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Item 1. Financial Statements

2022-08-04 compared with 2022-02-04 · 182 added, 295 removed, 365 unchanged (57% of the section changed)

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AND SUBSIDIARIES

UNAUDITED CONSOLIDATED BALANCE SHEETS

UNAUDITED CONSOLIDATED

BALANCE SHEETS

(in thousands, except per share amounts)

December 31, 2021

June 30, 2022

March 31, 2022

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50,000 shares authorized;

26,966 outstanding at December 31 , 2021 and 27,006 outstanding at March 31 , 2021

26,893 outstanding at June 30 , 2022 and 26,886 outstanding at March 31 , 2022

Additional paid-in capital

Treasury stock, at cost, 258

shares at December 31 , 2021

shares at June 30 , 2022

and 130 shares at March 31 ,

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(in thousands, except per share amounts)

Three Months Ended

Nine Months Ended

Three Months Ended June 30,

Cost of sales

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(in thousands)

Three Months Ended

Nine Months Ended

Three Months Ended June 30,

OTHER COMPREHENSIVE INCOME, NET OF TAX:

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AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

UNAUDITED CONSOLIDATED

STATEMENTS OF CASH FLOWS

(in thousands)

Nine Months Ended December 31,

Three Months Ended June 30,

Cash flows from operating activities:

Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:

Adjustments to reconcile net earnings to net cash used in operating activities:

Depreciation and amortization

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Share-based compensation expense

Deferred taxes

Payments from lessees directly to lenders—operating leases

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Salaries and commissions payable, deferred revenue, and other liabilities

Net cash provided by (used in) operating activities

Net cash used in operating activities

Cash flows from investing activities :

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Purchases of property, equipment and operating lease equipment

Cash used in acquisitions, net of cash acquired

Net cash used in investing activities

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Repurchase of common stock

Repayments of financing of acquisitions

Net borrowings on floor plan facility

Net borrowings (repayments) on floor plan facility

Net cash provided by financing activities

Effect of exchange rate changes on cash

Net increase (decrease) in cash and cash equivalents

Net increase in cash and cash equivalents

Cash and cash equivalents, beginning of period

Cash and cash equivalents, end of period

See Notes to Unaudited Consolidated Financial Statements.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS - continued

(in thousands)

Nine Months Ended December 31,

Three Months Ended June 30,

S upplemental disclosures of cash flow

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Vesting of share-based compensation

Repurchase of common stock

New operating lease assets obtained in exchange for lease obligations

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(in thousands)

Nine Months Ended December 31, 2021

Three Months Ended June 30,

Comprehensive

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Balance, June 30 , 2022

Issuance of restricted stock awards

Share-based compensation

Repurchase of common stock

Foreign currency translation adjustment

Balance, September 30, 2021

Issuance of restricted stock awards

Share-based compensation

Repurchase of common stock

Stock split effected in the form of a dividend

Retirement of treasury stock

Foreign currency translation adjustment

Balance, December 31,

Nine Months Ended December 31, 2020

Three Months Ended June 30,

Comprehensive

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Balance, June 30 , 2021

Issuance of restricted stock awards

Share-based compensation

Repurchase of common stock

Foreign currency translation adjustment

Balance, September 30, 2020

Issuance of restricted stock awards

Share-based compensation

Repurchase of common stock

Foreign currency translation adjustment

Balance, December 31, 2020

See Notes to Unaudited Consolidated Financial Statements.

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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, 2021, and 2020, were prepared by us and include all

INTERIM FINANCIAL STATEMENTS — The unaudited consolidated financial statements for the three months ended June 30, 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, 2021, and 2020, are not necessarily indicative of results that may be expected for any other interim period or for the full fiscal year ended March 31, 2022, or any other future period.

three months ended June 30, 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

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Actual results may differ from these estimates.

CONCENTRATIONS OF RISK — A substantial portion of our sales are products from Cisco Systems, which were 38 % and 32 % of our technology segment’s net sales for the three months ended

December 31, 2021, and 2020, respectively, and 40 % and 37 % of our technology segment’s net sales for the nine months ended December 31, 2021, and 2020, respectively.

CONCENTRATIONS OF RISK — A substantial portion of our sales are products from Cisco Systems, which were 35 % of our technology segment’s net sales for the three months ended June 30, 2022, and 42 %

for the three months ended June 30, 2021.

SIGNIFICANT ACCOUNTING POLICIES — The significant accounting policies used in preparing these Consolidated

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had $ 57.1 million and $ 47.5 million of receivables from contracts with customers included within financing

receivables as of December 31 , 2021, and March 31, 2021, respectively.

The following table provides the

balance of contract liabilities from contracts with customers (in thousand s):

December 31, 2021

receivables as of June 30 , 2022, and March 31, 2022, respectively.

The following table provides the balance

of contract liabilities from contracts with customers (in thousand s):

June 30, 2022

March 31, 2022

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Revenue recognized from the beginning contract liability balance was $ 24.9

million and $ 47.9 million for the three and nine months ended December 31, 2021, respectively, and $ 9.6 million and $ 36.5 million for the three

and nine months ended December 31, 2020, respectively.

million and $ 21.5 million for the three months ended June 30, 2022, and 2021, respectively.

PERFORMANCE OBLIGATIONS

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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.

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.

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, 2021, and 2020 (in thousands):

Three months ended December 31,

Nine months ended December 31,

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, 2022, and 2021 (in thousands):

Three months ended June 30,

Cost of sales

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, 2021, and 2020 (in thousands):

Three months ended December 31,

Nine months ended December 31,

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, 2022, and 2021 (in thousands):

Three months ended June 30,

Interest income on sales-type leases

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FINANCING RECEIVABLES—NET

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

December 31 ,

The following tables provide a disaggregation of our financing receivables – net

(in thousand s):

Gross receivables

Unguaranteed residual value (1)

Initial direct costs, net of amortization

Unearned income

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Includes unguaranteed residual values of $ 5,607 thousand that we retained after selling the related lease receivable.

Refer to Note 6, “Allowance for Credit Losses” for

Refer to Note 6 ,

“Allowance for Credit Losses” for details.

Gross receivables

Unguaranteed residual value (1)

Initial direct costs, net of amortization

Unearned income

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Investment in operating lease equipment—net (1)

Amounts include estimated unguaranteed residual

values of $ 5.0 million and $ 2.5

million as of December 31, 2021, and March 31, 2021, respectively.

Amounts include estimated unguaranteed

residual values of $ 1.8 million and $ 1.7

million as of June 30, 2022, and March 31, 2022, 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.

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, 2021, and

March 31, 2021, we had financing receivables of $ 33.3 million and $ 60.5 million, respectively, and operating leases of $ 8.6

million and $ 3.3 million, respectively, which were collateral for non-recourse notes payable.

See Note 8, ‘‘Credit Facility and Notes

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 December 31, 2021, and 2020, we recognized net gains of $ 2.3 million and $ 3.0 million, respectively, and total proceeds from these sales were $ 63.5 million and $ 67.5 million,

As of June 30, 2022, and

March 31, 2022, we had financing receivables of $ 29.0 million and $ 21.1 million, respectively, and operating leases of $ 1.8 million

and $ 2.0 million, respectively, which were collateral for non-recourse notes payable.

See Note 7 , “ 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 June 30, 2022, and 2021, we recognized net gains of $ 1.8 million and $ 3.2 million, respectively, and total proceeds from these sales were $ 52.5 million and $ 75.3 million,

respectively.

For the year to date periods ended December 31, 2021, and 2020, we recognized net gains of $ 15.6 million and $ 10.1 million, respectively, and total proceeds from these sales were $ 753.9 million and $ 259.2 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 December 31, 2021, and March 31, 2021, we had deferred revenue of $ 0.5 million and $ 0.3 million, respectively, 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, 2021, and March 31, 2021, the total potential payments that could result from these indemnities is immaterial.

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 June 30, 2022, and March 31, 2022, we had deferred revenue of $ 0.4 million and $ 0.5 million, respectively, 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, 2022, and March 31, 2022, the total potential payments that could result from these indemnities is immaterial.

LESSEE ACCOUNTING

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expense as part of selling, general and administrative expenses.

We recognized rent expense of $ 1.4 million and $ 1.5 million for the three months ended December 31, 2021, and 2020, respectively.

We recognized rent expense of $ 4.0 million and $ 4.6 million for the nine months ended December 31,

2021, and 2020, respectively.

We recognized rent expense of $ 1.3 million for both the three months

ended June 30, 2022, and June 30, 2021.

GOODWILL AND OTHER INTANGIBLE ASSETS

The following table summarizes the changes in the carrying amount of goodwill for the nine months ended

December 31, 2021 (in thousand s):

Nine months ended December 31, 2021

The following table summarizes the changes in the carrying amount of goodwill for

the three months ended June 30, 2022 (in thousand s):

Three months ended June 30, 2022

Beginning balance

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Ending balance

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, 2021, relates to our technology segment, which we also determined to be one reporting unit.

The change in our goodwill balance during the nine months ended December 31, 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, 2021, 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 .

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, 2022, 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, 2022, 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, 2021, 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

O ur other intangible assets consist of the following on December

31, 2021, and March 31, 2021 (in thousands) :

December 31, 2021

Our other intangible assets consist of the following on June 30, 2022, and March

31, 2022 (in thousands):

June 30, 2022

March 31, 2022

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Capitalized software development is generally amortized over 5 years.

Total amortization expense for customer relationships and other intangible assets was $ 2.8 million and $ 2.3 million for the three months ended December 31, 2021, and December 31, 2020,

respectively, and $ 8.8 million and $ 7.3

million for the nine months ended December 31, 2021, and December 31, 2020, respectively.

Total amortization expense for customer relationships and other intangible

assets was $ 2.2 million and $ 2.7 million for the three months ended June 30, 2022, and June 30, 2021,

respectively .

ALLOWANCE FOR CREDIT LOSSES

The following table provides the activity in our allowance for credit losses for the nine months ended December 31, 2021, and 2020 (in thousands):

The following table provides the activity in our allowance for credit losses for the three months ended June 30, 2022, and 2021 (in thousands):

Balance April 1, 2022

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Write-offs and other

Balance December 31 ,

Balance June 30 ,

Balance April 1, 2021

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Write-offs and other

Balance December 31 ,

Balance June 30 ,

We evaluate our customers using an

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The loss rates in this category in the normal course are generally in the range of 10 % 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, 2021 (in thousands):

The following table provides the amortized cost basis of our financing receivables by CQR and by credit origination year as of June 30, 2022 (in thousands):

Amortized cost basis by origination year ending March 31,

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Unguaranteed residual values of $ 5,607 thousand

that we retained after selling the related lease receivable and initial direct costs of notes receivable of $ 234 thousand are excluded from amortized cost.

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.

that we retained after selling the related lease receivable is excluded from amortized cost.

Transfers consist of receivables that have been transferred to third-party financial institutions on a non-recourse

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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Unguaranteed residual values of $ 6,424 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.

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 , 2021 (in thousands):

that we retained after selling the related lease receivable is excluded from amortized cost.

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 , 2022 (in thousands):

Notes receivable

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Lease receivables

Our financial assets on nonaccrual status were not significant as of December 31, 2021, and March 31, 2021.

PROPERTY, EQUIPMENT, OTHER ASSETS AND LIABILITIES

Our property, equipment, other assets and liabilities consist of the following (in thousands):

Other current assets:

Deposits & funds held in escrow

Prepaid assets

Property, equipment and other assets

Property and equipment, net

Deferred costs - non-current

Right-of-use assets

Other current liabilities :

Accrued expenses

Accrued income taxes payable

Short-term lease liability

Other liabilities :

Deferred revenue - non-current

Long-term lease liability

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.

Our financial assets on nonaccrual status were not significant as of June 30, 2022, and March 31, 2022.

CREDIT FACILITY AND NOTES PAYABLE

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facility has a floor plan facility and a revolving credit facility.

Under the floor plan facility, we had an outstanding balance of $ 157.7 million and $ 98.7 million as of December 31, 2021, and March 31, 2021, respectively.

On our balance sheet, our liability under the floor plan facility is presented

as accounts payable – floor plan .

Under the floor plan facility, we had an outstanding balance of $ 138.0 million and $ 145.3 million as of June 30, 2022, and March 31, 2022, respectively.

On our balance sheet, our liability under the floor plan facility is presented as

accounts payable – floor plan .

Under the revolving credit facility, we had $ 40.0

million outstanding as of December 31, 2021, and no balance outstanding as of March 31, 2021.

On our balance sheet, our liability under

the revolving credit facility is presented as part of recourse notes payable – current.

fair value of the outstanding balances under the WFCDF credit facility were approximately equal to their carrying value as of December 31, 2021, and March 31, 2021.

million outstanding as of June 30, 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.

fair value of the outstanding balances under the WFCDF credit facility were approximately equal to their carrying value as of June 30, 2022, and March 31, 2022.

October 13, 2021, the Borrowers amended, restated, and replaced in entirety their then-existing credit agreements with WFCDF.

The new credit facility is established 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 $ 375

million, an increase from $ 275 million, together with a sublimit for a revolving credit facility for up to $ 100 million (collectively, the “2021 Credit Facility”).

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 LIBOR plus 1.75 %.

The new credit facility is established 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 $ 375 million,

an increase from $ 275 million, together with a sublimit for a revolving credit facility for up to $ 100 million (collectively, the “2021 Credit Facility”).

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 LIBOR

The LIBOR rate is based upon one-month, three-month, six-month, and 12-month LIBOR periods, as selected by the Borrowers, and subject to a floor of 0.00 %.

Our borrowings under the 2021 Credit Facility are secured by the assets of the Borrowers.

Additionally, the 2021 Credit Facility requires a

guaranty of $ 10.5 million by e Plus inc.

Additionally, the 2021 Credit Facility requires a guaranty

of $ 10.5 million by e Plus inc.

Under the 2021 Credit Facility, and under the predecessor WFCDF credit facility, the Borrowers are restricted in their ability to pay dividends to e Plus inc.

unless their available borrowing meets or met certain thresholds.

As of December 31, 2021, and March 31, 2021, their available borrowing met the

thresholds such that there were no restrictions on their ability to pay dividends.

As of June 30, 2022, and March 31, 2022, their available borrowing met the thresholds

such that there were no restrictions on their ability to pay dividends.

The 2021 Credit Facility has an initial one-year

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Recourse notes payable consist of borrowings that, in the event of default, the lender has recourse against us.

As of December 31, 2021, we had $ 58.8 million in recourse borrowings consisting of $ 44.0 million

outstanding under our revolving WFCDF credit facility, and $ 14.8 million arising 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, 2021, and March 31, 2021.

As of June 30, 2022, we had $ 51.4 million in recourse borrowings consisting of $ 40.0 million outstanding under

our revolving WFCDF credit facility, and $ 11.4 million arising from one installment payment arrangement within our technology segment.

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 June 30, 2022, and March 31, 2022.

NON-RECOURSE NOTES PAYABLE

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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 December 31, 2021, and March 31, 2021, we had $ 43.6 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 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 3.68 %

and 3.35 %, as of December 31, 2021, and March 31, 2021, respectively.

As of June 30, 2022, and March 31, 2022, we had $ 26.4 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 3.78 % and 3.59 %, as of June 30, 2022, and March 31, 2022, respectively.

COMMITMENTS AND CONTINGENCIES

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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

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 .

As of June 30, 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.

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 .

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, 2021, and 2020,

respectively (in thousands, except per share data).

The numbers of shares and per share amounts for the prior periods presented in the table have been retroactively restated to reflect the stock split.

See Note 1 “Organization and Summary of

Significant Accounting Policies” and Note 11 “Stockholders’ Equity” in the consolidated financial statements included elsewhere in this report for additional information on the stock split.

Three Months Ended

Nine Months Ended

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.

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, 2022, and 2021, respectively (in thousands, except per share data).

Three Months Ended June 30,

Net earnings attributable to common shareholders - basic and diluted

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STOCKHOLDERS’ EQUITY

STOCK SPLIT AND TREASURY

On November 9, 2021, our

Board of Directors (“Board”) approved a two -for-one stock split of our common stock in the form of a stock dividend paid on December 13, 2021 , to shareholders of record as of close of business on November 29, 2021 .

All share and per share information have been retroactively adjusted to reflect the stock split and the incremental par value of the newly issued shares

was recorded with the offset to additional paid-in capital.

On November 10, 2021, we

retired 2,139,918 shares of treasury stock, adjusted for the stock split, with a carrying value of $ 82.2 million, which was deducted from common stock, for the par value of the retired shares, and from retained earnings, for the excess of cost over

the par value.

SHARE REPURCHASE PLAN

2021, our board of directors authorized the repurchase of up to 1,000,000 shares of our outstanding common stock, adjusted for the

stock split, over a 12-month period beginning May 28, 2021.

On May 20, 2020, our board of directors authorized the repurchase of up to 1,000,000

shares of our outstanding common stock, retroactively restated for the split, over a 12-month period beginning May 28, 2020.

Under both authorized programs, purchases may be made from time to time in the open market, or in privately negotiated

transactions, subject to availability.

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.

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;

During the three months ended June 30, 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

During the nine months ended December 31, 2020,

we purchased 118,202 shares of our outstanding common stock at a value of $ 4.2 million under the share repurchase plan;

During the three months ended June 30, 2021, we

purchased 35,258 shares of our outstanding common stock at a value of $ 1.6 million under the share repurchase plan;

we also purchased 55,430

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SHARE-BASED PLANS

e Plus’ 2021 Employee Long-Term Incentive Plan (“2021 Employee LTIP”) was

approved by our shareholders on September 16, 2021.

The 2021 Employee LTIP is effective October 1, 2021 and replaces the ePlus inc.

2012 Employee Long-Term Incentive Plan (“2012 Employee LTIP”), as approved by our stockholders on September 13,

of June 30, 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”) .

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 issuing any additional shares under the 2012 Employee LTIP .

As of December 31, 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 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

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RESTRICTED STOCK ACTIVITY

For the nine months ended December 31, 2021, adjusted for the stock split, we granted 13,562 shares under the 2017 Director LTIP, and 155,722 restricted shares under the 2012 Employee LTIP.

For the nine months ended December 31, 2020, retroactively restated for the stock split, we granted 19,742 shares under the 2017 Director

LTIP, and 179,746 restricted shares under the 2012 Employee LTIP.

A summary of our restricted stock activity, reflecting the stock split,

is as follows:

For the three months ended June 30, 2022, we granted 774 shares under the 2017 Director LTIP, and 138,643 restricted shares under the 2021 Employee LTIP.

For the three months ended June 30, 2021, we granted 828 shares under the 2017 Director LTIP, and 155,722 restricted

shares under the 2012 Employee LTIP.

A summary of our restricted stock activity , is as follows:

Weighted Average

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Nonvested April 1, 2022

Nonvested December 31 ,

Upon each vesting period of the restricted stock awards, employees are subject to minimum tax withholding obligations.

Under the 2012 Employee LTIP, we purchased enough

shares due to participants to satisfy the minimum tax withholding requirements on employee stock awards.

For the nine months ended December 31, 2021, adjusted for the stock split, we withheld 55,430 shares of common stock at a value of $ 2.6 million, which was

included in treasury stock and retired on November 10, 2021.

Nonvested June 30 ,

COMPENSATION EXPENSE

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conditions for vesting other than service conditions.

Share-based compensation expense for both the three and nine months ended December 31, 2021, and 2020, were $ 1.8 million and $ 5.4 million, respectively.

Unrecognized compensation expense related to unvested

restricted stock was $ 10.4 million as of December 31, 2021, which will be fully recognized over the next 30 months.

During the three

months ended June 30, 2022, and 2021, we recognized $ 1.8 million and $ 1.7 million of total share-based compensation expense, respectively.

Unrecognized compensation expense related to unvested restricted stock was $ 14.9 million as of June 30, 2022, which will be fully recognized over the next 36

We also provide our employees with a contributory 401(k) profit sharing plan, to which we may contribute

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Employer contributions to the plan are always fully vested.

Our estimated contribution expense for the plan for the three months ended December 31, 2021, and 2020, was $ 0.8 million and $ 0.9 million, respectively.

For the nine months ended December 31, 2021, and 2020, o ur estimated contribution expense for the plan was $ 2.6 million and $ 2.2 million, respectively.

Our provision for income tax expense was $ 9.5

million and $ 31.1 million for the three and nine months ended December 31, 2021, as compared to $ 8.4 million and $ 25.0 million for the same periods in the prior

Our effective income tax rate for the three and nine months ended December 31, 2021, was 26.4 % and 27.7 %, compared to 28.1 % and 29.8 % for the three and nine months ended December 31, 2020.

The change in our effective income tax rate for the nine months ended December 31, 2021

compared to the same period in the prior year was primarily due to a prior year unfavorable adjustment to the federal benefit from state taxes.

Our estimated contribution expense to the plan for the three months ended June 30, 2022, and 2021, was $ 1.1 million and $ 0.8 million, respectively.

Our provision for income tax expense was $ 8.7 million for the three months ended June 30, 2022,

as compared to $ 9.1 million for the same period in the prior year.

Our effective income tax rate for the three months ended June 30,

2022, was 28.0 %, comparable to 27.8 %

for the same period in the prior year.

The effective tax rate for the three months ended June 30, 2022, and June 30, 2021, differed from the US federal statutory rate of 21.0 % primarily due to state and local income taxes and non-deductible executive compensation .

FAIR VALUE OF FINANCIAL INSTRUMENTS

The following table summarizes the fair value hierarchy of our financial instruments as of December 31, 2021, and March 31, 2021 (in thousands):

The following table summarizes the fair value hierarchy of our financial instruments as of June 30, 2022, and March 31, 2022 (in thousands):

Fair Value Measurement Using

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Observable Inputs

December 31 , 2021

June 30 , 2022

Money market funds

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BUSINESS COMBINATIONS

SYSTEMS MANAGEMENT PLANNING, INC.

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.

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):

Accounts receivable

Identified intangible assets

Accounts payable and other current liabilities

Performance obligations

Total identifiable net assets

Total purchase consideration

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

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.

On July 15, 2022, our

subsidiary, ePlus Technology, inc., acquired certain assets and liabilities of Future Com, Ltd., a Texas-based provider of cyber security 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 US region, as well as bolstering the skills and expertise surrounding ePlus’ growing cyber security practice.

Our preliminary total consideration

transferred was $ 13.0 million, which was paid in cash at closing.

As of our filing date, our initial accounting for the business

combination is incomplete.

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 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.

Our reportable segment information for the three-and nine-month periods ended December 31, 2021, and 2020 are summarized in the following table (in thousands):

measure the performance of the segments based on operating income.

Our reportable segment information for the three month periods ended June 30, 2022, and 2021 are summarized in the following table (in thousands):

Three Months Ended

December 31, 2021

December 31, 2020

Cost of Sales

Selling, general, and administrative

Depreciation and amortization

Interest and financing costs

Operating expenses

Operating income

Other income (expense)

Earnings before tax

Contracts with customers

Financing and other

Selected Financial Data - Statement of Cash Flow

Depreciation and amortization

Purchases of property, equipment and operating lease equipment

Selected Financial Data - Balance Sheet

Nine Months Ended

December 31, 2021

December 31, 2020

June 30, 2022

June 30, 2021

Cost of Sales

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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, 2021, and 2020 in the tables below (in thousands):

Three Months Ended December 31,

Nine Months Ended December 31,

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,

Customer end market:

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Revenue from contracts with customers

Three Months Ended December 31,

Nine Months Ended December 31,

Three Months Ended June 30,

Cisco Systems

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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

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.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements