What changed in this filing

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Item 1. Financial Statements

2023-08-07 compared with 2023-02-07 · 331 added, 1059 removed, 323 unchanged (81% of the section changed)

4 unchanged sentences

(in thousands, except per share amounts)

December 31, 2022

June 30, 2023

March 31, 2023

8 unchanged sentences

Financing receivables and operating leases—net

Deferred tax asset—net

Deferred tax asset

Property, equipment, and other assets

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Total current liabilities

Recourse notes payable - long-term

Non-recourse notes payable - long-term

Deferred tax liability

Other liabilities

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50,000 shares authorized;

26,907 outstanding at December 31 , 2022 and 26,886 outstanding at March 31 , 2022

26,947 outstanding at June 30 , 2023 and 26,905 outstanding at March 31 , 2023

Additional paid-in capital

Treasury stock, at cost, 408

shares at December 31 , 2022

shares at June 30 , 2023

and 261 shares at March 31 ,

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AND SUBSIDIARIES

UNAUDITED CONSOLIDATED

STATEMENTS OF OPERATIONS

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

Three Months Ended

Nine Months Ended

Cost of sales

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AND SUBSIDIARIES

UNAUDITED CONSOLIDATED

STATEMENTS OF COMPREHENSIVE INCOME

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

Three Months Ended

Nine Months Ended

OTHER COMPREHENSIVE INCOME, NET OF TAX:

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(in thousands)

Nine Months Ended December 31,

Three Months Ended June 30,

Cash flows from operating activities:

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

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

Depreciation and amortization

1 unchanged sentence

Share-based compensation expense

Deferred taxes

Payments from lessees directly to lenders—operating leases

Gain on disposal of property, equipment, and operating lease equipment

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Repayments of non-recourse and recourse notes payable

Proceeds from issuance of common stock

Repurchase of common stock

Net borrowings on floor plan facility

Net borrowings (repayments) on floor plan facility

Net cash provided by financing activities

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(in thousands)

Nine Months Ended December 31,

Three Months Ended June 30,

S upplemental disclosures of cash flow

8 unchanged sentences

Borrowing of non-recourse and recourse notes payable

Repayments of non-recourse and recourse notes payable

Vesting of share-based compensation

Repurchase of common stock

New operating lease assets obtained in exchange for lease obligations

3 unchanged sentences

(in thousands)

Nine Months Ended December 31, 2022

Three Months Ended June 30, 2023

Comprehensive

1 unchanged sentence

Issuance of restricted stock awards

Issuance of common stock

Share-based compensation

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Balance, June 30 , 2023

Issuance of restricted stock awards

Share-based compensation

Foreign currency translation adjustment

Balance, September 30, 2022

Issuance of restricted stock awards

Share-based compensation

Foreign currency translation adjustment

Balance, December 31,

Nine Months Ended December 31, 2021

Three Months Ended June 30, 2022

Comprehensive

5 unchanged sentences

Balance, June 30 , 2022

Issuance of restricted stock awards

Share-based compensation

Repurchase of common stock

Foreign currency translation adjustment

Balance, September 30, 2021

Issuance of restricted stock awards

Share-based compensation

Repurchase of common stock

Stock split effected in the form of a dividend

Retirement of treasury stock

Foreign currency translation adjustment

Balance, December 31, 2021

See Notes to Unaudited Consolidated Financial Statements.

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ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS — Our company was founded in 1990 and is a Delaware corporation.

is sometimes referred to in this Quarterly Report on Form 10-Q as “we,” “our,” “us,” “ourselves,” or “ e Plus.” e Plus inc.

is a holding company that through its subsidiaries provides information technology solutions

that enable organizations to optimize their IT environment and supply chain processes.

We also provide consulting, professional, and managed services and complete lifecycle management services including flexible financing solutions.

selling to medium and large enterprises in North America, the United Kingdom (“UK”), and other European countries.

BASIS OF PRESENTATION — The unaudited consolidated financial statements include the accounts of e Plus inc.

DESCRIPTION OF BUSINESS —

Our company was founded in 1990 and is a Delaware corporation.

is sometimes referred to in this Quarterly Report on Form 10-Q as “we,” “our,” “us,” “ourselves,” or “ePlus.” ePlus inc.

is a holding company that through its subsidiaries

provides IT solutions that enable organizations to optimize their IT environment and supply chain processes.

We also provide consulting, professional services, managed services, and complete lifecycle management services including flexible

financing solutions.

We focus on selling to medium and large enterprises in the United States (“US”) and in select international markets including the United Kingdom (“UK”), the European Union (“EU”), India, Singapore, and Israel.

BASIS OF PRESENTATION — The unaudited consolidated financial statements include the accounts of ePlus inc.

and its wholly-owned subsidiaries.

All intercompany balances and transactions have been eliminated in consolidation.

The accounts of businesses

acquired are included in the unaudited consolidated financial statements from the dates of acquisition.

INTERIM FINANCIAL STATEMENTS — The unaudited consolidated financial statements for the nine months ended December 31, 2022, and 2021, were prepared by us and include all

normal and recurring adjustments that, in the opinion of management, are necessary for a fair presentation of our financial position, results of operations, changes in comprehensive income, and cash flows for such periods.

Operating results for the

nine months ended December 31, 2022, and 2021, are not necessarily indicative of results that may be expected for any other interim period or for the full fiscal year ended March 31, 2023, or any other future period.

These unaudited consolidated

financial statements do not include all disclosures required by the accounting principles generally accepted in the United States (“US GAAP”) for annual financial statements.

Our audited consolidated financial statements are contained in our annual

report on Form 10-K for the year ended March 31, 2022 (“2022 Annual Report”), which should be read in conjunction with these interim consolidated financial statements.

USE OF ESTIMATES — The preparation of financial statements in conformity with US GAAP requires

management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenues and expenses

during the reporting periods.

Estimates are used when accounting for items and matters including, but not limited to, revenue recognition, residual values, vendor consideration, lease classification, goodwill and intangible assets, allowance for

credit losses, inventory obsolescence, and the recognition and measurement of income tax assets and other provisions and contingencies.

We base our estimates on historical experience and on various other assumptions that we believe to be reasonable

under the circumstances.

All intercompany balances

and transactions have been eliminated in consolidation.

The accounts of businesses acquired are included in the unaudited consolidated financial statements from the dates of acquisition.

During the quarter ended June 30, 2023, we split our

technology segment into new segments-- product, professional services, and managed services-- to provide our management the ability to better manage and allocate resources among the separate components of our technology business.

Our professional

services and managed services are a significant component of our growth and long-term strategic initiatives.

Subsequently, we manage and report our operating results through four operating segments:

product, professional services, managed services, and financing.

For additional information, see Note 16, “Segment Reporting”.

INTERIM FINANCIAL STATEMENTS — The unaudited consolidated

financial statements for the three months ended June 30, 2023, and 2022, were prepared by us and include all normal and recurring adjustments that, in the opinion of management, are necessary for a fair presentation of our financial position,

results of operations, changes in comprehensive income, and cash flows for such periods.

Operating results for the three months ended June 30, 2023, and 2022, are not necessarily indicative of results that may be expected for any other interim

period or for the full fiscal year ended March 31, 2024, or any other future period.

These unaudited consolidated financial statements do not include all disclosures required by the accounting principles generally accepted in the United States (“US

GAAP”) for annual financial statements.

Our audited consolidated financial statements are contained in our annual report on Form 10-K for the year ended March 31, 2023 (“2023 Annual Report”), which should be read in conjunction with these interim

consolidated financial statements.

USE OF ESTIMATES — The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities,

disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods.

Estimates are used when accounting for items and matters including, but not

limited to, revenue recognition, residual values, vendor consideration, lease classification, goodwill and intangible assets, allowance for credit losses, inventory obsolescence, and the recognition and measurement of income tax assets and other

provisions and contingencies.

We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances.

Actual results may differ from these estimates.

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

December 31, 2022, and 2021, respectively, and 38 % and 40 % of our technology segment’s net sales for the nine months ended December 31, 2022, and 2021, respectively.

CONCENTRATIONS

OF RISK — A substantial portion of our sales are products from Cisco Systems, which were 45 % of our technology business net sales for

the three months ended June 30, 2023, and 35 % for the three months ended June 30, 2022.

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

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RECENT ACCOUNTING PRONOUNCEMENTS

RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS — In October 2021, the Financial

Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, that

requires companies to apply Accounting Standards Codification Topic 606, Contracts with Customers, to recognize and measure contract assets and contract liabilities from contracts with customers acquired in

a business combination.

We early adopted this update beginning in the second quarter of our fiscal year ending March 31, 2023, and it did not have a material impact on our Consolidated Financial Statements.

The ongoing impact of this standard will

be fact dependent on the transactions within its scope.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED — In September 2022, the FASB issued ASU 2022-04, Liabilities—Supplier Finance Programs (Subtopic 405-50):

RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS— In September 2022, the Financial Accounting Standards Board (“FASB”) issued ASU

2022-04, Liabilities—Supplier Finance Programs (Subtopic 405-50):

Disclosure of Supplier Finance Program Obligations.

This update requires buyers in a supplier finance program

to disclose certain qualitative and quantitative information about the program.

This update is effective for us beginning in our fiscal year ending March 31, 2024, including interim periods within that fiscal year, except for a requirement to

provide a roll forward of our obligations during the annual period, which is effective for us beginning in our fiscal year ending March 31, 2025.

We are currently evaluating the impact this update will have on our disclosures.

This update requires buyers in a supplier finance program to disclose certain qualitative and quantitative information about the

It is intended to provide information about an entity’s use of supplier finance programs and their effect on the entity’s working capital, liquidity, and cash flows.

This update is effective for us beginning in the first quarter of our

fiscal year ending March 31, 2024, except for a requirement to provide a roll forward of our obligations during the annual period, which is effective for us beginning in the first quarter of our fiscal year ending March 31, 2025.

We adopted the

standard during the first quarter of fiscal year ending March 31, 2024, as reflected in this Quarterly Report on Form 10-Q, except for the roll forward requirement, which will be adopted during the first quarter of fiscal year ending March 31,

The adoption of the standard resulted in new disclosures only for amounts presented within Accounts payable – floor plan.

For additional information on the new disclosures, see Note 8, “Notes Payable and Credit Facility”.

CONTRACT BALANCES

Accounts receivable – trade consists entirely of amounts due from contracts with customers.

In addition, we

had $ 62.1 million and $ 47.5 million of receivables from contracts with customers included within financing

receivables as of December 31 , 2022, and March 31, 2022, respectively.

The following table provides the

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

December 31, 2022

Accounts receivable – trade

consists entirely of amounts due from contracts with customers.

In addition, we had $ 58.5 million and $ 70.4 million of receivables from contracts with customers included within financing receivables as of June 30, 2023, and March 31, 2023, respectively.

following table provides the balance of contract liabilities from contracts with customers (in thousands):

June 30, 2023

March 31, 2023

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Non-current (included in other liabilities)

Revenue recognized from the beginning contract liability balance was $ 15.0

million and $ 57.4 million for the three and nine months ended December 31, 2022, respectively, and $ 11.7 million and $ 47.9 million for the

three and nine months ended December 31, 2021, respectively.

Revenue recognized from the

beginning contract liability balance was $ 30.9 million and $ 24.9 million for the three months ended June 30, 2023, and 2022, respectively.

PERFORMANCE OBLIGATIONS

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FINANCING RECEIVABLES AND OPERATING LEASES

Our financing receivables and operating leases consist primarily of leases of IT and communication

equipment and notes receivable from financing customer purchases of third -party software, maintenance, and services.

Our leases often include elections for the lessee to

purchase the underlying asset at the end of the lease term.

Often, our leases provide the lessee a bargain purchase option.

The following table provides the profit recognized for sales-type leases at their commencement date, including modifications that

are recognized on a net basis, for the three and nine months ended December 31, 2022, and 2021 (in thousands):

Three Months Ended December 31,

Nine Months Ended December 31,

Our financing receivables and operating leases consist primarily of leases of IT and communication equipment

and notes receivable from financing customer purchases of third -party software, maintenance, and services.

Our leases often include elections for the lessee to purchase the

underlying asset at the end of the lease term.

Occasionally, our leases provide the lessee a bargain purchase option.

The following table provides the profit recognized for sales-type leases at their commencement date, including modifications that are recognized on a net basis, for the

three months ended June 30, 2023, and 2022 (in thousands):

Three months Ended June 30,

Cost of sales

The following table provides interest income in aggregate on our sales-type leases and lease income on our operating leases for the three and nine months ended December

31, 2022, and 2021 (in thousands):

Three Months Ended December 31,

Nine Months Ended December 31,

The following table provides interest income in aggregate on our sales-type leases and lease income on our operating leases for the

three months ended June 30, 2023, and 2022 (in thousands):

Three months Ended June 30,

Interest income on sales-type leases

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

December 31 ,

June 30 , 2023

Gross receivables

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Allowance for credit losses (2)

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

Refer to Note 7, “Allowance for Credit Losses” for

Includes unguaranteed residual values of $ 4,488 thousand that we retained after selling the related lease receivable.

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

March 31 , 2023

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Allowance for credit losses (2)

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

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

Includes unguaranteed residual values of $ 4,222 thousand that we retained after selling the related lease receivable.

Refer to Note 7 , “Allowance for Credit Losses”

OPERATING LEASES—NET

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Accumulated depreciation

Operating lease equipment—net

Investment in operating lease equipment—net (1)

include estimated unguaranteed residual values of $ 1,873 thousand and $ 1,717 thousand as of June 30, 2023, and March 31, 2023, respectively.

TRANSFERS OF FINANCIAL ASSETS

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

secured borrowings.

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

For transfers accounted for as a secured borrowing, the corresponding investments serve as collateral for non-recourse notes payable.

As of December 31, 2022, and March

31, 2022, we had financing receivables of $ 58.1 million and $ 21.1 million, respectively, and operating leases of $ 1.4

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

See Note 8, ‘‘Credit Facility and Notes

For transfers accounted for as a sale, we derecognize the carrying value of the asset transferred plus any liability and recognize a net gain or loss on the sale, which

are presented within net sales in the consolidated statement of operations.

During the three months ended December 31, 2022, and 2021, we recognized net gains of $ 5.2 million and $ 2.3 million, respectively, and total proceeds from these sales were $ 157.2 million and $ 63.5 million,

respectively.

For the year to date periods ended December 31, 2022, and 2021, we recognized net gains of $ 15.1 million and $ 15.6 million, respectively, and total proceeds from these sales were $ 586.1 million and $ 753.9 million, respectively.

When we retain servicing obligations in transfers accounted for as sales, we allocate a portion of the proceeds to deferred revenue, which is recognized as we perform

the services.

As of both December 31, 2022, and March 31, 2022, we had deferred revenue of $ 0.5 million, for servicing obligations.

In a limited number of transfers accounted for as sales, we indemnified the assignee if the lessee elects

to early terminate the lease.

As of December 31, 2022, and March 31, 2022, the total potential payments that could result from these indemnities is immaterial.

As of June 30, 2023, and March 31,

2023, we had financing receivables of $ 22.0 million and $ 35.7 million, respectively, and operating leases of $ 2.1 million and $ 2.5 million, respectively, which were collateral for non-recourse notes payable.

See Note 8, “ Notes Payable and Credit Facility.

For transfers accounted for as a sale, we derecognize the carrying value of the asset transferred plus any liability and recognize a net gain or loss on the sale, which are

presented within net sales in the consolidated statement of operations.

During the three months ended June 30, 2023, and 2022, we recognized net gains of $ 1.3

million and $ 1.8 million, respectively, and total proceeds from these sales were $ 61.4 million and $ 52.5 million, respectively.

When we retain servicing obligations in transfers accounted for as sales, we allocate a portion of the proceeds to deferred revenue, which is recognized as we perform the

As of June 30, 2023, and March 31, 2023, we had deferred revenue of $ 0.4 million and $ 0.5 million, respectively, for servicing obligations.

In a limited number of transfers accounted for as sales, we indemnified the assignee in the event that the

lessee elects to early terminate the lease.

As of June 30, 2023, and March 31, 2023, our total potential liability that could result from these indemnities is immaterial.

LESSEE ACCOUNTING

We lease office and warehouse space for periods generally between one

to five years and, in some instances, for longer periods up to ten years .

We lease office space for periods up to six years and lease

warehouse space for periods of up to 10 years, and we have some lease options that can be exercised to extend beyond those lease term

We recognize our right-of-use assets as part of property, equipment, and other assets.

We recognize the current and long-term portions of our lease liability as part

of other current liabilities and other liabilities, respectively.

We recognized rent expense as part of selling, general and administrative expenses.

We recognized rent expense of $ 1.3 million as part of selling, general and administrative expenses for the three months ended December 31, 2022, and $ 1.4 million for the three months ending December 31, 2021, and $ 3.8 million and $ 4.0 million for the nine months ended December 31, 2022, and 2021, respectively .

We recognize the current and long-term portions of our lease liability as part of other current liabilities and other liabilities, respectively.

recognized rent expense as part of selling, general and administrative expenses.

We recognized rent expense of $ 1.5 million and $ 1.3 million for the three months ended June 30, 2023, and June 30, 2022, respectively.

GOODWILL AND OTHER INTANGIBLE ASSETS

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

December 31, 2022 (in thousand s):

Nine Months Ended December 31,

Accumulated Impairment

Beginning balance

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

30, 2023 (in thousand s):

Technology Segment

Professional Services

Managed Services

Balance March 31, 2023

Accumulated impairment losses

Net carrying amount

Reporting unit change

Impairment losses

Foreign currency translations

Ending balance

Balance June 30 , 2023

Accumulated impairment losses

Net carrying amount

Goodwill represents the premium paid over the fair value of the net tangible and intangible assets that are

individually identified and separately recognized in business combinations.

Our entire balance as of December 31, 2022, relates to our technology segment, which we also determined to be one reporting uni t.

As of March 31, 2023, our entire balance related to our technology segment, which we had also determined to be one reporting unit.

During the first quarter ended June 30, 2023, we separated our technology segment into three different reporting units:

product, professional services, and managed services.

As such, we allocated our goodwill and impairment losses to the

reporting units affected using a relative fair value.

The carrying value of goodwill was $ 158.3 million and $ 136.1 million as of

December 31, 2022, and March 31, 2022, respectively.

Our goodwill balance increased by $ 9.5 million over the nine months ended December

31, 2022, due to $ 9.7 million in goodwill additions from our acquisition of Future Com, Ltd., offset by foreign currency translation of $ 0.2 million.

June 30, 2023, and March 31, 2023, respectively.

Our goodwill balance increased by $ 22.2 million over the three months ended June 30,

2023, due to $ 22.1 million in goodwill additions from our acquisition of Network Solutions Group (“NSG”), and from foreign currency

translations of $0.1 million.

Please refer to Note 15, “Business Combinations” for details of our acquisition.

We test goodwill for impairment on an annual basis, as of the first day of our third fiscal quarter, and between annual tests if an event occurs, or circumstances change,

that would more likely than not reduce the fair value of a reporting unit below its carrying value.

In our annual test as of October 1, 2022, we performed a quantitative assessment of goodwill

and concluded that the fair value of our technology reporting unit exceeded its carrying value.

Our conclusions would not be impacted by a ten percent

change in our estimate of the fair value of the reporting unit.

We test goodwill for impairment on an annual basis, as of the first day of our third fiscal quarter, and

between annual tests if an event occurs, or circumstances change, that would more likely than not reduce the fair value of a reporting unit below its carrying value.

In our annual test as of October 1, 2022, we performed a quantitative

assessment of goodwill and concluded that the fair value of our technology reporting unit exceeded its carrying value.

Our conclusions would not be impacted by a ten percent change in our estimate of the fair value of the reporting unit.

OTHER INTANGIBLE ASSETS

O ur other intangible assets consisted of the following on

December 31, 2022, and March 31, 2022 (in thousands) :

December 31, 2022

Our other intangible assets consist of the following on June 30, 2023, and March 31, 2023 (in thousands):

June 30, 2023

March 31, 2023

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Purchased intangibles, consisting mainly of customer relationships, are generally amortized between 5 to 10 years.

Capitalized software development is generally amortized over five years.

Total amortization expense for purchased intangibles was $ 2.5

million for both the three months ended December 31, 2022 and December 31, 2021, and $ 7.2 million and $ 7.9 million for the nine months ended December 31, 2022, and December 31, 2021, respectively.

Capitalized software development is generally amortized over 5 years.

Total amortization expense for customer relationships and other intangible assets was $ 3.5 million and $ 2.2 million for the three months ended June 30, 2023, and June 30, 2022, respectively .

ALLOWANCE FOR CREDIT LOSSES

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

The following table provides the activity in our allowance for credit losses for the three months ended June 30, 2023, and 2022 (in thousands):

Accounts Receivable

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Write-offs and other

Balance December 31 ,

Balance June 30 ,

Balance April 1, 2022

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Write-offs and other

Balance December 31 ,

Balance June 30 ,

We evaluate our customers using an

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capacity to meet financial obligations.

Loss rates in this category are generally up to 1 % .

Loss rates in this category are generally less than 1 % .

This rating includes accounts with average credit risk that are more susceptible to

loss in the event of adverse business or economic conditions.

Loss rates in this category are generally in the range of 2 % to 10 % .

Loss rates in this category are in the range of 1 % to 8 % .

This rating includes accounts that have marginal credit risk such that the customer’s

ability to make repayment is impaired or may likely become impaired.

The loss rates in this category in the normal course are generally greater than 10 % and up to 100 % .

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

The loss rates in this category in the normal course are greater than 8 % and up to 100 % .

The following table provides the amortized cost basis of our financing receivables by CQR and by credit origination year as of June 30, 2023 (in thousands):

Amortized cost basis by origination year ending March 31,

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Total amortized cost (1)

Unguaranteed residual values of $ 4,130 that we

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

Excludes unguaranteed residual values of $ 4,488 thousand that we retained after selling the related lease receivable.

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

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Total amortized cost (1)

Unguaranteed residual values of $ 6,424 that we

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

Excludes unguaranteed residual values of $ 4,222

thousand that we retained after selling the related lease receivable.

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

process of being transferred to third-party financial institutions.

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

The following table provides an aging analysis of our financing receivables as of June 30 , 2023 (in thousands):

Notes receivable

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Lease receivables

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

CREDIT FACILITY AND NOTES PAYABLE

Our financial assets on nonaccrual status were not significant as of June 30, 2023, and March 31, 2023.

NOTES PAYABLE AND CREDIT FACILITY

CREDIT FACILITY

We finance the operations of our subsidiaries

ePlus Technology, inc., ePlus Technology Services, inc., and SLAIT Consulting, LLC (collectively, the “Borrowers”) in our technology segment through a credit facility with Wells Fargo Commercial Distribution Finance, LLC (“WFCDF”).

The WFCDF credit

facility has an accounts payable floor plan facility component and a revolving credit facility component.

On October 13, 2021, the Borrowers amended,

restated, and replaced in entirety their then-existing credit agreements with WFCDF.

We finance the operations of our subsidiaries e Plus Technology, inc., e Plus Technology Services, inc., and SLAIT Consulting, LLC (collectively, the “Borrowers”) in our technology business through a credit facility with Wells Fargo Commercial Distribution Finance, LLC (“WFCDF”).

credit facility (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 entirety their then-existing credit agreements with WFCDF.

On October 31, 2022, the Borrowers entered into the First Amendment to the credit agreement.

agreement and its amendment (collectively, the “WFCDF Credit Facility”), the credit facility is provided by a syndicate of banks for which WFCDF acts as administrative agent and consists of a discretionary senior secured floorplan

facility in favor of the Borrowers in the aggregate principal amount of up to $ 425.0 million, together with a sublimit for a revolving

credit facility for up to $ 150.0 million.

Under this agreement and its amendment, the credit facility is provided by a syndicate of banks (collectively, the “Lenders”) for which WFCDF acts as administrative agent and consists of a discretionary senior secured floor plan facility in favor

of the Borrowers.

On March 10, 2023, the Borrowers entered into a Second Amendment to the credit agreement that amended the credit agreement to increase the maximum aggregate amount of principal available under the floor plan facility to $ 500.0 million and increase the maximum aggregate amount of principal available under the Revolving Facility to $ 200.0 million.

Under the accounts payable floor plan facility, we had an outstanding balance of $ 182.9

million and $ 145.3 million as of December 31, 2022, and March 31, 2022, respectively.

On our balance sheet, our liability under the

accounts payable floor plan facility is presented as accounts payable – floor plan .

Under the revolving credit facility, we had $ 95.0

million outstanding as of December 31 ,

2022, and no balance outstanding as of March 31, 2022.

On our balance sheet, our liability under the revolving credit facility is

presented as part of recourse notes payable – current.

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

million and $ 134.6 million as of June 30, 2023, and March 31, 2023 ,

respectively.

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

We use the floor plan to facilitate the purchase of inventory from designated suppliers.

The Lenders pay our suppliers and provide us extended payment terms.

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

We do not incur any interest or other incremental expenses for the floor plan facility.

We are not involved in

establishing the terms or conditions of the arrangements between our suppliers and the Lenders.

U nder the revolving credit facility, we had $ 52.0 million outstanding as of June 30, 2023, and no balance outstanding as of

March 31, 2023.

On our balance sheet, our liability under the revolving credit facility is presented as part of recourse notes payable – current.

fair value of the outstanding balances under the WFCDF Credit Facility were approximately equal to their carrying value as of June 30, 2023, and March 31, 2023 .

The amount of

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unless their available borrowing meets or met certain thresholds.

As of December 31 , 2022, and March 31, 2022, their available borrowing met the thresholds such that there were no restrictions on their ability to pay

A s of June 30, 2023, and March 31, 2023 ,

their available borrowing met the thresholds such that there were no restrictions on their ability to pay dividends.

The WFCDF Credit Facility has an initial one-year

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However, either the Borrowers or WFCDF may terminate the WFCDF Credit Facility at any time by providing a written termination notice to the other party no less than 90 days prior to such termination .

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 business and as an operational function of our accounts payable process.

RECOURSE NOTES PAYABLE

Recourse notes payable consisted of borrowings for which the lender has recourse against us.

As of December 31 , 2022, we had $ 103.0

million in recourse notes payable consisting of $ 95.0 million outstanding under the revolving credit facility component of our WFCDF

Credit Facility, and $ 8.0 million arising from one installment payment arrangement within our technology segment.

As of March 31, 2022,

we had $ 13.1 million in recourse notes payable arising entirely from one installment payment arrangement within our technology segment.

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

As of June 30, 2023 ,

we had $ 58.1 million in recourse notes payable consisting of $ 52.0 million outstanding under our revolving WFCDF Credit Facility, $ 4.0 million arising from one installment payment arrangement within our technology

business, and $ 2.1 million arising from borrowings that that were collateralized by financial receivables held by our financing

As of March 31, 2023, we ha d $ 6.0 million in recourse notes payable arising entirely from one installment payment

arrangement within our technology business.

Our payments under this installment agreement are due quarterly in amounts that are correlated to the payments due to us from a customer under a related notes receivable.

We discounted our payments due under this installment agreement to calculate

our payable balance using an interest rate of 3.50 % as of both December 31, 2022, and March 31, 2022.

We discounted our payments due

under this installment agreement to calculate our payable balance using an interest rate of 3.50 % as of both June 30, 2023, and March 31, 2023.

The weighted average interest rate for our recourse notes payable in our financing segment was 6.27 % as of June 30, 2023 .

NON-RECOURSE NOTES PAYABLE

Non-recourse notes payable

consist of borrowings that, in the event of a default by a customer, the lender generally only has recourse against the customer, and the assets serving as collateral, but not against us.

As of December 31, 2022, and March 31, 2022, we had $ 48.5 million and $ 21.2 million,

respectively, of non-recourse borrowings that were collateralized by investments in notes and leases.

Principal and interest payments are generally due in amounts that are approximately equal to the total payments due from the customer under the

leases or notes receivable that collateralize the notes payable.

The weighted average interest rate for our non-recourse notes payable was 5.05 %

and 3.59 %, as of December 31, 2022, and March 31, 2022, respectively.

consists of borrowings that, in the event of a default by a customer, the lender generally only has recourse against the customer, and the assets serving as collateral, but not against us.

As of June 30,

2023, and March 31, 2023 , we had $ 22.7 million and $ 34.3 million, respectively, of non-recourse borrowings that were collateralized by investments in notes and leases.

Principal and interest payments are generally due periodically

in amounts that are approximately equal to the total payments due from the customer under the leases or notes receivable that collateralize the notes payable.

The weighted average interest rate for our non-recourse notes payable was 5.22 % and 5.01 %, as of June 30, 2023, and March 31, 2023 , respectively.

COMMITMENTS AND CONTINGENCIES

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arise in the normal course of our business and have not been fully resolved.

The ultimate outcome of any litigation or any other legal dispute is uncertain.

When a loss related to a legal proceeding or claim is probable and reasonably estimable,

we accrue our best estimate for the ultimate resolution of the matter.

If one or more legal matters are resolved against us in a reporting period for amounts above management’s expectations, our financial condition and operating results for that

period could be adversely affected.

As of December 31, 2022, we do not believe that there is a reasonable possibility that any material loss exceeding the amounts already recognized for these proceedings and matters, if any, has been incurred.

Any outcome, whether favorable or unfavorable, may materially and adversely affect us due to legal costs and expenses, diversion of management attention and other factors.

The ultimate outcome of any litigation or other legal dispute is uncertain.

When a loss related to a legal proceeding or claim is probable and reasonably estimable, we

accrue our best estimate for the ultimate resolution of the matter.

If one or more legal matters are resolved against us in a reporting period for amounts above our expectations, our financial condition and operating results for that period may

be adversely affected.

As of June 30, 2023, we do not believe that there is a reasonable possibility that any material loss exceeding the amounts already recognized for these proceedings and matters, if any, has been incurred.

whether favorable or unfavorable, may materially and adversely affect us due to legal costs and expenses, diversion of management attention and other factors.

We expense legal costs in the period incurred.

We cannot assure that

additional contingencies of a legal nature or contingencies having legal aspects will not be asserted against us in the future, and these matters could relate to prior, current, or future transactions or events .

We cannot assure that additional

contingencies of a legal nature or contingencies having legal aspects will not be asserted against us in the future, and these matters could relate to prior, current, or future transactions or events .

EARNINGS PER SHARE

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

The following table provides a reconciliation of the numerators and denominators used to calculate basic and diluted net income per

common share as disclosed on our unaudited consolidated statements of operations for the three and nine months ended December 31, 2022, and 2021, respectively (in thousands, except per share data) .

Three Months Ended

Nine Months Ended

The following table provides a reconciliation of the numerators and denominators used to calculate basic and diluted net income per common share as disclosed on our

unaudited consolidated statements of operations for the three months ended June 30, 2023, and 2022, respectively (in

thousands, except per share data).

Three Months Ended June 30,

Net earnings attributable to common shareholders - basic and diluted

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SHARE REPURCHASE PLAN

On March 24, 2022, our board of directors authorized the repurchase of up to 1,000,000 shares of our

outstanding common stock, over a 12-month period beginning May 28, 2022 .

On March 22, 2023, our board of directors authorized the repurchase of up to 1,000,000

shares of our outstanding common stock, over a 12-month period beginning May 28, 2023.

On March 24, 2022, our board of directors authorized the repurchase of up to 1,000,000 shares of our outstanding common stock, over a 12-month period beginning May 28, 2022 .

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

negotiated transactions, subject to availability.

Under both authorized programs, purchases

may be made from time to time in the open market, or in privately negotiated transactions, subject to availability.

Any repurchased shares will have the status of treasury shares and may be used, when needed, for general corporate purposes.

During the nine months ended December 31, 2022,

we purchased 70,473 shares of our outstanding common stock at a value of $ 3.9 million under the share repurchase plan;

we also purchased 58,080

shares of common stock at a value of $ 3.3 million to satisfy tax withholding obligations relating to the vesting of employees’ restricted

During the nine months ended December 31, 2021,

we purchased 147,999 shares of our outstanding common stock at a value of $ 6.9 million under the share repurchase plan;

we also purchased 55,430

shares of common stock at a value of $ 2.6 million to satisfy tax withholding obligations relating to the vesting of employees’ restricted

During the three months ended June 30, 2023 , we purchased 93,541 shares of our outstanding common stock at a value of $ 4.4 million under the share repurchase plan;

we also purchased 53,945 shares of common stock at a value of $ 3.0 million to satisfy tax

withholding obligations relating to the vesting of employees’ restricted stock.

During the three months ended June 30, 2022 , we purchased 70,473 shares of our outstanding common stock at a value of $ 3.9 million under the share repurchase plan;

we also purchased 58,080 shares of common stock at a value of $ 3.3 million to satisfy tax

withholding obligations relating to the vesting of employees’ restricted stock.

SHARE-BASED COMPENSATION

SHARE-BASED PLANS

of December 31, 2022, we had share-based awards outstanding under the following plans:

of June 30, 2023, we had share-based awards outstanding under the following plans:

(1) the 2017 Non-Employee Director Long-Term Incentive Plan (“2017 Director LTIP”), (2) the 2012 Employee Long-Term Incentive Plan (“2012 Employee LTIP”), and (3)

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The 2021 Employee LTIP replaced the 2012 Employee LTIP that had previously been approved by our stockholders on September 13, 2012.

Beginning September 16, 2021, we permanently ceased granting any additional shares under the 2012 Employee LTIP .

Beginning September 16, 2021, we permanently ceased issuing any additional shares under the 2012 Employee LTIP .

These share-based plans define fair market value as the closing sales price of a share of common stock as quoted on any established stock exchange for such date or the most

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RESTRICTED STOCK ACTIVITY

For the nine months ended December 31, 2022, we granted 18,842 shares of our stock under the 2017

Director LTIP, and 138,643 restricted shares of our stock under the 2021 Employee LTIP.

For the nine months ended December 31, 2021, we

granted 13,562 shares of our stock under the 2017 Director LTIP, and 155,722 restricted shares of our stock under the 2012 Employee LTIP, and no

the three months ended June 30, 2023, we granted 862 shares under the 2017 Director LTIP, and 152,865 restricted shares under the 2021 Employee LTIP.

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

shares under the 2021 Employee LTIP.

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

following table provides a summary of the non-vested restricted shares for the three months ended June 30, 2023:

Weighted Average

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Nonvested April 1, 2023

Nonvested December 31 ,

Nonvested June 30 ,

EMPLOYEE STOCK PURCHASE PLAN

On September 15, 2022, our shareholders approved the 2022 Employee Stock Purchase Plan

(“2022 ESPP”) through which eligible employees may purchase shares of our stock at a purchase price of the lesser of the closing price on the offering date or purchase date, discounted by up to 15 %.

As of December 31, 2022, we had not yet issued any shares under the 2022 ESPP.

On September 15, 2022, our stockholders approved the 2022 Employee Stock Purchase Plan (“ESPP”) through which eligible employees may

purchase up to an aggregate of 2.50 million shares of our stock at 6 -month intervals at a discount off the lesser of the closing market price on the first or the last trading day of each offering period.

Our inaugural offering period under

the ESPP was January 1, 2023, to June 30, 2023.

During the three months ended June 30, 2023, we issued 36,697 shares at a price of $ 38.10 per share under the ESPP.

As of June 30, 2023, there were 2.46 million shares remaining under the ESPP.

COMPENSATION EXPENSE

We recognize compensation cost for awards of restricted stock with graded vesting on a straight-line basis over the requisite service period.

There are no additional

conditions for vesting other than service conditions.

During the three

months ended December 31, 2022, and 2021, we recognized $ 2.0 million and $ 1.8 million of total share-based compensation expense, respectively.

During the nine months ended December 31, 2022, and 2021, we recognized $ 5.7 million and $ 5.4 million of total share-based compensation

expense, respectively.

Unrecognized compensation expense related to unvested restricted stock was $ 11.6 million as of December 31, 2022,

which will be fully recognized over the next 30 months.

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

contribute from time to time at our sole discretion.

The following table provides a

summary of our total share-based compensation expense, including for restricted stock awards and our ESPP, and the related income tax benefit for the three months ended June 30, 2023, and 2022 (in thousands):

Three Months Ended June 30,

Equity-based compensation expense

Income tax benefit

We recognized the income tax benefit as a reduction to our provision for income taxes.

As of June 30, 2023, the total

unrecognized compensation expense related to non-vested restricted stock was $ 16.2 million, which is expected to be recognized over a

weighted-average period of 36 months.

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

at our sole discretion.

Employer contributions to the plan are always fully vested.

For the three months ended December 31, 2022, our estimated contribution expense to the plan was $ 1.1 million, as compared to $ 0.8 million

for the same period in the prior year.

For the nine months ended December 31, 2022, our estimated contribution expense to the plan was $ 3.2

million, as compared to $ 2.6 million for the same period in the prior year.

Our estimated contribution expense to the plan for the three months ended June 30, 2023, and 2022, was $ 1.4 million and $ 1.1 million, respectively.

Our provision for income tax expense was $ 12.7

million and $ 34.1 million for the three and nine months ended December 31, 2022, as compared to $ 9.5 million and $ 31.1 million for the same period in the prior

Our effective tax rate for the three and nine months ended December 31, 2022, was 27.7 % and 28.3 % respectively, compared with 26.4 %

and 27.7 %, respectively, for the same periods in the prior year.

Our effective tax rate for the three and nine months ended December 31,

2022, and December 31, 2021, differed from the US federal statutory rate of 21.0 % primarily due to state and local income taxes.

effective tax rate was higher for the three months ended December 31, 2022, than for the same period in the prior year due to a tax benefit from restricted stock in the prior year.

Our effective tax rate was higher for the nine months ended

December 31, 2022, than for the same period in the prior year due to foreign currency transaction losses incurred in lower tax jurisdictions .

million for the three months ended June 30, 2023 , as compared to $ 8.7

million for the same period in the prior year.

Our effective income tax rate for the three months ended June 30, 2023 , was 27.2 %, compared to 28.0 % for the same period in the prior year, primarily due to a lower state effective tax rate.

The effective tax rate for the three months ended June 30, 2023, and June 30, 2022, differed from the US

federal statutory rate of 21.0 % primarily due to state and local income taxes .

FAIR VALUE OF FINANCIAL INSTRUMENTS

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

The following table summarizes the fair value hierarchy of our financial instruments as of June 30, 2023,

and March 31, 2023 (in thousands):

Fair Value Measurement Using

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Observable Inputs

Inputs(Level 3)

December 31 , 2022

June 30 , 2023

Money market funds

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BUSINESS COMBINATIONS

On July 15, 2022, our subsidiary,

ePlus Technology, inc., acquired certain assets and liabilities of Future Com, Ltd., a Texas-based provider of cybersecurity solutions, cloud security and security consulting services throughout the US.

Our acquisition provides access to

enhanced engineering, sales, and services delivery capabilities in the South-Central region of the United States, as well as bolstering the skills and expertise surrounding ePlus’ growing cybersecurity practice.

Our sum for consideration transferred

is $ 13.3 million consisting of $ 13.0

million paid in cash at closing plus an additional $ 0.3 million that was subsequently paid to the sellers based on adjustments to our

determination of the total net assets delivered.

Our allocation of the purchase consideration to the assets acquired and liabilities assumed is presented below (in thousands):

SOLUTIONS GROUP (NSG)

On April 30, 2023, our subsidiary, e Plus Technology, inc., acquired certain assets and liabilities of NSG, formerly a business unit of CCI Systems, Inc., a Michigan-based provider of

networking services and solutions.

This acquisition will help drive additional growth for us in the service provider end-markets with enhanced engineering, sales, and services delivery capabilities specific to the industry.

Our preliminary sum for consideration transferred is $ 48.6 million consisting of $ 59.6 million paid in cash at closing minus $ 11.0

million that is due to us from the sellers based on adjustments to our determination of the total net assets delivered .

preliminary allocation of the purchase consideration to the assets acquired and liabilities assumed is presented below (in thousands):

Acquisition Date

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We expect to collect all acquired receivables.

We recognized goodwill related to this transaction of $ 9.7 million, which was assigned to our technology reporting unit.

The goodwill recognized in the acquisition is attributable to the acquired

assembled workforce and expected synergies, none of which qualify for recognition as a separate intangible asset.

We recognized goodwill related to this transaction of $ 22.1

million, of which $ 19.7 million and $ 2.4

million were assigned to our product and professional services reporting units, respectively.

The goodwill recognized in the acquisition is attributable to the acquired assembled workforce and expected synergies, none of which qualify for

recognition as a separate intangible asset.

The total amount of goodwill is expected to be deductible for tax purposes.

The amount of revenues and earnings of the acquiree

since the acquisition date are not material.

Likewise, the impact to the revenue and earnings of the combined entity for the current reporting period as though the acquisition date had been April 1, 2022, is not material.

The amount of revenues and earnings of the acquiree since the acquisition date are not material.

Likewise, the impact to the revenue and earnings of the combined entity for the current reporting period as though the

acquisition date had been April 1, 2023, is not material.

SEGMENT REPORTING

Our operations are conducted through two operating segments

that are also both reportable segments.

Our technology segment includes sales of IT products, third-party software, third-party maintenance, advanced professional and managed services, and our proprietary software to commercial enterprises, state and

local governments, and government contractors.

Our financing segment consists of the financing of IT equipment, software, and related services to commercial enterprises, state and local governments, and government contractors.

Prior to the start of the

fiscal year ending March 31, 2024, we had two segments:

technology and financing.

During the quarter ended June 30, 2023, we split our

Our professional

services and managed services are a significant component of our growth and long-term strategic initiatives.

Subsequently, we manage and report our operating results through four operating segments:

product, professional services, managed services, and financing.

Our product segment includes sales of IT products, third-party software, and

third-party maintenance, software assurance, and other third-party services.

Our professional services segment includes our advanced professional services, staff augmentation, project management services, cloud consulting services and security

Our managed services segment includes our advanced managed services, service desk, storage-as-a-service, cloud hosted services, cloud managed services and managed security services.

Our financing segment consists of the financing of IT

equipment, software, and related services to commercial enterprises, state and local governments, and government contractors.

We measure the

performance of the segments based on operating income.

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

Three Months Ended

December 31, 2022

December 31, 2021

Cost of Sales

Selling, general, and administrative

Depreciation and amortization

Interest and financing costs

Operating expenses

performance of the segments within our technology business based on gross profit, while we measure our financing segment based on operating income.

We do not present asset information for our reportable segments as we do not provide asset

information to our chief operating decision maker (“CODM”).

The following table provides reportable segment information for the three-month

periods ended June 30, 2023, and 2022 (in thousands):

Three Months Ended June 30,

Professional Services

Managed Services

Professional Services

Managed Services

Operating income

Technology Business

Other income (expense), net

Earnings before tax

Contracts with customers

Financing and other

Selected Financial Data - Statement of Cash Flow

Depreciation and amortization

Purchases of property, equipment and operating lease equipment

Selected Financial Data - Balance Sheet

Nine Months Ended

December 31, 2022

December 31, 2021

Cost of Sales

Selling, general, and administrative

Depreciation and amortization

Technology Business

Interest and financing costs

Operating expenses

Operating income

Other income (expense), net

Earnings before tax

Technology Business

Selected Financial Data - Statement of Cash Flow

Purchases of property, equipment and operating lease equipment Technology Business

The following table provides a disaggregation of net sales by source and further disaggregates our revenue

recognized from contracts with customers by timing and our position as principal or agent for the three-month period ended June 30, 2023 (in thousands):

Three months ended June 30, 2023

Managed Services

Contracts with customers

Financing and other

Selected Financial Data - Statement of Cash Flow

Depreciation and amortization

Purchases of property, equipment and operating lease equipment

Selected Financial Data - Balance Sheet

TECHNOLOGY SEGMENT DISAGGREGATION OF REVENUE

We analyze net sales for our technology segment by customer end market and by vendor, as opposed to discrete product and service categories, which are summarized for the

three- and nine-month periods ended December 31, 2022, and 2021 in the tables below (in thousands):

Three Months Ended December 31,

Nine Months Ended December 31,

Timing and position as

principal or agent

Transferred at a point in

time as principal

Transferred at a point in

time as agent

Transferred over time as

Total revenue from

contracts with customers

The following table provides a disaggregation of net sales by source and

further disaggregates our revenue recognized from contracts with customers by timing and our position as principal or agent for the three-month period ended June 30, 2022 (in thousands):

Three months ended June 30, 2022

Managed Services

Contracts with customers

Financing and other

Timing and position as

principal or agent

Transferred at a point in

time as principal

Transferred at a point in

time as agent

Transferred over time as

Total revenue from

contracts with customers

TECHNOLOGY BUSINESS DISAGGREGATION OF REVENUE

The following table provides a disaggregation of our revenue from contracts with customers for our technology business by customer end market and by type (in

Three Months Ended June 30,

Customer end market:

Telecom, media & entertainment

State and local government and educational institutions

Financial services

revenue from financing and other

Revenue from contracts with customers

Three Months Ended December 31,

Nine Months Ended December 31,

Cisco systems

Juniper networks

Arista networks

Total revenue from contracts with customers

Collaboration

Total product

Professional services

Managed services

revenue from financing and other

Revenue from contracts with customers

Total revenue from contracts with customers

We do not disaggregate sales by customer end market beyond the technology business level.

FINANCING SEGMENT DISAGGREGATION OF REVENUE

We analyze our revenues

within our financing segment based on the nature of the arrangement.

Our financing revenue generally consists of portfolio income, transactional gains, and post-contract earnings including month-to-month rents and the sales of off-lease

All of our revenues from contracts with customers within our financing segment is from the sales of off-lease equipment.

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

This discussion is intended to further the reader’s understanding of our consolidated financial condition and results of operations.

It should be read in conjunction with the unaudited consolidated financial

statements included in this Quarterly Report on Form 10-Q and the audited consolidated financial statements included in our 2022 Annual Report.

These historical financial statements may not be indicative of our future performance.

Management’s Discussion and Analysis of Financial Condition and Results of Operations may contain forward-looking statements, all of which are based on our current expectations and could be affected by the uncertainties and risks described in

Part I, Item 1A, “ Risk Factors ,” in our 2022 Annual Report, as well as in our other filings with the SEC.

EXECUTIVE OVERVIEW

BUSINESS DESCRIPTION

We are a leading solutions provider in the areas of security, cloud, networking, data center, collaboration, and emerging technologies.

We deliver actionable outcomes for organizations by using information technology (“IT”) and consulting

solutions to drive business agility and innovation.

Leveraging our engineering talent, we assess, plan, deliver, and secure solutions comprised of leading technologies and consumption models aligned with our customers’ needs.

Our expertise and

experience enable us to craft optimized solutions that take advantage of the cost, scale, and efficiency of private, public and hybrid cloud in an evolving market.

As part of our solutions, we provide consulting, professional services, managed

services, IT staff augmentation, and complete lifecycle management.

Additionally, we offer flexible financing for purchases from us and from third-parties.

We have been in the business of selling, leasing, financing, and managing IT and other

assets for more than 30 years.

Our primary focus is to deliver integrated solutions that address our customers’ business needs, leveraging the appropriate technologies, both on-premise and in the cloud.

Our approach is to lead with advisory consulting to understand our

customers’ needs, and then design, deploy, and manage solutions aligned to their objectives.

Underpinning the broader areas of Cloud, Security, Networking, Data Center, and Collaboration are specific skills in orchestration and automation,

application modernization, DevOps, data management, data visualization, analytics, network modernization, edge compute and other advanced and emerging technologies.

These solutions are comprised of class-leading technologies from partners such as Amazon Web Services, Arista Networks, Check Point, Cisco Systems, Citrix, Commvault, Dell EMC, F5 Networks, Fortinet, Gigamon, HPE, Juniper Networks, Lenovo, Microsoft, NetApp, Nutanix, NVIDIA, Oracle, Palo Alto

Networks, Pure Storage, Rubrik, Splunk, Varonis, and VMware, among many others.

We possess top-level engineering certifications with a broad range of leading IT vendors that enable us to offer multi-vendor IT solutions that are optimized

for each of our customers’ specific requirements.

Our hosted, proprietary software solutions are focused on giving our customers more control over their IT supply chain, by automating and optimizing the procurement and management of their owned,

leased, and consumption-based assets.

Our scale and financial resources have enabled us to continue investing in engineering and technology resources to stay at the forefront of technology trends.

Our expertise in core and emerging technologies, buttressed by our robust portfolio of

consulting, professional, and managed services, has enabled us to remain a trusted advisor for our customers.

In addition, we offer a wide range of consumption options including leasing and financing for technology and other capital assets.

believe our lifecycle approach offering of integrated solutions, services and financing, asset management and our proprietary supply chain software, is unique in the industry.

This broad portfolio enables us to deliver a customized customer

experience that spans the continuum from fast delivery of competitively priced products and services to subsequent management and maintenance, and through to end-of-life disposal services.

This approach permits us to deploy sophisticated solutions

to enable our customers’ business outcomes.

Our go-to-market strategy focuses primarily on diverse end-markets for middle market to large enterprises.

We serve customers in markets including telecom, media and entertainment, technology, state and local

government and educational institutions (“ SLED”), healthcare, and financial services.

We sell to customers in the United States (“US”), which account for most of our sales, and to customers in select

international markets including the United Kingdom (“UK”), the European Union (“EU”), India, and Singapore .

Our technology segment accounted for 97% of our net sales and 83% of our operating income, while our financing segment accounted

for 3% of our net sales and 17% of our operating income, for the nine months ended December 31, 2022.

BUSINESS TRENDS

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

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

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

Like others, we are experiencing ongoing supply constraints that

have affected, and could continue to further affect, lead times for delivery of products, our having to carry more inventory for longer periods, the costs of products, vendor return and cancellation policies, and our ability to meet

customer demands.

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

Despite these actions, we believe extended lead times will likely persist for at least the next few quarters.

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

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

Our labor costs related to

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

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

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

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

on the transaction.

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

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

We have developed advisory

services, solutions, and professional and managed services to meet these priorities and help our customers attain and maintain their desired state.

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

and consuming technology.

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

KEY BUSINESS METRICS

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

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

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

gross billings, Non-GAAP:

Net earnings and Non-GAAP:

Net earnings per common share.

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

and prepare and approve annual budgets.

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

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

and presented in accordance with US GAAP.

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

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

Set forth in footnotes (1), (2) and (3) of the tables that immediately follow this paragraph, we set forth our reasons for using and presenting Adjusted EBITDA, Adjusted EBITDA margin, Adjusted gross

billings, Non-GAAP:

Net earnings and Non-GAAP:

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

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

Three Months Ended

Nine Months Ended

Operating income margin

Net earnings margin

Net earnings per common share - diluted

Net earnings (1)

Net earnings per common share - diluted (1)

Adjusted EBITDA (2)

Adjusted EBITDA margin

Technology Segment

Adjusted gross billings (3)

Operating income

Adjusted EBITDA (2)

Financing Segment

Operating income

Adjusted EBITDA (2)

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.

We believe that the

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

Net earnings and Non-GAAP:

Net earnings per common share diluted provides management and investors a useful measure for period-to-period comparisons of

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

Accordingly, we believe that Non-GAAP:

Net earnings and Non-GAAP:

Net earnings per common share diluted

provide useful information to investors and others in understanding and evaluating our operating results.

However, our use of non-GAAP information as analytical tools has limitations, and you should not consider them in isolation or as substitutes

for analysis of our financial results as reported under US GAAP.

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

Net earnings and Non-GAAP:

Net earnings per common share or similarly titled

measures differently, which may reduce their usefulness as comparative measures.

Three Months Ended

Nine Months Ended

Earnings before tax

Share based compensation

Acquisition related amortization expense

Other (income) expense

Earnings before provision for income taxes

Provision for income taxes

Share based compensation

Acquisition related amortization expense

Other (income) expense

Tax benefit (expense) on restricted stock

Provision for income taxes

Three Months Ended

Nine Months Ended

Net earnings per common share - diluted

Share based compensation

Acquisition related amortization expense

Other (income) expense

Tax benefit (expense) on restricted stock

Total non-GAAP adjustments - net of tax

Net earnings per common share - diluted

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.

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

In the table below, we provide a reconciliation of Adjusted EBITDA to net earnings, which is the most directly comparable financial

measure to this non-GAAP financial measure.

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

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

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

However, our use of Adjusted EBITDA and Adjusted EBITDA

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

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

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

Three Months Ended

Nine Months Ended

Provision for income taxes

Share based compensation

Interest and financing costs

Depreciation and amortization

Other income (expense)

Adjusted EBITDA

Technology Segment

Operating income

Depreciation and amortization

Share based compensation

Interest and financing costs

Adjusted EBITDA

Financing Segment

Operating income

Depreciation and amortization

Share based compensation

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.

Three Months Ended

Nine Months Ended

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.

In addition, other

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

CONSOLIDATED RESULTS OF OPERATIONS

Net sales for the three months ended December 31, 2022, increase d $128.7 million, or 26.0%, to $623.5 mill ion, as compared to $494.8 million for the

same period in the prior year.

Product sales for the three months ended December 31, 2022, increase d $123.7 million, or 28.6% to $556.0 million, as compared to $432.3 million for the same period in the prior year , due to increased demand and higher prices for some products in our technology segment.

Service sales for the three months ended December 31, 2022, increas ed $5.0 million, or 7.9%, to $67.5 million,

as compared to $62.5 m illion for the same period in the prior year, primarily due to growth in managed services volume.

In the technology segment, we had increases in net sales to customers in technology,

telecom, media, and entertainment, professional services, financial services, SLED, and healthcare due to increases in demand from existing customers.

Net sales for the nine months ended December 31, 2022, increase d $206.0 million, or 15.0%, to $1,575.5 mill ion, as compared to $1,369.5 million for the same period in

the prior year.

Product sales for the nine months ended December 31, 2022, increase d $189.3 million, or 15.9%, to $1,379.8 million, as compared to $1,190.5 million for the same period in the prior year ,

due to increased demand and higher prices for some products in our technology segment.

Service sales for the nine months ended December 31, 2022, increas ed $16.7 million, or 9.4%, to $195.7 million, as

compared to $179.0 m illion for the same period in the prior year, primarily due to growth in managed services volume and increases in professional services volume and rates.

In the technology segment, we

had increases in net sales to customers in technology, telecom, media, and entertainment, professional services, financial services, and SLED due to increases in demand and the timing of fulfilling orders from existing customers, which were

partially offset by decreases in net sales to customers in manufacturing due to the timing of fulfilling orders from existing customers during the nine months ended December 31, 2022, compared to the same period in the prior year.

Withing our technology segment, Adjusted gross billings for the three months for the three months ended December 31, 2022, increased $203.6 million, or 29.7%, to $888.6 million, as compared to $685.0 million for the

same period in the prior year.

We had increases in adjusted gross billings to customers in technology, telecom, media, and entertainment, professional services, financial services, SLED, and healthcare.

Adjusted gross billings for the nine months ended December 31, 2022, increased $374.1 million, or 18.9%, to $2,356.3 million, as compared to $1,982.2 million for the same period in the prior year.

We had increases in

adjusted gross billings to customers in technology, telecom, media and entertainment, professional services, financial services, SLED, and healthcare, which were partially offset by decreases in adjusted gross billings to customers in the

manufacturing market.

Gross profit :

Consolidated gross profit for the three months ended December 31, 2022, increased $21.3 million, or 18.1%, to $138.4 million, as compared to $117.1 million for the same period in the prior year.

gross profit increased during the three month period ended December 31, 2022, our overall gross margin decreased, primarily due to lower service margins.

We also had a decrease in product margins during this period, driven by a lower volume of

sales of third party maintenance, software assurance and subscription/SaaS licenses, and services.

Consolidated gross margins for the three months ended December 31, 2022, decreased 150 basis points to 22.2%, as compared to 23.7% for the same

period in the prior year.

Consolidated gross profit for the nine months ended December 31, 2022, increased $39.6 million, or 11.4%, to $385.2 million, as compared to $345.6 million for the same period in the prior year.

While gross profit

increased during the nine month period ended December 31, 2022, our overall gross margin decreased, primarily due to lower service margins.

We also had a decrease in product margins during this period, driven by a lower volume of sales of third

party maintenance, software assurance and subscription/SaaS licenses, and services.

Consolidated gross margins for the nine months ended December 31, 2022, decreased 80 basis points to 24.4%, as compared to 25.2% for the same period in the prior

Operating expenses :

Operating expenses for the three months ended December 31, 2022 , increased $10.9 million, or 13.4%, to $91.9 million, as compared to $81.0 million for the same period in the

Our increase in operating expenses was primarily due to an increase in salaries and benefits of $6.8 million, an increase in general and administrative expenses of $2.0 million including higher software, subscription, and maintenance

fees, professional service fees, and travel and entertainment costs, an increase in our provision for credit losses of $1.1 million caused by an increase in our receivables over this period compared to the same period in the prior year, and an

increase in interest and financing costs of $1.0 million.

As of December 31, 2022 , we had 1,745 employees, an increase of 191 from 1,554 as of December 31, 2021.

Operating expenses for the nine months ended December 31, 2022 , increased $28.7 million, or 12.3%, to $261.5 million, as compared to $232.8 million for the same period in the prior year.

Our increase in

operating expenses was primarily due to an increase of $16.5 million in salaries and benefits, an increase of $8.8 million in general and administrative expenses including higher advertising and marketing fees, software, subscription and

maintenance fees, professional service fees, and travel and entertainment costs, an increase of $2.8 million in our provision for credit losses caused by an increase in our receivables over this period compared to the same period in the prior year,

an increase of $1.6 million in interest and financing costs, and partially offset by a $1.0 million decrease in depreciation and amortization.

Operating income :

As a result of the foregoing, operating income for the three months ended December 31, 2022, increased $10.4 million, or 28.7% , to $46.5

million, as compared to $36.1 millio n for the same period in the prior year.

Operating income for the nine months ended December 31, 2022, increased $10.9 million, or 9.7% ,

to $123.7 million, as compared to $112.8 millio n for the same period in the prior year.

Provision for inco me taxes :

Our effective tax rate for the three and nine months ended December 31, 2022, was 27.7% and 28.3% respectively, compared with 26.4% and 27.7%, respectively, for

the same periods in the prior year.

Our effective tax rate was higher for the three months ended December 31, 2022, than for the same period in the prior year due to a tax benefit from restricted stock in the prior year.

Our effective tax rate was

higher for the nine months ended December 31, 2022, than for the same period in the prior year due to foreign currency transaction losses incurred in lower tax jurisdictions.

Net earnings :

Consolidated net earnings for the three months ended December 31, 2022, increased $9.3 millio n, or 35.1%, to $35.7 million, as compared to $26.4 million for the same period in the prior year, due to an increase in gross profit and other income (expense), net.

The increase in other income (expense),

net was driven by the receipt of $1.9 million related to our claim in a class action lawsuit, which was received in December 2022, and foreign exchange gains.

These increases were partially offset by an increase in operating expenses.

Consolidated net earnings for the nine months ended December 31, 2022, increased $5.1 millio n, or 6.3%, to $86.5 million,

as compared to $81.4 million for the same period in the prior year, due to an increase in gross profit, offset by an increase in operating expenses and foreign exchange losses.

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

Adjusted EBITDA margin for

the three months ended December 31, 2022, increased 20 b asis points to 8.6% , as compared to the prior year period of 8.4%.

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

Adjusted EBITDA margin for

the nine months ended December 31, 2022, decreased 50 b asis points to 9.0% , as compared to the prior year period of 9.5%.

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

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

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

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

SEGMENT OVERVIEW

Our operations are conducted through two segments:

technology and financing.

TECHNOLOGY SEGMENT

Our technology segment earns revenues from sales of IT products, professional services, managed services, and staff augmentation.

Our technology segment sells primarily to corporations, state and local governments, and

higher education institutions.

We sell across the US, which accounts for most of our sales, and in select international markets.

Our technology segment also provides business-to-business supply chain management solutions for IT products.

Our customers generally purchase IT products and services from us under the terms and conditions of a customer master agreement (“CMA”).

Our customers generally place orders for IT products using purchase orders.

Customer orders from state and local governments may involve public bids and our written bid responses.

Our customers generally purchase services from us under the terms of statements of work.

Our charges for services may be fixed price or

determined on time and materials.

We purchase IT products for resale from vendors and distributors.

Our relationships with vendors are generally governed by our reseller authorization level.

We achieve these authorization levels through purchase

volume, certifications held by sales executives or engineers, and though contractual commitments.

Our authorization level determines the types of products we can resell, variable discounts applied against the list price, funds provided for the

marketing, and other special promotions.

We endeavor to minimize our cost of sales through vendor incentive programs.

Our benefit from these programs is also determined by our reseller authorization level.

These authorization levels are costly to maintain

and vendors often change their incentive programs.

As such, our ability to continue to reduce our costs of sales through participating in these programs is not guaranteed.

FINANCING SEGMENT

Our financing segment offers financing solutions to corporations, state and local governments, and higher education institutions.

We provide financing across the US ,

which accounts for most of our sales, and in select international markets .

Our financing segment earns revenues from leasing IT equipment, from financing purchases of third-party software licenses, software assurance, maintenance, and

other services, and from selling IT equipment at the end of a lease.

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

Portfolio income:

Interest income from financing receivables and rents due under operating leases

Transactional gains:

Net gains on the sale of financial assets;

Post-contract earnings:

Month-to-month rents;

early termination, prepayment, make-whole, or buyout fees;

and sales of off-lease equipment

FLUCTUATIONS IN OPERATING RESULTS

Our operating results may fluctuate due to customer demand for our products and services, supplier costs, wage costs, product availability, changes in vendor incentive programs, interest rate fluctuations, the timing

of sales of financial assets, general economic conditions, and differences between estimated residual values and actual amounts realized for leased equipment.

We expect to continue to expand by hiring additional staff for specific targeted market

areas and roles whenever we can find both experienced personnel and desirable geographic areas over the longer term, which may impact our operating results.

SEGMENT RESULTS OF OPERATIONS

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

TECHNOLOGY SEGMENT

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

Three Months Ended

Nine Months Ended

Cost of sales

Selling, general, and administrative

Depreciation and amortization

Interest and financing costs

Operating expenses

Operating income

Adjusted gross billings

Adjusted EBITDA

Net sales for the three months ended December 31, 2022, increased $134.8 million, or 28.3%, to $611.8 million, as compared to $477.0 m illion for the

same period in the prior year, due to increases in net sales from customers in technology, telecom, media, and entertainment, financial services, SLED, and healthcare.

Product sales for the three months ended December 31, 2022, increase d

$129.9 million, or 31.3%, to $544.3 million, as compared to $414.4 million for the same period in the prior year .

Service sales for the three months ended December 31, 2022, increas ed $5.0 million, or 7.9%,

to $67.5 million, as compared to $62.5 m illion for the same period in the prior year, due to an increase in managed services.

Net sales for the nine months ended December 31, 2022, increased $218.4 million, or 16.6%, to $1,532.0 million, as compared to $1,313.6 m illion for the same period in

the prior year, due to increases in net sales from customers in technology, telecom, media, and entertainment, financial services, SLED, and healthcare.

Product sales for the nine months ended December 31, 2022, increased 17.8%, or $201.7 million

to $1,336.3 million, as compared to $1,134.7 million for the same period in the prior year, and service revenue increased by 9.4%, or $16.7 million, to $195.7 million, as compared to $179.0 million during the same period in the prior year.

Adjusted gross billings for the three months ended December 31, 2022, increase d $203.6 million, or 29.7%, to $888.6 million, as compared to $685.0 million for the same period in the prior yea r.

Our increase in adjusted gross billings was due to higher demand from our current customers and higher prices for some products.

Adjusted gross billings for the nine months ended December 31, 2022, increase d $374.2 million, or 18.9%, to $2,356.3 million, as compared to $1,982.2 million for the same period in the prior yea r.

The increase in adjusted gross billings is due to higher demand from the same customer end markets that were previously identified for the increase in net sales.

We rely on our vendors to fulfill a large majority of shipments to our customers.

As of December 31, 2022, we had open orders of $957.3 million and deferred revenue of $168.6 million.

As of December 31, 2021,

we had open orders o f $852.9 million and deferred revenue of $121.0 million.

We analyze net sales by customer end market and by vendor, as opposed to discrete product and service categories.

The percentage of net sales by industry and vendor for the twelve month periods ended December

31, 2022 , and 2021 are summarized below:

Twelve Months Ended

Net sales by customer end market:

Telecom, Media & Entertainment

Financial Services

Twelve Months Ended

Net sales by vendor:

Cisco Systems

Juniper Networks

Arista Networks

Our revenues by customer end market have remained consistent over the twelve-month period, with over 80% of our revenues generated from customers within the five end markets identified above.

During the trailing twelve month period ended

December 31, 2022 , we had an increase in the percentage of total revenues from customers in the technology industry, and decreases in the percentage of total revenues in the telecom, media and

entertainment, healthcare, and SLED, industries.

These changes were driven by changes in customer buying cycles and the timing of specific IT-related initiatives, rather than the acquisition or loss of a customer or set of customers.

The majority of our revenues by vendor is derived from our top six suppliers.

None of the vendors included within the “All others” category individually exceeded 5% of total net sales.

Cost of sales :

Cost of sales for the three months ended December 31, 2022 , increased $111.4 million, or 29.9%, to $483.9 million, as compared to $372.5

m illion for the same period in the prior year.

Our gross margin decreased 100 b asis points to 20.9% for the three months ended December

31, 2022 , compared to 21.9% for the same period in the prior year.

Our decrease in gross margins was primarily due to lower service gross margin from a change in services mix.

We also had a decrease in

product margins, of 10 basis points to 19.2%.

Cost of sales for the nine months ended December 31, 2022, increased $173.6 million, or 17.2%, to $1,182.3 million, as compared to $1,008.6 million, which is in-line with the increase in net sales that occurred

during the prior year period.

Our gross margin decreased 40 b asis points to 22.8% for the nine months ended December 31, 2022 , compared to 23.2% for the same period in the prior year, primarily due to lower service margins offset by higher product margins.

Selling, general, and administrative :

Selling, general, and administrative expenses for the three months ended December 31, 2022 , increased $8.5 million,

or 11.5%, to $81.9 million, as compared to $73.4 million for the same period in the prior year.

Salaries and benefits for the three months ended December 31, 2022, increased $7.2 million, or 11.4% to $70.5 million, as compared to $63.3 million for the same period in the prior

year, primarily due to an increase in salaries driven by increases in headcount and an increase in variable compensation driven by increases in gross profit.

Our technology segment had 1,709 employees as of December 31, 2022 , an increase of 188 from 1,521 as of December 31, 2021, driven by increased demand for our services and the acquisition of

Future Com, Ltd.

We added 157 additional customer-facing employees, of which 101 were professional services and technical support personnel.

General and administrative expenses for the three months ended December

31, 2022, increased $1.0 million, or 10.0%, to $11.0 million, as compared to $10.0 million for the same period in the prior year, due to higher professional service fees, and higher travel and

entertainment costs.

Selling, general, and administrative expenses for the nine months ended December 31, 2022 , increased by $24.8 million, or 11.8%, to $235.1 million, as compared to $210.4 million for the same period in

the prior year.

Salaries and benefits for the nine months ended December 31, 2022, increased $16.4 million, or 9.0% to $198.5 million, compared to $182.1 million during the same period in the prior year , mainly due to an increase in salaries driven by increases in headcount and an increase in variable compensation driven by increases in gross profit.

General and administrative expenses for the nine months

ended December 31, 2022, increased $7.1 million, or 25.4%, to $35.3 million, as compared to $28.2 million for the same period in the prior year, due to higher

advertising and marketing fees, professional service fees, software license and maintenance fees, and higher travel and entertainment costs.

Depreciation and amortization :

Depreciation and amortization for the three months ended December 31, 2022 , remained flat at $3.6 million, as compared to

the same period in the prior year.

Depreciation and amortization for the nine months ended December 31, 2022 , decreased $1.0 million, or 8.7%, to $10.3 million, as compared

to $11.3 mi llion for the same period in the prior year.

Interest and financing costs :

Interest and financing costs for the three and nine months ended December 31, 2022, were $1.3 million and $2.1 million, respectively, an

increase of $1.0 million and $1.4 million, respectively, as compared to $0.3 million and $0.7 million, respectively, for the same periods in the prior year.

The increase in interest expense for the three and nine month periods is primarily due to

an increase in borrowings from our revolving credit facility.

We had $103.0 million of recourse debt in our technology segment as of December 31, 2022, compared to $58.8 million as of December 31, 2021.

Segment operating income :

As a result of the foregoing, operating income for the three

months ended December 31, 2022 , increased $13.9 million, or 51.3%, to $41.1 million, as compared to $27.2 million for the same period in the prior year.

Operating income

for the nine months ended December 31, 2022, increased $19.6 million, or 23.7% , to $102.2 million, as compared to $82.6 millio n for the same period in the prior

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

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

FINANCING SEGMENT

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

Three Months Ended

Nine Months Ended

Cost of sales

Selling, general, and administrative

Depreciation and amortization

Interest and financing costs

Operating expenses

Operating income

Adjusted EBITDA

Net sales for the three months ended December 31, 2022, decreased $6.2 m illio n, or 34.5%, to $11.7 mi llion,

as compared to $17.9 million for the same period in the prior year.

The decrease in net sales was due to lower post- contract and portfolio earnings, partially offset by higher transactional gains.

For the three months ended December 31, 2022, we

recognized net gains on sales of financial assets of $5.2 mi llion and proceeds from these sales were $157.2 million.

For the three months ended December 31, 2021, net gains on the sale of financial assets

w ere $2.3 million and the proceeds from these sales were $63.5 million.

Net sales for the nine months ended December 31, 2022, decreased $12.4 m illio n, or 22.1%, to $43.5 mi llion, as compared to

$55.9 million for the same period in the prior year.

The decrease in net sales was due to lower post-contract and portfolio earnings and transactional gains.

For the nine months ended December 31, 2022, we recognized net gains on sales of

financial assets of $15.1 mi llion and proceeds from these sales were $586.1 million.

For the nine months ended December 31, 2021, net gains on the sale of financial assets w ere $15.6 million and

the proceeds from these sales were $753.9 million.

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

Cost of sales :

Cost of sales for the three months ended December 31, 2022, decreased $4.0 million, or 77.3%, to $1.2 million, as compared to $5.2 million for the same period in the prior year, due to

lower cost of sales on off-lease equipment and depreciation expense from operating leases.

Gross profit for the three months ended December 31, 2022, decreased by 16.8% to $10.5 million, as compared to the same period in the prior year.

Cost of sales for the nine months ended December 31, 2022, decreased $7.1 million, or 46.9%, to $8.1 million, as compared to $15.2 million for the same period in the prior year, due to lower cost of sales of off-lease

equipment and depreciation expense from operating leases.

Gross profit for the nine months ended December 31, 2022, decreased by 12.8% to $35.4 million, as compared to the same period in the prior year.

Selling, general and administrative :

Selling, general, and administrative expenses for the three months ended December 31, 2022 , increased $1.4 million, or 40.3%, to $4.9 million, as compared to $3.5 million for the same period in the prior year, due to higher general and administrative expenses

consisting mostly of higher professional service fees, higher software, license and maintenance fees driven by the deployment of newly hosted software in August 2022, and a higher reserve for credit losses caused by changes in our net credit

Selling, general, and administrative expenses for the nine months ended December 31, 2022 , increased $3.3 million, or 33.4%, to $13.1 million, as compared to $9.8 million for the same period in the

prior year, due to higher general and administrative expenses consisting mostly of higher professional service fees, higher software, license and maintenance fees driven by the deployment of newly hosted software

in August 2022, and a higher reserve for credit losses caused by changes in our net credit exposure.

In August 2022, we completed the deployment of a new hosted software to manage our financing portfolio.

As a result, we anticipate higher general and administrative costs of approximately $1.5 million per year

related to amortizing the cost to implement the hosted software and annual fees paid to license the hosted software.

Interest and financing costs :

Interest and financing costs for the three months ended December 31, 2022, increased by 18.1% to $0.3 million, and increased by 31.1% to $0.7 million for the nine months

ended December 31, 2022, compared to the prior year.

As of December 31, 2022, our notes payable was $48.5 million, an increase of $4.9 million, or 11.2% compared to notes payable of $43.6 million as of December 31, 2021.

As of December 31, 2022,

and 2021, our notes payable consisted entirely of non-recourse notes payable.

Our weighted average interest rate for non-recourse notes payable was 5.05% and 3.68%, a s of December 31, 2022, and 2021,

respectively.

Segment operating income :

As a result of the foregoing, operating income for the three months ended December 31, 2022, decreased by $3.6 million to $5.4 million and Adjusted EBITDA decrease d by

$3.5 million to $5.5 million, as compared to the prior year period.

Operating income and Adjusted EBITDA for the nine months ended December 31, 2022, decreased by $8.7 million to $21.5 million and $21.8 million,

respectively, as compared to the same period in the prior year.

Other income (expense), net :

Other income (expense), net for the three and nine months ended December 31, 2022 was a net gain of $2.9 million and a net expense of $3.1 million, respectively,

compared to a net expense of $0.2 million and a net expense of $0.4 million, respectively, for the same periods in the prior year.

Our higher net gain for the three months ended December 31, 2022, was due to higher net foreign exchange gains in the

current period and $1.9 million we received in December 2022 related to our claim in a class action lawsuit.

Our higher net expense for the nine months ended December 31, 2022, was due to higher exchange losses that were only partially offset by

the gain related to our claim in a class action lawsuit.

Provision for income taxes :

Our provision for income tax expense was $13.7 million and $34.1

million for the three and nine months ended December 31, 2022, as compared to $9.5 million and $31.1 million for the same periods in the prior year.

Our effective tax rate for the three and nine months ended December 31, 2022, was 27.7% and 28.3%

respectively, compared with 26.4% and 27.7%, respectively, for the same periods in the prior year.

Our effective tax rate was higher for the three months ended December 31, 2022, than for the same period in the prior year due to a tax

benefit from restricted stock in the prior year.

Our effective tax rate was higher for the nine months ended December 31, 2022, than for the same period in the prior year due to foreign currency transaction losses incurred in lower tax

jurisdictions.

Net earnings :

As a result of the foregoing, our net earnings for the three months ended December 31, 2022, increased $9.3 million, or 35.1%, to $35.7 million, as compared to $26.4 million during the same period in

the prior year.

Net earnings for the nine months ended December 31, 2022, increased $5.1 million, or 6.3%, to $86.5 million, as compared to $81.4 million during the same period in the prior year.

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

months ended December 31, 2021.

Basic and fully diluted earnings per common share were $3.26 and $3.24, respectively, for the nine months ended December 31, 2022, an increase of 6.9%, as compared to $3.05 and $3.03, respectively, for the nine

months ended December 31, 2021.

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

Non-GAAP net earnings

per common share diluted for the nine months ended December 31, 2022, increased $0.28, or 8.3%, to $3.66, as compared to $3.38 for the nine months ended December 31, 2021.

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

average common shares outstanding was 26.6 million in the calculation of basic earnings per common share for the nine months ending December 31, 2022, and 26.7 million in the calculation of diluted earnings per common share for the nine months

ending December 31, 2022.

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

diluted earnings per common share for both the three and nine months ending December 31, 2021.

LIQUIDITY AND CAPITAL RESOURCES

LIQUIDITY OVERVIEW

We finance our operations through funds generated from operations and through borrowings.

We use those funds to meet our capital requirements, which have historically consisted primarily of working capital for

operational needs, capital expenditures, purchases of equipment for lease, payments of principal and interest on indebtedness outstanding, acquisitions and the repurchase of shares of our common stock.

Our borrowings in our technology segment are primarily through a credit facility with Wells Fargo Commercial Distribution Finance, LLC (the “WFCDF Credit Facility”).

The WFCDF Credit Facility has an accounts payable

floor plan facility component and a revolving credit facility component.

Our borrowings in our financing segment are primarily through secured borrowings that involve transferring all or part of the contractual payments due to us to third-party

financing institutions.

We believe that cash on hand and funds generated from operations, together with available credit under our WFCDF Credit Facility, will be enough to finance our working capital, capital expenditures, and other

standard business requirements for at least the next year.

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

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

Nine Months Ended December 31,

Net cash used in operating activities

Net cash used in investing activities

Net cash provided by financing activities

Effect of exchange rate changes on cash

Net decrease in cash and cash equivalents

Cash flows from operating activities :

We used $147.0 million in operating activities during the nine months ended December 31, 2022, compared to $121.5 million used by operating activities for the nine months ended

December 31, 2021.

See below for a breakdown of operating cash flows by segment (in thousands):

Nine Months Ended December 31,

Technology segment

Financing segment

Net cash used in operating activities

Technology segment :

For the nine months ended December 31, 2022 , our technology segment used $115.8 million from operating activities primarily due to increases

in our accounts receivable and inventories, partially offset by net earnings.

In the nine months ended December 31, 2021, our technology segment used $112.7 million from operating activities primarily due to increases in our accounts receivable of $123.4 million and inventories of $77.9

million, offset by net earnings.

Additionally, we had net borrowing on the floor plan component of our credit facility of $59.0 million.

We use this facility to manage working capital needs.

We present changes in this balance as financing activity

in our consolidated statement of cash flows.

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

outstanding in accounts payable (“DPO”).

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

As of December 31,

(DSO) Days sales outstanding (1)

(DIO) Days inventory outstanding (2)

(DPO) Days payable outstanding (3)

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 for the same

three month period.

Our cash conversion cycle increased to 51 days as of December 31, 2022, as compared to 47 days as of December 31, 2021.

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

however, certain customer orders may be approved for extended

payment terms.

Our DPO remained the same at 41 days.

Invoices processed through the accounts payable floor plan facility are typically paid within 45-60 days from the invoice date, while accounts payable trade invoices are typically paid within 30

days from the invoice date.

Our DSO decreased by 5 days to 62 days.

The DSO for both December 31, 2022, and 2021, reflects higher sales to customers with terms greater than or equal to net 60 days.

Our DIO increased to 30 days due to higher

inventory balance.

Inventory, which represents equipment ordered by customers but not yet delivered, increased 57.9% to $244.8 million as of December 31, 2022, up from $155.1 million as of March 31, 2022, due to ongoing projects with customers and

supply constraints that lengthen the time over which we receive all the parts in an order for a completed delivery to our customers.

Financing segment :

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

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

million, offset by net earnings.

Cash flows related to investing activities :

For the nine months ended Dec ember 31, 2022 , we used $15.6 million in investing activities, consisting of $13.3

million in cash used in acquiring Future Com, Ltd.

and $5.7 million for purchases of property, equipment, and operating lease equipment, and partially offset by $3.3 million of proceeds from the sale of

property, equipment, and operating lease equipment.

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

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

Cash flows from financing activities :

For the nine months ended December 31, 2022, cash provided by financing activities was $103.6 million, consisting of net borrowings of non-recourse and recourse

notes payable of $101.6 million, partially offset by $7.2 million in cash used to repurchase outstanding shares of our common stock and $9.2 million in net repayments on the accounts payable floor plan facility .

In the nine months ended December 31, 2021, cash provided by financing activities was $116.0 million, consisting of net borrowings on the floor plan component of our credit facility of $59.0 million and net

repayments of non-recourse and recourse notes payable of $66.4 million, partially offset by $9.5 million in cash used to repurchase outstanding shares of our common stock.

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

the transfers do not meet the requirements for a sale, the proceeds paid to us represent borrowings of non-recourse or recourse notes payable.

Non-cash activities :

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

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

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

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

transactions.

SECURED BORROWINGS – FINANCING SEGMENT

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

When we account for the

transfer as a secured borrowing, we recognize the proceeds as either recourse or non-recourse notes payable.

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

The lender typically secures a lien on the financed assets at

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

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

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

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

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

CREDIT FACILITY – TECHNOLOGY SEGMENT

We finance the operations of our subsidiaries e Plus Technology, inc., e Plus Technology Services, inc.

and SLAIT Consulting, LLC

(collectively, the “Borrowers”) in our technology segment through the WFCDF Credit Facility.

The WFCDF Credit Facility has an accounts payable floor plan facility component and a revolving credit facility component.

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

Statements” for additional information concerning our WFCDF Credit Facility.

Accounts payable floor plan facility :

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

customer places a purchase order with us and we have approved their credit, we place an order for the desired products with one of our vendors.

Our vendors are generally paid by the floor plan facility and our liability is reflected in “accounts

payable—floor plan” in our consolidated balance sheets.

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

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

We pay down the

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

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

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

As of December 31, 2022, we had a maximum credit limit of $425.0 million, and an outstanding balance on the floor plan of $154.5 million.

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

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

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

Revolving credit facility :

The outstanding balance under the revolving credit facility is presented as part of recourse notes payable- current on our consolidated balance sheets.

Our borrowings

and repayments under the revolving credit facility are included in “borrowings of non-recourse and recourse notes payable” and “repayments of non-recourse and recourse notes payable,” respectively, within cash flows from the financing activities in

our consolidated statements of cash flows.

As of December 31, 2022, the outstanding balance under the revolving credit facility was $95.0 million.

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

The maximum credit limit under this

facility was $150.0 million as of December 31, 2022, and $100.0 million as of March 31, 2022.

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

segment and as an operational function of our accounts payable process.

PERFORMANCE GUARANTEES

In the normal course of business, we may provide certain customers with performance guarantees, which are generally backed by surety bonds.

In general, we would only be liable for these

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

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

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

OFF-BALANCE SHEET ARRANGEMENTS

As part of our ongoing business, we do not participate in transactions that generate relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or

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

As of December 31, 2022, we were not involved in any unconsolidated

special purpose entity transactions.

ADEQUACY OF CAPITAL RESOURCES

The continued implementation of our business strategy will require a significant investment in both resources and managerial focus.

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

customer relationships and skilled sales and/or engineering forces.

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

We may also acquire technology companies to expand and enhance the platform

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

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

actions may result in increased working capital needs as the business expands.

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

additional debt and equity financing.

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

Additionally, while our lending partners in our financing segment have become more discerning in

their approval processes, we currently have funding resources available for our transactions.

POTENTIAL FLUCTUATIONS IN QUARTERLY OPERATING RESULTS

Our future quarterly operating results and the market price of our common stock may fluctuate.

In the event our revenues or earnings for any quarter are less than the level expected by

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

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

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

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

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

and other factors.

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

financial assets.

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

See Part I, Item 1A, “ Risk Factors ,” in our 2022 Annual Report, as well as in our other filings with the SEC.

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

CRITICAL ACCOUNTING ESTIMATES

As disclosed in Note 2 , “Recent Accounting Pronouncements,” we adopted a new s tandard on accounting for contract assets and contract liabilities from contracts with customers in a business combination

in the second quarter of our fiscal year 2023.

Under this new standard, we apply Accounting Standards Codification Topic 606, Contracts with Customers , to recognize and measure contract assets and contract liabilities from contracts with customers.

Other than this change, our critical accounting estimates have not changed from those reported in Item 7 , “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2022 Annual Report.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Although a substantial portion of our liabilities are non-recourse, fixed-interest-rate instruments, we utilize lines of credit and other financing facilities that are subject to fluctuations in short-term

interest rates.

Our non-recourse instruments, which are denominated in US dollars, were entered for other than trading purposes and bear interest at a fixed rate.

Because the interest rate on these instruments is fixed, changes in interest rates

will not directly impact our cash flows.

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

If the market interest rate exceeds our internal rate of return,

we may not fund the transaction to obtain the proceeds.

Borrowings under the WFCDF Credit Facility bear interest at a market-based variable rate.

As of December 31, 2022, the aggregate fair value of our recourse and non-recourse borrowings

approximated their carrying value.

We have foreign currency exposure when transactions are not denominated in our subsidiaries’ functional currency, which include purchases and sales of the products and services we provide, as well as loans with other

e Plus entities.

Additionally, we lease assets in foreign countries, including Canada, the UK, and several other European countries.

As a lessor, we lease assets for amounts denominated in British Pounds,

Euros, and Canadian dollars.

To date, foreign currency exposure associated with purchases and sales of the products and services we provide has not been significant.

We have incurred foreign currency transaction gains and losses in certain foreign

subsidiaries on US dollar denominated loans.

Fluctuations in currency exchange rates may impact our results of operations and financial position.

CONTROLS AND PROCEDURES

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer (“CEO”) and our Chief

Financial Officer (“CFO”), of the effectiveness of the design and operation of our disclosure controls and procedures, or “disclosure controls,” as defined in the Exchange Act Rule 13a-15(e).

Disclosure controls are controls and procedures designed

to reasonably ensure that information required to be disclosed in our reports filed under the Exchange Act, such as this Quarterly Report, is recorded, processed, summarized, and reported within the periods specified in the SEC’s rules and forms.

Disclosure controls include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to our management, including our CEO

and CFO, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.

Our disclosure controls include some, but not all, components of our internal control over financial reporting.

that evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective as of December 31, 2022.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

In August 2022, we completed the implementation of a new ERP system within our Financing segment.

As a result of this implementation, certain internal controls over financial reporting have been automated or modified to align with the new ERP

While we believe this new system will strengthen our internal controls, there are inherent risks in implementing any new system, and we will continue to evaluate these control changes as part of our assessment of internal control over

financial reporting throughout fiscal 2023.

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

LIMITATIONS AND EFFECTIVENESS OF CONTROLS

Our management, including our CEO and CFO, do not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all errors and all fraud.

system cannot provide absolute assurance due to its inherent limitations;

it is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures.

A control system also can be

circumvented by collusion or improper management override.

Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.

Because of such

limitations, disclosure controls and internal control over financial reporting cannot prevent or detect all misstatements, whether unintentional errors or fraud.

However, these inherent limitations are known features of the financial reporting

therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.

OTHER INFORMATION

We analyze our revenues within our financing segment based on the nature of the arrangement.

Our financing revenue generally consists of portfolio

income, transactional gains, and post-contract earnings including month-to-month rents and the sales of off-lease equipment.

All our revenues from contracts with customers within our financing segment is from the sales of

off-lease equipment.

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

What changed 10-Q

Item 1. Financial Statements