in net sales that occurred during the prior year period. Our gross margin decreased 40 basis points to 22.8% for the nine months ended December 31, 2022, compared to 23.2% for the same period in the prior year, primarily due to lower service margins offset by higher product margins.

Selling, general, and administrative: Selling, general, and administrative expenses for the three months ended December 31, 2022, increased $8.5 million, or 11.5%, to $81.9 million, as compared to $73.4 million for the same period in the prior year. Salaries and benefits for the three months ended December 31, 2022, increased $7.2 million, or 11.4% to $70.5 million, as compared to $63.3 million for the same period in the prior year, primarily due to an increase in salaries driven by increases in headcount and an increase in variable compensation driven by increases in gross profit. Our technology segment had 1,709 employees as of December 31, 2022, an increase of 188 from 1,521 as of December 31, 2021, driven by increased demand for our services and the acquisition of Future Com, Ltd. We added 157 additional customer-facing employees, of which 101 were professional services and technical support personnel. General and administrative expenses for the three months ended December 31, 2022, increased $1.0 million, or 10.0%, to $11.0 million, as compared to $10.0 million for the same period in the prior year, due to higher professional service fees, and higher travel and entertainment costs.

Selling, general, and administrative expenses for the nine months ended December 31, 2022, increased by $24.8 million, or 11.8%, to $235.1 million, as compared to $210.4 million for the same period in the prior year. Salaries and benefits for the nine months ended December 31, 2022, increased $16.4 million, or 9.0% to $198.5 million, compared to $182.1 million during the same period in the prior year, mainly due to an increase in salaries driven by increases in headcount and an increase in variable compensation driven by increases in gross profit. General and administrative expenses for the nine months ended December 31, 2022, increased $7.1 million, or 25.4%, to $35.3 million, as compared to $28.2 million for the same period in the prior year, due to higher advertising and marketing fees, professional service fees, software license and maintenance fees, and higher travel and entertainment costs.

Depreciation and amortization: Depreciation and amortization for the three months ended December 31, 2022, remained flat at $3.6 million, as compared to the same period in the prior year. Depreciation and amortization for the nine months ended December 31, 2022, decreased $1.0 million, or 8.7%, to $10.3 million, as compared to $11.3 million for the same period in the prior year.

Interest and financing costs: Interest and financing costs for the three and nine months ended December 31, 2022, were $1.3 million and $2.1 million, respectively, an increase of $1.0 million and $1.4 million, respectively, as compared to $0.3 million and $0.7 million, respectively, for the same periods in the prior year. The increase in interest expense for the three and nine month periods is primarily due to an increase in borrowings from our revolving credit facility. We had $103.0 million of recourse debt in our technology segment as of December 31, 2022, compared to $58.8 million as of December 31, 2021.

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Segment operating income: As a result of the foregoing, operating income for the three months ended December 31, 2022, increased $13.9 million, or 51.3%, to $41.1 million, as compared to $27.2 million for the same period in the prior year. Operating income for the nine months ended December 31, 2022, increased $19.6 million, or 23.7%, to $102.2 million, as compared to $82.6 million for the same period in the prior year.

Adjusted EBITDA for the three months ended December 31, 2022, increased $15.1 million, or 46.0%, to $47.9 million, as compared to $32.8 million for the same period in the prior year. Adjusted EBITDA for the nine months ended December 31, 2022, increased $20.3 million, or 20.4%, to $120.1 million, as compared to $99.8 million for the same period in the prior year.

FINANCING SEGMENT

The results of operations for our financing segment were as follows (dollars in thousands):

		Three Months Ended December 31,								Nine Months Ended December 31,
		2022				2021				2022				2021
Net sales		$	11,702			$	17,859			$	43,504			$	55,866
Cost of sales			1,184				5,225				8,085				15,229
Gross profit			10,518				12,634				35,419				40,637
Selling, general, and administrative			4,856				3,461				13,054				9,784
Depreciation and amortization			27				28				83				84
Interest and financing costs			267				226				746				569
Operating expenses			5,150				3,715				13,883				10,437
Operating income		$	5,368			$	8,919			$	21,536			$	30,200
Adjusted EBITDA		$	5,456			$	9,003			$	21,798			$	30,453

 

Net sales: Net sales for the three months ended December 31, 2022, decreased $6.2 million, or 34.5%, to $11.7 million, as compared to $17.9 million for the same period in the prior year. The decrease in net sales was due to lower post- contract and portfolio earnings, partially offset by higher transactional gains. For the three months ended December 31, 2022, we recognized net gains on sales of financial assets of $5.2 million and proceeds from these sales were $157.2 million. For the three months ended December 31, 2021, net gains on the sale of financial assets were $2.3 million and the proceeds from these sales were $63.5 million.

Net sales for the nine months ended December 31, 2022, decreased $12.4 million, or 22.1%, to $43.5 million, as compared to $55.9 million for the same period in the prior year. The decrease in net sales was due to lower post-contract and portfolio earnings and transactional gains. For the nine months ended December 31, 2022, we recognized net gains on sales of financial assets of $15.1 million and proceeds from these sales were $586.1 million. For the nine months ended December 31, 2021, net gains on the sale of financial assets were $15.6 million and the proceeds from these sales were $753.9 million.

As of December 31, 2022, our financing segment had $174.4 million in financing receivables and operating leases, compared to $171.1 million as of December 31, 2021, an increase of $3.3 million, or 1.9%.

Cost of sales: Cost of sales for the three months ended December 31, 2022, decreased $4.0 million, or 77.3%, to $1.2 million, as compared to $5.2 million for the same period in the prior year, due to lower cost of sales on off-lease equipment and depreciation expense from operating leases. Gross profit for the three months ended December 31, 2022, decreased by 16.8% to $10.5 million, as compared to the same period in the prior year.

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Cost of sales for the nine months ended December 31, 2022, decreased $7.1 million, or 46.9%, to $8.1 million, as compared to $15.2 million for the same period in the prior year, due to lower cost of sales of off-lease equipment and depreciation expense from operating leases. Gross profit for the nine months ended December 31, 2022, decreased by 12.8% to $35.4 million, as compared to the same period in the prior year.

Selling, general and administrative: Selling, general, and administrative expenses for the three months ended December 31, 2022, increased $1.4 million, or 40.3%, to $4.9 million, as compared to $3.5 million for the same period in the prior year, due to higher general and administrative expenses consisting mostly of higher professional service fees, higher software, license and maintenance fees driven by the deployment of newly hosted software in August 2022, and a higher reserve for credit losses caused by changes in our net credit exposure.

Selling, general, and administrative expenses for the nine months ended December 31, 2022, increased $3.3 million, or 33.4%, to $13.1 million, as compared to $9.8 million for the same period in the prior year, due to higher general and administrative expenses consisting mostly of higher professional service fees, higher software, license and maintenance fees driven by the deployment of newly hosted software in August 2022, and a higher reserve for credit losses caused by changes in our net credit exposure.

In August 2022, we completed the deployment of a new hosted software to manage our financing portfolio. As a result, we anticipate higher general and administrative costs of approximately $1.5 million per year related to amortizing the cost to implement the hosted software and annual fees paid to license the hosted software.

Interest and financing costs: Interest and financing costs for the three months ended December 31, 2022, increased by 18.1% to $0.3 million, and increased by 31.1% to $0.7 million for the nine months ended December 31, 2022, compared to the prior year. As of December 31, 2022, our notes payable was $48.5 million, an increase of $4.9 million, or 11.2% compared to notes payable of $43.6 million as of December 31, 2021. As of December 31, 2022, and 2021, our notes payable consisted entirely of non-recourse notes payable. Our weighted average interest rate for non-recourse notes payable was 5.05% and 3.68%, as of December 31, 2022, and 2021, respectively.

Segment operating income: As a result of the foregoing, operating income for the three months ended December 31, 2022, decreased by $3.6 million to $5.4 million and Adjusted EBITDA decreased by $3.5 million to $5.5 million, as compared to the prior year period. Operating income and Adjusted EBITDA for the nine months ended December 31, 2022, decreased by $8.7 million to $21.5 million and $21.8 million, respectively, as compared to the same period in the prior year.

CONSOLIDATED

Other income (expense), net: Other income (expense), net for the three and nine months ended December 31, 2022 was a net gain of $2.9 million and a net expense of $3.1 million, respectively, compared to a net expense of $0.2 million and a net expense of $0.4 million, respectively, for the same periods in the prior year. Our higher net gain for the three months ended December 31, 2022, was due to higher net foreign exchange gains in the current period and $1.9 million we received in December 2022 related to our claim in a class action lawsuit. Our higher net expense for the nine months ended December 31, 2022, was due to higher exchange losses that were only partially offset by the gain related to our claim in a class action lawsuit.

Provision for income taxes: Our provision for income tax expense was $13.7 million and $34.1 million for the three and nine months ended December 31, 2022, as compared to $9.5 million and $31.1 million for the same periods in the prior year. Our effective tax rate for the three and nine months ended December 31, 2022, was 27.7% and 28.3% respectively, compared with 26.4% and 27.7%, respectively, for the same periods in the prior year. Our effective tax rate was higher for the three months ended December 31, 2022, than for the same period in the prior year due to a tax benefit from restricted stock in the prior year. Our effective tax rate was higher for the nine months ended December 31, 2022, than for the same period in the prior year due to foreign currency transaction losses incurred in lower tax jurisdictions.

Net earnings: As a result of the foregoing, our net earnings for the three months ended December 31, 2022, increased $9.3 million, or 35.1%, to $35.7 million, as compared to $26.4 million during the same period in the prior year. Net earnings for the nine months ended December 31, 2022, increased $5.1 million, or 6.3%, to $86.5 million, as compared to $81.4 million during the same period in the prior year.

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Basic and fully diluted earnings per common share were both $1.34 for the three months ended December 31, 2022, an increase of 35.4% and 36.7%, respectively, as compared to $0.99 and $0.98, respectively, for the three months ended December 31, 2021. Basic and fully diluted earnings per common share were $3.26 and $3.24, respectively, for the nine months ended December 31, 2022, an increase of 6.9%, as compared to $3.05 and $3.03, respectively, for the nine months ended December 31, 2021.

Non-GAAP net earnings per common share diluted for the three months ended December 31, 2022, increased $0.28, or 25.5%, to $1.38, as compared to $1.10 for the three months ended December 31, 2021. Non-GAAP net earnings per common share diluted for the nine months ended December 31, 2022, increased $0.28, or 8.3%, to $3.66, as compared to $3.38 for the nine months ended December 31, 2021.

Weighted average common shares outstanding was 26.6 million in the calculation of both basic earnings per common share and diluted earnings per common share for the three months ending December 31, 2022. Weighted average common shares outstanding was 26.6 million in the calculation of basic earnings per common share for the nine months ending December 31, 2022, and 26.7 million in the calculation of diluted earnings per common share for the nine months ending December 31, 2022. Weighted average common shares outstanding used in the calculation of basic earnings per common share, was 26.7 million for both the three and nine months ending December 31, 2021, and 26.9 million in the calculation of diluted earnings per common share for both the three and nine months ending December 31, 2021.

LIQUIDITY AND CAPITAL RESOURCES

LIQUIDITY OVERVIEW

We finance our operations through funds generated from operations and through borrowings. We use those funds to meet our capital requirements, which have historically consisted primarily of working capital for operational needs, capital expenditures, purchases of equipment for lease, payments of principal and interest on indebtedness outstanding, acquisitions and the repurchase of shares of our common stock.

Our borrowings in our technology segment are primarily through a credit facility with Wells Fargo Commercial Distribution Finance, LLC (the “WFCDF Credit Facility”). The WFCDF Credit Facility has an accounts payable floor plan facility component and a revolving credit facility component. Our borrowings in our financing segment are primarily through secured borrowings that involve transferring all or part of the contractual payments due to us to third-party financing institutions.

We believe that cash on hand and funds generated from operations, together with available credit under our WFCDF Credit Facility, will be enough to finance our working capital, capital expenditures, and other standard business requirements for at least the next year.

Our ability to continue to expand, both organically and through acquisitions, is dependent upon our ability to generate enough cash flow from operations or from borrowing or other sources of financing as may be required.

CASH FLOWS

The following table summarizes our sources and uses of cash over the periods indicated (in thousands):

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		Nine Months Ended December 31,
		2022				2021
Net cash used in operating activities		$	(147,038	)		$	(121,542	)
Net cash used in investing activities			(15,624	)			(18,448	)
Net cash provided by financing activities			103,555				115,996
Effect of exchange rate changes on cash			3,124				(2	)
Net decrease in cash and cash equivalents		$	(55,983	)		$	(23,996	)

Cash flows from operating activities: We used $147.0 million in operating activities during the nine months ended December 31, 2022, compared to $121.5 million used by operating activities for the nine months ended December 31, 2021. See below for a breakdown of operating cash flows by segment (in thousands):

		Nine Months Ended December 31,
		2022				2021
Technology segment		$	(115,811	)		$	(112,740	)
Financing segment			(31,227	)			(8,802	)
Net cash used in operating activities		$	(147,038	)		$	(121,542	)

Technology segment: For the nine months ended December 31, 2022, our technology segment used $115.8 million from operating activities primarily due to increases in our accounts receivable and inventories, partially offset by net earnings.

In the nine months ended December 31, 2021, our technology segment used $112.7 million from operating activities primarily due to increases in our accounts receivable of $123.4 million and inventories of $77.9 million, offset by net earnings. Additionally, we had net borrowing on the floor plan component of our credit facility of $59.0 million. We use this facility to manage working capital needs. We present changes in this balance as financing activity in our consolidated statement of cash flows.

To manage our working capital, we monitor our cash conversion cycle for our technology segment, which is defined as days sales outstanding (“DSO”) in accounts receivable plus days of supply in inventory (“DIO”) minus days of purchases outstanding in accounts payable (“DPO”).

The following table presents the components of the cash conversion cycle for our technology segment:

		As of December 31,
		2022				2021
(DSO) Days sales outstanding (1)			62				67
(DIO) Days inventory outstanding (2)			30				21
(DPO) Days payable outstanding (3)			(41	)			(41	)
Cash conversion cycle			51				47

(1)	Represents the rolling three month average of the balance of trade accounts receivable-trade, net for our technology segment at the end of the period divided by adjusted gross billings for the same three month period.

(2)	Represents the rolling three month average of the balance of inventory, net for our technology segment at the end of the period divided by cost of adjusted gross billings for the same three month period.

(3)	Represents the rolling three month average of the combined balance of accounts payable-trade and accounts payable-floor plan for our technology segment at the end of the period divided by cost of adjusted gross billings for the same three month period.

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Our cash conversion cycle increased to 51 days as of December 31, 2022, as compared to 47 days as of December 31, 2021. Our standard payment term for customers is between 30-60 days; however, certain customer orders may be approved for extended payment terms. Our DPO remained the same at 41 days. Invoices processed through the accounts payable floor plan facility are typically paid within 45-60 days from the invoice date, while accounts payable trade invoices are typically paid within 30 days from the invoice date. Our DSO decreased by 5 days to 62 days. The DSO for both December 31, 2022, and 2021, reflects higher sales to customers with terms greater than or equal to net 60 days. Our DIO increased to 30 days due to higher inventory balance. Inventory, which represents equipment ordered by customers but not yet delivered, increased 57.9% to $244.8 million as of December 31, 2022, up from $155.1 million as of March 31, 2022, due to ongoing projects with customers and supply constraints that lengthen the time over which we receive all the parts in an order for a completed delivery to our customers.

Financing segment: For the nine months ended December 31, 2022, our financing segment used $31.2 million in operating activities, primarily due to increases in financing receivables-net, offset by net earnings.

In the nine months ended December 31, 2021, our financing segment used $8.8 million from operating activities, primarily due to increases in accounts receivable of $8.8 million and financing receivables-net of $23.4 million, offset by net earnings.

Cash flows related to investing activities: For the nine months ended December 31, 2022, we used $15.6 million in investing activities, consisting of $13.3 million in cash used in acquiring Future Com, Ltd. and $5.7 million for purchases of property, equipment, and operating lease equipment, and partially offset by $3.3 million of proceeds from the sale of property, equipment, and operating lease equipment.

 

In the nine months ended December 31, 2021, we used $18.4 million from investing activities, consisting of $21.4 million for purchases of property, equipment and operating lease equipment offset by $2.9 million of proceeds from the sale of property, equipment, and operating lease equipment.

 

Cash flows from financing activities: For the nine months ended December 31, 2022, cash provided by financing activities was $103.6 million, consisting of net borrowings of non-recourse and recourse notes payable of $101.6 million, partially offset by $7.2 million in cash used to repurchase outstanding shares of our common stock and $9.2 million in net repayments on the accounts payable floor plan facility.

In the nine months ended December 31, 2021, cash provided by financing activities was $116.0 million, consisting of net borrowings on the floor plan component of our credit facility of $59.0 million and net repayments of non-recourse and recourse notes payable of $66.4 million, partially offset by $9.5 million in cash used to repurchase outstanding shares of our common stock.

Our borrowing of non-recourse notes payable primarily arises from our financing segment when we transfer contractual payments due to us under lease and financing agreements to third-party financial institutions. When the transfers do not meet the requirements for a sale, the proceeds paid to us represent borrowings of non-recourse or recourse notes payable.

Non-cash activities: We transfer contractual payments due to us under lease and financing agreements to third-party financial institutions. In certain assignment agreements, we may direct the third-party financial institution to pay some of the proceeds from the assignment directly to the vendor or vendors that have supplied the assets being leased and or financed. In these situations, the portion of the proceeds paid directly to our vendors are non-cash transactions.

SECURED BORROWINGS – FINANCING SEGMENT

We may finance all or most of the cost of the assets that we finance for customers by transferring all or part of the contractual payments due to us to third-party financing institutions. When we account for the transfer as a secured borrowing, we recognize the proceeds as either recourse or non-recourse notes payable. Our customers are responsible for repaying the debt from a secured borrowing. The lender typically secures a lien on the financed assets at the time the financial assets are transferred and releases it upon collecting all the transferred payments. We are not liable for the repayment of non-recourse loans unless we breach our representations and warranties in the loan agreements. The lender assumes the credit risk and their only recourse, upon default by the customer, is against the customer and the specific equipment under lease. While we expect that the credit quality of our financing arrangements and our residual return history will continue to allow us to obtain such financing, such financing may not be available on acceptable terms, or at all.

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CREDIT FACILITY – TECHNOLOGY SEGMENT

We finance the operations of our subsidiaries ePlus Technology, inc., ePlus Technology Services, inc. and SLAIT Consulting, LLC (collectively, the “Borrowers”) in our technology segment through the WFCDF Credit Facility. The WFCDF Credit Facility has an accounts payable floor plan facility component and a revolving credit facility component.

Please refer to Note 8, “Credit Facility and Notes Payable” to the accompanying Consolidated Financial Statements included in “Part I, Item 1. Financial Statements” for additional information concerning our WFCDF Credit Facility.

Accounts payable floor plan facility: We finance most purchases of products for sale to our customers through the accounts payable floor plan facility. Once our customer places a purchase order with us and we have approved their credit, we place an order for the desired products with one of our vendors. Our vendors are generally paid by the floor plan facility and our liability is reflected in “accounts payable—floor plan” in our consolidated balance sheets.

Most customer payments to us are remitted to our lockbox accounts. Once payments are cleared, the monies in the lockbox accounts are automatically and daily transferred to our operating account. We pay down the floor plan facility on three specified dates each month, generally 30-60 days from the invoice date. Our borrowings and repayments under the floor plan component are included in “net borrowings (repayments) on floor plan facility” within cash flows from the financing activities in our consolidated statements of cash flows.

As of December 31, 2022, we had a maximum credit limit of $425.0 million, and an outstanding balance on the floor plan of $154.5 million. As of March 31, 2022, we had a maximum credit limit of $375.0 million, and the outstanding balance on the floor plan facility was $145.3 million. On our balance sheet, our liability under the floor plan facility is presented as part of accounts payable – floor plan.

Revolving credit facility: The outstanding balance under the revolving credit facility is presented as part of recourse notes payable- current on our consolidated balance sheets. Our borrowings and repayments under the revolving credit facility are included in “borrowings of non-recourse and recourse notes payable” and “repayments of non-recourse and recourse notes payable,” respectively, within cash flows from the financing activities in our consolidated statements of cash flows.

As of December 31, 2022, the outstanding balance under the revolving credit facility was $95.0 million. As of March 31, 2022, we did not have any outstanding balance under the revolving credit facility. The maximum credit limit under this facility was $150.0 million as of December 31, 2022, and $100.0 million as of March 31, 2022.

The loss of the WFCDF Credit Facility could have a material adverse effect on our future results as we currently rely on this facility and its components for daily working capital and liquidity for our technology segment and as an operational function of our accounts payable process.

PERFORMANCE GUARANTEES

In the normal course of business, we may provide certain customers with performance guarantees, which are generally backed by surety bonds. In general, we would only be liable for these guarantees in the event of default in the performance of our obligations. We are in compliance with material performance obligations under all service contracts for which there is a performance guarantee, and we believe that any liability incurred in connection with these guarantees would not have a material adverse effect on our consolidated statements of operations.

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OFF-BALANCE SHEET ARRANGEMENTS

As part of our ongoing business, we do not participate in transactions that generate relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements, or other contractually narrow or limited purposes. As of December 31, 2022, we were not involved in any unconsolidated special purpose entity transactions.

ADEQUACY OF CAPITAL RESOURCES

The continued implementation of our business strategy will require a significant investment in both resources and managerial focus. In addition, we may selectively acquire other companies that have attractive customer relationships and skilled sales and/or engineering forces. We may also open facilities in new geographic areas, which may require a significant investment of cash. We may also acquire technology companies to expand and enhance the platform of bundled solutions to provide additional functionality and value-added services. We may continue to use our internally generated funds to finance investments in leased assets or investments in notes receivables due from our customers. These actions may result in increased working capital needs as the business expands. As a result, we may require additional financing to fund our strategy, implementation, potential future acquisitions, and working capital needs, which may include additional debt and equity financing. While the future is uncertain, we do not believe our WFCDF Credit Facility will be terminated by WFCDF or us. Additionally, while our lending partners in our financing segment have become more discerning in their approval processes, we currently have funding resources available for our transactions.

POTENTIAL FLUCTUATIONS IN QUARTERLY OPERATING RESULTS

Our future quarterly operating results and the market price of our common stock may fluctuate. In the event our revenues or earnings for any quarter are less than the level expected by securities analysts or the market in general, such shortfall could have an immediate and significant adverse impact on the market price of our common stock. Any such adverse impact could be greater if any such shortfall occurs near the time of any material decrease in any widely followed stock index or in the market price of the stock of one or more public equipment leasing and financing companies, IT resellers, software competitors, or our major customers or vendors.

Our quarterly results of operations are susceptible to fluctuations for a number of reasons, including, but not limited to currency fluctuations, reduction in IT spending, shortages of product from our vendors due to material shortages, any reduction of expected residual values related to the equipment under our leases, the timing and mix of specific transactions, the reduction of manufacturer incentive programs, and other factors. Quarterly operating results could also fluctuate as a result of our sale of equipment in our lease portfolio to a lessee or third-party at the expiration of a lease term or prior to such expiration, and the transfer of financial assets. Sales of equipment and transfers of financial assets may have the effect of increasing revenues and net income during the quarter in which the sale occurs and reducing revenues and net income otherwise expected in subsequent quarters. See Part I, Item 1A, “Risk Factors,” in our 2022 Annual Report, as well as in our other filings with the SEC.

We believe that comparisons of quarterly results of our operations are not necessarily meaningful and that results for one quarter should not be relied upon as an indication of future performance.

CRITICAL ACCOUNTING ESTIMATES

As disclosed in Note 2, “Recent Accounting Pronouncements,” we adopted a new standard on accounting for contract assets and contract liabilities from contracts with customers in a business combination in the second quarter of our fiscal year 2023. Under this new standard, we apply Accounting Standards Codification Topic 606, Contracts with Customers, to recognize and measure contract assets and contract liabilities from contracts with customers. Other than this change, our critical accounting estimates have not changed from those reported in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2022 Annual Report.

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Item 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Although a substantial portion of our liabilities are non-recourse, fixed-interest-rate instruments, we utilize lines of credit and other financing facilities that are subject to fluctuations in short-term interest rates. Our non-recourse instruments, which are denominated in US dollars, were entered for other than trading purposes and bear interest at a fixed rate. Because the interest rate on these instruments is fixed, changes in interest rates will not directly impact our cash flows. Financing transactions funded with our cash flows, not debt, are subject to interest rate risk. If the market interest rate exceeds our internal rate of return, we may not fund the transaction to obtain the proceeds. Borrowings under the WFCDF Credit Facility bear interest at a market-based variable rate. As of December 31, 2022, the aggregate fair value of our recourse and non-recourse borrowings approximated their carrying value.

We have foreign currency exposure when transactions are not denominated in our subsidiaries’ functional currency, which include purchases and sales of the products and services we provide, as well as loans with other ePlus entities. Additionally, we lease assets in foreign countries, including Canada, the UK, and several other European countries. As a lessor, we lease assets for amounts denominated in British Pounds, Euros, and Canadian dollars. To date, foreign currency exposure associated with purchases and sales of the products and services we provide has not been significant. We have incurred foreign currency transaction gains and losses in certain foreign subsidiaries on US dollar denominated loans. Fluctuations in currency exchange rates may impact our results of operations and financial position.

Item 4.

CONTROLS AND PROCEDURES

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer (“CEO”) and our Chief Financial Officer (“CFO”), of the effectiveness of the design and operation of our disclosure controls and procedures, or “disclosure controls,” as defined in the Exchange Act Rule 13a-15(e). Disclosure controls are controls and procedures designed to reasonably ensure that information required to be disclosed in our reports filed under the Exchange Act, such as this Quarterly Report, is recorded, processed, summarized, and reported within the periods specified in the SEC’s rules and forms. Disclosure controls include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to our management, including our CEO and CFO, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Our disclosure controls include some, but not all, components of our internal control over financial reporting. Based upon that evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective as of December 31, 2022.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

In August 2022, we completed the implementation of a new ERP system within our Financing segment. As a result of this implementation, certain internal controls over financial reporting have been automated or modified to align with the new ERP system. While we believe this new system will strengthen our internal controls, there are inherent risks in implementing any new system, and we will continue to evaluate these control changes as part of our assessment of internal control over financial reporting throughout fiscal 2023.

There have not been any other changes in our internal control over financial reporting during the quarter ended December 31, 2022, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

LIMITATIONS AND EFFECTIVENESS OF CONTROLS

Our management, including our CEO and CFO, do not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system cannot provide absolute assurance due to its inherent limitations; it is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. A control system also can be circumvented by collusion or improper management override. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of such limitations, disclosure controls and internal control over financial reporting cannot prevent or detect all misstatements, whether unintentional errors or fraud. However, these inherent limitations are known features of the financial reporting process; therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.

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PART II. OTHER INFORMATION

Item 1.

LEGAL PROCEEDINGS

Please refer to Note 9, “Commitment and Contingencies” to the accompanying Consolidated Financial Statements included in “Part I, Item 1. Financial Statements.”

On February 25, 2022, a putative class action complaint was filed in the Delaware Court of Chancery by Michael Kent, a stockholder, against us and our then-current directors (the “Action”). The complaint sought a declaration that Section 2.9 of our then-bylaws violated Section 228 of the Delaware General Corporation Law because, as alleged in the complaint, the bylaw provision restricted the ability of our stockholders to act by written consent unless the Board of Directors provided prior approval for such stockholder action. While we disagreed with plaintiff’s allegations, we nevertheless amended our bylaws on March 2, 2022, to make clear that stockholders may act by written consent, subject to certain procedures. On April 8, 2022, the Court of Chancery entered a stipulated order pursuant to which the plaintiff voluntarily dismissed the Action. The dismissal was without prejudice with regard to the anticipated application of plaintiff’s counsel’s claim for attorneys’ fees and expenses. The Court of Chancery retained jurisdiction solely for the purpose of deciding the anticipated application of plaintiff’s counsel for an award of attorneys’ fees and reimbursement of expenses in connection with the company’s bylaw amendment. We subsequently agreed to pay $150,000 to plaintiff’s counsel for attorneys’ fees and expenses in full satisfaction of the claim for attorneys’ fees and expenses in the Action. The Court of Chancery has not been asked to review, and will pass no judgment on, the payment of the attorneys’ fees and expenses or their reasonableness, and the Action shall be dismissed with prejudice.

Item 1A.

RISK FACTORS

There has not been any material change in the risk factors disclosed in “Part I, Item 1A. Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended March 31, 2022.

Item 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table provides information regarding our total purchases of 128,553 shares of ePlus inc. common stock during the nine months ended December 31, 2022, including a total of 70,473 shares purchased as part of the publicly announced share repurchase plans or programs. There were no share repurchases during the three months ended December 31, 2022.

Period		Total number of shares purchased (1)				Average price paid per share				Total number of shares purchased as part of publicly announced plans or programs				Maximum number (or approximate dollar value) of shares that may yet be purchased under the plans or programs
April 1, 2022 through April 30, 2022			34,961			$	56.02				34,961				737,049				(2	)
May 1, 2022 through May 27, 2022			35,512			$	55.86				35,512				701,537				(3	)
May 28, 2022 through May 31, 2022			-			$	-				-				1,000,000				(4	)
June 1, 2022 through June 30, 2022			58,080			$	56.51				-				1,000,000				(5	)
July 1, 2022 through July 31, 2022			-			$	-				-				1,000,000				(6	)
August 1, 2022 through August 31, 2022			-			$	-				-				1,000,000				(7	)
September 1, 2022 through September 30, 2022			-			$	-				-				1,000,000				(8	)
October 1, 2022 through October 31, 2022			-			$	-				-				1,000,000				(9	)
November 1, 2022 through November 30, 2022			-			$	-				-				1,000,000				(10	)
December 1, 2022 through December 31, 2022			-			$	-				-				1,000,000				(11	)

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(1)

All shares acquired were in open-market purchases, except for 58,080 shares, which were repurchased in June 2022 to satisfy tax withholding obligations that arose due to the vesting of shares of restricted stock.

(2)

The share purchase authorization in place for the month ended April 30, 2022, had purchase limitations on the number of shares of up to 1,000,000 shares. As of April 30, 2022, the remaining authorized shares to be purchased were 737,049.

(3)

As of May 27, 2022, the authorization under the then-existing share repurchase plan expired.

(4)

On March 24, 2022, the board of directors authorized the company to repurchase up to 1,000,000 shares of our outstanding common stock commencing on May 28, 2022, and continuing to May 27, 2023. As of May 31, 2022, the remaining authorized shares to be purchased were 1,000,000.

(5)

The share purchase authorization in place for the month ended June 30, 2022, had purchase limitations on the number of shares of up to 1,000,000 shares. As of June 30, 2022, the remaining authorized shares to be purchased were 1,000,000.

(6)

The share purchase authorization in place for the month ended July 31, 2022, had purchase limitations on the number of shares of up to 1,000,000 shares. As of July 31, 2022, the remaining authorized shares to be purchased were 1,000,000.

(7)

The share purchase authorization in place for the month ended August 31, 2022, had purchase limitations on the number of shares of up to 1,000,000 shares. As of August 31, 2022, the remaining authorized shares to be purchased were 1,000,000.

(8)

The share purchase authorization in place for the month ended September 30, 2022, had purchase limitations on the number of shares of up to 1,000,000 shares. As of September 30, 2022, the remaining authorized shares to be purchased were 1,000,000.

(9)

The share purchase authorization in place for the month ended October 31, 2022, had purchase limitations on the number of shares of up to 1,000,000 shares. As of October 31, 2022, the remaining authorized shares to be purchased were 1,000,000.

(10)

The share purchase authorization in place for the month ended November 30, 2022, had purchase limitations on the number of shares of up to 1,000,000 shares. As of November 30, 2022, the remaining authorized shares to be purchased were 1,000,000.

(11)

The share purchase authorization in place for the month ended December 31, 2022, had purchase limitations on the number of shares of up to 1,000,000 shares. As of December 31, 2022, the remaining authorized shares to be purchased were 1,000,000.

 

The timing and expiration date of the current stock repurchase authorizations are included in Note 11, “Stockholders’ Equity” to our unaudited consolidated financial statements included elsewhere in this report.

Item 3.

DEFAULTS UPON SENIOR SECURITIES

Not Applicable.

Item 4.

MINE SAFETY DISCLOSURES

Not Applicable.

Item 5.

OTHER INFORMATION

None.

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Item 6.

EXHIBITS

Exhibit Number		Exhibit Description
3.1		ePlus inc. Amended and Restated Certificate of Incorporation, as last amended November 9, 2021 (Incorporated herein by reference to Exhibit 3.1 to our Quarterly Report on Form 10-Q for the period ended December 31, 2021).
3.2		Amended and Restated Bylaws of ePlus inc., as of March 2, 2022. (Incorporated herein by reference to Exhibit 3.2 to our Annual Report on Form 10-K for the fiscal year ended March 31, 2022).
10.1		First Amendment to First Amended and Restated Credit Agreement, dated as of October 31, 2022, by and among ePlus Technology, inc., ePlus Technology Services inc., SLAIT Consulting, LLC, certain of ePlus inc. subsidiaries as guarantors, Wells Fargo Commercial Distribution Finance, LLC as administrative agent and the Lenders party thereto. (Incorporated herein by reference to Exhibit 10.2 to our Current Report on Form 8-K filed on November 3, 2022).*
31.1		Certification of the Chief Executive Officer of ePlus inc. pursuant to the Securities Exchange Act Rules 13a-14(a) and 15d-14(a) filed herewith.
31.2		Certification of the Chief Financial Officer of ePlus inc. pursuant to the Securities Exchange Act Rules 13a-14(a) and 15d-14(a) filed herewith.
32.1		Certification of the Chief Executive Officer and Chief Financial Officer of ePlus inc. pursuant to 18 U.S.C. § 1350 furnished herewith.
101.INS		Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)
101.SCH		Inline XBRL Taxonomy Extension Schema Document
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File (embedded within the Exhibit 101 Inline XBRL document)

* Certain schedules and exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The registrant agrees to furnish a copy of any omitted schedule or exhibit to the SEC upon request; provided, however, that the registrant may request confidential treatment pursuant to Rule 24b-2 of the Exchange Act for any document so furnished.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	ePlus inc.
Date:  February 7, 2023	/s/ MARK P. MARRON
	By:	Mark P. Marron
	Chief Executive Officer and President
	(Principal Executive Officer)
Date:  February 7, 2023	/s/ ELAINE D. MARION
	By:	Elaine D. Marion
	Chief Financial Officer
	(Principal Financial Officer)

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