What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-08-07 compared with 2024-02-07 · 233 added, 1042 removed, 417 unchanged (75% of the section changed)

3 unchanged sentences

(in thousands, except per share amounts)

December 31, 2023

June 30, 2024

March 31, 2024

17 unchanged sentences

Deferred revenue

Recourse notes payable—current

Non-recourse notes payable—current

2 unchanged sentences

Non-recourse notes payable - long-term

Deferred tax liability

Other liabilities

9 unchanged sentences

50,000 shares authorized;

26,954 outstanding at December 31 , 2023 and 26,905 outstanding at March 31 , 2023

26,940 outstanding at June 30 , 2024 and 26,952 outstanding at March 31 , 2024

Additional paid-in capital

Treasury stock, at cost, 609

shares at December 31 , 2023

shares at June 30 , 2024

and 447 shares at March 31 ,

5 unchanged sentences

AND SUBSIDIARIES

UNAUDITED CONSOLIDATED

STATEMENTS OF OPERATIONS

UNAUDITED CONSOLIDATED STATEMENTS OF

(in thousands, except per share amounts)

Three Months Ended

Nine Months Ended

Cost of sales

13 unchanged sentences

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:

Foreign currency translation adjustments

Other comprehensive income

Other comprehensive income (loss)

TOTAL COMPREHENSIVE INCOME

4 unchanged sentences

(in thousands)

Nine Months Ended December 31,

Three Months Ended June 30,

Cash flows from operating activities:

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

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

Depreciation and amortization

1 unchanged sentence

Share-based compensation expense

Deferred taxes

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

Loss (gain) on disposal of property, equipment, and operating lease equipment

Accounts receivable

Inventories—net

Financing receivables—net

13 unchanged sentences

Repurchase of common stock

Net borrowings (repayments) on floor plan facility

Net cash provided by (used in) financing activities

Payments to settle

liabilities for acquisitions

Net borrowings on floor plan facility

Net cash provided by financing activities

Effect of exchange rate changes on cash

4 unchanged sentences

(in thousands)

Nine Months Ended December 31,

Three Months Ended June 30,

S upplemental disclosures of cash flow

3 unchanged sentences

Cash paid for amounts included in the measurement of lease liabilities

S chedule of non-cash investing and

financing activities :

S chedule of non-cash investing and financing

Proceeds from sale of property, equipment, and leased equipment

3 unchanged sentences

Vesting of share-based compensation

Repurchase of common stock

New operating lease assets obtained in exchange for lease obligations

1 unchanged sentence

AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF

STOCKHOLDERS’ EQUITY

UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’

(in thousands)

Nine Months Ended December 31, 2023

Three Months Ended June 30, 2024

Comprehensive

6 unchanged sentences

Balance, June 30 , 2024

Issuance of restricted stock awards

Share-based compensation

Repurchase of common stock

Foreign currency translation adjustment

Balance, September 30, 2023

Issuance of restricted stock awards

Issuance of common stock

Share-based compensation

Repurchase of common stock

Foreign currency translation adjustment

Balance, December 31,

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

2 unchanged sentences

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, 2022

See Notes to Unaudited Consolidated Financial Statements.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO UNAUDITED

CONSOLIDATED FINANCIAL STATEMENTS

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

1 unchanged sentence

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.

is a holding company that through its subsidiaries provides information technology ( “IT”) solutions which enable

organizations to optimize their IT environment and supply chain processes.

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

We focus on selling to

medium and large enterprises and state and local government and educational institutions (“SLED”) in the United States (“US”) and 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.

12 unchanged sentences

I NTERIM FINANCIAL STATEMENTS —

The unaudited consolidated financial statements for the nine months ended December 31, 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 nine months ended December 31, 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.

The unaudited consolidated financial statements for the three months ended June 30, 2024, and 2023, 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, 2024, and 2023, are not necessarily indicative of results that may be expected

for any other interim period or for the full fiscal year ended March 31, 2025, 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, 2024 (“2024 Annual Report”), which should be read in

conjunction with these interim consolidated financial statements.

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

7 unchanged sentences

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

were 36 % and 39 % of our technology business segments net sales for the three months ended December 31,

2023, and 2022, respectively, and 45 % and 38 %

of our technology business segments net sales for the nine months ended December 31, 2023, and 2022, respectively.

represented approximately 36 % and 45 % of our technology business segments net sales for the three months ended June 30, 2024,

and 2023, respectively.

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

2 unchanged sentences

RECENT ACCOUNTING PRONOUNCEMENTS

In September 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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.

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, 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”.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED

In November 2023, the

16 unchanged sentences

consists entirely of amounts due from contracts with customers.

In addition, we had $ 67.3 million and $ 70.4 million of receivables from contracts with customers included within financing receivables as of December 31, 2023, and March 31, 2023, respectively.

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

December 31, 2023

In addition, we had $ 46.8 million and $ 44.6 million of receivables from contracts with customers included within financing receivables as of June 30, 2024, and March 31, 2024, respectively.

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

June 30, 2024

March 31, 2024

2 unchanged sentences

Revenue recognized from

the beginning contract liability balance was $ 15.5 million and $ 70.1 million for the three and nine months ended December 31, 2023, respectively, and $ 15.0 million and $ 57.4 million for the three and nine months ended December 31, 2022, respectively.

the beginning contract liability balance was $ 40.5 million and $ 30.9 million for the three months ended June 30, 2024, and 2023, respectively.

PERFORMANCE OBLIGATIONS

11 unchanged sentences

FINANCING RECEIVABLES AND OPERATING LEASES

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

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

Our leases often include elections for the lessee to

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

Our financing receivables and operating leases consist of our financing receivables from notes receivable and

sales-type leases and the carrying value of our assets that we are leasing to our customers on leases that are classified as operating leases.

We generally lease IT, communication, and medical equipment.

Our lease terms generally range from 2 to 6 years , with most terms ranging

between 3 to 4 years .

Our leases often provide the lessee the option 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, 2023, and 2022 (in thousands):

Three months Ended December 31,

Nine months Ended December 31,

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

Additionally , we finance purchases of third-party software and third-party services for our customers, which we classify as notes receivable.

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, 2024, and 2023 (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, 2023, and 2022 (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, 2024, and 2023 (in thousands):

Three Months Ended June 30,

Interest income on sales-type leases

2 unchanged sentences

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

December 31 ,

Sales-Type Lease

June 30 , 2024

Gross receivables

3 unchanged sentences

Includes unguaranteed residual values of $ 3,554 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 details.

Sales-Type Lease

March 31 , 2024

4 unchanged sentences

Includes unguaranteed residual values of $ 3,718 thousand that we retained after selling the related lease receivable.

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

Refer to Note 7 , “Allowance

for Credit Losses” for details.

OPERATING LEASES—NET

1 unchanged sentence

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

June 30, 2024

March 31, 2024

Cost of equipment under operating leases

Accumulated depreciation

Investment in operating lease

equipment—net (1)

Amounts include estimated unguaranteed residual values of $ 1,647 thousand and $ 1,717 thousand as of December 31, 2023, and

March 31, 2023, respectively.

Operating leases—net (1)

include estimated unguaranteed residual values of $ 1,711 thousand and $ 1,346 thousand as of June 30, 2024, and March 31, 2024, 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.

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

As of December 31, 2023, and March

31, 2023, we had financing receivables of $ 70.0 million and $ 35.7 million, respectively, and operating leases of $ 2.5 million for

both periods, which were collateral for non-recourse notes payable.

As of June 30, 2024, and March 31,

2024, we had financing receivables of $ 52.2 million and $ 45.8 million, respectively, and operating leases of $ 2.5 million and $ 2.8 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 December 31, 2023, and 2022, we recognized net gains of $ 8.1

million and $ 5.2 million, respectively, and total proceeds from these sales were $ 422.1 million and $ 157.2 million, respectively.

months ended December 31, 2023, and 2022, we recognized net gains of $ 16.3 million and $ 15.1 million, respectively, and total proceeds from these sales were $ 704.3

million and $ 586.1 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.

December 31, 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 provide an indemnification right to

the assignee if the lessee elects to early terminate the lease.

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

For transfers accounted for as sales, we derecognize the carrying value of the financial 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, 2024, and 2023, we recognized net gains of $ 1.3 million for both periods, and total proceeds from these sales were $ 47.9 million and $ 61.4 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, 2024, and March 31, 2024, we had deferred revenue of $ 0.3 million and $ 0.4 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, 2024, and March 31, 2024, our total potential liability that could result from these indemnities is immaterial.

LESSEE ACCOUNTING

3 unchanged sentences

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 $ 1.4 million and $ 1.3 million for the three months ended December 31, 2023, and December 31, 2022, respectively, and $ 4.4 million and $ 3.8 million for the nine months ended December

31, 2023, and 2022, respectively.

recognize operating lease cost as part of selling, general and administrative expenses.

We recognized operating lease cost of $ 1.3

million and $ 1.5 million for the three months ended June 30, 2024, and June 30, 2023, 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, 2023 (in thousands):

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

30, 2024 (in thousand s):

Professional Services

Managed Services

Balance, March 31, 2024 (1)

Foreign currency translations

Balance December 31, 2023 (1)

Balance is net of $ 8,673 thousand in accumulated impairments that were recorded in segments that precede 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 $ 22.2 million over the nine months ended December 31, 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

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, 2023, we performed a qualitative assessment of

goodwill and concluded that, more likely than not, the fair value of our product, professional services, and managed services reporting units continued to exceed their carrying value.

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.

Balance, June 30, 2024 (1)

Balance is net of $ 8,673 thousand in accumulated impairments that were recorded in segments that preceded 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.

The only activity in our goodwill balance over the three months ended June

30, 2024 was foreign currency translation adjustments.

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, 2023, we performed a qualitative assessment of goodwill and concluded that, more likely than not, the fair value of our product, professional services, and managed services reporting units continued to exceed their 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 consist of the following on

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

December 31, 2023

Our other intangible assets consist of the following on June 30, 2024, and March 31, 2024 (in thousands):

June 30, 2024

March 31, 2024

Gross Carrying

Purchased intangibles

1 unchanged sentence

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 $ 3.9 million for the three months ended December 31, 2023, and $ 2.5 million for the three months ended

December 31, 2022, and $ 11.3 million and $ 7.2

million for the nine months ended December 31, 2023, and 2022, respectively.

Capitalized software development is generally amortized over 5 years.

Total amortization expense for purchased intangibles was $ 3.8 million and $ 3.5 million for the three months ended June 30, 2024, and June 30, 2023, respectively .

ALLOWANCE FOR CREDIT LOSSES

The following table provides the activity in our allowance for credit losses for the nine months ended December 31, 2023, and 2022 (in thousands):

The following table provides the activity in our allowance for credit losses for the three months ended June 30, 2024, and 2023 (in thousands):

Accounts Receivable

Balance April 1, 2023

Balance as of April 1, 2024

Provision for credit losses

Write-offs and other

Balance December 31 ,

Balance April 1, 2022

Balance as of June 30, 2024

Balance as of April 1, 2023

Provision for credit losses

Write-offs and other

Balance December 31 ,

Balance as of June 30, 2023

We evaluate our customers using an

10 unchanged sentences

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 December 31, 2023 (in thousands):

The following table provides the amortized cost basis of our financing receivables by CQR and by credit origination year as of June 30, 2024 (in thousands):

Amortized cost basis by origination year ending March 31,

2 unchanged sentences

Total amortized cost (1)

Excludes unguaranteed residual values of $ 4,009 thousand that we retained after selling the related lease receivable.

U nguaranteed residual values of $ 3,554 thousand that we retained after selling the related lease receivable excluded from amortized cost.

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

4 unchanged sentences

Total amortized cost (1)

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 , 2023 (in thousands):

Unguaranteed residual values of $ 3,718 thousand

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

Transfers consist of receivables that

have been transferred to third-party financial institutions on a non-recourse basis.

The following table provides an aging analysis of our financing receivables as of June 30, 2024 (in thousands):

Notes receivable

3 unchanged sentences

Lease receivables

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

Our financial assets on nonaccrual status were not significant as of June 30, 2024, and March 31, 2024.

NOTES PAYABLE AND CREDIT FACILITY

CREDIT FACILITY

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.

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”).

The 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.

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 this agreement and its amendment, the credit facility is provided by a syndicate of banks for which WFCDF

acts as administrative agent and consists of a discretionary senior secured floor plan 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.

On March 10, 2023, the Borrowers entered into a Second Amendment to the credit agreement which amended the Credit Agreement to increase the maximum aggregate amount of principal available under the floor plan facility from $ 425.0 million to $ 500.0 million and

increase the maximum aggregate amount of principal available under the Revolving Facility from $ 150.0 million to $ 200.0 million.

Under the accounts payable floor plan facility, we had an outstanding balance of $ 119.5

million and $ 134.6 million as of December 31, 2023, and March 31, 2023 ,

million and $ 105.1 million as of June 30, 2024, and March 31, 2024 ,

respectively.

1 unchanged sentence

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.

WFCDF pays our suppliers and provides us extended payment terms.

We pay down the floor plan facility on three specified dates each month, generally 45

to 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.

involved in establishing the terms or conditions of the arrangements between our suppliers and WFCDF .

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

as of December 31, 2023, and March 31, 2023.

as of June 30, 2024, and March 31, 2024.

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, 2023, and March 31,

The amount of

7 unchanged sentences

unless their available borrowing meets or met certain thresholds.

A s of December 31, 2023, and March 31, 2023 ,

A s of June 30, 2024, and March 31, 2024 ,

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

4 unchanged sentences

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

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

As of March 31, 2023, we had $ 6.0 million

arising from one installment payment arrangement within our technology business.

As of December 31, 2023, we have fully paid off our recourse notes payable.

Our payments under this installment agreement were due quarterly in amounts that were

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 March 31, 2023.

NON-RECOURSE NOTES PAYABLE

1 unchanged sentence

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

As of December 31,

As of June 30,

2024, and March 31, 2024 , we had $ 40.8 million and $ 36.2 million, respectively, of non-recourse borrowings that were collateralized by investments in notes and leases.

1 unchanged sentence

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 6.64 % and 5.01 %, as of December 31, 2023, and March 31, 2023 , respectively.

The weighted average interest rate for our non-recourse notes payable was 6.52 % and 6.49 %, as of June 30, 2024, and March 31, 2024 , respectively.

COMMITMENTS AND CONTINGENCIES

7 unchanged sentences

be adversely affected.

As of December 31, 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 June 30, 2024, 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.

6 unchanged sentences

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, 2023, and 2022, 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, 2024, and 2023, respectively (in

thousands, except per share data).

Three Months Ended June 30,

Net earnings attributable to common shareholders - basic and diluted

7 unchanged sentences

SHARE REPURCHASE PLAN

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

On May 18, 2024, our board of directors authorized the repurchase of up to

1,250,000 shares of our outstanding common stock, over a 12-month period beginning May 28, 2024.

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.

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, 2023 , we purchased 131,263 shares of our outstanding common stock at a value of $ 6.7 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 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 stock.

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.

Under both authorized programs, purchases may be made from time to time in the open market, or in privately negotiated transactions, subject to availability and the plan terms.

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, 2024 , we purchased 109,869 shares of our outstanding common stock at a value of $ 8.1

million under the share repurchase plan;

we also purchased 52,450 shares of common stock at a value of $ 3.8 million to satisfy tax withholding obligations relating to the vesting of employees’ restricted stock.

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.

SHARE-BASED COMPENSATION

SHARE-BASED PLANS

of December 31, 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) the 2021 Employee Long-Term Incentive Plan (“2021 Employee LTIP”) .

2021 Employee LTIP was approved by our shareholders on September 16, 2021, and became effective October 1, 2021.

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

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

As of June 30, 2024, we

had share-based awards outstanding under the following plans:

(1) the 2017 Non-Employee Director Long-Term Incentive Plan (“2017 Director LTIP”) and (2) the 2021 Employee Long-Term Incentive Plan (“2021 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

1 unchanged sentence

RESTRICTED STOCK ACTIVITY

For the nine months

ended December 31, 2023, we granted 13,120 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 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.

The following table provides a summary of our restricted stock activity:

Weighted Average

Grant-date Fair Value

For the three months

ended June 30, 2024, we granted 437 restricted shares under the 2017 Director LTIP and 121,097 restricted shares under the 2021 Employee LTIP.

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

restricted shares under the 2021 Employee LTIP.

The following table provides a summary of the nonvested restricted shares for the three months ended June 30, 2024:

Number of Shares

Weighted Average Grant-date Fair Value

Nonvested April 1, 2024

Nonvested December 31 ,

Nonvested June 30 ,

PERFORMANCE STOCK UNITS

On November 17, 2023, we granted 15,120 Performance Stock Units (“PSUs”) with a grant date fair value of $ 61.17 to our named executive officers under our 2021 Employee LTIP.

The PSUs will vest based on the achievement of certain performance goals at the end of a three-year performance period ending March 31, 2026.

The PSUs represent the right to receive shares of our common stock on a one -to-one basis.

The total number of PSUs that vest range from 0 % to 200 % of the number of PSUs at the target level of achievement for one or

more of the performance targets.

No shares vested or were forfeited during the year.

Beginning with the fiscal year ended March 31, 2024 , we granted

Performance Stock Units (“PSUs”) to our executive officers under our 2021 Employee LTIP.

The PSUs will vest based on the achievement of certain performance goals at the end of a three-year performance period.

The PSUs represent the right to receive shares of our common stock at the time of vesting.

The total number of PSUs that vest range from 0 % to 200 % of the target number of PSUs based on our achievement of certain performance targets.

The following table provides a summary of the nonvested PSUs for the three months ended June 30, 2024:

Number of Units

Weighted Average Grant-date Fair Value

Nonvested April 1, 2024

Nonvested June 30, 2024

EMPLOYEE STOCK PURCHASE PLAN

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.

During the nine months ended December 31, 2023, we

issued 70,715 shares at a weighted average price of $ 42.69 per share under the ESPP.

As of December 31, 2023, there were 2.43

million shares remaining under the 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 six-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.

During the three months ended June 30, 2024, and June 30, 2023, we issued 28,915 shares at a price of $ 62.63 per

share and 36,697 shares at a price of $ 38.10

per share, respectively, under the ESPP.

As of June 30, 2024, there were 2.40 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, ESPP, PSUs, and the related income tax benefit for the three and nine months ended December 31, 2023, and 2022, respectively (in thousands):

Three Months Ended

Nine Months Ended

The following table provides a summary of our total share-based compensation

expense, including for restricted stock awards, PSUs, our ESPP, and the related income tax benefit for the three months ended June 30,

2024, and 2023 (in thousands):

Three Months Ended June 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 December 31, 2023, the total unrecognized compensation expense

related to non-vested restricted stock was $ 12.6 million, which is expected to be recognized over a weighted-average period of 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.

Employer contributions to the plan are always fully vested.

Our estimated

contribution expense to the plan for the three months ended December 31, 2023, and 2022, was $ 1.0 and $ 1.1 million, respectively.

For the nine months ended December 31, 2023, and 2022, our estimated contribution expense for the plan was $ 3.6 million and $ 3.2 million,

respectively.

As of June 30, 2024, the total unrecognized compensation expense related to

non-vested restricted stock was $ 17.1 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 (the “401(k) plan”) , to which we may contribute from time to time at our sole discretion.

Employer contributions to the 401(k) plan are always fully vested.

Our estimated contribution expense to the 401(k) plan for the three months ended June 30, 2024, and 2023, were both $ 1.4

Our provision for income tax expense was $ 10.2

million and $ 36.1 million for the three and nine months ended December 31, 2023, as compared to $ 13.7 million and $ 34.1 million for the

same periods in the prior year.

Our effective tax rate for the three and nine months ended December 31, 2023, was 29.0 % and 27.8 % respectively, compared with 27.7 %

and 28.3 %, respectively, for the same periods in the prior year.

The effective tax rate for the three and nine months ended December

31, 2023, and December 31, 2022, differed from the US federal statutory rate of 21.0 % primarily due to state and local income

million for the three months ended June 30, 2024 , as compared to $ 12.7

million for the same three-month period in the prior year.

Our effective income tax rate for the three months ended June 30, 2024 , and 2023, were both 27.2 % .

The effective tax rate for the three months ended June 30, 2024, and June 30,

2023, 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,

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

The following table summarizes the fair value hierarchy of our financial instruments as of June 30, 2024, and March 31, 2024 (in thousands):

Fair Value Measurement Using

Quoted Prices in

Active Markets for

Identical Assets

Significant Other

Observable Inputs

December 31 , 2023

Active Markets

for Identical

Assets (Level 1)

Inputs (Level 2)

June 30, 2024

Money market funds

2 unchanged sentences

BUSINESS COMBINATIONS

PEAK RESOURCES, INC.

On January 27, 2024, our subsidiary, e Plus Technology, inc., acquired certain assets and liabilities of PEAK.

Based in Denver, CO, PEAK is an established provider of modern data center, networking, and security

products and services.

The acquisition will help drive additional growth with enhanced engineering, sales, and services delivery capabilities in the mountain west region.

Our preliminary sum for consideration transferred is $ 5.6 million , equal to cash paid at closing.

As of our filing date, our

initial accounting for the business combination is incomplete.

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

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

Acquisition Date

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 sum for consideration transferred was $ 48.6 million consisting of $ 59.6

million paid in cash at closing minus $ 11.0 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 allocation of the purchase consideration to the assets acquired and liabilities assumed is presented below (in

Acquisition Date Amount

Accounts receivable

Identified intangible assets

Identified intangible asset

Accounts payable and other liabilities

2 unchanged sentences

Total purchase consideration

The identified intangible assets of $ 30.0 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.

The identified intangible asset of $ 30.0 million consists of customer relationships with an estimated useful life of seven years .

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

We expect to collect all acquired accounts receivable.

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 segment, respectively.

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

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

4 unchanged sentences

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.

FUTURE COM, LTD.

(“FUTURE COM”)

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

assets and liabilities of Future Com, 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 current 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.

As a result of changes in our segments, 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, 2022, is not material.

SEGMENT REPORTING

10 unchanged sentences

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.

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

Nine Months Ended

Three Months Ended June 30,

Professional services

15 unchanged sentences

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 December 31, 2023

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

Nine months ended December 31, 2023

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

Three months ended December 31, 2022

Managed Services

The following tables provide 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 (in thousands):

Three Months Ended June 30, 2024

Contracts with customers

7 unchanged sentences

with customers

Nine months ended December 31, 2022

Managed Services

Three Months Ended June 30, 2023

Contracts with customers

Financing and other

Timing and position as principal

Timing and position as

principal or agent:

Transferred at a point in time

4 unchanged sentences

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 thousands):

Three Months Ended December 31,

Nine Months Ended December 31,

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

Total revenue from contracts with customers

Collaboration

3 unchanged sentences

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.

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.

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 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.

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

This 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 2023 Annual Report, as updated by our Form 8-K that we filed with the SEC on October 6, 2023, 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, collaboration, artificial intelligence, and emerging technologies to domestic and foreign organizations across all industry segments.

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.

our solutions, we provide consulting, professional services, managed services, IT staff augmentation, and complete lifecycle management services in the areas of security, cloud, networking, collaboration, and emerging technologies.

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-premises 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, and collaboration are specific skills in orchestration and automation, application

modernization, DevSecOps, zero-trust architectures, 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, Crowdstrike, Deepwatch, Dell EMC, F5 Networks, Foresite, Fortinet, Gigamon, HPE, Juniper Networks, Lenovo, Microsoft, NetApp, Nutanix, NVIDIA,

Oracle, Palo Alto Networks, Proficio, Pure Storage, Rubrik, Splunk, Varonis, and VMware, among many others.

We are an authorized reseller of over 1,500 vendors, which enable us to provide our customers with new and

evolving IT solutions.

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.

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, Singapore, and Israel.

Our technology business segments accounted for 98% of our net sales and 84% of our operating income, while our financing segment accounted for 2% of our net sales and 16% of our operating income, for the

nine months ended December 31, 2023.

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 geopolitical concerns may impact our customers’ willingness to spend on technology and

Like others in the industry, we are experiencing ongoing supply constraints that have affected, and could continue to further affect, lead times for delivery of certain products, our having to carry more inventory

for longer periods, the cost of products, vendor return and cancellation policies, and our ability to meet customer demands.

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

Despite these

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

We are experiencing increases in prices from our suppliers.

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

Accordingly, inflation could have a material impact on our sales, gross profit, or

operating costs in the future.

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

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.

Also, we are experiencing constriction of funds available and more

stringent assessment for our financing arrangements from our lender partners.

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

modernization.

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

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

consuming technology.

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

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

These challenges are consistent across all industries and sizes.

We have developed a Cloud Managed

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

KEY BUSINESS METRICS

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

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

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

Net earnings and Non-GAAP:

Net earnings per common share.

We also use a variety of operating and other information to evaluate the operating performance of our business, develop financial forecasts, make strategic decisions, and prepare and approve annual budgets.

We use gross billings as an

operational metric to assess the volume of transactions or market share for our technology business segments—product, professional services, and managed services—as well as to understand changes in our accounts receivable and accounts payable.

believe gross billings will aid investors in the same manner.

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

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 correspondingly not normally excluded or included in the most directly comparable

measure calculated and presented in accordance with US GAAP.

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

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

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

Net earnings and Non-GAAP:

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

The following tables provide our key business metrics for our consolidated entity, our technology business- consisting of our product, professional services, and managed services segments- and our financing business segment (in thousands, except

per share amounts):

Three Months Ended

Nine Months Ended

Financial metrics

Operating income margin

Net earnings margin

Net earnings per common share - diluted

Non-GAAP financial metrics

Net earnings (1)

Net earnings per common share - diluted (1)

Adjusted EBITDA (2)

Adjusted EBITDA margin

Technology business segments

Financial Metrics

Professional services

Managed services

Professional services

Managed services

Professional services

Managed services

Operating income

Non-GAAP financial metric

Adjusted EBITDA (2)

Operational metric

Gross billings (3)

Collaboration

Product gross billings

Service gross billings

Total gross billings

Financing business segment

Financial metrics

Operating income

Non-GAAP financial metric

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 – diluted or similarly

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

The following table provides our calculation of Non-GAAP:

Net earnings and Non-GAAP:

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

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 (expense).

Adjusted EBITDA presented for the technology business and the financing business segment 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 business segment and depreciation expense presented within cost of sales, which

includes depreciation on assets financed as operating leases, to be operating expenses.

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

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.

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

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 business segments

Operating income

Depreciation and amortization

Share based compensation

Interest and financing costs

Adjusted EBITDA

Financing business segment

Operating income

Depreciation and amortization

Share-based compensation

Adjusted EBITDA

Gross billings are the total dollar value of customer purchases of goods and services including shipping charges during the period, net of customer returns and credit memos, sales, or other taxes.

Gross billings

includes the transaction values for certain sales transactions that are recognized on a net basis, and, therefore, includes amounts that will not be recognized as revenue.

CONSOLIDATED RESULTS OF OPERATIONS

Net sales for the three months ended December 31, 2023, decreased $114,.4 million, or 18.4%, to $509.1 million, compared to $623.5 million in the same three-month period in the prior year.

in net sales was partially driven by lower net sales from our product segment due to decreased sales volume and was partially offset by higher net sales from professional services segment, managed services segment, and financing segment net sales

due to higher transaction gains.

Net sales for the nine months ended December 31, 2023, increased $95.3 million, or 6.0%, to $1,670.8 million, compared to $1,575.5 million in the same nine-month period in the prior year.

The increase in net sales was

driven by higher net sales from our product segment and managed services segments, primarily from the addition of sales to new customers from our acquisitions of Network Solutions Group (“NSG”) and Future Com, Ltd.

(“Future Com”), and was partially

offset by a decline in revenues from our financing business segment primarily due to lower post contract earnings.

Gross profit :

Gross profit for the three months ended December 31, 2023, decreased 3.3%, to $133.8 million, compared to $138.4 million in the same three-month period in the prior year due to a decline in product

Overall, gross margin increased 410 basis points to 26.3%, as compared to the same period in the prior year.

The increase in gross margin was primarily due to increases in both product and service margin along with higher gross margin in

our financing business segment.

Gross profit for the nine months ended December 31, 2023, increased 9.2%, to $420.4 million, compared to $385.2 million in the same nine-month period in the prior year due to increased net sales volume.

Overall, gross

margin for the nine months ended December 31, 2023, increased 80 basis points to 25.2%, as compared to the same period in the prior year.

The increase in gross margin was primarily due increases in both product and service margin within our

technology business segments along with higher margin in our financing business segment.

Operating expenses :

Operating expenses for the three months ended December 31, 2023, increased $3.9 million, or 4.2%, to $95.8 million, as compared to $91.9 million for the same three-month period in the prior year.

The increase in

operating expenses was primarily due to an increase of $4.3 million in salaries and benefits, mainly driven by an increase in headcount and salary increases offset by a decrease of $1.1 million in variable compensation corresponding to the decrease

in gross profit.

As of December 31, 2023, we had 1,897 employees, an increase of 8.7% from 1,745 as of December 31, 2022.

General and administrative expenses also increased $0.6 million for the three months ended December 31, 2023, compared to the three months ended December 31, 2022, as we had higher software, subscription, and maintenance fees due to the increase

in headcount.

Depreciation and amortization increased $1.8 million for the three months ended December 31, 2023, compared to the three months ended December 31, 2022, due to increased amortization of intangible assets from the acquisition of NSG.

financing costs decreased $0.6 million for the three months ended December 31, 2023, compared to the same three-month period in the prior year due to lower outstanding borrowings.

Offsetting these increases was a decrease of $1.2 million in

provision for credit losses.

Operating expenses for the nine months ended December 31, 2023, increased $29.7 million, or 11.4%, to $291.2 million, as compared to $261.5 million for the same nine-month period in the prior year.

Our increase in operating expenses was

primarily due to an increase of $18.9 million in salaries and benefits, mainly driven by an increase in headcount, as well as higher variable compensation of $3.5 million corresponding to the increase in gross profit.

General and administrative expenses also increased $3.6 million for the nine months ended December 31, 2023, compared to the nine months ended December 31, 2022, as we had higher software, subscription and maintenance fees, travel and

entertainment costs due to the return of in-person business meetings and events, advertising and marketing fees, and facility rent due to the opening of our new Customer Innovation Center.

In addition, we had higher professional and legal fees.

Depreciation and amortization increased $5.4 million for the nine months ended December 31, 2023, compared to the nine months ended December 31, 2022, due to increased amortization of intangible assets from the acquisition of NSG.

financing costs increased $0.2 million for the nine months ended December 31, 2023, compared to the same nine-month period in the prior year due to higher interest rates offset by lower outstanding borrowings.

Offsetting these increases was a

decrease of $1.8 million in provision for credit losses.

Operating income :

As a result of the foregoing, operating income for the three months ended December 31, 2023, decreased $8.5 million, or 18.3%, to $38.0 million, as compared to $46.5 million for the three months

ended December 31, 2022, and operating margin remained flat at 7.5%.

The decrease in operating income was due to decreases from our technology business, which was offset by higher operating income from our financing business segment.

Operating income for the nine months ended December 31, 2023, increased $5.5 million, or 4.4%, to $129.2 million, as compared to $123.7 million for the nine months ended December 31, 2022, and operating margin decreased

by 20 basis points to 7.7%.

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

Adjusted EBITDA for the three months ended December 31, 2023, was $46.2 million, a decrease of $7.1 million, or 13.4%, as compared to $53.3 million for the same three-month period in the prior year.

Adjusted EBITDA margin

for the three months ended December 31, 2023, increased 50 basis points to 9.1%, as compared to the three months ended December 31, 2022, of 8.6%.

The decrease in Adjusted EBITDA was due to decreases from our technology business, which was offset

by higher Adjusted EBITDA from our financing business segment.

Adjusted EBITDA for the nine months ended December 31, 2023, was $153.6 million, an increase of $11.6 million, or 8.2%, as compared to $141.9 million for the same nine-month period in the prior year.

Adjusted EBITDA

margin for the nine months ended December 31, 2023, increased 20 basis points to 9.2%, as compared to the nine months ended December 31, 2022, of 9.0%.

The increase in Adjusted EBITDA was due to increases from our technology business, which was

offset slightly by lower Adjusted EBITDA from our financing business segment.

Net earnings per common share diluted for the three months ended December 31, 2023, decreased $0.32, or 23.9%, to $1.02 per share, as compared to $1.34 per share in the same three-month period in the prior year.

Net earnings per common

share diluted for the three months ended December 31, 2023, decreased $0.20, or 14.5%, to $1.18 per share, as compared to $1.38 per share for the three months ended December 31, 2022.

Net earnings per common share diluted for the nine months ended December 31, 2023, increased $0.28, or 8.6%, to $3.52 per share, as compared to $3.24 per share in the same nine-month period in the prior year.

Net earnings per common

share diluted for the nine months ended December 31, 2023, increased $0.33, or 9.0%, to $3.99 per share, as compared to $3.66 per share for the nine months ended December 31, 2022.

SEGMENT OVERVIEW

Technology business segments

Our technology business includes three segments:

product, professional services, and managed services as further discussed below.

Product segment:

Our product segment consists of the sale of third-party hardware, third-party perpetual and subscription software, and third-party maintenance, software assurance, and other third-party

The product segment also includes internet-based business-to-business supply chain management solutions for IT products.

Professional services segment:

Our professional services segment includes our advanced professional services to our customers that are performed under time and materials, fixed fee, or milestone contracts.

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

Managed services segment:

Our managed services segment includes our advanced managed services that include managing various aspects of our customers’ environments and are billed in regular intervals over a

contract term, usually between three to five years.

Managed services also include security solutions, storage-as-a-service, cloud hosted services, cloud managed services, and service desk.

The quarter ended June 30, 2023, was the first quarterly period in which we reported these three separate segments within our technology business as we previously consolidated this information within a single technology

We manage the technology business segments based on gross profit and the operating expenses associated with these segments in total as our technology business.

Based upon our current business and operations, we intend to continue reporting

these three segments that will comprise our technology business.

We recast prior periods to conform with our current segment organization.

Our technology business segments sell primarily to corporations, state and local governments, and higher education institutions.

Customers of our technology business may have a customer master agreement (“CMA”) with our

company, which stipulates the terms and conditions of the commercial relationship.

Some CMAs contain pricing arrangements, and most contain mutual voluntary termination clauses.

Our other customers place orders using purchase orders without a CMA

in place or with other documentation customary for the business.

Often, our work with state and local governments is based on public bids and our written bid responses.

Our service engagements are generally governed by statements of work and are

primarily fixed price (with allowance for changes);

however, some service agreements are based on time and materials.

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

The programs we qualify for are generally set by our reseller authorization level with the

The authorization level we achieve and maintain governs the types of products we can resell as well as such items as variable discounts applied against the list price, funds provided for the marketing of these products and other special

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

The authorization levels are costly to maintain, and these programs

continually change;

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

Financing business segment

Our financing business segment offers financing solutions to corporations, government contractors, state and local governments, and educational institutions in the US, which accounts for most of our transactions, and to corporations in select

international markets including Canada, the UK, and the EU.

The financing business segment derives revenue from leasing IT equipment, medical equipment, and other equipment, and the disposition of that equipment at the end of the lease.

financing business segment also derives revenues from the financing of third-party software licenses, software assurance, maintenance, and other services.

Financing revenue generally falls into the following three categories:

Portfolio income:

Interest income from financing receivables and rents due under operating leases.

Transactional gains:

Net gains or losses on the sale of financial assets.

Post-contract earnings:

Month-to-month rents;

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

and the sale of off-lease (used) equipment.

Fluctuations in operating results

Our operating results may fluctuate due to customer demand for our products and services, supplier costs, product availability, changes in vendor incentive programs, interest rate fluctuations, currency 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, 2023, compared to the three and nine months ended December 31, 2022

TECHNOLOGY BUSINESS SEGMENTS

The results of operations for our technology business segments were as follows (in thousands):

Three Months Ended

Nine Months Ended

Financial Metrics

Professional services

Managed services

Professional services

Managed services

Selling, general, and administrative

Depreciation and amortization

Interest and financing costs

Operating expenses

Operating income

Key Metrics & Other Information

Gross billings

Adjusted EBITDA

Product margin

Professional service margin

Managed service margin

Net sales by customer end market:

Telecom, media & entertainment

Financial services

Net sales by type:

Collaboration

Total products

Professional services

Managed services

Net sales of the combined technology business segments for the three months ended December 31, 2023, decreased compared to the three months ended December 31, 2022, driven by decreased volume from

customers across all our significant customer end markets.

Net sales of the combined technology business segments for the nine months ended December 31, 2023, increased compared to the nine months ended December 31, 2022, driven by demand from customers in SLED, financial

services, and healthcare industries, offset by decreased volume with customers in telecom, media, and entertainment, and technology industries.

Product segment sales for the three months ended December 31, 2023, decreased compared to the same three-month period in the prior year due to lower sales of networking equipment, cloud, and security products.

changes were driven by the timing of purchases by existing customers, which are determined by their buying cycles, and the timing of specific IT related initiatives.

Offsetting these decreases was the addition of product sales to customers from the

NSG acquisition, which contributed $15.5 million.

Product segment sales for the nine months ended December 31, 2023, increased compared to the same nine-month period in the prior year due to higher sales of networking equipment and collaboration products, offset by a

decline in sales of cloud and security products.

These changes were driven by the timing of purchases by existing customers, which are determined by their buying cycles, and the timing of specific IT related initiatives.

In addition, the increase

in product segment sales during this nine-month period was due to the addition of product sales to customers from the NSG acquisition, which contributed $75.0 million.

Professional services segment sales for the three months ended December 31, 2023, increased compared to the three months ended December 31, 2022, due to higher project related services of $3.8 million, offset by a

decrease in staff augmentation and consulting revenues of $2.7 million and $0.2 million, respectively, primarily driven by the closure of projects with existing customers.

Professional services segment sales for the nine months ended December 31, 2023, decreased compared to the nine months ended December 31, 2022, due to a decrease in staff augmentation and consulting revenues of $7.1

million and $0.1 million, respectively, primarily driven by the decline in customer demand for these services.

Offsetting this decline was higher project related services of $7.1 million, primarily driven by the addition of professional services

sales to customers from our NSG acquisition.

Managed services segment sales for the three and nine months ended December 31, 2023, increased compared to the three and nine months ended December 31, 2022, due to ongoing expansion of these service offerings during

both periods primarily related to ongoing growth in enhanced maintenance support, service desk, and security operations center revenues.

Gross profit :

Gross profit of the combined technology business segments for the three months ended December 31, 2023, decreased compared to the three months ended December 31, 2022, due mainly to the decrease in product segment sales,

offset by increases in managed service, and professional service sales.

Gross profit margin increased by 340 basis points to 24.3% during this three-month period due to higher product, managed service, and professional service margin.

Gross profit of the combined technology business segments for the nine months ended December 31, 2023, increased compared to the nine months ended December 31, 2022, due to the increase in product and managed service sales, offset by a slight

decline in professional service sales.

Gross profit margin increased by 90 basis points to 23.7% during this nine-month period due to higher product, managed service, and professional service margin.

Product segment margin for the three months ended December 31, 2023, increased by 270 basis points from the same three-month period in the prior year due to a shift in product mix as we sold a higher proportion of third-party maintenance and

services in the third quarter of 2024, and an increase in vendor incentives.

Product segment margin for the nine months ended December 31, 2023, increased by 60 basis points from the same nine-month period in the prior year due to improvements to up front margins and an increase in vendor incentives, offset by a shift in

product mix as we sold a higher proportion of networking hardware than third party services that are recognized on a net basis.

Professional services segment margin for the three and nine months ended December 31, 2023, increased by 420 and 260 basis points, respectively, from the same three- and nine-month period in the prior year primarily due to a shift in mix toward

higher margin project-based services, offset by lower staff augmentation services.

Managed services segment margin for the three and nine months ended December 31, 2023, increased by 330 basis points, from the same three- and nine-month period in the prior year primarily due to improved margin within our service desk line of

Selling, general, and administrative :

Selling, general, and administrative expenses for the three and nine months ended December 31, 2023, for the technology business, increased compared to the

three and nine months ended December 31, 2022, mainly due to increases in salaries and benefits.

Salaries and benefits for the three months ended December 31, 2023, increased $3.4 million, or 4.8% to $73.9 million, as compared to $70.5 million for the same three-month period in the prior year, due to an increase of $3.4 million in salaries

and benefits, mainly driven by increased headcount and salary increases.

Our technology business had an aggregate of 1,863 employees as of December 31, 2023, an increase of 154 from 1,709 as of December 31, 2022.

We added 83 employees from our

acquisition of NSG.

In total, we added 134 additional customer-facing employees for the three months ended December 31, 2023, compared to the same three-month period in the prior year, of which 60 were professional services and technical support

personnel due to demand for our services.

Salaries and benefits for the nine months ended December 31, 2023, increased $23.4 million, or 11.8% to $221.9 million, as compared to $198.5 million for the same nine-month period in the prior year, due to an increase of $18.7 million in

salaries and benefits, mainly driven by increased headcount and salary increases, and an increase of $4.7 million in variable compensation because of the increase in gross profit.

General and administrative expenses for the technology business for the three months ended December 31, 2023, increased $1.1 million, or 9.9%, to $12.1 million, as compared to $11.0 million for the same three-month period in the prior year,

driven by higher software, subscription and maintenance fees of $0.4 million, and higher consulting fees of $0.4 million.

General and administrative expenses for our technology business for the nine months ended December 31, 2023, increased $4.0 million, or 11.4%, to $39.3 million, as compared to $35.3 million for the same nine-month period in the prior year.

General and administrative expenses increased due to higher travel and entertainment costs of $1.0 million due to the return of in-person business meetings and events, higher software, subscription and maintenance fees of $0.9 million, higher

consulting fees of $0.8 million, higher advertising and marketing fees of $0.7 million, and higher facility rent of $0.6 million due to the opening of our new Customer Innovation Center.

Provision for credit losses for our technology business for the three months ended December 31, 2022, was $0.3 million.

There were no provision for credit losses in December 31, 2023.

Our lower provision for credit losses for the three months

ended December 31, 2023, was due to changes in our net credit exposure.

Provision for credit losses for our technology business for the nine months ended December 31, 2023, was $0.4 million, as compared to $1.3 million for the same nine-month period in the prior year.

Our lower provision for credit losses for the

nine months ended December 31 , 2023, was due to changes in our net credit exposure.

Depreciation and amortization :

Depreciation and amortization of our technology business for the three and nine months ended December 31 , 2023, increased

compared to the three and nine months ended December 31 , 2022, primarily due to more amortization from intangible assets acquired in the NSG and Future Com acquisitions.

Interest and financing costs :

Interest and financing costs of our technology business for the three months ended December 31, 2023, decreased by 83.4% to $0.2 million

compared to $1.3 million for the three months ended December 31, 2022, primarily due to lower average borrowings under our WFCDF Credit Facility.

Interest and financing costs of our technology business for the nine months ended December 31, 2023,

decreased by 32.5% to $1.4 million compared to $2.1 million for the nine months ended December 31, 2022, due to lower average borrowings outstanding under our WFCDF Credit Facility.

FINANCING BUSINESS SEGMENT

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

Three Months Ended

Nine Months Ended

Financial metrics

Portfolio earnings

Transactional gains

Post-contract earnings

Selling, general, and adminstrative

Depreciation and amortization

Interest and financing costs

Operating expenses

Operating income

Key metrics & other information

Adjusted EBITDA

Net sales for the three months ended December 31, 2023, increased due to higher portfolio earnings and transactional gains offset by lower post-contract earnings.

Portfolio earnings increased compared to

the same period in the prior year mainly due to higher average investments outstanding as well as a higher average earnings rate.

Transactional gains increased due to a higher volume of financial assets sold during the quarter.

Total proceeds from

sales of financing receivables were $422.1 million and $157.2 million for the three months ended December 31, 2023, and 2022, respectively.

Our proceeds from sales of financing receivables for the three months ended December 31, 2023, are higher

than the same period in the prior year due in part to a few large transactions in the current year period.

Post-contract earnings decreased due to lower month-to-month rents.

Net sales for the nine months ended December 31, 2023, decreased due to lower post-contract earnings offset by higher portfolio earnings and transactional gains.

Post-contract earnings decreased due to lower proceeds from

sales of off-lease equipment, and lower month-to-month rents.

Portfolio earnings increased compared to the same period in the prior year mainly due to higher average investments outstanding as well as a higher average earnings rate.

Transactional

gains increased due to higher volume of financial assets sold during the year.

Total proceeds from sales of financing receivables were $704.3 million and $586.1 million for the nine months ended December 31, 2023, and 2022, respectively.

proceeds from sales of financing receivables for the nine months ended December 31, 2023, are higher than the same period in the prior year due in part to a few large transactions in the current year period.

Gross Profit :

Gross profit for the three months ended December 31, 2023, increased compared to the three months ended December 31, 2022, due to an increase in transaction

Gross profit for the nine months ended December 31, 2023, decreased compared to the nine months ended December 31, 2022, due to a decrease in revenue, primarily month-to-month rents.

Selling, general and administrative :

Selling, general, and administrative expenses for the three months ended December 31, 2023, decreased

compared to the three months ended December 31, 2022, due to a decrease in provision for credit losses, and a decrease in other professional fees.

Selling, general, and administrative expenses for the nine months ended December 31, 2023, decreased

compared to the nine months ended December 31, 2022, due to a decrease in variable compensation due to the decline in gross profit.

Also contributing to the decrease is a decline in provision for credit losses as we incurred increased expense in

the prior nine-month period due to higher investment exposure.

Interest and financing costs :

Interest and financing costs for the three and nine months ended December 31, 2023, increased compared to the three and nine months ended December 31, 2022, due to higher interest

As of December 31, 2023, our non-recourse notes payable decreased to $48.4 million from $48.5 million as of December 31, 2022.

Our weighted average interest rate for non-recourse notes payable was 6.64% and 5.05% as of December 31, 2023, and

2022, respectively.

Other income, net :

Other income, net, for both the three and nine months ended December 31 , 2023, was a benefit of $0.4

million and $0.7 million, respectively , compared to a benefit of $2.9 million and a net expense of $3.1 million, for the three and nine months ended December 31, 2022,

respectively.

For the three months ended December 31, 2023, the lower benefit was driven by decreased net foreign exchange gains and $1.9 million we received related to our claim in a class action lawsuit in the prior three-month period.

nine months ended December 31, 2023, the higher net gain was driven by increased interest income and decreased foreign exchange losses offset slightly by the gain related to our claim in a class action lawsuit in the prior nine-month period.

Provision for income taxes :

Our provision for income tax expense for the three and nine months ended December 31 , 2023, was $11.1

million and $36.1 million, respectively, as compared to $13.7 million and $34.1 million for the same three-and nine-month periods in the prior year, respectively.

Our effective income tax rates for the three and nine months ended December 31 , 2023, were 29.0% and 27.8%, respectively, compared to 27.7% and 28.3% for the three and nine months ended December 31 , 2022, respectively.

Our effective tax rate

was higher for the three months ended December 31 , 2023, as compared to the same three-month period in the prior year, primarily due to an unfavorable return to provision adjustment in the three months ended December 31 , 2023, compared to a favorable return to provision adjustment in same three-month period in the prior year.

Our effective tax rate was lower for the nine months ended December

31 , 2023, as compared to the same nine-month period in the prior year, primarily due to lower state effective tax rates and less non-deductible executive compensation in the current period.

Net earnings :

Net earnings for the three months ended December 31, 2023, were $27.3 million, a decrease of 23.6% or $8.4 million, as

compared to $35.7 million in the same three-month period in the prior year, mainly due to a decrease in operating profits from our technology business offset by an increase in operating profits within our financing business segment.

we had a decrease in other income, net driven by higher foreign exchange gains and other income in the prior three-month period.

These decreases were offset by lower income taxes.

Net earnings for the nine months ended December 31, 2023, were $93.8 million, an increase of 8.4% or $7.3 million, as compared to $86.5 million in the same nine -month period in the prior year, mainly due to the increase in

operating profits from our technology business, and an increase in other income, net driven by less foreign exchange losses.

These increases were offset by higher income taxes.

Basic earnings per common share and diluted earnings per common share were both $1.02 for the three months ended December 31, 2023, a decrease of 23.9%, as compared to $1.34 for both our basic earnings per common

share and diluted earnings per common share for the three months ended December 31, 2022.

Basic earnings per common share and diluted earnings per common share were $3.53 and $3.52, respectively, for the nine

months ended December 31, 2023, an increase of 8.3% and 8.6%, respectively, as compared to $3.26 and $3.24 for our basic earnings per common share and diluted earnings per common share, respectively, for the nine months ended December 31, 2022.

Weighted average common shares outstanding used in the calculation of basic earnings per common share and diluted earnings per common share were 26.6 million and 26.7 million, respectively, for the three months

ended December 31, 2023.

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

average common shares outstanding used in the calculation of basic earnings per common share and diluted earnings per common share for the nine months ended December 31, 2023, and 2022, were 26.6 million and

26.7 million respectively.

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 business segments are through our WFCDF Credit Facility.

Our borrowings in our financing business 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 credit facility, will be enough to finance our working capital, capital expenditures, and other 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 required.

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

substantially affected.

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

Nine Months Ended December 31,

Net cash provided by (used in) operating activities

Net cash used in investing activities

Net cash (used in) provided by financing activities

Effect of exchange rate changes on cash

Net increase (decrease) in cash and cash equivalents

Cash flows from operating activities :

We had cash provided by operating activities of $143.5 million during the nine months ended December 31, 2023, compared to cash used in operating activities of $147.0 million

for the nine months ended December 31, 2022.

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

Nine Months Ended December 31,

Technology business segments

Financing business segment

Net cash provided by (used in) operating activities

Technology business :

For the nine months ended December 31 , 2023 , our combined technology business segments had cash provided by operating activities of $150.0 million

primarily due to net earnings and increases in accounts payable – trade and salaries and commissions payable, offset by increases in our accounts receivable.

For the nine months ended December 31, 2022, our combined technology business segments used $115.8 million from operating activities primarily due to increases in our accounts receivable and inventories, partially offset by net earnings.

To manage our working capital, we monitor our cash conversion cycle for our technology business segments, 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 business segments:

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 business segments at the end of the period divided by Gross billings for the same three-month period.

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

three-month period.

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

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

Our cash conversion cycle increased to 54 days as of December 31 , 2023, as compared to 51 days as of December 31 , 2022.

Our standard payment term for customers is

between 30-60 days;

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

Our DSO increased 9 days to 71 days as of December 31 , 2023, compared to 62 days as of December 31 , 2022, reflecting higher sales to customers with terms greater than or equal to net 60 days.

Our DIO decreased to 27 days as of December 31 , 2023, compared to 30 days as of December 31 , 2022.

Our DPO increased 3 days as of December 31, 2023.

Invoices processed through our WFCDF Credit Facility , or the A/P-floor plan balance, are typically paid

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

Financing business segment :

For the nine months ended December 31 , 2023, our financing business segment used $6.5 million from operating activities, primarily due to

an increase in financing receivables, offset by net earnings and an increase in accounts payable-trade.

For the nine months ended December 31 , 2022, our financing business

segment used $31.2 million from operating activities, primarily due to increases in financing receivables-net, offset by net earnings.

Cash flows related to investing activities :

For the nine months ended December 31 , 2023 , we used $55.8 million in investing activities, consisting of $48.6 million for the

acquisition of NSG, and $7.7 million for purchases of property, equipment and operating lease equipment, partially offset by $0.5 million of proceeds from the sale of property, equipment, and operating lease equipment.

For the nine months ended

December 31 , 2022 , we used $15.6 million in investing activities, consisting of $13.3 million in cash used in acquiring Future Com and $5.7 million for purchases of

property, equipment, and operating lease equipment, partially offset by $3.3 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, 2023, we used $48.7 million in financing activities, consisting of $58.1 million in net repayments on the floor plan

component of our WFCDF Credit Facility and $9.8 million to repurchase outstanding shares of our common stock, partially offset by $16.2 million in net borrowings of non-recourse

and recourse notes payable, and $3.0 million in proceeds of issuance of common stock to employees under an employee stock purchase plan.

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 .

Other than recourse borrowings under our WFCDF Credit Facility, our borrowing of recourse and non-recourse notes payable primarily arises from our financing business segment when we transfer contractual payments due to us

under lease and financing agreements to third-party financial institutions.

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

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

transactions.

SECURED BORROWINGS

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.

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.

Interest rates have been rising and may continue to rise.

To preserve our expected internal rate of return, we generally quote

rates that are indexed.

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

CREDIT FACILITY

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 segments through a credit facility with WFCDF.

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

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

Statements” for additional information concerning our WFCDF Credit Facility.

Floor plan facility :

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

Once our customer places a purchase order with us and

we have approved their credit, we place an order for the desired products with one of our vendors.

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, 2023, and March 31, 2023, we had a maximum credit limit, including the revolving credit facility, of $500.0 million, and an outstanding balance on the floor plan facility of $92.5 million and $134.6

million, respectively.

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

The maximum credit limit under this facility was $200.0 million as of both December 31, 2023, and March 31, 2023, and is a

sublimit of the $500.0 million facility.

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 the performance obligations under all service contracts for which there is a performance guarantee, and we believe that any liability incurred in connection with these guarantees

would not have a material adverse effect on our consolidated statements of operations.

OFF-BALANCE SHEET ARRANGEMENTS

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, 2023, 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

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

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

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

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

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 of ours.

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

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

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

Item 1A, “ Risk Factors ,” in our 2023 Annual Report, as supplemented in subsequently filed reports, including the Form 8-K that we filed with the SEC on October 6, 2023, and in Part II, Item 1A.

Factors ” in this Report.

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

CRITICAL ACCOUNTING ESTIMATES

As disclosed in Note 2 , “Recent Accounting Pronouncements,” we adopted a new standard 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 2023 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, 2023, 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.

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 are 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