What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2023-05-25 compared with 2022-05-26 · 597 added, 478 removed, 242 unchanged (82% of the section changed)

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

The following discussion and analysis of the financial condition and results of operations (“financial review”) of e Plus is intended to help investors understand our

company and our operations.

The following discussion and analysis of the financial condition and results of operations (the “financial review”) of e Plus is intended to help investors understand

our company and our operations.

The financial review is provided as a supplement to, and should be read in conjunction with, the Consolidated Financial Statements and the related notes included elsewhere in this report.

For a discussion of results for the year ended March 31, 2021 compared to the results for the year ended March 31, 2020, see “Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual

Report on Form 10-K for the year ended March 31, 2021, filed with the Securities and Exchange Commission on May 21, 2021.

On December 13, 2021, we completed a two-for-one stock split in the form of a stock dividend.

References made to outstanding shares or per share amounts have been retroactively adjusted for this stock split.

EXECUTIVE OVERVIEW

5 unchanged sentences

incorporate hardware and software products from multiple leading IT vendors.

As our customers’ IT requirements have grown increasingly complex, we have evolved our offerings by investing in our professional and managed services capabilities

and by expanding our relationships with existing and emerging key vendors.

As our customers’ IT requirements have grown increasingly complex, we have evolved our offerings by investing in our professional and managed services

capabilities and by expanding our relationships with existing and emerging key vendors.

We are an authorized reseller of over 1,500 vendors, which have enabled us to provide our customers with new and evolving IT solutions.

3 unchanged sentences

BUSINESS TRENDS

COVID-19 pandemic update :

The novel coronavirus (“COVID-19”) pandemic continues to have widespread

impacts on global society, economies, financial markets, and business practices.

Federal, state, and local governments and public health authorities have required and may in the future require measures to contain the virus, including rules

related to vaccine status, social distancing, travel restrictions, border closures, limitations on public gatherings, work from home, safety-related modifications to workplaces, supply chain logistical changes, and closure of non-essential

As COVID-19 impacts continue across the country and globe, we have been adjusting our business activities for the safety of our employees and to best serve our customers in this rapidly evolving environment.

Our offices are open, with required health and safety protocols in place.

However, we have implemented a flexible work from home strategy applicable to all offices and operational continuity plans to provide sufficient resources to continue

supporting our customers, and we will continue to evaluate returning to the office on an ongoing basis.

Our configuration centers have remained open with our employees working in them following required health and safety protocols.

addition, we also have a procedure to review our employees’ business-related travel in accordance with health regulations and guidance.

Our managed service teams are distributed across the US with the ability to leverage technology to provide

coverage while working from home.

While we and many of our customers and vendor partners have restricted in-person meetings, we are leveraging video and other collaborative tools to continue to be responsive.

Our account relationship teams are actively engaging with our customers to ensure they have the support needed in adjusting to changes in the business environment and government directives.

Also, we are working

closely with our vendor partners to address varying impacts on their supply chains, which have been impacted by materials shortages.

We continue to execute against and adjust our business continuity plans to maximize our ability to support our employees and customers in concert with our vendor partners.

We have an internal resource page to

support specific customer inquiries from security to collaboration to financing options.

We remain committed to driving positive business outcomes.

The extent to which the COVID-19 pandemic impacts our business going forward will depend on numerous evolving factors we cannot

reliably predict, including the duration and scope of the pandemic;

the impact of variants;

governmental, business, and individuals’ actions in response to the pandemic;

the efficacy of vaccines and boosters;

the willingness of people to be

potential vaccine-related regulations;

court rulings;

and the impact on economic activity including the possibility of recession, inflation, or financial market instability.

These factors may adversely impact business and

government spending on technology as well as our customers’ ability to pay for our products and services on an ongoing basis.

This uncertainty also affects management’s accounting estimates and assumptions, which could result in greater

variability in a variety of areas that depend on these estimates and assumptions.

Refer to Part I, Item 1A.

“ Risk Factors ” of this Annual Report on Form 10-K.

Supply constraints :

A worldwide shortage of certain IT products is resulting from, among other things, shortages in

semiconductors and other product components.

Like others, we are experiencing ongoing supply constraints that have affected, and could continue to further affect, lead times for delivery of products, the costs of products, vendor return and

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

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

A worldwide shortage of certain IT products is resulting from, among other things, shortages in semiconductors and other product components.

Like others in the industry, we are experiencing

ongoing supply constraints that have affected, and could continue to further affect, lead times for delivery of products, our having to carry more inventory for longer periods, the cost of products, vendor return and

cancellation policies, and our ability to meet customer demands.

We continue to work closely with our suppliers to further mitigate disruptions outside our control.

Despite these actions, we believe extended lead times will likely persist

for at least the next few quarters.

For the periods presented herein, we have experienced increases in prices from our suppliers as well as rising

wages and interest rates.

Despite these actions, we believe extended lead times will

likely persist for at least the next few quarters.

We are experiencing increases in prices from our suppliers, as well as rising wages and interest rates.

We generally have been able to pass price increases to our customers.

Our labor costs related to services we perform will take longer to pass to customers that have services engagements where prices may be set.

financing quotes are generally indexed to market changes to enable us to change rates from time of quote to funding.

Our labor costs

related to services we perform will take longer to pass to customers that have service engagements where prices may be set.

Our financing quotes are generally indexed to market changes to enable us to change rates from time of

quote to funding.

Financing transactions funded with our cash flows, not debt, are subject to interest rate risk.

If the market interest rate

exceeds our internal rate of return, we may not fund the transaction to obtain the proceeds and lock in our profit on the transaction.

There can be no assurances, however, that inflation would not have a material impact on our sales, gross

profit, or operating costs in the future.

If the market interest rate exceeds our internal rate of return, we may not fund the transaction to obtain the

proceeds and lock in our profit on the transaction.

Accordingly, inflation could have a material impact on our sales, gross profit, or operating costs in the future.

Customers’ top focus areas include security, cloud solutions, hybrid work environments (work from home, work from anywhere, and return to office), as well as digital transformation and

modernization.

We have developed advisory services, solutions, and professional and managed services to meet these priorities and help our customers attain and maintain their desired outcome.

Modernizing legacy applications, data modernization, reducing operational complexity, securing workloads, the cost and performance of IT operations, and agility are changing the way companies are

purchasing and consuming technology.

These are fueling deployments of solutions on cloud, managed services and hybrid platforms and licensing models, which may include invoicing over the term of the agreement.

Rapid cloud adoption has led to customer challenges around increasing costs, security concerns, and skillset gaps.

These challenges are consistent across all industries and sizes.

developed a Cloud Managed Services portfolio to address these needs, allowing our clients to focus on driving business outcomes via optimized and secure cloud platforms.

KEY BUSINESS METRICS

Our management monitors several financial and non-financial measures and ratios on a regular basis to track the progress of our business.

We believe that the most important of these measures and ratios include net sales, gross margin,

operating income margin, net earnings, net earnings per common share, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted gross billings, and Non-GAAP Net earnings per share.

We use a variety of operating and other information to evaluate the

operating performance of our business, develop financial forecasts, make strategic decisions, and prepare and approve annual budgets.

These key indicators include financial information that is prepared in accordance with US GAAP and presented in our consolidated financial statements, as well as Non-GAAP performance measurement tools.

Generally, a Non-GAAP financial

measure is a numerical measure of a company’s performance or financial position that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance

with US GAAP.

Non-GAAP measures used by management may differ from similar measures used by other companies, even when similar terms are used to identify such measures.

We believe that the most important of these measures and ratios include net sales, gross

margin, operating income margin, net earnings, and net earnings per common share, in each case based on information prepared in accordance with US GAAP, as well as the non-GAAP financial measures and ratios, including Adjusted EBITDA,

Adjusted EBITDA margin, Non-GAAP:

Net earnings and Non-GAAP:

Net earnings per common share.

We use a variety of operating and other information to evaluate the operating performance of our business, develop financial forecasts, make

strategic decisions, and prepare and approve annual budgets.

We use Gross billings as an operational metric to assess the volume of transactions within our Technology segment as well as to understand changes in our accounts receivable.

We believe Gross billings will aid investors in the same manner.

These key indicators include financial information that is prepared in accordance with US GAAP and presented in our consolidated financial statements, as well as non-GAAP and operational performance measurement tools.

non-GAAP financial measure is a numerical measure of a company’s performance or financial position that either excludes or includes amounts that are correspondingly not normally excluded or included in the most directly comparable

measure calculated and presented in accordance with US GAAP.

Our use of non-GAAP information as analytical tools has limitations, and you should not consider them in isolation or as substitutes for analysis of our financial results

reported under GAAP, as these measures used by management may differ from similar measures used by other companies, even when similar terms are used to identify such measures.

Set forth in footnotes (1) and (2) of the tables that immediately follow this paragraph, we set forth our reasons for using and presenting Adjusted EBITDA, Adjusted EBITDA margin, Non-GAAP:

Net earnings and Non-GAAP:

Net earnings per

common share-diluted in the tables and discussion that follow.

The following table provides our key business metrics (in thousands, except per share amounts):

Year Ended March 31,

Financial Metrics

Operating income margin

1 unchanged sentence

Net earnings per common share - diluted

Non-GAAP Financial Metrics

Net earnings (1)

3 unchanged sentences

Technology Segment

Adjusted gross billings (3)

Financial Metrics

Operating income

Non-GAAP Financial Metric

Adjusted EBITDA (2)

Operational Metric

Gross billings (3)

Data Center / Cloud

Collaboration

Product gross billings

Service billings

Total gross billings

Financing Segment

Financial Metrics

Operating income

Non-GAAP Financial Metric

Adjusted EBITDA (2)

Non-GAAP Net earnings and Non-GAAP Net earnings per common share – diluted is based on net earnings calculated in accordance with GAAP, adjusted to exclude other income (expense), share-based compensation, and acquisition and

integration expenses, and the related tax effects.

We use Non-GAAP Net earnings per common share as a supplemental measure of our performance to gain insight into our operating performance.

We believe that the exclusion of other income and acquisition related

amortization expense in calculating Non-GAAP Net earnings per common share provides management and investors a useful measure for period-to-period comparisons of our business and operating results by excluding items that management believes

are not reflective of our underlying operating performance.

Accordingly, we believe that Non-GAAP Net earnings per common share provide useful information to investors and others in understanding and evaluating our operating results.

our use of Non-GAAP information as analytical tools has limitations, and you should not consider them in isolation or as substitutes for analysis of our financial results as reported under GAAP.

In addition, other companies, including

companies in our industry, might calculate similar Non-GAAP Net earnings and Non-GAAP Net earnings per common share or similarly titled measures differently, which may reduce their usefulness as comparative measures.

The following table provides our calculation of Non-GAAP Net earnings and Non-GAAP Net earnings per common share – diluted

(in thousands, except per share amounts):

(1) Non-GAAP:

Net earnings and Non-GAAP:

Net earnings per common share – diluted are based on net earnings calculated in accordance with US GAAP, adjusted to exclude other income (expense), share-based

compensation, and acquisition and integration expenses, and the related tax effects.

We use Non-GAAP:

Net earnings and Non-GAAP:

Net earnings per common share – diluted as supplemental measures of our performance to gain insight into our operating performance and performance trends.

believe that the exclusion of other income and acquisition-related amortization expense in calculating Non-GAAP:

Net earnings and Non-GAAP:

Net earnings per common share – diluted provides management and investors a useful measure for

period-to-period comparisons of our business and operating results by excluding items that management believes are not reflective of our underlying operating performance.

Accordingly, we believe that Non-GAAP:

Net earnings and Non-GAAP:

Net earnings per common share – diluted provide useful information to investors and others in understanding and evaluating our operating results.

However, our use of non-GAAP information as analytical tools has limitations, and you

should not consider them in isolation or as substitutes for analysis of our financial results as reported under US GAAP.

In addition, other companies, including companies in our industry, might calculate similar Non-GAAP:

and Non-GAAP:

Net earnings per common share – diluted or similarly titled measures differently, which may reduce their usefulness as comparative measures.

The following table provides our calculation of Non-GAAP:

Net earnings and Non-GAAP:

Net earnings per common share – diluted (in thousands, except per share amounts):

Year Ended March 31,

21 unchanged sentences

Net earnings per common share - diluted

We define Adjusted EBITDA as net earnings calculated in accordance with GAAP, adjusted for the following:

interest expense, depreciation and amortization, share-based compensation, acquisition and integration expenses, provision

for income taxes, and other income.

Segment Adjusted EBITDA is defined as operating income calculated in accordance with GAAP, adjusted for interest expense, share-based compensation, acquisition and integration expenses, and

depreciation and amortization.

We consider the interest on notes payable from our financing segment and depreciation expense presented within cost of sales, which includes depreciation on assets financed as operating leases, to be

operating expenses.

(2) We define Adjusted EBITDA as net earnings calculated in accordance with US GAAP, adjusted for the following:

interest expense, depreciation and amortization, share-based compensation, acquisition and

integration expenses, provision for income taxes, and other income.

Segment Adjusted EBITDA is defined as operating income calculated in accordance with US GAAP, adjusted for interest expense, share-based compensation, acquisition and

integration expenses, and depreciation and amortization.

We consider the interest on notes payable from our financing segment and depreciation expense presented within cost of sales, which includes depreciation on assets financed as

operating leases, to be operating expenses.

As such, they are not included in the amounts added back to net earnings in the Adjusted EBITDA calculation.

We provide below a reconciliation of Adjusted EBITDA to net earnings, which is the most directly

comparable financial measure to this Non-GAAP financial measure.

In the table below, we provide a reconciliation of Adjusted EBITDA to net earnings,

which is the most directly comparable financial measure to this non-GAAP financial measure.

Adjusted EBITDA margin is our calculation of Adjusted EBITDA divided by net sales.

We use Adjusted EBITDA as a supplemental measure of our performance to gain insight into our operating performance.

We believe that the exclusion of other income in calculating Adjusted EBITDA and Adjusted EBITDA

margin provides management and investors a useful measure for period-to-period comparisons of our business and operating results by excluding items that management believes are not reflective of our underlying operating performance.

We use Adjusted EBITDA as a supplemental measure of our performance to gain insight into our operating performance and performance trends.

We believe that the exclusion of other income in calculating

Adjusted EBITDA and Adjusted EBITDA margin provides management and investors a useful measure for period-to-period comparisons of our business and operating results by excluding items that management believes are not reflective of our

underlying operating performance.

Accordingly, we believe that Adjusted EBITDA and Adjusted EBITDA margin provide useful information to investors and others in understanding and evaluating our operating results.

However, our use of Adjusted EBITDA and Adjusted EBITDA margin

as analytical tools has limitations, and you should not consider them in isolation or as substitutes for analysis of our financial results as reported under GAAP.

In addition, other companies, including companies in our industry, might

calculate Adjusted EBITDA and Adjusted EBITDA margin or similarly titled measures differently, which may reduce their usefulness as comparative measures.

However, our use of

Adjusted EBITDA and Adjusted EBITDA margin as analytical tools has limitations, and you should not consider them in isolation or as substitutes for analysis of our financial results as reported under US GAAP.

In addition, other

companies, including companies in our industry, might calculate Adjusted EBITDA and Adjusted EBITDA margin or similarly titled measures differently, which may reduce their usefulness as comparative measures.

The following table provides our calculations of Adjusted EBITDA (in thousands):

5 unchanged sentences

Depreciation and amortization

Other income (expense)

Other (income) expense, net

Adjusted EBITDA

11 unchanged sentences

Adjusted EBITDA

We define Adjusted gross billings as our technology segment net sales

calculated in accordance with US GAAP, adjusted to exclude the costs incurred related to sales of third-party maintenance, software assurance, subscription/SaaS licenses, and services.

We have provided below a reconciliation of

Adjusted gross billings to technology segment net sales, which is the most directly comparable financial measure to this Non-GAAP financial measure.

The following table provides our calculation of Adjusted gross billings (in thousands):

Year Ended March 31,

Technology segment net sales

Costs incurred related to sales of third party maintenance, software assurance and subscription/SaaS licenses, and services

Adjusted gross billings

We use Adjusted gross billings as a supplemental measure of our performance to gain insight into the volume of business generated by our technology segment, and to analyze the changes to our accounts receivable

and accounts payable.

Our use of Adjusted gross billings as an analytical tool has limitations, and you should not consider them in isolation or as substitutes for analysis of our financial results as reported under US GAAP.

other companies, including companies in our industry, might calculate Adjusted gross billings or a similarly titled measure differently, which may reduce its usefulness as a comparative measure.

(3) Gross billings are the total dollar value of customer purchases of goods and services including shipping charges during the period, net of customer returns and credit memos, sales,

or other taxes.

Gross billings includes the transaction values for certain sales transactions that are recognized on a net basis, and, therefore,

includes amounts that will not be recognized as revenue.

FINANCIAL SUMMARY

During the year ended March 31, 2022, net sales increased 16.1% to $1,821.0 million, or an increase of $252.7 million compared to $1,568.3 million in the prior fiscal year.

Product sales for the year ended

March 31, 2022, increased 15.7% to $1,580.4 million, or an increase of $214.2 million compared to $1,366.2 million in the prior year.

Services sales during the year ended March 31, 2022, increased 19.0% to $240.6 million, or an increase of

$38.5 million, over prior year services sales of $202.2 million.

The increase in net sales was driven by higher product and service revenues along with higher proceeds from sales of leased equipment.

We had increases in net sales to customers

in the telecom, media and entertainment, healthcare, and smaller other categories of customers, which were offset by a decrease in net sales to customers in the financial services industry, during the year ended March 31, 2022, compared to

the prior year.

Adjusted gross billings increased by 15.8%, or $356.7 million, to $2,620.6 million for the year ended March 31, 2022, compared to $2,263.9 million in the prior fiscal year.

The increase in Adjusted gross

billings was due to higher demand from our current customers, as well as from our acquisitions.

Adjusted gross billings increased year over year at a faster rate than net sales due to a shift in mix to a higher proportion of third-party

maintenance, software assurance, subscriptions/SaaS licenses, and services which we recognize revenue on a net basis.

Consolidated gross profit increased 17.1%, to $461.0 million, compared to $393.6 million in the prior fiscal year due to higher margins.

Consolidated gross margin increased 20 basis points to 25.3% for the year

ended March 31, 2022, compared to 25.1% for the year ended March 31, 2021.

The increase in gross margin was due to expanded gross profit and margins of our technology segment, due to a shift in revenue mix resulting from our continued focus

on value added services for our customers, including the increase in sales of our professional and managed services, and sales of third-party maintenance agreements, software assurance, subscriptions/SaaS licenses, and services.

in gross margin was partially offset by lower margins in our finance segment due to gains on several large transactions in the prior year.

For the year ended March 31, 2022, operating expenses increased $26.4 million, or 9.2%, to $313.7 million, as compared to $287.2 million in the prior year.

The increase in operating expenses for the year ended

March 31, 2022, was mainly driven by increased selling, general, and administrative costs with a slight increase in depreciation and amortization expense.

Selling, general, and administrative expense for the year ended March 31, 2022, increased $25.9 million, or 9.5%, to $297.1 million, mainly driven by an increase in salary and fringe benefits, slightly offset

by a decrease in our reserve for credit losses.

Net sales for the year ended March 31, 2023, increased 13.5% to $2,067.7 million, or an increase of $246.7 million compared to $1,821.0 million in the prior fiscal year.

The increase in net

sales was driven by higher revenues from our technology segment, offset by lower revenues from our financing segment.

The increase in sales from the technology segment was due to increases in both product and services sales as a result

of higher customer demand.

The decline in revenues from our financing segment was due to lower proceeds from early lease buyouts and sales of leased equipment.

Gross billings from our technology segment for the year ended March 31, 2023, increased by 19.8%, or $520.1 million, to $3,145.9 million compared to $2,625.7 million in the prior fiscal year.

Gross billings

increased year over year at a faster rate than net sales due to a shift in mix to a higher proportion of third-party maintenance, software assurance, subscriptions/SaaS licenses, and services which we recognize revenue on a net basis.

Gross profit:

Consolidated gross profit for the year ended March 31, 2023, increased 12.3%, to $517.5 million, compared to $461.0 million in the prior fiscal year due to increased net sales volume.

Overall, gross margins were consistent year over year as higher product margins were offset by lower service margins.

Operating expenses:

Operating expenses for the year ended March 31, 2023, increased $37.7 million, or 12.0%, to $351.4 million, as compared to $313.7 million in the prior year.

increase in operating expenses was primarily due to an increase of $23.5 million in salaries and benefits and an increase of $12.2 million in general and administrative expenses.

Salaries and benefits increased due to an increase in the

number of employees as well as higher variable compensation corresponding to the increase in gross profit.

As of March 31, 2023, we had 1,754 employees, an increase of 11.2% from 1,577 as of March 31,

Depreciation and amortization expense increased by $0.7 million and interest and financing

costs decreased $0.1 million, due to a decrease in the average balance of non-recourse and recourse notes payable outstanding during the year.

Operating income increased $41.0 million, or 38.5%, to $147.3 million and operating margin increased by 130 basis points to 8.1%, as compared to the year ended March 31, 2021.

The increase in operating income

was due to a year over increase in gross profit offset by an increase in selling, general, and administrative expense.

Our effective income tax rate for the year ended March 31, 2022, was 28.1%, compared to 30.4% for the prior year.

The decrease in our effective income tax rate year over year is primarily due to prior year unfavorable adjustments to the

federal benefit from state taxes and non-deductible executive compensation.

Net earnings for the year ended March 31, 2022, increased 41.9% to $105.6 million, as compared to $74.4 million for the year ended March 31, 2021.

General and administrative expenses also increased due to the increase in employees, as we had higher software, subscription and maintenance fees and travel and entertainment costs.

Travel and entertainment increased due to the

return of in person business meetings and events.

The other categories of expenses increased from the increase in personnel.

We had higher professional service fees, which was partially due to post go-live support for a new software

platform within our financing segment.

Provision for credit losses increased $0.8 million primarily due to higher exposure within our financing portfolio.

Interest and financing costs increased

$2.2 million due to higher outstanding borrowings.

Offsetting these increases, was a decrease of $1.0 million in depreciation and amortization.

Operating income:

As a result of the foregoing, operating income for the year ended March 31, 2023, increased $18.9 million, or 12.8%, to $166.2 million and operating margin decreased by 10 basis points

to 8.0%, as compared to $147.3 million for the year ended March 31, 2022.

The increase in operating income was due to increases from our technology segment, which was offset by lower operating income from our financing segment.

Provision for income taxes:

Our effective income tax rate for the year ended March 31, 2023, was 26.8% compared to 28.1% in the prior year.

The decrease in our effective income tax rate year over year is primarily due to lower

than forecasted non-deductible expenses, increased benefits from foreign sales along with favorable state return to provision adjustments.

Net earnings:

Consolidated net earnings for the year ended March 31, 2023, increased 13.0% to $119.4 million, as compared to $105.6 million for the year ended March 31, 2022, due to an increase in gross

profit, offset by an increase in operating expenses and foreign exchange losses.

Adjusted EBITDA for the year ended March 31, 2023, was $190.6 million, an increase of $20.6 million, or 12.1%, compared to the prior year.

Adjusted EBITDA margin was 9.3% for the year ended March 31, 2022, an

increase of 110 basis points over the prior year.

For the year ended March 31, 2022, diluted earnings per share were $3.93, an increase of $1.16, or 41.9%, compared to the prior year of $2.77 per diluted share.

Non-GAAP diluted earnings per share was $4.39 for

fiscal year 2022, an increase of $1.20, or 37.6%, from $3.19 per diluted share in the prior year.

Cash and cash equivalents increased $25.8 million, or 19.9%, to $155.4 million as of March 31, 2022, compared to March 31, 2021.

We increased our cash balance through earnings , which was partially offset by an increase in working capital required for the growth in our technology

segment, an increase in our cash conversion cycle, and the repurchase of shares of our common stock of $13.6 million.

Our cash on hand, funds generated from operations, amounts available under our credit facility and the possible

monetization of our investment portfolio have provided sufficient liquidity for our business.

Adjusted EBITDA margin for the year ended March 31, 2023,

decreased 10 b asis points to 9.2% , as compared to the prior year period of 9.3%.

The increase in Adjusted EBITDA was due

to increases from our technology segment, which was offset by lower Adjusted EBITDA from our financing segment.

Net earnings per common share diluted for the year ended March 31, 2023, increased $0.55, or 14.0%, to $4.48 per share, as compared to $3.93 per share in the

Net earnings per common share diluted for the year ended March 31, 2023, increased $0.63, or 14.4%, to $5.02 per share, as compared to $4.39 per share in the prior year.

SEGMENT OVERVIEW

11 unchanged sentences

Our other customers place orders using purchase orders without a CMA in place or with other documentation customary for the business.

Often, our work with state and local

governments is based on public bids and our written bid responses.

Often, our work with state and

local governments is based on public bids and our written bid responses.

Our service engagements are generally governed by statements of work and are primarily fixed price (with allowance for changes);

however, some service agreements are based on

time and materials.

however, some service agreements

are based on time and materials.

Technology segment revenue generally falls into the following three categories:

Product revenue:

Revenue generated from the sale of third-party hardware, perpetual and subscription software, maintenance,

software assurance, and services.

Professional services:

Revenue generated from our advanced professional services that are performed under time & materials,

fixed fee, or milestone contracts.

Professional services include cloud consulting, staff augmentation services, and project management services.

Managed services:

Revenue generated from our advanced managed

services that include managing various aspects of our customers environments and are billed in regular intervals over a contract term, usually between three to five years.

Managed services include security solutions,

storage-as-a-service, cloud hosted services, cloud managed services, and service desk.

We endeavor to minimize the cost of sales through incentive programs provided by vendors and distributors.

2 unchanged sentences

These authorization levels are achieved by us through purchase volume, certifications held by sales executives or engineers and/or contractual commitments by us.

The authorization levels are costly to maintain, and these programs

continually change and, therefore, there is no guarantee of future reductions of costs provided by these vendor consideration programs.

The authorization levels are costly to maintain, and these

programs continually change and, therefore, there is no guarantee of future reductions of costs provided by these vendor consideration programs.

Financing Segment

4 unchanged sentences

maintenance, and other services.

Financing revenue generally falls into the following three categories:

Financing segment revenue generally falls into the following three categories:

Portfolio income:

7 unchanged sentences

We also recognize revenue from events that occur after the initial sale of a financial asset and remarketing fees from certain residual value investments.

We are implementing a new cloud-based lease accounting application which will provide us with a platform for scalable growth, eliminate inefficient processes, and allow us to retire several legacy applications.

CRITICAL ACCOUNTING ESTIMATES

Our consolidated financial statements have been prepared in accordance with US GAAP.

Our significant accounting policies are

described in Note 1 of the Notes to the Consolidated Financial Statements under

“Organization and Summary of Significant Accounting Policies.” The accounting policies described below are significantly affected by critical accounting estimates.

Such accounting policies require significant judgments, assumptions, and

estimates, and actual results could differ materially from the amounts reported based on these policies.

REVENUE RECOGNITION — When we enter contracts with customers, we are required to identify the performance obligations in the contract.

We recognize most of our revenues from the sales of third-party products,

third-party software, third-party maintenance, software support, and services, e Plus professional and managed services, and hosting e Plus proprietary

Our recognition of revenue differs for each of these different types of performance obligations and identifying each performance obligation appropriately may require judgment.

When a contract contains multiple distinct performance obligations, we allocate the transaction price to each performance obligation based on its relative standalone selling price.

We determine standalone

selling prices using expected cost-plus margin.

When we finance sales of third-party software and third-party maintenance, software support, and services, we reduce the transaction price by the financing component.

We recognize revenue from sales of third-party products and third-party software at the point in time that control passes to the customer, which is typically upon delivery of the product to the customer.

perform an analysis to estimate the amount of sales in-transit at the end of the period and adjust revenue and the related costs to reflect only what has been delivered to the customer.

This analysis is based upon an analysis of current

quarter and historical delivery dates.

We recognize revenue from sales of third-party maintenance, software support, and services when our customer and vendor accept the terms and conditions of the arrangement.

On occasion, judgment is required to

determine this point in time.

We provide e Plus professional services under both time and materials and fixed price contracts.

When services are provided on a time and materials basis, we recognize

sales at agreed-upon billing rates as services are performed.

When services are provided on a fixed fee basis, we recognize sales over time in proportion to our progress toward complete satisfaction of the performance obligation.

method requires a determination of the appropriate input or output method to measure progress.

We most often measure progress based on costs incurred in proportion to total estimated costs, commonly referred to as the “cost-to-cost” method.

When using this method, significant judgment may be required to estimate the total costs to complete the performance obligation.

We typically recognize sales of e Plus managed services on a

straight-line basis over the period services are provided.

We recognize financing revenues from our investments in leases and notes receivable.

We recognize interest income on our notes-receivable using the effective interest method.

We classify our leases as either sales-type leases or operating leases.

For sales-type leases, upon lease commencement, we recognize the present value of the lease payments and the residual asset discounted

using the rate implicit in the lease.

When we are financing equipment provided by another dealer, we typically do not have any selling profit or loss arising from the lease.

When we are the dealer of the equipment being leased, we typically

recognize revenue in the amount of the lease receivable and cost of sales in the amount of the carrying value of the underlying asset minus the unguaranteed residual asset.

We may need to use judgment to determine the fair value of the

After the commencement date, we recognize interest income as part of net sales using the effective interest method.

For operating leases, we recognize the underlying asset as an operating lease asset.

We depreciate the asset on a

straight-line basis to its estimated residual value over its estimated useful life.

We recognize the lease payments over the lease term on a straight-line basis as part of net sales.

We account for the transfer of financial assets as sales or secured borrowings.

When a transfer meets all the requirements for sale accounting, we derecognize the financial asset and record a net gain or loss

that is included in net sales.

We utilize qualified attorneys to provide a true-sale-at-law opinion to support the conclusion that transferred financial assets have been legally isolated.

RESIDUAL ASSETS — Our estimate for the residual asset in a lease is the amount we expect to derive from the underlying asset following the end of the lease term.

Our estimates vary, both in amount and as a

percentage of the original equipment cost, and depend upon several factors, including the equipment type, vendor’s discount, market conditions, lease term, equipment supply and demand, and new product announcements by vendors.

residual values for impairment on a quarterly basis.

We do not recognize upward adjustments due to changes in estimates of residual values.

GOODWILL — We test goodwill for impairment on an annual basis, as of October 1, 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 amount.

Goodwill is tested for impairment at a level of reporting referred to as a reporting unit.

In a qualitative assessment, we assess qualitative factors to determine whether it is more likely than not (that is, a likelihood of more than 50 percent) that the fair value of a reporting unit is less than

its carrying amount, including goodwill.

A significant amount of judgment is involved in determining if an event representing an indicator of impairment has occurred between annual test dates.

Such indicators may include:

a significant

decline in expected future cash flows;

a sustained, significant decline in stock price and market capitalization;

a significant adverse change in legal factors or in the business climate;

unanticipated competition;

the testing for

recoverability of a significant asset group within a reporting unit;

and reductions in revenue or profitability growth rates.

In the quantitative impairment test, we compare the fair value of a reporting unit with its carrying amount, including goodwill.

We estimate the fair value of each reporting unit using a combination of the

income approach and market approaches.

The income approach incorporates the use of a discounted cash flow method in which the estimated future cash flows and terminal values for each reporting unit are discounted to a present value using a

discount rate.

Cash flow projections are based on management’s estimates of economic and market conditions which drive key assumptions of revenue growth rates, operating margins, capital expenditures and working capital requirements.

discount rate in turn is based on the specific risk characteristics of each reporting unit, the weighted average cost of capital and its underlying forecast.

The market approach estimates fair value by applying performance metric multiples to the reporting unit’s prior and expected operating performance.

The multiples are derived from comparable publicly traded

companies with similar operating and investment characteristics as the reporting unit.

The fair values determined by the market approach and income approach, as described above, are weighted to determine the fair value for each reporting unit.

Although we have consistently used the same methods

in developing the assumptions and estimates underlying the fair value calculations, such estimates are uncertain and may vary from actual results.

VENDOR CONSIDERATION — We receive payments and credits from vendors and distributors, including consideration pursuant to volume incentive programs, and shared marketing expense programs.

Many of these

programs extend over one or more quarters’ sales activities.

Different programs have different vendor/program specific goals to achieve.

We recognize the rebates pursuant to volume incentive programs, when the rebate is probable and

reasonably estimable, based on a systematic and rational allocation of the cash consideration offered to each of the underlying transactions that results in our progress towards earning the rebate.

Should our actual performance be different

from our estimates, we may be required to adjust our receivables.

ALLOWANCE FOR CREDIT LOSSES — We maintain an allowance for credit losses related to our accounts receivable and financing receivables.

We measure expected credit losses on a collective (pool) basis when

similar risk characteristics exist.

Prior to providing credit, we assign an internal rating for each customer’s credit quality based on the customer’s financial status, rating agency reports and other financial information.

We review our

internal ratings for each customer at least annually or when there is an indicator of a change in credit quality, such as a delinquency or bankruptcy.

We estimate a loss rate for each pool using the historical loss rate as a basis and

adjust for differences in asset specific risk and current conditions.

Since the onset of the COVID-19 pandemic, we have measured our allowance using higher than historical loss rates to reflect forecasted credit deterioration.

actual credit losses be different from our estimates, this will result in adjustments to credit losses that could adversely affect our operating results.

INCOME TAXES — We make certain estimates and judgments in determining income tax expense for financial statement reporting purposes.

These estimates and judgments occur in the calculation of certain tax

assets and liabilities, which principally arise from differences in the timing of recognition of revenue and expense for tax and financial statement reporting purposes.

We also must analyze income tax reserves, as well as determine the

likelihood of recoverability of deferred tax assets and adjust any valuation allowances accordingly.

Considerations with respect to the recoverability of deferred tax assets include the period of expiration of the tax asset, planned use of the tax asset, and historical and projected taxable income as well as

tax liabilities for the tax jurisdiction to which the tax asset relates.

Valuation allowances are evaluated periodically and will be subject to change in each future reporting period as a result of changes in one or more of these factors.

The calculation of our tax liabilities also involves considering uncertainties in the application of complex tax regulations.

We recognize liabilities for uncertain income tax positions based on our estimate of whether, and the extent to

which, additional taxes will be required.

BUSINESS COMBINATIONS — We account for business combinations using the acquisition method.

For each acquisition, we recognize most assets acquired, and liabilities assumed at their fair values at the

acquisition date.

Our valuations of certain assets acquired, including customer relationships and trade names, and certain liabilities assumed, such as performance obligations, involve significant judgment and estimation.

Additionally, our

determination of the purchase price may include an estimate for the fair value of contingent consideration.

We utilize independent valuation specialists to assist us in determining the fair value of certain assets and liabilities.

valuations utilize significant estimates, such as forecasted revenues and profits.

Changes in our estimates could significantly impact the value of certain assets and liabilities.

During the fiscal year 2023, we implemented a new cloud-based lease accounting application to provide us with a platform for scalable growth, eliminate inefficient processes, and allow us to retire several

legacy applications.

RESULTS OF OPERATIONS

3 unchanged sentences

Year Ended March 31,

Financial Metrics

Cost of sales

4 unchanged sentences

Operating income

Adjusted gross billings

Key Metrics & Other Information

Gross billings

Adjusted EBITDA

Net sales for the year ended March 31, 2022, increased by $225.1 million, or 14.9%, to $1,733.0 million due to an

increase in net sales to our customers in telecom, media and entertainment, healthcare, and smaller other categories of customers, which were offset by a decrease in net sales to customers in the financial services sector.

Product sales

increased 14.3%, or $186.6 million, to $1,492.4 million and services revenues increased 19.0%, or $38.5 million, to $240.6 million due to an increase in professional services for the year ended March 31, 2022, as compared to the prior year.

Adjusted gross billings increased to $2,620.6 million, or 15.8%, from $2,263.9 million in the prior year.

The increase in Adjusted

gross billings was due to an increase in organic demand from our customers in the telecom, media and entertainment, healthcare, and smaller other categories of customers, and our acquisition of Systems Management and Planning, Inc.

(“SMP ”) in December 2020.

We analyze sales by customer end market and by manufacturer.

The percentage of net sales by customer end market and by vendor are summarized below:

Year Ended March 31,

Net sales by customer end market:

1 unchanged sentence

Financial Services

Net sales by type:

Data Center / Cloud

Collaboration

ePlus services

Net sales for the year

ended March 31, 2023, increased due to an increase in customer demand, primarily from customers in technology and SLED industries, due to customer specific IT related initiatives.

P roduct sales increased in networking due to our ability to leverage improvements in the global supply chain and an increase in security product sales as our customers’ focus on improving their security posture

in their environments .

Contributing to the increase in net sales was higher service revenues, due to increases in sales of our managed services

offerings, as well as higher professional services due, in part, to improvements in the global supply chain.

Also contributing to the increase in net sales were increases in the cost of equipment we incurred from our

suppliers due, in part, to inflation, which we typically pass on to our customers.

Our net sales by customer end market have remained consistent with the prior year, with over 80% of our sales being generated from

customers within the five end markets specified in the table above.

Gross billings to our customers increased primarily due to organic customer demand, rather than acquisition or loss of a specific customer or set of customers.

Cost of sales:

Cost of sales for the year ended March 31, 2023, increased due to the increase in demand for both product and services.

Cost of product increased slightly less than the increase in

product sales due to a change in product sales mix, as a greater portion of our transaction volume consisted of sales of third-party maintenance, software assurance, subscription/SaaS licenses, and services, for which the revenues and

cost of sales are presented on a net basis.

Cost of services increased slightly more than the increase in service revenue due to higher third-party costs incurred.

Gross profit:

Gross profit for the year ended March 31, 2023, increased consistent with the increase in net sales.

Gross margins were consistent year over year as higher product margins were offset by

lower service margins.

Gross margin on product sales increased 50 basis points to 21.7% due to a shift in product mix to a greater proportion of sales of third-party maintenance, software assurance, subscription/SaaS licenses, and

services, which are presented on a net basis.

Also contributing to the increase in gross margin on product sales was higher vendor incentives which as a percentage of net sales for the year ended March 31, 2023, increased by 10 basis

Gross margin on service sales decreased 250 basis points to 35.5% for the year ended March 31, 2023, primarily due to a decrease in

professional service margins.

The decline in professional service margins was due to higher third party costs , as well as a few larger competitively priced contracts with existing customers.

Selling, general, and administrative expenses:

Selling, general, and administrative expenses for the year ended March 31, 2023, increased mainly

due to an increase in salaries and benefits.

Salaries and benefits, including variable compensation, increased $24.1 million or 9.8% to $270.0 million, compared to $245.9 million during the prior year, due to an increase in the number of employees and

higher variable compensation as a result of the corresponding increase in gross profit.

Our technology segment had 1,718 employees as of March 31, 2023, an increase of 175 from 1,543 as of March 31, 2022, driven by increased demand for

our services and the acquisition of Future Com, Ltd.

We added 139 additional customer-facing employees, of which 84 were professional services and technical support personnel.

General and administrative expenses increased $10.2 million, or 27.0%, to $47.8

million, as compared to $37.6 million in the prior year.

General and administrative expenses increased in travel and entertainment, advertising

and marketing fees, professional service fees, software license and maintenance fees, and warehouse and logistics costs.

Travel and entertainment increased due to the return of in-person business meetings and events.

Warehouse and logistics costs increased due to the increase in inventory.

The other categories of expenses increased primarily from

increase s in personnel.

Depreciation and amortization expense:

Depreciation and amortization expense for the year ended March 31, 2023, decreased as higher amortization expense from our

acquisition of Future Com, Ltd was offset by lower amortization from previous acquisitions.

Interest and financing costs:

Interest and financing costs for the year ended March 31, 2023 , increased due

to higher average borrowings outstanding and higher interest rates during the year under our WFCDF Credit Facility, offset by paydowns on an installment payment arrangement.

Our average month-end borrowing balance on the accounts

receivable component of our WFCDF Credit Facility was $47.0 million over the year ended March 31, 2023, compared to $19.0 million over the prior year.

Our weighted average interest rate on the accounts receivable component of our

WFCDF Credit Facility was 5.35% during our year ended March 31, 2023, compared to 2.00% over the prior year.

FINANCING SEGMENT

The results of operations for our financing segment for the years ended March 31, 2023, and 2022 were as follows (in thousands):

Year Ended March 31,

Net sales by vendor:

Cisco Systems

Juniper Networks

Arista Networks

Our revenues by customer end market have remained consistent over the prior year, with over 80% of our sales being generated from

customers within the five end markets specified above.

For the fiscal year ended March 31, 2022, we had an increase in the percentage total revenues from customers in telecom, media and

entertainment, and healthcare industries, while we had decreases in the percentage of total revenues in the financial service, technology, and SLED industries.

These changes were driven by changes in customer buying cycles, and the timing

of specific IT related initiatives, rather than the acquisition or loss of a customer or set of customers.

The majority of our revenues by vendor are derived from our top six suppliers, which, when combined, is a fairly constant percentage of 60% or more of total revenues for the twelve-month periods ended March 31,

2022, and 2021.

Financial Metrics

Portfolio earnings

Transactional gains

Post-contract earnings

Cost of sales

The 14.0% increase in cost of sales was due to the increase in product sales and a change in product sales

mix, with a greater portion from sales of third-party maintenance, software assurance, subscription/SaaS licenses, and services, for which the revenues and cost of sales are presented on a net basis, and with a greater portion from services

revenue, for which we have higher profit margins.

Selling, general, and administrative

Depreciation and amortization

Interest and financing costs

Operating expenses

Operating income

Key Metrics & Other Information

Adjusted EBITDA

Net sales for the year ended March 31, 2023, decreased due to lower post-contract and portfolio earnings.

Post-contract revenue decreased due

to lower proceeds from early lease buyouts and sales of equipment, as we had a few large, customer-driven transactions in the prior year.

Portfolio revenue decreased mostly due to decreases in operating lease revenue as a portion of the early lease buyouts in fiscal year 2022 were from customers with operating lease contracts.

Transactional gains decreased compared to the prior year due to a decline in the volume of

financial assets sold during the year.

T otal proceeds from sales of financing receivables were $706.0 million and $855.1 million for the years ended March 31, 2023, and 2022, respectively .

Cost of sales:

Cost of sales for the year ended March 31, 2023, de creased due to a decrease in the cost of equipment from early lease buyouts, and

sales of off-lease equipment of $20.1 million and a decrease in operating lease depreciation of $5.6 million.

Selling, general, and administrative expenses:

Selling, general, and administrative expenses for

the year ended March 31, 2023, increased due to the deployment of hosted lease accounting software in August 2022, as we incurred higher

professional fees following the implementation of this software platform, as well as higher software license and maintenance costs including amortization of the costs to implement the hosted software.

In addition, we incurred

additional provision for credit losses as a result of changes in our net

credit exposure.

These increases are offset by a slight decrease in salaries and benefits, mainly driven by a decrease in variable compensation due to the decline in gross profit.

Our financing segment employed 36 people as of March 31, 2023, compared to 34 people as of March 31, 2022.

Certain support functions for the financing segment are shared resources with the technology segment.

Interest and financing costs:

Interest and financing costs for the year ended March 31, 2023, increased due to higher borrowings during the year as well as higher interest rates.

As of March 31, 2023,

our non-recourse notes payable increased to $34.3 million from $21.2 million in the prior year.

Our weighted average interest rate for non-recourse notes payable was 5.01% and 3.59% as of March 31, 2023, and 2022, respectively.

Other income (expense), net:

Other income (expense), net, for the year ended March 31, 2023, was a net expense of $3.2 million, compared to a net expense of $0.4 million in the prior year.

We incurred foreign currency transaction losses of $5.4 million during fiscal year 2023, up from $0.5 million last year.

Offsetting this, was a $1.9 million gain recognized in fiscal year 2023 related to our receipt of funds resulting

from our claim in a class action lawsuit.

Income taxes:

Our effective income tax rates for the years ended March 31, 2023, and 2022 were 26.8% and 28.1%, respectively.

Our effective tax rate was lower for the year ended March 31,

2023, as compared to the prior year, primarily due to lower than forecasted non-deductible expenses, increased benefits from foreign sales along with favorable state return to provision adjustments.

Net earnings:

Net earnings for the year ended March 31, 2023, were $119.4 million, an increase of 13.0% or $13.8 million, as compared to $105.6 million in the prior year.

The net earnings increase was

due primarily to the increase in operating profits from our technology segment.

Basic and fully diluted earnings per common share for the year ended March 31, 2023, were $4.49 and $4.48, respectively, an increase of 13.3% and 13.9% over the prior year.

Basic and fully diluted earnings per

common share were $3.96 and $3.93, respectively, for the year ended March 31, 2022.

Weighted average common shares outstanding used in the calculation of basic and diluted earnings per common share were 26.6 million and 26.7 million, respectively, for the year ended March 31, 2023.

average common shares outstanding used in the calculation of basic and diluted earnings per common share were 26.6 million and 26.9 million, respectively, for the year ended and March 31, 2022.

The Year Ended March 31, 2022, Compared to the Year Ended March 31, 2021

TECHNOLOGY SEGMENT

The results of operations for our technology segment for the years ended March 31, 2022, and 2021 were as follows (in thousands):

Year Ended March 31,

Financial Metrics

Cost of sales

Selling, general, and administrative

Depreciation and amortization

Interest and financing costs

Operating expenses

Operating income

Key Metrics & Other Information

Gross billings

Adjusted EBITDA

Net sales by customer end market:

Telecom, Media & Entertainment

Financial Services

Net sales by type:

Data Center / Cloud

Collaboration

ePlus services

Net sales for the year

ended March 31, 2022, increased due to an increase in customer demand, primarily from customers in telecom, media and entertainment and healthcare industries, partially offset by a decrease in net sales to customers in the financial

services sector.

These changes were driven by growth in product sales in collaboration and networking, and peripherals and artificial intelligence included in the other category, which management, based on its industry knowledge,

generally attributed to hybrid work models having become the prominent operating model for most of our customers.

Timing of purchases by our existing customers are determined by their buying cycle and the timing of their specific IT

related initiatives throughout the year .

Also contributing to the increase in net sales were increases in the cost of equipment we incurred from our suppliers due, in part, to

inflation, which we typically pass on to our customers.

Service revenues increased due to higher demand for both professional and managed services.

Our net sales by customer end market have remained consistent with the prior year, with over 80% of our sales being generated from customers

within the five end markets specified in the table above.

Gross billings to our customers increased due to organic customer demand as well as our acquisition of Systems Management and Planning, Inc.

(“SMP”) in December 2020 , rather than the acquisition or loss of a specific customer

or set of customers.

Cost of sales:

The increase in cost

of sales for the year ended March 31, 2022, was due to the increase in demand for both product and services.

Cost of product increased slightly less than the increase in product sales due to a change in product sales mix, as a greater

portion of our transaction volume consisted of sales of third-party maintenance, software assurance, subscription/SaaS licenses, and services, for which the revenues and cost of sales are presented on a net basis.

Overall, cost of

services increased 19.2%, consistent with the 19.0% increase in sales.

Gross profit:

Gross profit increased 17.9%, to $408.2 million, compared to $346.2 million in the prior fiscal year due to

higher margins.

Gross margin on product sales increased 60 basis points to 21.2% due a shift in product mix to a greater proportion of sales of third-party maintenance, software assurance, subscription/SaaS licenses, and services.

margin on services decreased 10 basis points to 38.0%.

for the year ended March 31, 2022, due to a slight decrease in professional services gross margin, as compared to the prior year.

Vendor incentives earned as a percentage of sales for

the year ended March 31, 2022 increased by 20 basis points, which has a positive effect on gross margin, as compared to the prior year.

increased for the 2022 fiscal year due to the increase in customer demand as well as higher margins.

Gross margin in the Technology segment increased 60 basis points to 23.6%.

Gross margin on product sales increased 60 basis points to

21.2% due to a shift in product mix to a greater proportion of sales of third-party maintenance, software assurance, subscription/SaaS licenses, and services.

Also contributing to the increase in product margins was higher vendor

incentives earned, which increased $9.0 million in fiscal year 2022.

Service margin decreased 10 basis points to 38.0% for the year ended March 31, 2022, due to changes in mix of services provided.

The service margin decline was comprised of a 90 basis points improvement from managed services, due to ongoing growth and scale in this offering, offset by a 100 basis points decline from professional services due to higher third party

Selling, general, and administrative expenses:

Selling, general, and administrative expenses of $283.7 million for the year

ended March 31, 2022, increased by $27.5 million, or 10.7% compared to the prior year, mainly driven by an increase in salaries and benefits.

Salaries and benefits, including variable compensation, increased $24.1 million or 10.9% to $245.9 million, compared to $221.8 million during the prior year, due to higher variable compensation a result of the

increase in gross profit.

Our technology segment had 1,543 employees as of March 31, 2022, which is an increase of 17, or 1.1%, from 1,526 on March 31, 2021.

Selling, general, and administrative expenses increased for the 2022 fiscal year mainly due to an increase in salaries and benefits.

Salaries and benefits, including variable compensation, increased $24.1 million or 10.9% to $245.9 million, compared to $221.8 million during the prior year, due to $14.2 million of additional variable

compensation resulting from the increase in gross profit and $9.9 million due to higher salary and benefits expense.

Our technology segment had 1,543 employees as of March 31, 2022, which is an increase of 17, or 1.1%, from 1,526 on

March 31, 2021.

General and administrative expenses increased $3.8 million, or 11.2%, to $37.6 million during the year ended March 31, 2022, compared to $33.9 million the prior year.

Contributing to the year over year

increase in general and administrative expense were increases in travel and entertainment, and software, subscription, and maintenance expenses.

increase in general and administrative expenses were increases in travel and entertainment, and software, subscription, and maintenance expenses of $2.5 million.

Depreciation and amortization expense:

Depreciation and amortization expense increased $0.7 million, or 5.0%, to $14.5 million during the fiscal year ended March 31, 2022, compared to $13.8 million in the prior year.

Depreciation and amortization expense increased for the year ended March 31, 2022, due to an increase in amortization of customer relationships as a result of the

SMP acquisition in December 2020.

Interest and financing costs:

Interest and financing costs were $0.9 million for the year ended March 31, 2022, compared to

$0.5 million in the prior year.

Segment earnings:

As a result of the foregoing, operating income increased $33.3 million, or 44.1%, to $109.0 million for the

year ended March 31, 2022, compared to $75.7 million in the prior year and Adjusted EBITDA increased 35.1% to $131.4 million for the year ended March 31, 2022, compared to $97.2 million in the prior year.

Interest and financing costs increased for the year ended March 31, 2022, due to higher borrowings outstanding during the year under our WFCDF Credit Facility.

FINANCING SEGMENT

1 unchanged sentence

Year Ended March 31,

Financial Metrics

Portfolio earnings

Transactional gains

Post-contract earnings

Cost of sales

4 unchanged sentences

Operating income

Key Metrics & Other Information

Adjusted EBITDA

Net sales increased by $27.6 million, or 45.7%, to $88.0

million for the year ended March 31, 2022.

The increase was due to higher post contract and portfolio revenue offset slightly by a decrease in other financing revenues.

Post-contract revenue increased by

$26.7 million to $50.5 million as compared to $23.8 million in the prior year due to proceeds from early lease buyouts and sales of off-lease equipment.

Portfolio revenue increased $1.3 million to $17.8 million, due to increases

in operating lease income offset by decreased sales-type lease earnings over the prior fiscal year.

Other financing revenues decreased $4.1 million to $1.5 million, compared to the prior year primarily

due to lower profit recognized from signing new lease extensions with customers where the prior lease was classified as an operating lease and the new modified lease was determined to be sales-type lease.

Transactional gains increased

$3.7 million to $18.2 million compared to the prior year driven by higher net gains on sale of notes receivable.

T otal proceeds from sales of financing receivables were $855.1 million and $364.0 million for the years ended March

31, 2022, and 2021, respectively .

For the year ended March 31, 2022, net sales increased due to higher post contract earnings and transactional gains, offset slightly by a decrease in other financing revenues.

Post-contract

revenue increased due to an increase of $22.8 million from proceeds from early lease buyouts and sales of off-lease equipment, as we had a few large customer driven transactions in fiscal year 2022.

Portfolio revenue increased due to

increases in operating lease income offset by decreased sales-type lease earnings over the prior fiscal year.

Other financing revenues decreased due to lower profit recognized from signing new lease extensions with customers where the

prior lease was classified as an operating lease and the new modified lease was determined to be a sales-type lease.

Transactional gains increased due to higher volume of financing receivables sold.

Total proceeds from sales of

financing receivables were $855.1 million and $364.0 million for the years ended March 31, 2022, and 2021, respectively.

Cost of sales:

Cost of sales increased 169.4%, or $22.1 million, to $35.2 million for the year ended March 31,

2022, as compared to the prior year, due to an increase in the cost of equipment from early lease buyouts and sales of off-lease equipment of $18.2 million and an increase in operating lease depreciation of $3.7 million.

Gross profit increased 11.6%, or $5.5 million, to $52.8 million primarily due to gains on several significant transactions.

Cost of sales for the year ended March 31, 2022, increased due to an increase of $18.2 million in the cost of equipment from early lease buyouts and off-lease equipment and an increase in

operating lease depreciation of $3.7 million.

Selling, general, and administrative expenses:

Selling, general, and administrative expenses were $13.4 million and $15.1 million for years ended March 31, 2022, and 2021, respectively.

This decrease of $1.6 million was driven by a reduction in

our reserve for credit losses, and salaries and benefits.

general, and administrative expenses decreased in the 2022 fiscal year due to a reduction in our allowance for credit losses by $1.2 million, and salaries and

benefits of $0.6 million.

Our financing segment employed 34 people as of March 31, 2022, and 2021.

1 unchanged sentence

Interest and financing costs:

Interest and financing costs decreased by $0.5 million, or 34.3%, to $1.0 million for the year

ended March 31, 2022, as compared to the prior year.

Our total notes payable for the financing segment decreased as of March 31, 2022, to $21.2 million from $56.1 million for the prior year.

Our weighted average interest rate for our

non-recourse notes payable was 3.59% as of March 31, 2022, compared to 3.35% for March 31, 2021.

Segment earnings:

As a result of the foregoing, operating income increased $7.6 million, or 24.9%, to $38.3 million for the

year ended March 31, 2022, as compared to the prior year.

Adjusted EBITDA increased $7.6 million, or 24.6%, to $38.7 million for the year ended March 31, 2022, as compared to the prior year.

Other income:

Other income and expense during the year ended March 31,

2022, netted to an expense of $0.4 million and included foreign exchange rate loss of $0.5 million.

Other income and expense during the year ended March 31, 2021, was income of $0.6 million and included foreign exchange rate gain of $0.5 million and interest income of $0.1 million.

Interest and financing costs decreased due to lower borrowings during the year.

Our total notes payable for the financing segment decreased as of March 31, 2022, to $21.2

million from $56.1 million for the prior year.

Our weighted average interest rate for our non-recourse notes payable was 3.59% as of March 31, 2022, compared to 3.35% for March 31, 2021.

Other income (expense), net:

Other income (expense), net during the year ended March 31, 2022, netted to an expense of $0.4 million and included foreign exchange rate loss of $0.5 million.

(expense), net during the year ended March 31, 2021, was income of $0.6 million and included foreign exchange rate gain of $0.5 million and interest income of $0.1 million.

Income taxes:

Our effective income tax rates for the years ended March 31, 2022, and 2021 were 28.1% and 30.4%, respectively.

The decrease in our effective income tax rate year over year is primarily due to prior year unfavorable adjustments to the federal benefit from state taxes and non-deductible executive compensation.

The decrease in our effective income tax rate year over year is primarily

due to prior year unfavorable adjustments to the federal benefit from state taxes and non-deductible executive compensation.

Net earnings:

Net earnings were $105.6 million for the year ended March 31, 2022, an increase of 41.9% or $31.2 million as

compared to $74.4 million in the prior fiscal year.

The net earnings increase was due primarily to the increase in operating profits from our technology segment, and a lower income tax rate in the current year compared to the year ended

March 31, 2021.

Net earnings were $105.6 million for the year ended March 31, 2022, an increase of 41.9% or $31.2 million as compared to $74.4 million in the prior fiscal year.

The net earnings increase

was due primarily to the increase in operating profits from our technology segment, and a lower income tax rate in the current year compared to the year ended March 31, 2021.

Basic and fully diluted earnings per common share for the year ended March 31, 2022, were $3.96 and $3.93, respectively, and both increased 41.9% over the prior year.

Basic and fully diluted earnings per common

share were $2.79 and $2.77, respectively, for the year ended March 31, 2021.

Basic and fully diluted earnings per

common share were $2.79 and $2.77, respectively, for the year ended March 31, 2021.

Weighted average common shares outstanding used in the calculation of basic and diluted earnings per common share were 26.6 million and 26.9 million, respectively, for year ended March 31, 2022.

average common shares outstanding used in the calculation of basic and diluted earnings per common share were 26.7 million and 26.8 million, respectively, for year ended and March 31, 2021.

average common shares outstanding used in the calculation of basic and diluted earnings per common share were 26.7 million and 26.8 million, respectively, for the year ended March 31, 2021.

LIQUIDITY AND CAPITAL RESOURCES

8 unchanged sentences

requirements for at least the next year.

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

While at this time we do not anticipate requiring any additional sources of financing to fund operations, if demand for IT products declines, or if our supply of products is delayed or interrupted, our cash flows from operations may

be substantially affected.

operations may be substantially affected.

The following table summarizes our sources and uses of cash for the years ended March 31, 2023, and 2022 (in thousands):

Year Ended March 31,

Net cash provided by (used in) operating activities

Net cash used in operating activities

Net cash used in investing activities

3 unchanged sentences

Cash flows from operating activities

Our operating activities used $20.6 million during the year ended March 31, 2022, compared to providing $129.5 million during the year ended March 31, 2021.

We used $15.4 million in operating activities during the year ended March 31, 2023, compared to using $20.6 million during the year ended March 31, 2022.

The following table provides a breakdown of operating

cash flows by segment for the years end March 31, 2022, and 2021 (in thousands):

cash flows by segment for the years ended March 31, 2023, and 2022 (in thousands):

Year Ended March 31,

1 unchanged sentence

Financing segment

Net cash provided by (used in) operating activities

Net cash used in operating activities

Technology Segment:

During the year ended March 31, 2022,

operating cash flows used by our technology segment were $20.2 million due to increases in working capital, primarily increases in inventories and accounts receivable, offset by earnings.

Cash provided by the accounts payable – floor plan

facility was $46.7 million.

The accounts payable – floor plan is a facility used to manage working capital needs and we are required to present changes in this balance as financing activity in our consolidated statement of cash flows.

During the year ended March 31, 2021, operating cash flows provided by our technology segment were $153.3 million due to cash

generated from earnings and changes in working capital.

In addition, cash used by the accounts payable – floor plan facility was $34.4 million.

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

minus days of purchases outstanding in accounts payable (“DPO”).

During the year ended March 31, 2023, our technology segment provided $17.2 million from operating activities primarily due to net earnings and an

increase in payables, partially offset by increases in accounts receivables and inventories.

During the year ended March 31, 2022, our technology segment used $20.2 million from operating activities primarily due to increases in working capital, inventories, and accounts receivable, offset by net

(“DIO”) minus days of purchases outstanding in accounts payable (“DPO”).

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

4 unchanged sentences

Cash conversion cycle

Represents the rolling three-month average of the balance of trade accounts receivable-trade, net for our Technology segment at the end of the period divided by Adjusted gross billings for the same three-month period.

Represents the rolling three-month average of the balance of inventory, net for our Technology segment at the end of the period divided by cost of Adjusted gross billings for the same three-month period.

Represents the rolling three-month average of the combined balance of accounts payable-trade and accounts payable-floor plan for our Technology segment at the end of the period divided by cost of Adjusted gross billings, product,

and services for the same three-month period.

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

Represents the rolling three-month average of the balance of inventory, net for our technology segment at the end of the period divided by the direct cost of products and services billed to our customers for the same

three-month period.

Represents the rolling three-month average of the combined balance of accounts payable-trade and accounts payable-floor plan for our technology segment at the end of the period divided by the direct cost of products and

services billed to our customers for the same three-month period.

Our standard payment term for customers is between 30-60 days;

however, certain customers or orders may be approved for extended payment terms.

Our DSOs for the quarters ended March 31, 2022 and 2021 were greater than our standard payment

terms primarily due to a significant proportion of sales in those quarters to customers with payment terms greater than or equal to net 60 days.

Invoices processed through our credit facility, or the A/P-floor plan balance, are typically paid

within 45-60 days from the invoice date, while A/P trade invoices are typically paid within 30 days from the invoice date.

Our cash conversion cycle increased to 48 days for March 31, 2022 compared to 37 days for March 31, 2021 as DIO increased by 10 days and DPO decreased by 1 day from March 31, 2021 to March 2022.

Our DSOs for the quarters ended March 31, 2023, and 2022 were greater than our standard

payment terms primarily due to a significant proportion of sales in those quarters to customers with payment terms greater than or equal to net 60 days.

Invoices processed through our credit facility, or the A/P-floor plan balance, are

typically paid within 45-60 days from the invoice date, while A/P trade invoices are typically paid within 30 days from the invoice date.

Our cash conversion cycle increased to 59 days for March 31, 2023, compared to 50 days for March 31, 2022, as DIO increased by 13 days, DPO increased by 7 days, and DSO increased by 3 days from March 31, 2022,

to March 2023.

Inventory, which represents equipment ordered by customers but not yet delivered, increased 56.9% to $243.3 million as of March 31, 2023, up from $155.1 million as of March 31, 2022, partially due to ongoing projects with customers.

Accounts receivable—trade, net increased by 17.1% to $504.1 million as of March 31, 2023, up from $430.4 million as of March 31, 2022, primarily due to a 17.6% increase in Gross billings to $733.1 million in the fourth quarter as

compared to $623.6 million in the prior fiscal year.

The increase in days payable outstanding is driven by our growth in sales volume.

Financing Segment:

During the year ended March 31, 2022,

our financing segment used $0.3 million from operating activities, primarily due to an increase in accounts receivable and deferred costs and decreases in accounts payable, partially offset by net earnings.

During the year ended March 31, 2023, our financing segment used $32.6 million in operating activities, primarily due to changes in financing

receivables and deferred costs, partially offset by net earnings.

During the year ended March 31, 2022, our financing segment used $0.3 million from operating activities, primarily due to the issuance of new financing receivables.

Cash flows related to investing activities

During the year ended March 31, 2023, we used $18.9 million in investing activities, consisting of $9.4 million for purchases of property, equipment, and operating lease equipment and $13.3 million to acquire

Future Com, Ltd., partially offset by $3.7 million of proceeds from the sale of operating lease equipment.

During the year ended March 31, 2022, we used $1.3 million from investing activities, consisting of $23.2 million for purchases of property, equipment, and operating lease equipment, partially offset by $21.9

million of proceeds from the sale of property, equipment, and operating lease equipment.

During the year ended March 31, 2021, we used $35.8 million from investing activities, consisting of $27.0 million for our acquisition of SMP and $11.5 million for purchases of property, equipment, and

operating lease equipment, and partially offset by $2.8 million of proceeds from the sale of property, equipment, and operating lease equipment.

Cash flows from financing activities

During the year ended March 31, 2023, we used $21.0 million in financing activities.

We had net repayments of notes payable and borrowings on our credit facility in our technology segment of $7.1 million,

offset by net borrowings of non-recourse and recourse notes payable of $4.1 million by our financing segment.

Additionally, we had cash inflows of $10.7 million from net borrowings on the floor plan facility and cash outflows of $7.2

million from the repurchase of common stock.

During the year ended March 31, 2022, financing activities provided $47.2 million.

We had net repayments of notes payable in our technology segment of $6.7 million, offset by net borrowings of notes payable of

$20.8 million by our financing segment.

We had net repayments of notes payable in our technology segment of $6.7 million, offset by net borrowings of non-recourse and

recourse notes payable of $20.8 million by our financing segment.

Additionally, we had cash inflows of $46.7 million from net borrowings on the floor plan facility and cash outflows of $13.6 million from the repurchase of common stock.

During the year ended March 31, 2021, we used $49.8 million from financing activities.

We had net repayments on the accounts receivable component of our credit facility of $35.0 million, partially offset by net

borrowings of non-recourse and recourse notes payable of $27.1 million by our financing segment.

Contributing to cash outflows was net repayments on floor plan facility of $34.4 million, repurchase of common stock of $6.9 million, and

payments to payoff contingent consideration agreements and hold backs from prior fiscal year acquisitions of $0.6 million.

Our borrowing of non-recourse and recourse notes payable primarily arises from our financing segment when we transfer contractual payments due to us under financing agreements to third-party financial

3 unchanged sentences

We transfer contractual payments due to us under lease and financing agreements to third-party financial institutions.

As a condition of these agreements, certain financial institutions may request that the

customer remit their contractual payments to a trust, rather than to us, and the trust pays the financial institution.

Alternatively, the customer will make payments to us, and we will remit the payment to the financial institution.

economic impact to us under either structure is similar, in that the assigned contractual payments are paid by the customer and remitted to the lender.

However, when our customer makes payments through a trust, such payments represent

non-cash transactions.

Also, in certain assignment agreements, we may direct the third-party financial institution to pay some of the proceeds from the assignment directly to the vendor or vendors that have supplied the assets being leased

and or financed.

In these situations, the portion of the proceeds paid directly to our vendors are non-cash transactions.

In certain assignment agreements, we may direct the third-party financial institution to

pay some of the proceeds from the assignment directly to the vendor or vendors that have supplied the assets being leased or financed.

In these situations, the portion of the proceeds paid directly to our vendors are non-cash

transactions.

SECURED BORROWINGS – FINANCING SEGMENT

We may finance all or most of the cost of the assets that we finance for customers by transferring all or part of the contractual payments due to us to third-party financing institutions.

We may finance all or most of the cost of the assets that we finance for customers by transferring all or part of the contractual payments due to us to third-party financial institutions.

When we account for the transfer as a secured

1 unchanged sentence

Our customers are responsible for repaying the debt from a secured borrowing.

The lender typically secures a lien on the financed assets at the time the

financial assets are transferred and releases it upon collecting all the transferred payments.

The lender typically secures a lien on the financed assets at the time

the financial assets are transferred and releases it upon collecting all the transferred payments.

We are not liable for the repayment of non-recourse loans unless we breach our representations and warranties in the loan agreements.

assumes the credit risk and their only recourse, upon default by the customer, is against the customer and the specific equipment under lease.

While we expect that the credit quality of our financing arrangements and our residual return

history will continue to allow us to obtain such financing, such financing may not be available on acceptable terms, or at all.

As a result of COVID-19, credit markets have tightened.

Our lenders are more discerning and are taking longer to

approve transactions.

In addition, certain lenders have narrowed their demand to certain types of transactions and/or credit quality and excluding others.

For example, some lenders have declined transactions that have longer terms or

transactions with certain market segments.

Therefore, we may no longer be able to transfer certain receivables to financial institutions which may result in investing our capital or declining the transaction.

In addition, interest rates have

In order to preserve our expected internal rate of return, we generally quote rates that are indexed.

Some of our lenders will not commit to rates for a length of time, resulting in exposure to us if the rates rise and we cannot

pass such exposure to the customer.

lender assumes the credit risk and its only recourse, upon default by the customer, is against the customer and the specific equipment under lease.

While we expect that the credit quality of our financing arrangements and our residual

return history will continue to allow us to obtain such financing, such financing may not be available on acceptable terms, or at all.

Interest rates have been rising and may continue to rise.

To preserve our expected internal rate of

return, we generally quote rates that are indexed.

Some of our lenders will not commit to rates for a length of time, resulting in exposure to us if the rates rise and we cannot pass such exposure to the customer.

CREDIT FACILITY – TECHNOLOGY SEGMENT

3 unchanged sentences

The WFCDF Credit Facility has a floor plan facility and a revolving credit facility.

On October 13, 2021, the Borrowers amended, restated, and replaced in their entirety the 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, together with a sublimit for a revolving credit facility

for up to $100 million (collectively, the “2021 Credit Facility”).

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

Financial Statements” for additional information concerning our 2021 Credit

The loss of the 2021 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

Please refer to Note 9 , “Notes Payable and Credit Facility” in the Notes to the Consolidated Financial Statements included in Part

II, Item 8 of this Annual Report on Form 10-K for additional information concerning our WFCDF Credit Facility.

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.

1 unchanged sentence

We finance most purchases of products for sale to our customers through the floor plan facility.

Once our customer places a purchase order with us and we have approved their credit, we place an order for

the desired products with one of our vendors.

Once our customers place a purchase order with us and we have approved their credit, we place an

order for the desired products with one of our vendors.

Our vendors are generally paid by the floor plan facility and our liability is reflected in “accounts payable—floor plan” in our consolidated balance sheets.

Most customer payments to us are remitted to our lockbox accounts.

Once payments are cleared, the monies in the lockbox accounts are

automatically and daily transferred to our operating account.

We pay down the floor plan facility on three specified dates each month, generally 30-60 days from the invoice date .

Our borrowings and repayments under the floor plan component are included in “net borrowings (repayments) on floor plan facility” within cash flows from the financing activities in our consolidated statements

of cash flows.

As of March 31, 2022, and March 31, 2021, we had a maximum credit limit of $375.0 million and $275.0 million, respectively, and an outstanding balance on the floor plan facility of $145.3 million and $98.7

million, respectively.

On our balance sheet, our liability under the floor plan facility is presented as part of as accounts payable – floor plan.

Once payments are cleared, the monies in the lockbox accounts are automatically and daily transferred to our operating account.

down the floor plan facility on three specified dates each month, generally 30-60 days from the invoice date .

Our borrowings and repayments under the floor plan component are included in “net

borrowings (repayments) on floor plan facility” within cash flows from the financing activities in our consolidated statements of cash flows.

As of March 31, 2023, we had a maximum credit limit of $500.0 million, and an outstanding balance on the floor plan of $134.6 million.

As of March 31, 2022, we had a maximum credit limit of $375.0 million, and

the outstanding balance on the floor plan facility was $145.3 million.

On our balance sheet, our liability under the floor plan facility is presented as part of accounts payable – floor plan.

Revolving credit facility

3 unchanged sentences

As of March 31, 2023, and March 31, 2022, we did not have any outstanding balance under the revolving credit facility.

The maximum credit limit under this facility was $100.0 million as of both March 31, 2022, and March 31, 2021.

The maximum credit limit under this facility was $200.0 million as of March 31, 2023, compared to $100.0 million

as of March 31, 2022.

PERFORMANCE GUARANTEES

2 unchanged sentences

guarantees in the event of default in the performance of our obligations.

We are in compliance with the performance obligations under all service contracts for which there is a performance guarantee, and we believe that any liability incurred

in connection with these guarantees would not have a material adverse effect on our consolidated statements of operations.

We are in compliance with the performance obligations under all service contracts for which there is a performance guarantee, and we believe that any liability

incurred in connection with these guarantees would not have a material adverse effect on our consolidated statements of operations.

OFF-BALANCE SHEET ARRANGEMENTS

1 unchanged sentence

finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

As of March 31, 2022, and 2021, we were not involved in

any unconsolidated special purpose entity transactions.

As of March 31, 2023, and 2022, we were not

involved in any unconsolidated special purpose entity transactions.

ADEQUACY OF CAPITAL RESOURCES

1 unchanged sentence

In addition, we may selectively acquire other companies that have attractive

customer relationships and skilled sales forces.

We may also start offices or configuration centers in new geographic areas, which may require a significant investment of cash.

customer relationships and skilled sales and/or engineering forces.

We may also open facilities in new geographic areas, which may require a significant investment of cash.

We may also acquire technology companies to expand and enhance

the platform of bundled solutions to provide additional functionality and value-added services.

As a result, we may require additional financing to fund our strategy, implementation, and potential future acquisitions, which may include

additional debt and equity financing.

The impacts of COVID-19 may limit or eliminate our access to capital.

While the future is uncertain, we do not believe our credit facility will be terminated by the lender or us.

Our lending partners in

our financial segment have tightened credit availability and are more discerning in their approval process.

However, currently we have funding resources available for our transactions.

our geographic footprint, or the platform of bundled solutions to provide additional functionality and value-added services.

We may require additional capital due to increases in inventory to accommodate our customers’ IT installation

We may continue to use our internally generated funds to finance investments in leased assets or investments in notes receivable due from our customers.

These actions may result in increased working capital needs as the

business expands.

As a result, we may require additional financing to fund our strategy, implementation, potential future acquisitions, and working capital needs, which may include additional debt and equity financing.

While the future

is uncertain, we do not believe our WFCDF Credit Facility will be terminated by WFCDF or us.

Additionally, while our lending partners in our financing segment have become more discerning in their approval processes, we currently have

funding resources available for our transactions.

POTENTIAL FLUCTUATIONS IN QUARTERLY OPERATING RESULTS

2 unchanged sentences

securities analysts or the market in general, such shortfall could have an immediate and significant adverse impact on the market price of our common stock.

Any such adverse impact could be greater if any such shortfall occurs near the time

of any material decrease in any widely followed stock index or in the market price of the stock of one or more public equipment leasing and financing companies, IT resellers, software competitors, major customers, or vendors of ours.

Our quarterly results of operations are susceptible to fluctuations for a number of reasons, including, but not limited to the worldwide impacts from COVID-19, inflation, interest rate

increases, currency fluctuations, reduction in IT spending, any reduction of expected residual values related to the equipment under our leases, the timing and mix of specific transactions, the reduction of manufacturer incentive programs,

pricing discounts offered by manufacturers at their year ends, pricing increases, and other factors.

Quarterly operating results could also fluctuate as a result of our sale of equipment in our lease portfolio at the expiration of a lease

term or prior to such expiration, to a lessee or to a third-party and the transfer of financial assets.

Sales of equipment and transfers of financial assets may have the effect of increasing revenues and net income during the quarter in which

the sale occurs and reducing revenues and net income otherwise expected in subsequent quarters.

See Part I, Item 1A, “Risk Factors” herein.

Any such adverse impact could be greater if any such shortfall occurs near the

time of any material decrease in any widely followed stock index or in the market price of the stock of one or more public equipment leasing and financing companies, IT resellers, software competitors, major customers, or vendors of

Our quarterly results of operations are susceptible to fluctuations for a number of reasons, including, but not limited to currency fluctuations, reduction in IT spending, shortages of

product from our vendors due to material shortages, any reduction of expected residual values related to the equipment under our leases, the timing and mix of specific transactions, the reduction of manufacturer incentive programs, and

other factors.

Quarterly operating results could also fluctuate as a result of our sale of equipment in our lease portfolio to a lessee or third-party at the expiration of a lease term or prior to such expiration, and the transfer of

financial assets.

Sales of equipment and transfers of financial assets may have the effect of increasing revenues and net income during the quarter in which the sale occurs and reducing revenues and net income otherwise expected in

subsequent quarters.

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

1 unchanged sentence

Our material contractual obligations consist of payments on recourse and non-recourse notes payable and lease liabilities.

refer to Note 4 , “Lessee accounting” and Note 8 , “Notes payable and credit facility” in the Notes to Consolidated Financial

Statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information regarding the maturities of these obligations.

Additionally, we have contractual obligations of $7.8

million over the next 5 years for certain hosted software and data center services.

Please refer to Note 5 , “Lessee Accounting” and Note 9 , “Notes Payable and Credit Facility” in the Notes to the Consolidated Financial Statements included in Part II, Item 8 of

this Annual Report on Form 10-K for additional information regarding the maturities of these obligations.

Additionally, we have contractual obligations of $10.5 million over the next 4 years for

certain hosted software and data center services.

CRITICAL ACCOUNTING ESTIMATES

Our consolidated financial statements have been prepared in accordance with US GAAP.

Our significant accounting policies are described in Note 1 , “Organization and Summary of Significant Accounting Policies” in the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.

The accounting policies described below

are significantly affected by critical accounting estimates.

Such accounting policies require significant judgments, assumptions, and estimates, and actual results could differ materially from the amounts reported based on these

REVENUE RECOGNITION — When we enter into contracts with customers, we are required to identify the performance obligations in the contract.

We recognize most of our revenues from the sales of third-party

products, third-party software, third-party maintenance, software support, and services, e Plus professional and managed services, and hosting e Plus

proprietary software.

Our recognition of revenue differs for each of these distinct types of performance obligations and identifying each performance obligation appropriately may require judgment.

When a contract contains multiple distinct performance obligations, we allocate the transaction price to each performance obligation based on its relative standalone selling price.

We determine standalone

selling prices using expected cost-plus margin.

When we finance sales of third-party software and third-party maintenance, software support, and services, we reduce the transaction price by the financing component.

perform an analysis to estimate the amount of sales in-transit at the end of the period and adjust revenue and the related costs to reflect only what has been delivered to the customer.

This analysis is based upon an analysis of

current quarter and historical delivery dates.

We recognize revenue from sales of third-party maintenance, software support, and services when our customer and vendor accept the terms and conditions of the arrangement.

On occasion, judgment is required

to determine this point in time.

We provide e Plus professional services under both time and materials and fixed price contracts.

When services are provided on a time and materials basis, we

recognize sales at agreed-upon billing rates as services are performed.

When services are provided on a fixed fee basis, we recognize sales over time in proportion to our progress toward complete satisfaction of the performance

Using this method requires a determination of the appropriate input or output method to measure progress.

We most often measure progress based on costs incurred in proportion to total estimated costs, commonly referred to

as the “cost-to-cost” method.

When using this method, significant judgment may be required to estimate the total costs to complete the performance obligation.

We typically recognize sales of e Plus

managed services on a straight-line basis over the period services are provided.

We recognize financing revenues from our investments in leases and notes receivable.

We recognize interest income on our notes-receivable using the effective interest method.

We classify our leases as either sales-type leases or operating leases.

For sales-type leases, upon lease commencement, we recognize the present value of the lease payments and the residual asset discounted

using the rate implicit in the lease.

When we are financing equipment provided by another dealer, we typically do not have any selling profit or loss arising from the lease.

When we are the dealer of the equipment being leased, we

typically recognize revenue in the amount of the lease receivable and cost of sales in the amount of the carrying value of the underlying asset minus the unguaranteed residual asset.

We may need to use judgment to determine the fair

value of the equipment.

After the commencement date, we recognize interest income as part of net sales using the effective interest method.

For operating leases, we recognize the underlying asset as an operating lease asset.

depreciate the asset on a straight-line basis to its estimated residual value over its estimated useful life.

We recognize the lease payments over the lease term on a straight-line basis as part of net sales.

We account for the transfer of financial assets as sales or secured borrowings.

When a transfer meets all the requirements for sale accounting, we derecognize the financial asset and record a net gain or

loss that is included in net sales.

We utilize qualified attorneys to provide a true-sale-at-law opinion to support the conclusion that transferred financial assets have been legally isolated.

RESIDUAL ASSETS — Our estimate for the residual asset in a lease is the amount we expect to derive from the underlying asset following the end of the lease term.

Our estimates vary, both in amount and as a

evaluate residual values for impairment on a quarterly basis.

We do not recognize upward adjustments due to changes in estimates of residual values.

a reporting unit below its carrying amount.

Goodwill is tested for impairment at a level of reporting referred to as a reporting unit.

its carrying amount, including goodwill.

A significant amount of judgment is involved in determining if an event representing an indicator of impairment has occurred between annual test dates.

Such indicators may include:

significant decline in expected future cash flows;

a sustained, significant decline in stock price and market capitalization;

a significant adverse change in legal factors or in the business climate;

unanticipated competition;

testing for recoverability of a significant asset group within a reporting unit;

and reductions in revenue or profitability growth rates.

In the quantitative impairment test, we compare the fair value of a reporting unit with its carrying amount, including goodwill.

We estimate the fair value of each reporting unit using a combination of the

income approach and market approaches.

discount rate.

The discount rate in turn is based on the specific risk characteristics of each reporting unit, the weighted average cost of capital and its underlying forecast.

The market approach estimates fair value by applying performance metric multiples to the reporting unit’s prior and expected operating performance.

The multiples are derived from comparable publicly traded

companies with similar operating and investment characteristics as the reporting unit.

The fair values determined by the market approach and income approach, as described above, are weighted to determine the fair value for each reporting unit.

Although we have consistently used the same methods

in developing the assumptions and estimates underlying the fair value calculations, such estimates are uncertain and may vary from actual results.

VENDOR CONSIDERATION — We receive payments and credits from vendors and distributors, including consideration pursuant to volume incentive programs, and shared marketing expense programs.

Many of these

programs extend over one or more quarters’ sales activities.

Different programs have different vendor/program specific goals to achieve.

We recognize the rebates pursuant to volume incentive programs, when the rebate is probable and

reasonably estimable, based on a systematic and rational allocation of the cash consideration offered to each of the underlying transactions that results in our progress towards earning the rebate.

Should our actual performance be

different from our estimates, we may be required to adjust our receivables.

ALLOWANCE FOR CREDIT LOSSES — We maintain an allowance for credit losses related to our accounts receivable and financing receivables.

We record an expense in the amount necessary to adjust the allowance for

credit losses to our current estimate of expected credit losses on financial assets.

We estimate expected credit losses based on our internal rating of the customer’s credit quality, our historical credit losses, current economic

conditions, and other relevant factors.

Prior to providing credit, we assign an internal rating for each customer’s credit quality based on the customer’s financial status, rating agency reports and other financial information.

review our internal ratings for each customer at least annually or when there is an indicator of a change in credit quality, such as a delinquency or bankruptcy.

We write off financing receivables when we deem them to be

uncollectable.

As of March 31, 2023, we estimated lower expected credit loss rates related to both our accounts receivable and financing receivables as compared to March 31, 2022.

INCOME TAXES — We make certain estimates and judgments in determining income tax expense for financial statement reporting purposes.

These estimates and judgments occur in the calculation of certain tax

assets and liabilities, which principally arise from differences in the timing of recognition of revenue and expense for tax and financial statement reporting purposes.

We also must analyze income tax reserves, as well as determine

the likelihood of recoverability of deferred tax assets and adjust any valuation allowances accordingly.

as tax liabilities for the tax jurisdiction to which the tax asset relates.

Valuation allowances are evaluated periodically and will be subject to change in each future reporting period as a result of changes in one or more of these

The calculation of our tax liabilities also involves considering uncertainties in the application of complex tax regulations.

We recognize liabilities for uncertain income tax positions based on our estimate of whether, and

the extent to which, additional taxes will be required.

BUSINESS COMBINATIONS — We account for business combinations using the acquisition method.

For each acquisition, we recognize most assets acquired, and liabilities assumed at their fair values at the

acquisition date.

Our valuations of certain assets acquired, including customer relationships and trade names, and certain liabilities assumed, involve significant judgment and estimation.

Additionally, our determination of the

purchase price may include an estimate for the fair value of contingent consideration.

We utilize independent valuation specialists to assist us in determining the fair value of certain assets and liabilities.

Our valuations utilize

significant estimates, such as forecasted revenues and profits.

Changes in our estimates could significantly impact the value of certain assets and liabilities.

RECENT ACCOUNTING PRONOUNCEMENTS

Please refer to Note 2 , “Recent Accounting Pronouncements” in the Notes to the Consolidated Financial Statements included in Part II, Item

8 of this Form 10-K.

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-K

Item 7. Management’s Discussion and Analysis