EPLUS INC 10-Q

Item 1. Financial Statements e Plus inc. AND SUBSIDIARIES UNAUDITED CONSOLIDATED BALANCE SHEETS (in thousands, except per share amounts) June 30, 2021 March 31, 2021 ASSETS Current assets: Cash and cash equivalents $ 93,840 $ 129,562 Accounts receivable—trade, net 465,424 391,567 Accounts receivable—other, net 33,979 41,053 Inventories 77,752 69,963 Financing receivables—net, current 63,082 106,272 Deferred costs 27,812 28,201 Other current assets 12,309 10,976 Total current assets 774,198 777,594 Financing receivables and operating leases—net 98,277 90,165 Deferred tax asset—net 1,468 1,468 Property, equipment and other assets 41,282 42,289 Goodwill 126,651 126,645 Other intangible assets—net 35,540 38,614 TOTAL ASSETS $ 1,077,416 $ 1,076,775 LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Current liabilities: Accounts payable $ 149,685 $ 165,162 Accounts payable—floor plan 139,574 98,653 Salaries and commissions payable 31,758 36,839 Deferred revenue 76,821 72,802 Recourse notes payable—current 5,997 5,450 Non-recourse notes payable—current 12,700 50,397 Other current liabilities 29,870 30,061 Total current liabilities 446,405 459,364 Recourse notes payable - long-term 11,016 12,658 Non-recourse notes payable - long-term 2,587 5,664 Other liabilities 33,789 36,679 TOTAL LIABILITIES 493,797 514,365 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; 25,000 shares authorized; 13,536 outstanding at June 30 , 2021 and 13,503 outstanding at March 31 , 2021 146 145 Additional paid-in capital 154,101 152,366 Treasury stock, at cost, 1,038 shares at June 30 , 2021 and 993 shares at March 31 , 2021 ( 79,483 ) ( 75,372 ) Retained earnings 508,134 484,616 Accumulated other comprehensive income—foreign currency translation adjustment 721 655 Total Stockholders' Equity 583,619 562,410 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,077,416 $ 1,076,775 See Notes to Unaudited Consolidated Financial Statements. 5 Table of Contents e Plus inc. AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) Three Months Ended June 30, 2021 2020 Net sales Product $ 361,057 $ 307,240 Services 55,592 47,791 Total 416,649 355,031 Cost of sales Product 277,227 226,634 Services 33,910 29,840 Total 311,137 256,474 Gross profit 105,512 98,557 Selling, general, and administrative 68,775 69,467 Depreciation and amortization 3,926 3,516 Interest and financing costs 359 577 Operating expenses 73,060 73,560 Operating income 32,452 24,997 Other income 123 98 Earnings before tax 32,575 25,095 Provision for income taxes 9,057 7,735 Net earnings $ 23,518 $ 17,360 Net earnings per common share—basic $ 1.76 $ 1.30 Net earnings per common share—diluted $ 1.75 $ 1.30 Weighted average common shares outstanding—basic 13,333 13,322 Weighted average common shares outstanding—diluted 13,441 13,388 See Notes to Unaudited Consolidated Financial Statements. 6 Table of Contents e Plus inc. AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in thousands) Three Months Ended June 30, 2021 2020 NET EARNINGS $ 23,518 $ 17,360 OTHER COMPREHENSIVE INCOME, NET OF TAX: Foreign currency translation adjustments 66 37 Other comprehensive income 66 37 TOTAL COMPREHENSIVE INCOME $ 23,584 $ 17,397 See Notes to Unaudited Consolidated Financial Statements. 7 Table of Contents e Plus inc. AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Three Months Ended June 30, 2021 2020 Cash flows from operating activities: Net earnings $ 23,518 $ 17,360 Adjustments to reconcile net earnings to net cash provided by (used in) operating activities: Depreciation and amortization 6,082 4,779 Reserve for credit losses ( 261 ) 787 Share-based compensation expense 1,735 1,885 Deferred taxes - 1 Payments from lessees directly to lenders—operating leases ( 32 ) ( 8 ) Gain on disposal of property, equipment, and operaing lease equipment ( 148 ) ( 25 ) Changes in: Accounts receivable ( 68,641 ) ( 14,880 ) Inventories-net ( 7,800 ) ( 43,038 ) Financing receivables—net 193 ( 24,745 ) Deferred costs and other assets 61 4,973 Accounts payable-trade ( 15,393 ) 53,675 Salaries and commissions payable, deferred revenue, and other liabilities ( 4,450 ) 5,630 Net cash provided by (used in) operating activities ( 65,136 ) 6,394 Cash flows from investing activities : Proceeds from sale of property, equipment, and operating lease equipment 843 118 Purchases of property, equipment and operating lease equipment ( 6,994 ) ( 2,277 ) Net cash used in investing activities ( 6,151 ) ( 2,159 ) Cash flows from financing activities: Borrowings of non-recourse and recourse notes payable 3,199 10,332 Repayments of non-recourse and recourse notes payable ( 4,819 ) ( 1,874 ) Repurchase of common stock ( 3,807 ) ( 2,703 ) Net borrowings (repayments) on floor plan facility 40,921 48,285 Net cash provided by financing activities 35,494 54,040 Effect of exchange rate changes on cash 71 ( 124 ) Net increase (decrease) in cash and cash equivalents ( 35,722 ) 58,151 Cash and cash equivalents, beginning of period 129,562 86,231 Cash and cash equivalents, end of period $ 93,840 $ 144,382 8 Table of Contents UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS - continued (in thousands) Three Months Ended June 30, 2021 2020 S upplemental disclosures of cash flow information : Cash paid for interest $ 519 $ 558 Cash paid for income taxes $ 7,275 $ 193 Cash paid for amounts included in the measurement of lease liabilities $ 1,182 $ 1,503 S chedule of non-cash investing and financing activities : Proceeds from sale of property, equipment, and leased equipment $ 978 $ - Purchases of property, equipment, and operating lease equipment $ ( 2,619 ) $ ( 237 ) Borrowing of non-recourse and recourse notes payable $ - $ 22,824 Repayments of non-recourse and recourse notes payable $ ( 32 ) $ ( 8 ) Vesting of share-based compensation $ 7,493 $ 7,472 Repurchase of common stock $ ( 304 ) $ - New operating lease assets obtained in exchange for lease obligations $ - $ 726 See Notes to Unaudited Consolidated Financial Statements. 9 Table of Contents e Plus inc. AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (in thousands) Three Months Ended June 30, 2021 Common Stock Additional Paid-In Treasury Retained Accumulated Other Comprehensive Shares Par Value Capital Stock Earnings Income Total Balance, March 31 , 2021 13,503 $ 145 $ 152,366 $ ( 75,372 ) $ 484,616 $ 655 $ 562,410 Issuance of restricted stock awards 78 1 - - - - 1 Share-based compensation - - 1,735 - - - 1,735 Repurchase of common stock ( 45 ) - - ( 4,111 ) - - ( 4,111 ) Net earnings - - - - 23,518 - 23,518 Foreign currency translation adjustment - - - - - 66 66 Balance, June 30 , 2021 13,536 $ 146 $ 154,101 $ ( 79,483 ) $ 508,134 $ 721 $ 583,619 Three Months Ended June 30, 2020 Common Stock Additional Paid-In Treasury Retained Accumulated Other Comprehensive Shares Par Value Capital Stock Earnings Income Total Balance, March 31 , 2020 13,500 $ 144 $ 145,197 $ ( 68,424 ) $ 410,219 $ ( 991 ) $ 486,145 Issuance of restricted stock awards 91 1 - - - - 1 Share-based compensation - - 1,885 - - - 1,885 Repurchase of common stock ( 38 ) - - ( 2,703 ) - - ( 2,703 ) Net earnings - - - - 17,360 - 17,360 Foreign currency translation adjustment - - - - - 37 37 Balance, June 30 , 2020 13,553 $ 145 $ 147,082 $ ( 71,127 ) $ 427,579 $ ( 954 ) $ 502,725 See Notes to Unaudited Consolidated Financial Statements. 10 Table of Contents e Plus 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. e Plus inc. is sometimes referred to in this Quarterly Report on Form 10-Q as “we,” “our,” “us,” “ourselves,” or “ e Plus.” e Plus 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 e Plus 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 three months ended June 30, 2021, and 2020, 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 three months ended June 30, 2021, and 2020 are not necessarily indicative of results that may be expected for any other interim period or for the full fiscal year ending March 31, 2022, 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, 2021 (“2021 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 42 % of our technology segment’s net sales for the three months ended June 30, 2021, and 37 % for the three months ended June 30, 2020. 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, 2021 . 2. REVENUES CONTRACT BALANCES Accounts receivable – trade consists entirely of amounts due from contracts with customers. In addition, we had $ 49.6 million and $ 54.6 million of receivables from contracts with customers included within financing receivables as of June 30 , 2021, and March 31, 2021, respectively. The following table provides the balance of contract liabilities from contracts with customers (in thousand s): June 30, 2021 March 31, 2021 Current (included in deferred revenue) $ 76,261 $ 72,299 Non-current (included in other liabilities) $ 24,065 $ 26,042 Revenue recognized from the beginning contract liability balance was $ 21.5 million and $ 15.6 million for the three months ended June 30, 2021, and 2020, respectively. 11 Table of Contents PERFORMANCE OBLIGATIONS The following table includes revenue expected to be recognized in the future related to performance obligations, primarily non-cancelable contracts for e Plus managed services, that are unsatisfied or partially unsatisfied at the end of the reporting period (in thousand s). Remainder of the year ending March 31, 2022 $ 31,218 Year ending March 31, 2023 18,709 Year ending March 31, 2024 9,023 Year ending March 31, 2025 1,161 Year ending March 31, 2026 and thereafter 461 Total remaining performance obligations $ 60,572 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. 3. FINANCING RECEIVABLES AND OPERATING LEASES O ur 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. Occasionally, our leases provide the lessee a bargain purchase option . 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 months ended June 30, 2021, and 2020 (in thousands): Three months ended June 30, 2021 2020 Net sales $ 3,817 $ 10,163 Cost of sales 3,365 5,327 Gross profit $ 452 $ 4,836 The following table provides interest income in aggregate on our sales-type leases and lease income on our operating leases for the three months ended June 30, 2021, and 2020 (in thousands): Three months ended June 30, 2021 2020 Interest income on sales-type leases $ 1,290 $ 2,219 Lease income on operating leases $ 5,210 $ 3,838 FINANCING RECEIVABLES—NET The following tables provide a disaggregation of our financing receivables – net (in thousand s): June 30 , 2021 Notes Receivable Lease Receivables Financing Receivables Gross receivables $ 80,654 $ 58,360 $ 139,014 Unguaranteed residual value (1) - 14,207 14,207 Initial direct costs, net of amortization 242 - 242 Unearned income - ( 7,691 ) ( 7,691 ) Allowance for credit losses (2) ( 1,289 ) ( 873 ) ( 2,162 ) Total, net $ 79,607 $ 64,003 $ 143,610 Reported as: Current $ 39,452 $ 23,630 $ 63,082 Long-term 40,155 40,373 80,528 Total, net $ 79,607 $ 64,003 $ 143,610 (1) Includes unguaranteed residual values of $ 9,071 thousand that we retained after selling the related lease receivable. (2) Refer to Note 6, “Allowance for Credit Losses” for details. March 31 , 2021 Notes Receivable Lease Receivables Financing Receivables Gross receivables $ 112,641 $ 68,393 $ 181,034 Unguaranteed residual value (1) - 14,876 14,876 Initial direct costs, net of amortization 425 - 425 Unearned income - ( 8,393 ) ( 8,393 ) Allowance for credit losses (2) ( 1,212 ) ( 1,171 ) ( 2,383 ) Total, net $ 111,854 $ 73,705 $ 185,559 Reported as: Current $ 73,175 $ 33,097 $ 106,272 Long-term 38,679 40,608 79,287 Total, net $ 111,854 $ 73,705 $ 185,559 (1) Includes unguaranteed residual values of $ 9,453 thousand that we retained after selling the related lease receivable. (2) Refer to Note 6 , “Allowance for Credit Losses” for details. 12 Table of Contents 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): June 30, 2021 March 31, 2021 Cost of equipment under operating leases $ 26,434 $ 18,748 Accumulated depreciation ( 8,685 ) ( 7,870 ) Investment in operating lease equipment—net (1) $ 17,749 $ 10,878 (1) Amounts include estimated unguaranteed residual values of $ 3.5 million and $ 2.5 million as of June 30, 2021, and March 31, 2021, respectively. 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 June 30, 2021, and March 31, 2021, we had financing receivables of $ 12.4 million and $ 60.5 million, respectively, and operating leases of $ 5.7 million and $ 3.3 million, respectively, which were collateral for non-recourse notes payable. See Note 8, "Credit Facility and Notes Payable." For transfers accounted for as sales, 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 June 30, 2021, and 2020, we recognized net gains of $ 3.2 million and $ 2.5 million, respectively, and total proceeds from these sales were $ 75.3 million and $ 73.2 million, respectively. When we retain servicing obligations in transfers accounted for as sales, we allocate a portion of the proceeds to deferred revenues, which is recognized as we perform the services. As of both June 30, 2021, and March 31, 2021, we had deferred revenue of $ 0.3 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 June 30, 2021, the total potential payments that could result from these indemnities is immaterial. 13 Table of Contents 4. LESSEE ACCOUNTING We lease office space for periods up to six 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 of $ 1.3 million and $ 1.6 million for the three months ending June 30, 2021, and June 30, 2020, respectively, as part of selling, general, and administrative expenses . 5. GOODWILL AND OTHER INTANGIBLE ASSETS GOODWILL The following table summarizes the changes in the carrying amount of goodwill for the three months ended June 30, 2021 (in thousand s): Three months ended June 30, 2021 Goodwill Accumulated Impairment Loss Net Carrying Amount Beginning balance $ 135,318 $ ( 8,673 ) $ 126,645 Foreign currency translations 6 - 6 Ending balance $ 135,324 $ ( 8,673 ) $ 126,651 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 June 30, 2021, relates to our technology segment, which we also determined to be one reporting unit. The change in our goodwill balance during the three months ended June 30, 2021, is due solely to foreign currency translation. 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, 2020, we performed a qualitative assessment of goodwill and concluded that, more likely than not, the fair value of our technology reporting unit continued to substantially exceed its carrying value. OTHER INTANGIBLE ASSETS Our other intangible assets consist of the following on June 30, 2021, and March 31, 2021 (in thousands): June 30, 2021 March 31, 2021 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount Customer relationships & other intangibles $ 77,345 $ ( 44,819 ) $ 32,526 $ 77,335 $ ( 42,115 ) $ 35,220 Capitalized software development 10,486 ( 7,472 ) 3,014 10,553 ( 7,159 ) 3,394 Total $ 87,831 $ ( 52,291 ) $ 35,540 $ 87,888 $ ( 49,274 ) $ 38,614 Customer relationships and other intangibles are generally amortized between 5 to 10 years. Capitalized software development is generally amortized over 5 years. Total amortization expense for customer relationships and other intangible assets was $ 3.0 million and $ 2.5 million for the three months ended June 30, 2021, and June 30, 2020, respectively . 14 Table of Contents 6. ALLOWANCE FOR CREDIT LOSSES The following table provides the activity in our allowance for credit losses for the three months ended June 30, 2021, and 2020 (in thousands): Accounts Receivable Notes Receivable Lease Receivables Total Balance April 1, 2021 $ 2,064 $ 1,212 $ 1,171 $ 4,447 Provision for credit losses ( 40 ) 77 ( 298 ) ( 261 ) Write-offs and other ( 22 ) - - ( 22 ) Balance June 30 , 2021 $ 2,002 $ 1,289 $ 873 $ 4,164 Accounts Receivable Notes Receivable Lease Receivables Total Balance April 1, 2020 $ 1,781 $ 798 $ 610 $ 3,189 Provision for credit losses 329 341 117 787 Write-offs and other - - - - Balance June 30 , 2020 $ 2,110 $ 1,139 $ 727 $ 3,976 The following table provides the amortized cost basis of our financing receivables by CQR and by credit origination year as of June 30, 2021 (in thousands): Amortized cost basis by origination year ending March 31, 2022 2021 2020 2019 2018 2017 and prior Total Transfers (2) Net credit exposure Notes receivable: High CQR $ 12,389 $ 47,165 $ 4,298 $ 529 $ 225 $ 15 $ 64,621 $ ( 20,944 ) $ 43,677 Average CQR 6,529 6,556 2,329 290 5 - 15,709 ( 3,449 ) 12,260 Low CQR - - 324 - 324 - 324 Total $ 18,918 $ 53,721 $ 6,627 $ 1,143 $ 230 $ 15 $ 80,654 $ ( 24,393 ) $ 56,261 Lease receivables: High CQR $ 9,322 $ 16,485 $ 4,423 $ 1,736 $ 247 $ 98 $ 32,311 $ ( 7,301 ) $ 25,010 Average CQR 6,020 13,634 2,719 754 186 31 23,344 ( 4,222 ) 19,122 Low CQR 150 - - - - - 150 - 150 Total $ 15,492 $ 30,119 $ 7,142 $ 2,490 $ 433 $ 129 $ 55,805 $ ( 11,523 ) $ 44,282 Total amortized cost (1) $ 34,410 $ 83,840 $ 13,769 $ 3,633 $ 663 $ 144 $ 136,459 $ ( 35,916 ) $ 100,543 (1) Unguaranteed residual values of $ 9,071 thousand that we retained after selling the related lease receivable and initial direct costs of notes receivable of $ 242 thousand are 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. We evaluate our customers using an internally assigned credit quality rating (“CQR”): • 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 less than 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 in the range of 10 % to 100 % . 15 Table of Contents The following table provides the amortized cost basis of our financing receivables by CQR and by credit origination year as of March 31, 2021 (in thousands): Amortized cost basis by origination year ending March 31, 2021 2020 2019 2018 2017 Total Transfers (2) Net credit exposure Notes receivable: High CQR $ 93,793 $ 6,250 $ 769 $ 771 $ 19 $ 101,602 $ ( 63,471 ) $ 38,131 Average CQR 7,689 2,468 550 8 - 10,715 ( 2,896 ) 7,819 Low CQR - - 324 - - 324 - 324 Total $ 101,482 $ 8,718 $ 1,643 $ 779 $ 19 $ 112,641 $ ( 66,367 ) $ 46,274 Lease receivables: High CQR 28,898 $ 5,885 $ 1,798 $ 463 $ 125 $ 37,169 ( 7,468 ) $ 29,701 Average CQR 23,445 3,482 1,017 270 40 28,254 ( 4,592 ) 23,662 Low CQR - - - - - - - - Total $ 52,343 $ 9,367 $ 2,815 $ 733 $ 165 $ 65,423 $ ( 12,060 ) $ 53,363 Total amortized cost (1) $ 153,825 $ 18,085 $ 4,458 $ 1,512 184 $ 178,064 ( 78,427 ) $ 99,637 (1) Unguaranteed residual values of $ 9,453 thousand that we retained after selling the related lease receivable and initial direct costs of notes receivable of $ 425 thousand are 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 June 30 , 2021 (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 $ 38 $ 5 $ 555 $ 598 $ 5,042 $ 5,640 $ 75,014 $ 80,654 Lease receivables 539 550 1,377 2,466 784 3,250 52,555 55,805 Total $ 577 $ 555 $ 1,932 $ 3,064 $ 5,826 $ 8,890 $ 127,569 $ 136,459 The following table provides an aging analysis of our financing receivables as of March 31 , 2021 (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 $ 648 $ 910 $ 673 $ 2,231 $ 3,240 $ 5,471 $ 107,170 $ 112,641 Lease receivables 804 132 643 1,579 2,566 4,145 61,278 65,423 Total $ 1,452 $ 1,042 $ 1,316 $ 3,810 $ 5,806 $ 9,616 $ 168,448 $ 178,064 Our financial assets on nonaccrual status were not significant as of June 30, 2021, and March 31, 2021. 16 Table of Contents 7. PROPERTY, EQUIPMENT, OTHER ASSETS AND LIABILITIES Our property, equipment, other assets and liabilities consist of the following (in thousands): June 30, 2021 March 31, 2021 Other current assets: Deposits & funds held in escrow $ 461 $ 759 Prepaid assets 11,547 9,939 Other 301 278 Total $ 12,309 $ 10,976 Property, equipment and other assets Property and equipment, net $ 7,607 $ 7,388 Deferred costs - non-current 17,645 19,063 Right-of-use assets 7,580 8,763 Other 8,450 7,075 Total $ 41,282 $ 42,289 Other current liabilities : Accrued expenses $ 13,638 $ 13,598 Accrued income taxes payable 6,564 4,439 Short-term lease liability 3,561 3,934 Other 6,107 8,090 Total $ 29,870 $ 30,061 Other liabilities : Deferred revenue - non-current $ 24,324 $ 26,309 Long-term lease liability 4,180 5,040 Other 5,285 5,330 Total $ 33,789 $ 36,679 In the above table, deposits and funds held in escrow relate to financial assets that were sold to third-party banks. In conjunction with those sales, a portion of the proceeds was placed in escrow and will be released to us upon payment of outstanding invoices related to the underlying financing arrangements that were sold. 8. CREDIT FACILITY AND NOTES PAYABLE CREDIT FACILITY Within our technology segment, e Plus Technology, inc. and certain of its subsidiaries finance their operations, in addition to funds generated from operations, with a credit facility with Wells Fargo Commercial Distribution Finance, LLC (“WFCDF”). This facility provides short-term capital for our technology segment . There are two components of the WFCDF credit facility: (1) a floor plan component, and (2) an accounts receivable component. The WFCDF credit facility has an aggregate limit for th e two components, except during a temporary uplift, of $ 275 million. We may elect to temporarily increase the aggregate limit to $ 350 million for a period of not less than 30 days, provided that all such periods shall not exceed 150 days in the aggregate in any calendar year. Additionally, the WFCDF credit facility has a limit on the accounts receivable component of $ 100 million. WFCDF charges us an interest rate equal to two percent ( 2.00 %) plus the greater of one month LIBOR or seventy-five hundredths of one percent ( 0.75 %). As of June 30, 2021, the limit of the two components of the credit facility was $ 275 million. On July 2, 2021, we elected to temporarily increase the aggregate limit to $ 350 million. Our borrowing availability under the credit facility varies based upon the value of the receivables and inventory of e Plus Technology, inc., and certain of its subsidiaries. We had outstanding balances of $ 139.6 million and $ 98.7 million under the floor plan component as of June 30, 2021, and March 31, 2021, respectively. This component is presented as part of as accounts payable – floorplan. We had no outstanding balance under the accounts receivable component as of June 30, 2021, and as of March 31, 2021. This component 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 June 30, 2021, and March 31, 2021. 17 Table of Contents The WFCDF credit facility is secured by the assets of e Plus Technology, inc. and certain of its subsidiaries. Additionally, the credit facility requires a guaranty of $ 10.5 million by e Plus inc. The credit facility restricts the ability of e Plus Technology, inc. and certain of its subsidiaries to pay dividends to e Plus inc. unless their available borrowing meets certain thresholds. As of June 30, 2021, and March 31, 2021 , their available borrowing met the threshold such that there were no restricted net assets of e Plus Technology, inc. The credit facility requires that financial statements of e Plus Technology, inc. and certain of its subsidiaries be provided within 45 days of each quarter and 90 days of each fiscal year end, and requires that other operational reports be provided on a regular basis. Either party may terminate with 90 days’ written notice. 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. RECOURSE NOTES PAYABLE Recourse notes payable consist of borrowings that, in the event of default, the lender has recourse against us. We had $ 17.0 million and $ 18.1 million in recourse borrowings as of June 30, 2021, and March 31, 2021, respectively, that is resulting from one installment payment arrangement. 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 to calculate our payable balance using an interest rate of 3.50 % as of both June 30, 2021, and March 31, 2021 . NON-RECOURSE NOTES PAYABLE Non-recourse notes payable consists 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 June 30, 2021, and March 31, 2021 , we had $ 15.3 million and $ 56.1 million, respectively, of non-recourse borrowings that were collateralized by investments in notes and leases. Principal and interest payments are generally due monthly 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 3.66 % and 3.35 %, as of June 30, 2021, and March 31, 2021 , respectively. 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 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. 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 the 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. 18 Table of Contents 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 months ended June 30, 2021, and 2020, respectively (in thousands, except per share data). Three Months Ended June 30, 2021 2020 Net earnings attributable to common shareholders - basic and diluted $ 23,518 $ 17,360 Basic and diluted common shares outstanding: Weighted average common shares outstanding — basic 13,333 13,322 Effect of dilutive shares 108 66 Weighted average shares common outstanding — diluted 13,441 13,388 Earnings per common share - basic $ 1.76 $ 1.30 Earnings per common share - diluted $ 1.75 $ 1.30 11. STOCKHOLDERS’ EQUITY SHARE REPURCHASE PLAN On March 18, 2021, our board of directors authorized the repurchase of up to 500,000 shares of our outstanding common stock over a 12-month period beginning May 28, 2021, and ending on May 27, 2022. The plan authorized purchases to 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. On May 20, 2020, our board of directors authorized the repurchase of up to 500,000 shares of our outstanding common stock over a 12-month period beginning May 28, 2020, and ending on May 27, 2021. The plan authorized purchases to 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. During the three months ended June 30, 2021, we purchased 17,629 shares of our outstanding common stock at a value of $ 1.6 million under the share repurchase plan; we also purchased 27,715 shares of common stock at a value of $ 2.6 million to satisfy tax withholding obligations relating to the vesting of employees’ restricted stock. During the three months ended June 30, 2020, no shares of our outstanding common stock were purchased under the share repurchase plan; we purchased 37,640 shares of common stock at a value of $ 2.7 million to satisfy tax withholding obligations relating to the vesting of employees’ restricted stock. 12. SHARE-BASED COMPENSATION SHARE-BASED PLANS As of June 30, 2021, we had share-based awards outstanding under the following plans: (1) the 2017 Non-Employee Director Long-Term Incentive Plan (“2017 Director LTIP”), and (2) the 2012 Employee Long-Term Incentive Plan ("2012 Employee LTIP"). These share-based plans define fair market value as the previous trading day's closing price when the grant date falls on a date the stock was not traded. RESTRICTED STOCK ACTIVITY For the three months ended June 30, 2021, we granted 414 shares under the 2017 Director LTIP, and 77,861 restricted shares under the 2012 Employee LTIP. For the three months ended June 30, 2020, we granted 716 shares under the 2017 Director LTIP, and 89,873 restricted shares under the 2012 Employee LTIP. A summary of the grants is as follows: Number of Shares Weighted Average Grant-date Fair Value Nonvested April 1, 2021 183,378 $ 74.97 Granted 78,275 $ 92.20 Vested ( 81,276 ) $ 78.32 Nonvested June 30 , 2021 180,377 $ 80.94 19 Table of Contents Upon each vesting period of the restricted stock awards, employees are subject to minimum tax withholding obligations. Under the 2012 Employee LTIP, we may purchase a sufficient number of shares due to the participant to satisfy their minimum tax withholding on employee stock awards. For the three months ended June 30, 2021, we withheld 27,715 shares of common stock at a value of $ 2.6 million, which was included in treasury stock. 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 June 30, 2021, and 2020, we recognized $ 1.7 million and $ 1.9 million of total share-based compensation expense, respectively. Unrecognized compensation expense related to non-vested restricted stock was $ 13.7 million as of June 30, 2021, which will be fully recognized over the next 36 months. 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 June 30, 2021, and 2020, o ur estimated contribution expense for the plan was $ 0.8 million and $ 0.7 million, respectively. 13. INCOME TAXES We account for our tax positions in accordance with Codification Topic 740, Income Taxes . Under the guidance, we evaluate uncertain tax positions based on the two-step approach. The first step is to evaluate each uncertain tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained in an audit, including resolution of related appeals or litigation processes, if any. For tax positions that are not likely of being sustained upon audit, the second step requires us to estimate and measure the tax benefit as the largest amount that is more than 50 percent likely of being realized upon ultimate settlement. Our total gross unrecognized tax benefits recorded for uncertain income tax, and interest and penalties thereon, were negligible as of June 30, 2021, and June 30, 2020. We had no additions or reductions to our gross unrecognized tax benefits during the three months ended June 30, 2021. We recognize accrued interest and penalties related to unrecognized tax benefits in income tax expense. 14. FAIR VALUE OF FINANCIAL INSTRUMENTS We account for the fair values of our assets and liabilities in accordance with Codification Topic 820, Fair Value Measurement and Disclosure. The following table summarizes the fair value hierarchy of our financial instruments as of June 30, 2021, and March 31, 2021 (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) June 30 , 2021 Assets: Money market funds $ 6,136 $ 6,136 $ - $ - March 31 , 2021 Assets: Money market funds $ 45,134 $ 45,134 $ - $ - 15. BUSINESS COMBINATIONS SYSTEMS MANAGEMENT PLANNING (SMP) On December 31, 2020, our subsidiary, e Plus Technology, inc., acquired certain assets and liabilities of SMP, an established provider of technology solutions and services in upstate New York and the Northeast. The acquisition enhances e Plus’ footprint across the region, broadens our technology solution offerings especially in the areas of collaboration and supporting virtual employees, and adds to e Plus’ set of commercial, enterprise and state, local, and education customers. 20 Table of Contents Our sum of consideration transferred was $ 27.0 million consisting of $ 29.0 million paid in cash at closing less $ 2.0 million that was paid back to us in our quarter ended March 31, 2021, related to a working capital adjustment. Our allocation of the purchase consideration to the assets acquired and liabilities assumed is presented below (in thousands): Acquisition Date Amount Accounts receivable $ 14,526 Other assets 3,344 Identified intangible assets 14,280 Accounts payable and other current liabilities ( 11,424 ) Performance obligations ( 2,020 ) Total identifiable net assets 18,706 Goodwill 8,328 Total purchase consideration $ 27,034 The identified intangible assets of $ 14.3 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 $ 8.3 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, 2020, 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. 21 Table of Contents Our reportable segment information for the three month periods ended June 30, 2021, and 2020 are summarized in the following table (in thousands): Three Months Ended June 30, 2021 June 30, 2020 Technology Financing Total Technology Financing Total Sales Product $ 344,766 $ 16,291 $ 361,057 $ 293,433 $ 13,807 $ 307,240 Service 55,592 - 55,592 47,791 - 47,791 Net sales 400,358 16,291 416,649 341,224 13,807 355,031 Cost of Sales Product 271,015 6,212 277,227 224,543 2,091 226,634 Service 33,910 - 33,910 29,840 - 29,840 Total cost of sales 304,925 6,212 311,137 254,383 2,091 256,474 Gross Profit 95,433 10,079 105,512 86,841 11,716 98,557 Selling, general, and administrative 66,153 2,622 68,775 65,556 3,911 69,467 Depreciation and amortization 3,898 28 3,926 3,488 28 3,516 Interest and financing costs 159 200 359 265 312 577 Operating expenses 70,210 2,850 73,060 69,309 4,251 73,560 Operating income 25,223 7,229 32,452 17,532 7,465 24,997 Other income 123 98 Earnings before tax $ 32,575 $ 25,095 Net Sales Contracts with customers $ 396,541 $ 5,418 $ 401,959 $ 333,987 $ 960 $ 334,947 Financing and other 3,817 10,873 14,690 7,237 12,847 20,084 Net Sales $ 400,358 $ 16,291 $ 416,649 $ 341,224 $ 13,807 $ 355,031 Selected Financial Data - Statement of Cash Flow Depreciation and amortization $ 4,103 $ 1,979 $ 6,082 $ 3,634 $ 1,145 $ 4,779 Purchases of property, equipment and operating lease equipment $ 1,307 $ 5,687 $ 6,994 $ 2,048 $ 229 $ 2,277 Selected Financial Data - Balance Sheet Total assets $ 868,276 $ 209,140 $ 1,077,416 $ 834,264 $ 224,598 $ 1,058,862 22 Table of Contents 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 below (in thousands): Three Months Ended June 30, 2021 2020 Customer end market: Telecom, Media & Entertainment $ 112,192 $ 56,652 Technology 69,140 69,967 State and local government and educational institutions 65,415 70,563 Healthcare 54,688 46,535 Financial Services 30,011 47,421 All others 68,912 50,086 Net sales 400,358 341,224 Less: Revenue from financing and other ( 3,817 ) ( 7,237 ) Revenue from contracts with customers $ 396,541 $ 333,987 Three Months Ended June 30, 2021 2020 Vendor Cisco Systems $ 166,902 $ 127,932 Dell / EMC 26,340 31,081 Juniper Networks 24,714 13,579 HP Inc. & HPE 17,202 17,038 Arista Networks 11,498 6,820 NetApp 10,457 15,421 All others 143,245 129,353 Net sales 400,358 341,224 Less: Revenue from financing and other ( 3,817 ) ( 7,237 ) Revenue from contracts with customers $ 396,541 $ 333,987 FINANCING SEGMENT DISAGGREGATION OF REVENUE We analyze our revenues within our financing segment based on the nature of the arrangement. Our revenues from contracts with customers within our financing segment consist entirely of proceeds from the sale of off-lease equipment. 23 Table of Contents