What changed in this filing

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Item 1. Financial Statements

2023-11-08 compared with 2023-08-07 · 300 added, 226 removed, 428 unchanged (55% of the section changed)

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UNAUDITED CONSOLIDATED

BALANCE SHEETS

(in thousands, except per share amounts)

June 30, 2023

September 30, 2023

March 31, 2023

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50,000 shares authorized;

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

26,942 outstanding at September 30 , 2023 and 26,905 outstanding at March 31 , 2023

Additional paid-in capital

Treasury stock, at cost, 424

shares at June 30 , 2023

shares at September 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

September 30,

Six Months Ended

September 30,

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

September 30,

Six Months Ended

September 30,

OTHER COMPREHENSIVE INCOME, NET OF TAX:

Foreign currency translation adjustments

Other comprehensive income (loss)

Other comprehensive loss

TOTAL COMPREHENSIVE INCOME

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(in thousands)

Three Months Ended June 30,

Six Months Ended September 30,

Cash flows from operating activities:

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Salaries and commissions payable, deferred revenue, and other liabilities

Net cash used in operating activities

Net cash provided by (used in) operating activities

Cash flows from investing activities :

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(in thousands)

Three Months Ended June 30,

Six Months Ended September 30,

S upplemental disclosures of cash flow

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Purchases of property, equipment, and operating lease equipment

Consideration for acquisitions

Borrowing of non-recourse and recourse notes payable

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AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

UNAUDITED CONSOLIDATED

STATEMENTS OF

STOCKHOLDERS’ EQUITY

(in thousands)

Three Months Ended June 30, 2023

Six Months Ended September 30, 2023

Comprehensive

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Balance, June 30, 2023

Three Months Ended June 30, 2022

Issuance of restricted stock awards

Share-based compensation

Repurchase of common stock

Foreign currency translation adjustment

Balance, September 30, 2023

Six Months Ended September 30, 2022

Comprehensive

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Balance, June 30, 2022

Issuance of restricted stock awards

Share-based compensation

Foreign currency translation adjustment

Balance, September 30, 2022

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 “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.

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

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 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, with customers 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.

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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.

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

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

product, professional services, managed services, and financing.

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.

I NTERIM FINANCIAL STATEMENTS —

The unaudited consolidated financial statements for the six months ended September 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 six months ended September 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 ending 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.

These financial statements should be read in conjunction with the information contained in our annual report on Form 10-K for the year ended March 31, 2023 (“2023 Annual

Report”), and our Form 8-K that we filed with the SEC on October 6, 2023, which recasts the disclosures in certain portions of our 2023 Annual Report to reflect changes in our reportable segments.

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 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.

OF RISK — A substantial portion of our sale s are products from Cisco Systems, which

were 53 % and 39 % of our technology business net sales for the three months ended September 30, 2023, and

2022, respectively, and 49 % and 37 %

of our technology business net sales for the six months ended September 30, 2023, and 2022, respectively.

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

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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.

standard during the first quarter of fiscal year ending March 31, 2024, except for the roll forward requirement, which will be adopted during the first quarter of fiscal year ending March 31, 2025.

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”.

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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

In addition, we had $ 59.4 million and $ 70.4 million of receivables from contracts with customers included within financing receivables as of September 30, 2023, and March 31, 2023,

respectively.

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

September 30, 2023

March 31, 2023

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Non-current (included in other liabilities)

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.

Revenue recognized from

the beginning contract liability balance was $ 23.4 million and $ 54.3 million for the three and six months ended September 30, 2023, respectively, and $ 17.5 million and $ 42.4 million for the three and six months ended September 30, 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.

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,

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 six months ended September 30, 2023, and 2022 (in thousands):

Three months Ended September 30,

Six months Ended September 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 months ended June 30, 2023, and 2022 (in thousands):

Three months Ended June 30,

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

30, 2023, and 2022 (in thousands):

Three months Ended September 30,

Six months Ended September 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):

June 30 , 2023

September 30 ,

Gross receivables

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Includes unguaranteed residual values of $ 4,027 thousand that we retained after selling the related lease receivable.

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

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

March 31 , 2023

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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”

Refer to Note 7 , “Allowance for Credit

Losses” for details.

OPERATING LEASES—NET

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The components of the operating leases—net are as follows (in thousands):

September 30,

Cost of equipment under operating leases

Accumulated depreciation

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.

Investment in operating lease

equipment—net (1)

Amounts include estimated unguaranteed residual values of $ 1,643 thousand and $ 1,717 thousand as of September 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

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

secured borrowings.

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

As of June 30, 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.

As of September 30, 2023, and

March 31, 2023, we had financing receivables of $ 67.9 million and $ 35.7 million, respectively, and operating leases of $ 2.8 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

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 September 30, 2023, and 2022, we recognized net gains of $ 6.9

million and $ 8.1 million, respectively, and total proceeds from these sales were $ 220.8 million and $ 376.4 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.

months ended September 30, 2023, and 2022, we recognized net gains of $ 8.2 million and $ 9.9 million, respectively, and total proceeds from these sales were $ 282.2

million and $ 428.9 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.

September 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 if the lessee

elects to early terminate the lease.

As of September 30, 2023, and March 31, 2023, the total potential payments that could result from these indemnities was immaterial.

LESSEE ACCOUNTING

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

warehouse space for periods of up to ten 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.

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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.

We recognized rent expense of $ 1.5 million and $ 1.2 million for the three months ended September 30, 2023, and September 30, 2022, respectively, and $ 3.0 million and $ 2.5 million for the six months ended September

30, 2023, and 2022, respectively.

GOODWILL AND OTHER INTANGIBLE ASSETS

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

The following table summarizes the changes in the carrying amount of goodwill for the six months ended September 30, 2023 (in thousands):

Balance March 31, 2023 (1)

Accumulated impairment losses

Net carrying amount

Reporting unit change

Impairment losses

Foreign currency translations

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.

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

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.

Balance September 30, 2023 (1)

Balance is net of $ 8,673 thousand in accumulated impairments that were recorded in segments that proceed our current segment organization.

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 goodwill balance increased by $ 22.1 million over the six months ended September 30, 2023, due to $ 22.1 million

in goodwill additions from our acquisition of Network Solutions Group (“NSG”).

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

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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.

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.

During the first quarter ended June 30, 2023, we separated our technology segment into three new segments:

product, professional services, and managed services.

We concluded that each segment was one reporting unit.

At that time, we allocated our goodwill to the reporting units affected using a relative fair value approach.

We concluded that the fair value of each new

reporting unit exceeded its carrying value.

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

value of the reporting unit.

OTHER INTANGIBLE ASSETS

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

June 30, 2023

O ur other intangible assets consist of the following on

September 30, 2023, and March 31, 2023 (in thousands):

September 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 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 .

Capitalized software development is generally amortized over

Total amortization expense for customer relationships and other intangible assets was $ 4.0 million for the three months ended September 30, 2023, and $ 2.5 million

for the three months ended September 30, 2022, and $ 7.5 million and $ 4.7 million for the six months ended September 30, 2023, and 2022, respectively.

ALLOWANCE FOR CREDIT LOSSES

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

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

Accounts Receivable

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Write-offs and other

Balance June 30 ,

Balance September 30 ,

Balance April 1, 2022

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Write-offs and other

Balance June 30 ,

Balance September 30 ,

We evaluate our customers using an

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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):

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

Amortized cost basis by origination year ending March 31,

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process of being transferred to third-party financial institutions.

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

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

Notes receivable

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Lease receivables

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

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

NOTES PAYABLE AND CREDIT FACILITY

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Under the accounts payable floor plan facility, we had an outstanding balance of $ 168.6

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

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

respectively.

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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.

U nder the revolving credit facility, we had no balance outstanding

as of September 30, 2023, and 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 .

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

The amount of

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unless their available borrowing meets or met certain thresholds.

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

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

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

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RECOURSE NOTES PAYABLE

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 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 .

Recourse notes payable

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

As of September 30, 2023, and March 31, 2023, we had $ 2.0

million and $ 6.0 million, respectively, arising from one installment payment arrangement within our technology business.

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 September 30, 2023, and March 31, 2023.

NON-RECOURSE NOTES PAYABLE

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

As of June 30,

As of September 30,

2023, and March 31, 2023 , we had $ 51.5 million and $ 34.3 million, respectively, of non-recourse borrowings that were collateralized by investments in notes and leases.

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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.

The weighted average interest rate for our non-recourse notes payable was 5.84 % and 5.01 %, as of September 30, 2023, and March 31, 2023 , respectively.

COMMITMENTS AND CONTINGENCIES

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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.

As of September 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.

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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 months ended June 30, 2023, and 2022, respectively (in

thousands, except per share data).

Three Months Ended June 30,

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 six months ended September 30, 2023, and 2022, respectively (in thousands, except per share data) .

Three Months Ended

September 30,

Six Months Ended

September 30,

Net earnings attributable to common shareholders - basic and diluted

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

During the three months ended June 30, 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.

During the six months ended September 30, 2023 , we purchased 109,122 shares of our outstanding common stock at a value of $ 5.3 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 six months ended September 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 June 30, 2023, we had share-based awards outstanding under the following plans:

of September 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

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RESTRICTED STOCK ACTIVITY

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.

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

For the six months

ended September 30, 2023, we granted 12,454 restricted shares of our stock under the 2017 Director LTIP, and 152,865 restricted shares of our stock under the 2021 Employee LTIP.

For the six months ended September 30, 2022, we granted 15,954 shares of our stock under the 2017 Director LTIP, and 138,643 restricted shares of our stock under the 2021 Employee LTIP.

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

Weighted Average

1 unchanged sentence

Nonvested April 1, 2023

Nonvested June 30 ,

Nonvested September 30 ,

EMPLOYEE STOCK PURCHASE PLAN

1 unchanged sentence

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.

During the six months ended September 30, 2023, we

issued 36,697 shares at a price of $ 38.10

per share under the ESPP.

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

COMPENSATION EXPENSE

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,

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 and six months ended September 30, 2023, and 2022, respectively (in thousands):

Three Months Ended

Six Months Ended

September 30,

Equity-based compensation expense

1 unchanged sentence

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.

As of September 30, 2023, the total unrecognized compensation expense

related to non-vested restricted stock was $ 14.7 million, which is expected to be recognized over a weighted-average period of 33 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.

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 estimated

contribution expense to the plan for the three months ended September 30, 2023, and 2022, was $ 1.2 and $ 1.0 million, respectively.

For the six months ended September 30, 2023, and 2022, our estimated contribution expense for the plan was $ 2.6 million and $ 2.0 million,

respectively.

Our provision for income tax expense was $ 12.3

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 .

million and $ 25.0 million for the three and six months ended September 30, 2023, as compared to $ 11.8 million and $ 20.5 million for the

same periods in the prior year.

Our effective tax rate for the three and six months ended September 30, 2023, was 27.4 % and 27.3 % respectively, compared with 29.3 %

and 28.7 %, respectively, for the same periods in the prior year.

Our effective income tax rate for the three and six months ended

September 30, 2023, was lower compared to the same periods in the prior year primarily due to lower state effective tax rates and less non-deductible executive compensation in the current period.

The effective tax rate for the three and six

months ended September 30, 2023, and September 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 June 30, 2023,

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

2023, and March 31, 2023 (in thousands):

5 unchanged sentences

Observable Inputs

June 30 , 2023

September 30 , 2023

Money market funds

3 unchanged sentences

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.

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 is helping to 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):

million that was paid back to us during the quarter ended September 30, 2023, by the sellers based on adjustments to a determination of the total net assets delivered .

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

Acquisition Date

14 unchanged sentences

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, 2023, is not material.

On July 15, 2022, our subsidiary, ePlus Technology, inc., acquired certain

assets and liabilities of Future Com, Ltd., a Texas-based provider of 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):

Acquisition Date

Accounts receivable

Identified intangible assets

Accounts payable and other liabilities

Contract liabilities

Total identifiable net assets

Total purchase consideration

The identified intangible assets of $ 8.4 million consists of customer relationships with an estimated useful life of seven years .

The fair value of acquired receivables equals the gross contractual amounts receivable.

We expect to collect all acquired receivables.

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

As a result of changes in our reporting units, we

subsequently reassigned the goodwill to our product, professional services, and managed services segments.

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, 2023, is not material.

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.

SEGMENT REPORTING

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:

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 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,

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 services.

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

We refer to the product segment, professional services segment, and managed services segment collectively as our technology business.

Our financing business 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 within our technology business based on

gross profit, while we measure our financing business 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.

The following table provides reportable segment information (in thousands):

Three Months Ended

Six Months Ended

September 30,

Professional services

2 unchanged sentences

Managed services

Operating expenses

Technology business

Operating income

7 unchanged sentences

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

of property, equipment, and operating lease equipment

Technology business

The following tables provide a disaggregation of net sales by source and further disaggregate our revenue recognized from

contracts with customers by timing and our position as principal or agent (in thousands):

Three months ended September 30, 2023

Managed Services

1 unchanged sentence

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

Timing and position as principal

Transferred at a point in time

Transferred over time as

Total revenue from

Total revenue from contracts

with customers

Six months ended September 30, 2023

Managed Services

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

Financing and other

Timing and position as principal

Transferred at a point in time

Transferred over time as

Total revenue from contracts

with customers

Three months ended September 30, 2022

Managed Services

3 unchanged sentences

principal or agent

Transferred at a point in

time as principal

Transferred at a point in

time as agent

Transferred at a point in time

Transferred over time as

Total revenue from

Total revenue from contracts

with customers

Six months ended September 30, 2022

Managed Services

Contracts with customers

Financing and other

Timing and position as principal

Transferred at a point in time

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,

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 thousands):

Three Months Ended September 30,

Six Months Ended September 30

Customer end market:

Telecom, Media & Entertainment

State and local government and educational institutions

Financial Services

Revenue from financing and other

Total revenue from contracts with customers

Revenue from contracts with customers

Collaboration

3 unchanged sentences

Revenue from financing and other

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 equipment.

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

off-lease equipment.

Revenue from contracts with customers

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

FINANCING BUSINESS SEGMENT DISAGGREGATION OF REVENUE

We analyze our revenues within our financing business 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 business 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