ePlus 10Q 2023 Q2 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from____ to ____.

Commission file number: 1-34167

ePlus inc.

(Exact name of registrant as specified in its charter)

Delaware		54-1817218
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

13595 Dulles Technology Drive, Herndon, VA 20171-3413

(Address, including zip code, of principal executive offices)

Registrant’s telephone number, including area code: (703) 984-8400

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $.01 par value	PLUS	NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act (Check one):

Large accelerated filer ☒	Accelerated filer ☐
Non-accelerated filer ☐	Smaller reporting company ☐
	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

The number of shares of common stock outstanding as of November 1, 2022, was 26,906,709.

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	ePlus inc. AND SUBSIDIARIES

Part I. Financial Information:

Item 1.	Financial Statements

	Unaudited Consolidated Balance Sheets as of September 30, 2022, and March 31, 2022	5

	Unaudited Consolidated Statements of Operations for the Three and Six Months Ended September 30, 2022, and 2021	6

	Unaudited Consolidated Statements of Comprehensive Income for the Three and Six Months Ended September 30, 2022, and 2021	7

	Unaudited Consolidated Statements of Cash Flows for the Six Months Ended September 30, 2022, and 2021	8

	Unaudited Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended September 30, 2022, and 2021	10

	Notes to Unaudited Consolidated Financial Statements	11

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	43

Item 4.	Controls and Procedures	43

Part II. Other Information:

Item 1.	Legal Proceedings	44

Item 1A.	Risk Factors	44

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	44

Item 3.	Defaults Upon Senior Securities	45

Item 4.	Mine Safety Disclosures	45

Item 5.	Other Information	45

Item 6.	Exhibits	46

Signatures		47

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CAUTIONARY LANGUAGE ABOUT FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains certain statements that are, or may be deemed to be, “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, or “Exchange Act,” and are made in reliance upon the protections provided by such acts for forward-looking statements. Such statements are not based on historical fact but are based upon numerous assumptions about future conditions that may not occur. Forward-looking statements are generally identifiable by use of forward-looking words such as “may,” “should,” “would,” “intend,” “estimate,” “will,” “potential,” “possible,” “could,” “believe,” “expect,” “intend,” “plan,” “anticipate,” “project,” and similar expressions. Readers are cautioned not to place undue reliance on any forward-looking statements made by us or on our behalf. Forward-looking statements are made based upon information that is currently available or management’s current expectations and beliefs concerning future developments and their potential effects upon us, speak only as of the date hereof, and are subject to certain risks and uncertainties. We do not undertake any obligation to publicly update or correct any forward-looking statements to reflect events or circumstances that subsequently occur, or of which we hereafter become aware. Actual events, transactions and results may materially differ from the anticipated events, transactions, or results described in such statements. Our ability to consummate such transactions and achieve such events or results is subject to certain risks and uncertainties. Such risks and uncertainties include, but are not limited to, the matters set forth below:

•

national and international political instability fostering uncertainty and volatility in the global economy including exposure to fluctuation in foreign currency rates, interest rates, and inflation, including increases in our costs and our ability to increase prices to our customers which may result in adverse changes in our gross profit;

•

significant and rapid inflation may cause price, wage, and interest rate increases, as well as increases in operating costs which may impact the arrangements that have pricing commitments over the term of the agreement;

•

significant adverse changes in, reductions in, or loss of one or more of our larger volume customers or vendors;

•

supply chain issues, including a shortage of IT products, may increase our costs or cause a delay in fulfilling customer orders, or increase our need for working capital, or completing professional services, or purchasing IT products or services needed to support our internal infrastructure or operations, resulting in an adverse impact on our financial results;

•

the duration and ongoing impact of the novel coronavirus (“COVID-19”) pandemic, including but not limited to the impact and severity of new variants, vaccine efficacy, and immunization rates, the closure of non-essential businesses and other associated governmental containment actions, and the increase in cyber-security attacks that have occurred while employees work remotely;

•

maintaining and increasing advanced professional services by recruiting and retaining highly skilled, competent personnel, and vendor certifications;

•

our dependence on key personnel to maintain certain customer relationships, and our ability to hire, train, and retain sufficient qualified personnel;

•

our ability to secure our own and our customers’ electronic and other confidential information, while maintaining compliance with evolving data privacy and regulatory laws and regulations;

•

our ability to remain secure during a cybersecurity attack, including both disruptions in our or our vendors’ IT systems and data and audio communication networks;

•

reliance on third-parties to perform some of our service obligations to our customers, and the reliance on a small number of key vendors in our supply chain with whom we do not have long-term supply agreements, guaranteed price agreements, or assurance of stock availability;

•

the creditworthiness of our customers and our ability to reserve adequately for credit losses;

•

loss of our credit facility or credit lines with our vendors may restrict our current and future operations;

•

a possible decrease in the capital spending budgets of our customers or a decrease in purchases from us;

•

our ability to raise capital, maintain or increase as needed our lines of credit with vendors or floor planning facility, obtain debt for our financing transactions, or the effect of those changes on our common stock price;

•

reduction of vendor incentives provided to us;

•

changes in the Information Technology (“IT”) industry and/or rapid changes in product offerings, including the proliferation of the cloud, infrastructure as a service (“IaaS”), software as a service (“SaaS”) and platform as a service (“PaaS”);

•

our dependency on continued innovations in hardware, software, and services offerings by our vendors and our ability to partner with them;

•

future growth rates in our core businesses;

•

rising interest rates or the loss of key lenders or the constricting of credit markets;

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•

the possibility of goodwill impairment charges in the future;

•

adapting to meet changes in markets and competitive developments;

•

increasing the total number of customers using integrated solutions by up-selling within our customer base and gaining new customers;

•

managing a diverse product set of solutions in highly competitive markets with a number of key vendors;

•

increasing the total number of customers who use our managed services and professional services and continuing to enhance our managed services offerings to remain competitive in the marketplace;

•

performing professional and managed services competently;

•

our ability to implement comprehensive plans for the integration of sales forces, cost containment, asset rationalization, systems integration, and other key strategies;

•

exposure to changes in, interpretations of, or enforcement trends in, and customer and vendor actions in anticipation of or response to, legislation and regulatory matters;

•

domestic and international economic regulations uncertainty (e.g., tariffs, sanctions, and trade agreements);

•

our contracts may not be adequate to protect us, and we are subject to audit which we may not pass, and our professional and liability insurance policies coverage may be insufficient to cover a claim;

•

failure to comply with public sector contracts, or applicable laws or regulations;

•

maintaining our proprietary software and updating our technology infrastructure to remain competitive in the marketplace;

•

our ability to realize our investment in leased equipment;

•

our ability to successfully perform due diligence and integrate acquired businesses;

•

our ability to protect our intellectual property rights and successfully defend any challenges to the validity of our patents or allegations that we are infringing upon any third-party patents, and the costs associated with those actions, and, when appropriate, license required technology.

We cannot be certain that our business strategy will be successful or that we will successfully address these and other challenges, risks, and uncertainties. For a further list and description of various risks, relevant factors, and uncertainties that could cause future results or events to differ materially from those expressed or implied in our forward-looking statements, see Item 1A, “Risk Factors” and Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections contained elsewhere in this report, as well as other reports that we file with the Securities and Exchange Commission (“SEC”).

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PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements

e Plus inc. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

	September 30, 2022			March 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	99,531		$	155,378
Accounts receivable—trade, net		525,176			430,380
Accounts receivable—other, net		44,278			48,673
Inventories		274,863			155,060
Financing receivables—net, current		65,010			61,492
Deferred costs		36,085			32,555
Other current assets		24,970			13,944
Total current assets		1,069,913			897,482

Financing receivables and operating leases—net		75,093			64,292
Deferred tax asset—net		5,058			5,050
Property, equipment, and other assets		55,033			45,586
Goodwill		135,907			126,543
Other intangible assets—net		30,336			27,250
TOTAL ASSETS	$	1,371,340		$	1,166,203

LIABILITIES AND STOCKHOLDERS’ EQUITY

LIABILITIES

Current liabilities:
Accounts payable	$	192,511		$	136,161
Accounts payable—floor plan		136,215			145,323
Salaries and commissions payable		34,304			39,602
Deferred revenue		108,004			86,469
Recourse notes payable—current		92,744			7,316
Non-recourse notes payable—current		10,346			17,070
Other current liabilities		33,187			28,095
Total current liabilities		607,311			460,036

Recourse notes payable - long-term		1,947			5,792
Non-recourse notes payable - long-term		10,446			4,108
Other liabilities		45,991			35,529
TOTAL LIABILITIES		665,695			505,465

COMMITMENTS AND CONTINGENCIES (Note 9)

STOCKHOLDERS’ EQUITY

Preferred stock, $0.01 per share par value; 2,000 shares authorized; none outstanding		-			-
Common stock, $0.01 per share par value; 50,000 shares authorized; 26,906 outstanding at September 30, 2022 and 26,886 outstanding at March 31, 2022		272			270
Additional paid-in capital		163,211			159,480
Treasury stock, at cost, 258 shares at September 30, 2022 and 130 shares at March 31, 2022		(13,958	)		(6,734	)
Retained earnings		558,654			507,846
Accumulated other comprehensive income—foreign currency translation adjustment		(2,534	)		(124	)
Total Stockholders’ Equity		705,645			660,738
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	1,371,340		$	1,166,203

See Notes to Unaudited Consolidated Financial Statements.

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ePlus inc. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

	Three Months Ended September 30,						Six Months Ended September 30,
	2022			2021			2022			2021

Net sales
Product	$	428,545		$	397,160		$	823,795		$	758,217
Services		65,161			60,857			128,270			116,449
Total		493,706			458,017			952,065			874,666
Cost of sales
Product		317,127			297,629			621,337			574,856
Services		43,275			37,386			83,901			71,296
Total		360,402			335,015			705,238			646,152

Gross profit		133,304			123,002			246,827			228,514

Selling, general, and administrative		84,704			74,504			161,471			143,279
Depreciation and amortization		3,568			3,853			6,778			7,779
Interest and financing costs		925			342			1,288			701
Operating expenses		89,197			78,699			169,537			151,759

Operating income		44,107			44,303			77,290			76,755

Other income (expense)		(3,866	)		(325	)		(6,019	)		(202	)

Earnings before tax		40,241			43,978			71,271			76,553

Provision for income taxes		11,772			12,565			20,463			21,622

Net earnings	$	28,469		$	31,413		$	50,808		$	54,931
Net earnings per common share—basic	$	1.07		$	1.18		$	1.91		$	2.06
Net earnings per common share—diluted	$	1.07		$	1.17		$	1.91		$	2.04

Weighted average common shares outstanding—basic		26,578			26,664			26,546			26,666
Weighted average common shares outstanding—diluted		26,623			26,864			26,671			26,862

See Notes to Unaudited Consolidated Financial Statements.

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ePlus inc. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

	Three Months Ended September 30,						Six Months Ended September 30,
	2022			2021			2022			2021

NET EARNINGS	$	28,469		$	31,413		$	50,808		$	54,931

OTHER COMPREHENSIVE INCOME, NET OF TAX:

Foreign currency translation adjustments		(1,071	)		(506	)		(2,410	)		(440	)

Other comprehensive income (loss)		(1,071	)		(506	)		(2,410	)		(440	)

TOTAL COMPREHENSIVE INCOME	$	27,398		$	30,907		$	48,398		$	54,491

See Notes to Unaudited Consolidated Financial Statements.

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ePlus inc. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Six Months Ended September 30,
	2022			2021
Cash flows from operating activities:
Net earnings	$	50,808		$	54,931

Adjustments to reconcile net earnings to net cash used in operating activities:
Depreciation and amortization		9,539			12,044
Provision for credit losses		1,739			98
Share-based compensation expense		3,731			3,575
Deferred taxes		-			(1	)
Payments from lessees directly to lenders—operating leases		-			(32	)
Gain on disposal of property, equipment, and operaing lease equipment		(3,052	)		(525	)
Changes in:
Accounts receivable		(93,103	)		(85,463	)
Inventories-net		(122,182	)		(64,661	)
Financing receivables—net		(23,164	)		(18,019	)
Deferred costs and other assets		(24,711	)		(6,115	)
Accounts payable-trade		49,626			(43,375	)
Salaries and commissions payable, deferred revenue, and other liabilities		31,098			12,539
Net cash used in operating activities		(119,671	)		(135,004	)

Cash flows from investing activities:
Proceeds from sale of property, equipment, and operating lease equipment		3,114			2,553
Purchases of property, equipment and operating lease equipment		(2,410	)		(16,243	)
Cash used in acquisitions, net of cash acquired		(12,998	)		-
Net cash used in investing activities		(12,294	)		(13,690	)

Cash flows from financing activities:
Borrowings of non-recourse and recourse notes payable		142,271			64,815
Repayments of non-recourse and recourse notes payable		(54,597	)		(29,386	)
Repurchase of common stock		(7,224	)		(6,874	)
Net borrowings (repayments) on floor plan facility		(9,108	)		47,227
Net cash provided by financing activities		71,342			75,782

Effect of exchange rate changes on cash		4,776			300

Net decrease in cash and cash equivalents		(55,847	)		(72,612	)

Cash and cash equivalents, beginning of period		155,378			129,562

Cash and cash equivalents, end of period	$	99,531		$	56,950

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UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS - continued

(in thousands)

	Six Months Ended September 30,
	2022			2021
Supplemental disclosures of cash flow information:
Cash paid for interest	$	1,111		$	683
Cash paid for income taxes	$	28,878		$	24,511
Cash paid for amounts included in the measurement of lease liabilities	$	2,300		$	2,280

Schedule of non-cash investing and financing activities:
Proceeds from sale of property, equipment, and leased equipment	$	35		$	100
Purchases of property, equipment, and operating lease equipment	$	(720	)	$	(2,386	)
Consideration for acquisitions	$	(290	)	$	-
Borrowing of non-recourse and recourse notes payable	$	15,532		$	41,195
Repayments of non-recourse and recourse notes payable	$	-		$	(32	)
Vesting of share-based compensation	$	9,811		$	8,398
New operating lease assets obtained in exchange for lease obligations	$	2,353		$	1,070

See Notes to Unaudited Consolidated Financial Statements.

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ePlus inc. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)

	Six Months Ended September 30, 2022
													Accumulated
						Additional							Other
	Common Stock					Paid-In		Treasury			Retained		Comprehensive
	Shares			Par Value		Capital		Stock			Earnings		Income			Total
Balance, March 31, 2022		26,886		$	270	$	159,480	$	(6,734	)	$	507,846	$	(124	)	$	660,738
Issuance of restricted stock awards		135			1		-		-			-		-			1
Share-based compensation		-			-		1,773		-			-		-			1,773
Repurchase of common stock		(128	)		-		-		(7,224	)		-		-			(7,224	)
Net earnings		-			-		-		-			22,339		-			22,339
Foreign currency translation adjustment		-			-		-		-			-		(1,339	)		(1,339	)

Balance, June 30, 2022		26,893		$	271	$	161,253	$	(13,958	)	$	530,185	$	(1,463	)	$	676,288
Issuance of restricted stock awards		13			1		-		-			-		-			1
Share-based compensation		-			-		1,958		-			-		-			1,958
Repurchase of common stock		-			-		-		-			-		-			-
Net earnings		-			-		-		-			28,469		-			28,469
Foreign currency translation adjustment		-			-		-		-			-		(1,071	)		(1,071	)

Balance, September 30, 2022		26,906		$	272	$	163,211	$	(13,958	)	$	558,654	$	(2,534	)	$	705,645

	Six Months Ended September 30, 2021
													Accumulated
						Additional							Other
	Common Stock					Paid-In		Treasury			Retained		Comprehensive
	Shares			Par Value		Capital		Stock			Earnings		Income			Total
Balance, March 31, 2021		27,006		$	145	$	152,366	$	(75,372	)	$	484,616	$	655		$	562,410
Issuance of restricted stock awards		156			1		-		-			-		-			1
Share-based compensation		-			-		1,735		-			-		-			1,735
Repurchase of common stock		(90	)		-		-		(4,111	)		-		-			(4,111	)
Net earnings		-			-		-		-			23,518		-			23,518
Foreign currency translation adjustment		-			-		-		-			-		66			66

Balance, June 30, 2021		27,072		$	146	$	154,101	$	(79,483	)	$	508,134	$	721		$	583,619
Issuance of restricted stock awards		12			-		-		-			-		-			-
Share-based compensation		-			-		1,840		-			-		-			1,840
Repurchase of common stock		(64	)		-		-		(2,763	)		-		-			(2,763	)
Net earnings		-			-		-		-			31,413		-			31,413
Foreign currency translation adjustment		-			-		-		-			-		(506	)		(506	)

Balance, September 30, 2021		27,020		$	146	$	155,941	$	(82,246	)	$	539,547	$	215		$	613,603

See Notes to Unaudited Consolidated Financial Statements.

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ePlus inc. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1.	ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS — Our company was founded in 1990 and is a Delaware corporation. ePlus inc. is sometimes referred to in this Quarterly Report on Form 10-Q as “we,” “our,” “us,” “ourselves,” or “ePlus.” ePlus inc. is a holding company that through its subsidiaries provides information technology solutions that enable organizations to optimize their IT environment and supply chain processes. We also provide consulting, professional, and managed services and complete lifecycle management services including flexible financing solutions. We focus on selling to medium and large enterprises in North America, the United Kingdom (“UK”), and other European countries.

BASIS OF PRESENTATION — The unaudited consolidated financial statements include the accounts of ePlus inc. and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. The accounts of businesses acquired are included in the unaudited consolidated financial statements from the dates of acquisition.

INTERIM FINANCIAL STATEMENTS — The unaudited consolidated financial statements for the six months ended September 30, 2022, and 2021, were prepared by us and include all normal and recurring adjustments that, in the opinion of management, are necessary for a fair presentation of our financial position, results of operations, changes in comprehensive income, and cash flows for such periods. Operating results for the six months ended September 30, 2022, and 2021, are not necessarily indicative of results that may be expected for any other interim period or for the full fiscal year ended March 31, 2023, or any other future period. These unaudited consolidated financial statements do not include all disclosures required by the accounting principles generally accepted in the United States (“US GAAP”) for annual financial statements. Our audited consolidated financial statements are contained in our annual report on Form 10-K for the year ended March 31, 2022 (“2022 Annual Report”), which should be read in conjunction with these interim consolidated financial statements.

USE OF ESTIMATES — The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Estimates are used when accounting for items and matters including, but not limited to, revenue recognition, residual values, vendor consideration, lease classification, goodwill and intangible assets, allowance for credit losses, inventory obsolescence, and the recognition and measurement of income tax assets and other provisions and contingencies. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from these estimates.

CONCENTRATIONS OF RISK — A substantial portion of our sales are products from Cisco Systems, which were 39% and 40% of our technology segment’s net sales for the three months ended September 30, 2022, and 2021, respectively, and 37% and 41% of our technology segment’s net sales for the six months ended September 30, 2022, and 2021, respectively.

STOCK SPLIT — On December 13, 2021, we completed a two-for-one stock split in the form of a stock dividend. References made to outstanding shares or per share amounts in the accompanying financial statements and disclosures have been retroactively adjusted for this stock split.

SIGNIFICANT ACCOUNTING POLICIES — The significant accounting policies used in preparing these Consolidated Financial Statements were applied on a basis consistent with those reflected in our Consolidated Financial Statements for the year ended March 31, 2022, except for the changes provided in Note 2, “Recent Accounting Pronouncements”.

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2.	RECENT ACCOUNTING PRONOUNCEMENTS

RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS — In October 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2021-08, Business combinations (Topic 805): Accounting for contract assets and contract liabilities from contracts with customers (“ASU 2021-08”) that requires companies to apply Accounting Standards Codification Topic 606, Contracts with customers (“ASC Topic 606”) to recognize and measure contract assets and contract liabilities from contracts with customers acquired in a business combination. We early adopted this accounting standard update beginning in the second quarter of our fiscal year 2023 and it did not have a material impact on our Consolidated Financial Statements. The ongoing impact of this standard will be fact dependent on the transactions within its scope.

REVENUES

CONTRACT BALANCES

Accounts receivable – trade consists entirely of amounts due from contracts with customers. In addition, we had $62.3 million and $47.5 million of receivables from contracts with customers included within financing receivables as of September 30, 2022, and March 31, 2022, respectively. The following table provides the balance of contract liabilities from contracts with customers (in thousands):

	September 30, 2022		March 31, 2022
Current (included in deferred revenue)	$	107,802	$	85,826
Non-current (included in other liabilities)	$	40,119	$	30,086

Revenue recognized from the beginning contract liability balance was $17.5 million and $42.4 million for the three and six months ended September 30, 2022, respectively, and $14.6 million and $36.1 million for the three and six months ended September 30, 2021, respectively.

PERFORMANCE OBLIGATIONS

The following table includes revenue expected to be recognized in the future related to performance obligations, primarily non-cancelable contracts for ePlus managed services, that are unsatisfied or partially unsatisfied at the end of the reporting period (in thousands):

Remainder of the year ending March 31, 2023	$	33,299
Year ending March 31, 2024		34,681
Year ending March 31, 2025		17,839
Year ending March 31, 2026		5,470
Year ending March 31, 2027 and thereafter		2,354
Total remaining performance obligations	$	93,643

The table does not include the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less, and (ii) contracts where we recognize revenue at the amount that we have the right to invoice for services performed.

4.	FINANCING RECEIVABLES AND OPERATING LEASES

Our financing receivables and operating leases consist primarily of leases of IT and communication equipment and notes receivable from financing customer purchases of third-party software, maintenance, and services. Our leases often include elections for the lessee to purchase the underlying asset at the end of the lease term. Often, our leases provide the lessee a bargain purchase option.

The following table provides the profit recognized for sales-type leases at their commencement date, including modifications that are recognized on a net basis, for the three and six months ended September 30, 2022, and 2021 (in thousands):

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	Three months ended September 30,				Six months ended September 30,
	2022		2021		2022		2021
Net sales	$	4,506	$	5,962	$	9,489	$	9,779
Cost of sales		3,769		4,926		7,836		8,291
Gross profit	$	737	$	1,036	$	1,653	$	1,488

The following table provides interest income in aggregate on our sales-type leases and lease income on our operating leases for the three and six months ended September 30, 2022, and 2021 (in thousands):

	Three months ended September 30,				Six months ended September 30,
	2022		2021		2022		2021
Interest income on sales-type leases	$	819	$	1,000	$	1,680	$	2,290
Lease income on operating leases	$	4,659	$	6,634	$	9,241	$	11,844

FINANCING RECEIVABLES—NET

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

	Notes			Lease			Financing
September 30, 2022	Receivable			Receivables			Receivables
Gross receivables	$	89,717		$	50,714		$	140,431
Unguaranteed residual value (1)		-			8,385			8,385
Unearned income		(5,795	)		(5,104	)		(10,899	)
Allowance for credit losses (2)		(976	)		(1,207	)		(2,183	)
Total, net	$	82,946		$	52,788		$	135,734
Reported as:
Current	$	45,443		$	19,567		$	65,010
Long-term		37,503			33,221			70,724
Total, net	$	82,946		$	52,788		$	135,734

(1)	Includes unguaranteed residual values of $4,830 thousand that we retained after selling the related lease receivable.

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

	Notes			Lease			Financing
March 31, 2022	Receivable			Receivables			Receivables
Gross receivables	$	80,517		$	38,788		$	119,305
Unguaranteed residual value (1)		-			9,141			9,141
Unearned income		(2,728	)		(3,604	)		(6,332	)
Allowance for credit losses (2)		(708	)		(681	)		(1,389	)
Total, net	$	77,081		$	43,644		$	120,725
Reported as:
Current	$	45,415		$	16,077		$	61,492
Long-term		31,666			27,567			59,233
Total, net	$	77,081		$	43,644		$	120,725

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

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

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OPERATING LEASES—NET

Operating leases—net represents leases that do not qualify as sales-type leases. The components of the operating leases—net are as follows (in thousands):

	September 30,			March 31,
	2022			2022
Cost of equipment under operating leases	$	14,121		$	13,044
Accumulated depreciation		(9,752	)		(7,985	)
Investment in operating lease equipment—net (1)	$	4,369		$	5,059

(1)	Amounts include estimated unguaranteed residual values of $1.8 million and $1.7 million as of September 30, 2022, and March 31, 2022, respectively.

TRANSFERS OF FINANCIAL ASSETS

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

For transfers accounted for as a secured borrowing, the corresponding investments serve as collateral for non-recourse notes payable. As of September 30, 2022, and March 31, 2022, we had financing receivables of $20.2 million and $21.1 million, respectively, and operating leases of $1.7 million and $2.0 million, respectively, which were collateral for non-recourse notes payable. See Note 8, ‘‘Credit Facility and Notes Payable.’’

For transfers accounted for as a sale, we derecognize the carrying value of the asset transferred plus any liability and recognize a net gain or loss on the sale, which are presented within net sales in the consolidated statement of operations. During the three months ended September 30, 2022, and 2021, we recognized net gains of $8.1 million and $10.1 million, respectively, and total proceeds from these sales were $376.4 million and $615.0 million, respectively. For the year to date periods ended September 30, 2022, and 2021, we recognized net gains of $9.9 million and $13.3 million, respectively, and total proceeds from these sales were $428.9 million and $690.3 million, respectively.

When we retain servicing obligations in transfers accounted for as sales, we allocate a portion of the proceeds to deferred revenue, which is recognized as we perform the services. As of both September 30, 2022, and March 31, 2022, we had deferred revenue of $0.5 million, for servicing obligations.

In a limited number of transfers accounted for as sales, we indemnified the assignee if the lessee elects to early terminate the lease. As of September 30, 2022, and March 31, 2022, the total potential payments that could result from these indemnities is immaterial.

5.	LESSEE ACCOUNTING

We lease office and warehouse space for periods generally between one to five years and, in some instances, for longer periods up to ten years. We recognize our right-of-use assets as part of property, equipment, and other assets. We recognize the current and long-term portions of our lease liability as part of other current liabilities and other liabilities, respectively. We recognized rent expense as part of selling, general and administrative expenses. We recognized rent expense of $1.2 million as part of selling, general and administrative expenses for the three months ended September 30, 2022, and $1.3 million for the three months ending September 30, 2021, and $2.5 million and $2.6 million for the six months ended September 30, 2022, and 2021, respectively.

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6.	GOODWILL AND OTHER INTANGIBLE ASSETS

GOODWILL

The following table summarizes the changes in the carrying amount of goodwill for the six months ended September 30, 2022 (in thousands):

	Six months ended September 30, 2022
	Goodwill			Accumulated Impairment Loss			Net Carrying Amount
Beginning balance	$	135,216		$	(8,673	)	$	126,543
Acquisitions		9,694			-			9,694
Foreign currency translations		(330	)		-			(330	)
Ending balance	$	144,580		$	(8,673	)	$	135,907

Goodwill represents the premium paid over the fair value of the net tangible and intangible assets that are individually identified and separately recognized in business combinations. Our entire balance as of September 30, 2022, relates to our technology segment, which we also determined to be one reporting unit. The carrying value of goodwill was $135.9 and $126.5 million as of September 30, 2022, and March 31, 2022, respectively. Our goodwill balance increased by $9.4 million over the six months ended September 30, 2022, due to $9.7 million in goodwill additions from our acquisition of Future Com, Ltd., offset by foreign currency translation of $0.3 million. Please refer to Note 15, “Business Combinations” for details of our acquisition.

We test goodwill for impairment on an annual basis, as of the first day of our third fiscal quarter, and between annual tests if an event occurs, or circumstances change, that would more likely than not reduce the fair value of a reporting unit below its carrying value. In our prior year annual test as of October 1, 2021, we performed a qualitative assessment of goodwill and concluded that, more likely than not, the fair value of our technology reporting unit continued to substantially exceed its carrying value.

OTHER INTANGIBLE ASSETS

Our other intangible assets consist of the following on September 30, 2022, and March 31, 2022 (in thousands):

	September 30, 2022							March 31, 2022
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Purchased intangibles	$	85,218	$	(56,425	)	$	28,793	$	77,224	$	(52,087	)	$	25,137
Capitalized software development		10,516		(8,973	)		1,543		10,517		(8,404	)		2,113
Total	$	95,734	$	(65,398	)	$	30,336	$	87,741	$	(60,491	)	$	27,250

Purchased intangibles, consisting mainly of customer relationships intangibles, are generally amortized between 5 to 10 years. Capitalized software development is generally amortized over 5 years.

Total amortization expense for purchased intangibles was $2.5 million for the three months ended September 30, 2022, and $2.7 million for the three months ended September 30, 2021, and $4.7 million and $5.4 million for the six months ended September 30, 2022, and 2021, respectively.

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7.	ALLOWANCE FOR CREDIT LOSSES

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

	Accounts Receivable			Notes Receivable			Lease Receivables			Total
Balance April 1, 2022	$	2,411		$	708		$	681		$	3,800
Provision for credit losses		943			269			527			1,739
Write-offs and other		(71	)		(1	)		(1	)		(73	)
Balance September 30, 2022	$	3,283		$	976		$	1,207		$	5,466

	Accounts Receivable			Notes Receivable			Lease Receivables			Total
Balance April 1, 2021	$	2,064		$	1,212		$	1,171		$	4,447
Provision for credit losses		116			479			(497	)		98
Write-offs and other		(64	)		(4	)		(2	)		(70	)
Balance September 30, 2021	$	2,116		$	1,687		$	672		$	4,475

We evaluate our customers using an internally assigned credit quality rating “CQR”. The CQR categories of our financing receivables are:

•	High CQR: This rating includes accounts with excellent to good business credit, asset quality and capacity to meet financial obligations. Loss rates in this category are generally less than 1%.

•	Average CQR: This rating includes accounts with average credit risk that are more susceptible to loss in the event of adverse business or economic conditions. Loss rates in this category are generally in the range of 2% to 10%.

•	Low CQR: This rating includes accounts that have marginal credit risk such that the customer’s ability to make repayment is impaired or may likely become impaired. The loss rates in this category in the normal course are generally in the range of 10% to 100%.

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

	Amortized cost basis by origination year ending March 31,
	2023		2022		2021		2020		2019		2018		Total		Non-recourse debt (2)			Net credit exposure
Notes receivable:
High CQR	$	37,200	$	14,436	$	18,494	$	791	$	452	$	-	$	71,373	$	(16,450	)	$	54,923
Average CQR		8,039		2,655		1,220		508		123		4		12,549		(493	)		12,056
Low CQR		-		-		-		-		-		-		-		-			-
Total	$	45,239	$	17,091	$	19,714	$	1,299	$	575	$	4	$	83,922	$	(16,943	)	$	66,979

Lease receivables:
High CQR	$	11,271	$	5,513	$	2,879	$	2,754	$	317	$	32	$	22,766	$	(1,965	)	$	20,801
Average CQR		16,625		7,802		1,584		330		33		25		26,399		(1,248	)		25,151
Low CQR		-		-		-		-		-		-		-		-			-
Total	$	27,896	$	13,315	$	4,463	$	3,084	$	350	$	57	$	49,165	$	(3,213	)	$	45,952

Total amortized cost (1)	$	73,135	$	30,406	$	24,177	$	4,383	$	925	$	61	$	133,087	$	(20,156	)	$	112,931

(1)	Unguaranteed residual values of $4,830 thousand that we retained after selling the related lease receivable is excluded from amortized cost.

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

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

	Amortized cost basis by origination year ending March 31,
	2022		2021		2020		2019		2018		2017		Total		Transfers (2)			Net credit exposure

Notes receivable:
High CQR	$	35,264	$	28,005	$	1,297	$	345	$	2	$	4	$	64,917	$	(30,274	)	$	34,643
Average CQR		8,922		2,976		758		213		3		-		12,872		(4,763	)		8,109
Low CQR		-		-		-		-		-		-		-		-			-
Total	$	44,186	$	30,981	$	2,055	$	558	$	5	$	4	$	77,789	$	(35,037	)	$	42,752

Lease receivables:
High CQR	$	14,549	$	5,002	$	2,499	$	902	$	50	$	11	$	23,013	$	(3,385	)	$	19,628
Average CQR		10,936		3,092		741		47		72		-		14,888		(347	)		14,541
Low CQR		-		-		-		-		-		-		-		-			-
Total	$	25,485	$	8,094	$	3,240	$	949	$	122	$	11	$	37,901	$	(3,732	)	$	34,169

Total amortized cost (1)	$	69,671	$	39,075	$	5,295	$	1,507	$	127	$	15	$	115,690	$	(38,769	)	$	76,921

(1)	Unguaranteed residual values of $6,424 thousand that we retained after selling the related lease receivable is excluded from amortized cost.

(2)

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 September 30, 2022 (in thousands):

	31-60 Days Past Due		61-90 Days Past Due		> 90 Days Past Due		Total Past Due		Current		Total Billed		Unbilled		Amortized Cost
Notes receivable	$	268	$	425	$	97	$	790	$	5,623	$	6,413	$	77,509	$	83,922
Lease receivables		240		154		551		945		905		1,850		47,315		49,165
Total	$	508	$	579	$	648	$	1,735	$	6,528	$	8,263	$	124,824	$	133,087

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

	31-60 Days Past Due		61-90 Days Past Due		> 90 Days Past Due		Total Past Due		Current		Total Billed		Unbilled		Amortized Cost
Notes receivable	$	187	$	37	$	23	$	247	$	5,307	$	5,554	$	72,235	$	77,789
Lease receivables		115		325		430		870		639		1,509		36,392		37,901
Total	$	302	$	362	$	453	$	1,117	$	5,946	$	7,063	$	108,627	$	115,690

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

8.	CREDIT FACILITY AND NOTES PAYABLE

CREDIT FACILITY

We finance the operations of our subsidiaries ePlus Technology, inc., ePlus Technology Services, inc., and SLAIT Consulting, LLC (collectively, the “Borrowers”) in our technology segment through a credit facility with Wells Fargo Commercial Distribution Finance, LLC (“WFCDF”). The WFCDF credit facility has an accounts payable floor plan facility component and a revolving credit facility component.

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On October 13, 2021, the Borrowers amended, restated, and replaced in entirety their then-existing credit agreements with WFCDF. Under this agreement, the credit facility is provided by a syndicate of banks for which WFCDF acts as administrative agent and consists of a discretionary senior secured floorplan facility in favor of the Borrowers in the aggregate principal amount of up to $375.0 million, together with a sublimit for a revolving credit facility for up to $100.0 million (collectively, the “WFCDF Credit Facility”).

Under the accounts payable floor plan facility, we had an outstanding balance of $136.2 million and $145.3 million as of September 30, 2022, and March 31, 2022, respectively. On our balance sheet, our liability under the accounts payable floor plan facility is presented as accounts payable – floor plan.

Under the revolving credit facility, we had $85.0 million outstanding as of September 30, 2022, and no balance outstanding as of March 31, 2022. On our balance sheet, our liability under the revolving credit facility is presented as part of recourse notes payable – current.

The fair value of the outstanding balances under the WFCDF Credit Facility were approximately equal to their carrying value as of September 30, 2022, and March 31, 2022.

The amount of principal available is subject to a borrowing base determined by, among other things, the Borrowers’ accounts receivable and inventory, each pursuant to a formula and subject to certain reserves. Loans accrue interest at a rate per annum equal to LIBOR plus 1.75%. The LIBOR rate is based upon one-month, three-month, six-month, and 12-month LIBOR periods, as selected by the Borrowers, and subject to a floor of 0.00%.

Our borrowings under the WFCDF Credit Facility are secured by the assets of the Borrowers. Additionally, the WFCDF Credit Facility requires a guaranty of $10.5 million by ePlus inc.

Under the WFCDF Credit Facility, the Borrowers are restricted in their ability to pay dividends to ePlus inc. unless their available borrowing meets or met certain thresholds. As of September 30, 2022, and March 31, 2022, their available borrowing met the thresholds such that there were no restrictions on their ability to pay dividends.

The WFCDF Credit Facility has an initial one-year term, which automatically renews for successive one-year terms thereafter. However, either the Borrowers or WFCDF may terminate by providing a written termination notice to the other party no less than 90 days prior to such termination.

On October 31, 2022, the Borrowers executed an amendment to the WFCDF Credit Facility that increased the limit on the aggregate principal amount to $425.0 million and increased the sublimit on the revolving credit facility up to $150.0 million. Additionally, this amendment converted all of the Borrower’s loans from a LIBOR rate to a Term SOFR rate.

RECOURSE NOTES PAYABLE

Recourse notes payable consist of borrowings that the lender has recourse against us. As of September 30, 2022, we had $94.7 million in recourse notes payable consisting of $85.0 million outstanding under the revolving credit facility component of our WFCDF Credit Facility, and $9.7 million arising from one installment payment arrangement within our technology segment. As of March 31, 2022, we had $13.1 million in recourse notes payable arising entirely from one installment payment arrangement within our technology segment. Our payments under this installment agreement are due quarterly in amounts that are correlated to the payments due to us from a customer under a related notes receivable. We discounted our payments due under this installment agreement to calculate our payable balance using an interest rate of 3.50% as of both September 30, 2022, and March 31, 2022.

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NON-RECOURSE NOTES PAYABLE

Non-recourse notes payable 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 September 30, 2022, and March 31, 2022, we had $20.8 million and $21.2 million, respectively, of non-recourse borrowings that were collateralized by investments in notes and leases. Principal and interest payments are generally due in amounts that are approximately equal to the total payments due from the customer under the leases or notes receivable that collateralize the notes payable. The weighted average interest rate for our non-recourse notes payable was 4.09% and 3.59%, as of September 30, 2022, and March 31, 2022, respectively.

9.	COMMITMENTS AND CONTINGENCIES

LEGAL PROCEEDINGS

We are subject to various legal proceedings, as well as demands, claims and threatened litigation, that arise in the normal course of our business and have not been fully resolved. The ultimate outcome of any litigation or any other legal dispute is uncertain. When a loss related to a legal proceeding or claim is probable and reasonably estimable, we accrue our best estimate for the ultimate resolution of the matter. If one or more legal matters are resolved against us in a reporting period for amounts above management’s expectations, our financial condition and operating results for that period could be adversely affected. As of September 30, 2022, we do not believe that there is a reasonable possibility that any material loss exceeding the amounts already recognized for these proceedings and matters, if any, has been incurred. Any outcome, whether favorable or unfavorable, may materially and adversely affect us due to legal costs and expenses, diversion of management attention and other factors. We expense legal costs in the period incurred. We cannot assure that additional contingencies of a legal nature or contingencies having legal aspects will not be asserted against the us in the future, and these matters could relate to prior, current, or future transactions or events.

10.	EARNINGS PER SHARE

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

The following table provides a reconciliation of the numerators and denominators used to calculate basic and diluted net income per common share as disclosed on our unaudited consolidated statements of operations for the three and six months ended September 30, 2022, and 2021, respectively (in thousands, except per share data).

	Three Months Ended September 30,				Six Months Ended September 30,
	2022		2021		2022		2021

Net earnings attributable to common shareholders - basic and diluted	$	28,469	$	31,413	$	50,808	$	54,931

Basic and diluted common shares outstanding:
Weighted average common shares outstanding — basic		26,578		26,664		26,546		26,666
Effect of dilutive shares		45		200		125		196
Weighted average shares common outstanding — diluted		26,623		26,864		26,671		26,862

Earnings per common share - basic	$	1.07	$	1.18	$	1.91	$	2.06

Earnings per common share - diluted	$	1.07	$	1.17	$	1.91	$	2.04

11.	STOCKHOLDERS’ EQUITY

SHARE REPURCHASE PLAN

On March 24, 2022, our board of directors authorized the repurchase of up to 1,000,000 shares of our outstanding common stock, over a 12-month period beginning May 28, 2022. On March 18, 2021, our board of directors authorized the repurchase of up to 1,000,000 shares of our outstanding common stock, over a 12-month period beginning May 28, 2021. Under both authorized programs, purchases may be made from time to time in the open market, or in privately negotiated transactions, subject to availability. Any repurchased shares will have the status of treasury shares and may be used, when needed, for general corporate purposes.

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During the six months ended September 30, 2022, we purchased 70,473 shares of our outstanding common stock at a value of $3.9 million under the share repurchase plan; we also purchased 58,080 shares of common stock at a value of $3.3 million to satisfy tax withholding obligations relating to the vesting of employees’ restricted stock.

During the six months ended September 30, 2021, we purchased 98,056 shares of our outstanding common stock at a value of $4.3 million under the share repurchase plan; we also purchased 55,430 shares of common stock at a value of $2.6 million to satisfy tax withholding obligations relating to the vesting of employees’ restricted stock.

12.	SHARE-BASED COMPENSATION

SHARE-BASED PLANS

As of September 30, 2022, we had share-based awards outstanding under the following plans: (1) the 2017 Non-Employee Director Long-Term Incentive Plan (“2017 Director LTIP”), (2) the 2012 Employee Long-Term Incentive Plan (“2012 Employee LTIP”), and (3) the 2021 Employee Long-Term Incentive Plan (“2021 Employee LTIP”).

The 2021 Employee LTIP was approved by our shareholders on September 16, 2021, and became effective October 1, 2021. The 2021 Employee LTIP replaced the 2012 Employee LTIP that had previously been approved by our stockholders on September 13, 2012. Beginning September 16, 2021, we permanently ceased issuing any additional shares under the 2012 Employee LTIP.

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 recent trading day preceding such date if there were no trades on such date.

RESTRICTED STOCK ACTIVITY

For the six months ended September 30, 2022, we granted 15,954 shares of our stock under the 2017 Director LTIP, and 138,643 restricted shares of our stock under the 2021 Employee LTIP. For the six months ended September 30, 2021, we granted 12,786 shares of our stock under the 2017 Director LTIP, and 155,722 restricted shares of our stock under the 2012 Employee LTIP. A summary of our restricted stock activity, is as follows:

	Number of Shares			Weighted Average Grant-date Fair Value

Nonvested April 1, 2022		343,806		$	41.01
Granted		154,597		$	56.82
Vested		(177,360	)	$	39.44
Forfeited		(6,399	)	$	41.51
Nonvested September 30, 2022		314,644		$	49.58

EMPLOYEE STOCK PURCHASE PLAN

On September 15, 2022, our shareholders approved the 2022 Employee Stock Purchase Plan (“2022 ESPP”) through which eligible employees may purchase shares of our stock at a discounted purchase price of up to 85% of the lesser of the closing price on the offering date or closing price on the purchase date. As of September 30, 2022, we have not had any offerings under the 2022 ESPP.

COMPENSATION EXPENSE

We recognize compensation cost for awards of restricted stock with graded vesting on a straight-line basis over the requisite service period. There are no additional conditions for vesting other than service conditions. During the three months ended September 30, 2022, and 2021, we recognized $2.0 million and $1.8 million of total share-based compensation expense, respectively. During the six months ended September 30, 2022, and 2021, we recognized $3.7 million and $3.6 million of total share-based compensation expense, respectively. Unrecognized compensation expense related to unvested restricted stock was $13.5 million as of September 30, 2022, which will be fully recognized over the next 33 months.

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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 was $1.0 million for both the three months ended September 30, 2022, and 2021. For the six months ended September 30, 2022, and 2021, our estimated contribution expense for the plan was $2.0 million and $1.8 million, respectively.

13.	INCOME TAXES

Our provision for income tax expense was $11.8 million and $20.5 million for the three and six months ended September 30, 2022, as compared to $12.6 million and $21.6 for the same period in the prior year. Our effective tax rate for the three and six months ended September 30, 2022, was 29.3% and 28.7% respectively, compared with 28.6% and 28.2%, respectively, for the same periods in the prior year. The effective tax rate for the three and six months ended September 30, 2022, and September 30, 2021, differed from the US federal statutory rate of 21.0% primarily due to state and local income taxes. Our effective income tax rate for the three and six months ended September 30, 2022, was higher compared to the same periods in the prior year primarily due to foreign currency losses incurred in lower tax jurisdictions.

14.	FAIR VALUE OF FINANCIAL INSTRUMENTS

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

			Fair Value Measurement Using
	Recorded Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs(Level 3)
September 30, 2022
Assets:
Money market funds	$	10,204	$	10,204	$	-	$	-

March 31, 2022
Assets:
Money market funds	$	18,138	$	18,138	$	-	$	-

15.	BUSINESS COMBINATIONS

FUTURE COM

On July 15, 2022, our subsidiary, ePlus Technology, inc., acquired certain assets and liabilities of Future Com, Ltd., a Texas-based provider of cybersecurity solutions, cloud security and security consulting services throughout the US. Our acquisition provides access to enhanced engineering, sales, and services delivery capabilities in the South-Central region of the United States, as well as bolstering the skills and expertise surrounding ePlus’ growing cybersecurity practice.

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Our preliminary 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 is owed to the sellers based on adjustments to our determination of the total net assets delivered. Our preliminary allocation of the purchase consideration to the assets acquired and liabilities assumed is presented below (in thousands):

	Acquisition Date Amount
Accounts receivable	$	4,033
Other assets		129
Identified intangible assets		8,360
Accounts payable and other current liabilities		(8,714	)
Contract liabilities		(214	)
Total identifiable net assets		3,594
Goodwill		9,694
Total purchase consideration	$	13,288

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 assigned to our technology reporting unit. The goodwill recognized in the acquisition is attributable to the acquired assembled workforce and expected synergies, none of which qualify for recognition as a separate intangible asset. 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.

As of our filing date, our accounting for this business combination is incomplete in respect to determining the final consideration transferred and the fair value of assets acquired, and liabilities assumed.

16.	SEGMENT REPORTING

Our operations are conducted through two operating segments that are also both reportable segments. Our technology segment includes sales of IT products, third-party software, third-party maintenance, advanced professional and managed services, and our proprietary software to commercial enterprises, state and local governments, and government contractors. Our financing segment consists of the financing of IT equipment, software, and related services to commercial enterprises, state and local governments, and government contractors. We measure the performance of the segments based on operating income.

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

	Three Months Ended
	September 30, 2022							September 30, 2021
	Technology		Financing		Total			Technology		Financing		Total

Net Sales
Product	$	406,317	$	22,228	$	428,545		$	375,444	$	21,716	$	397,160
Service		65,161		-		65,161			60,857		-		60,857
Total		471,478		22,228		493,706			436,301		21,716		458,017

Cost of Sales
Product		311,928		5,199		317,127			293,837		3,792		297,629
Service		43,275		-		43,275			37,386		-		37,386
Total		355,203		5,199		360,402			331,223		3,792		335,015

Gross Profit		116,275		17,029		133,304			105,078		17,924		123,002

Selling, general, and administrative		80,161		4,543		84,704			70,803		3,701		74,504
Depreciation and amortization		3,540		28		3,568			3,825		28		3,853
Interest and financing costs		671		254		925			199		143		342
Operating expenses		84,372		4,825		89,197			74,827		3,872		78,699

Operating income		31,903		12,204		44,107			30,251		14,052		44,303

Other income (expense)						(3,866	)						(325	)

Earnings before tax					$	40,241						$	43,978

Net Sales
Contracts with customers	$	466,972	$	6,923	$	473,895		$	430,339	$	1,776	$	432,115
Financing and other		4,506		15,305		19,811			5,962		19,940		25,902
Total	$	471,478	$	22,228	$	493,706		$	436,301	$	21,716	$	458,017

Selected Financial Data - Statement of Cash Flow

Depreciation and amortization	$	3,871	$	1,196	$	5,067		$	4,074	$	1,888	$	5,962
Purchases of property, equipment and operating lease equipment	$	611	$	22	$	633		$	948	$	8,301	$	9,249

Selected Financial Data - Balance Sheet

Total assets	$	1,167,532	$	203,808	$	1,371,340		$	902,070	$	237,875	$	1,139,945

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	Six Months Ended
	September 30, 2022							September 30, 2021
	Technology		Financing		Total			Technology		Financing		Total

Net Sales
Product	$	791,993	$	31,802	$	823,795		$	720,210	$	38,007	$	758,217
Service		128,270		-		128,270			116,449		-		116,449
Total		920,263		31,802		952,065			836,659		38,007		874,666

Cost of Sales
Product		614,436		6,901		621,337			564,852		10,004		574,856
Service		83,901		-		83,901			71,296		-		71,296
Total		698,337		6,901		705,238			636,148		10,004		646,152

Gross Profit		221,926		24,901		246,827			200,511		28,003		228,514

Selling, general, and administrative		153,273		8,198		161,471			136,956		6,323		143,279
Depreciation and amortization		6,722		56		6,778			7,723		56		7,779
Interest and financing costs		809		479		1,288			358		343		701
Operating expenses		160,804		8,733		169,537			145,037		6,722		151,759

Operating income		61,122		16,168		77,290			55,474		21,281		76,755

Other income (expense)						(6,019	)						(202	)

Earnings before tax					$	71,271						$	76,553

Net Sales
Contracts with customers	$	910,774	$	7,868	$	918,642		$	826,880	$	7,194	$	834,074
Financing and other		9,489		23,934		33,423			9,779		30,813		40,592
Total	$	920,263	$	31,802	$	952,065		$	836,659	$	38,007	$	874,666

Selected Financial Data - Statement of Cash Flow

Depreciation and amortization	$	7,386	$	2,153	$	9,539		$	8,177	$	3,867	$	12,044
Purchases of property, equipment and operating lease equipment	$	1,897	$	513	$	2,410		$	2,255	$	13,988	$	16,243

Selected Financial Data - Balance Sheet

Total assets	$	1,167,532	$	203,808	$	1,371,340		$	902,070	$	237,875	$	1,139,945

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TECHNOLOGY SEGMENT DISAGGREGATION OF REVENUE

We analyze net sales for our technology segment by customer end market and by vendor, as opposed to discrete product and service categories, which are summarized for the three- and six-month periods ended September 30, 2022, and 2021 in the tables below (in thousands):

	Three Months Ended September 30,						Six Months Ended September 30,
	2022			2021			2022			2021
Customer end market:
Telecom, media & entertainment	$	118,454		$	115,784		$	246,731		$	227,976
Technology		96,160			53,752			166,021			122,892
Healthcare		66,959			88,237			135,471			142,925
State and local government and educational institutions		70,491			68,662			135,092			134,077
Financial services		37,611			37,036			70,910			67,047
All others		81,803			72,830			166,038			141,742
Net sales		471,478			436,301			920,263			836,659

Less: Revenue from financing and other		(4,506	)		(5,962	)		(9,489	)		(9,779	)

Revenue from contracts with customers	$	466,972		$	430,339		$	910,774		$	826,880

	Three Months Ended September 30,						Six Months Ended September 30,
	2022			2021			2022			2021
Vendor:
Cisco systems	$	185,318		$	174,072		$	342,196		$	340,974
Juniper networks		39,580			18,438			62,089			43,152
HPE		32,330			8,965			39,129			21,301
NetApp		16,710			29,536			30,695			39,993
Dell EMC		15,221			43,498			77,094			69,838
Arista networks		8,933			8,047			20,105			19,545
All others		173,386			153,745			348,955			301,856
Net sales		471,478			436,301			920,263			836,659

Less: Revenue from financing and other		(4,506	)		(5,962	)		(9,489	)		(9,779	)

Revenue from contracts with customers	$	466,972		$	430,339		$	910,774		$	826,880

FINANCING SEGMENT DISAGGREGATION OF REVENUE

We analyze our revenues within our financing segment based on the nature of the arrangement. Our financing revenue generally consists of portfolio income, transactional gains, and post-contract earnings including month-to-month rents and the sales of off-lease equipment. All of our revenues from contracts with customers within our financing segment is from the sales of off-lease equipment.

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Item 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT 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 financial statements included in this quarterly report on Form 10-Q and our 2022 Annual Report. 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 2022 Annual Report.

EXECUTIVE OVERVIEW

BUSINESS DESCRIPTION

We are a leading solutions provider in the areas of security, cloud, networking, data center, collaboration, and emerging technologies. We deliver actionable outcomes for organizations by using information technology (“IT”) and consulting solutions to drive business agility and innovation. Leveraging our engineering talent, we assess, plan, deliver, and secure solutions comprised of leading technologies and consumption models aligned with our customers’ needs. Our expertise and experience enable us to craft optimized solutions that take advantage of the cost, scale, and efficiency of private, public and hybrid cloud in an evolving market. As part of our solutions, we provide consulting, professional services, managed services, IT staff augmentation, and complete lifecycle management. Additionally, we offer flexible financing for purchases from us and from third-parties. We have been in the business of selling, leasing, financing, and managing IT and other assets for more than 30 years.

Our primary focus is to deliver integrated solutions that address our customers’ business needs, leveraging the appropriate technologies, both on-premise and in the cloud. Our approach is to lead with advisory consulting to understand our customers’ needs, and then design, deploy, and manage solutions aligned to their objectives. Underpinning the broader areas of Cloud, Security, Networking, Data Center, and Collaboration are specific skills in orchestration and automation, application modernization, DevOps, data management, data visualization, analytics, network modernization, edge compute and other advanced and emerging technologies. These solutions are comprised of class-leading technologies from partners such as Amazon Web Services, Arista Networks, Check Point, Cisco Systems, Citrix, Commvault, Dell EMC, F5 Networks, Fortinet, Gigamon, HPE, Juniper Networks, Lenovo, Microsoft, NetApp, Nutanix, NVIDIA, Oracle, Palo Alto Networks, Pure Storage, Rubrik, Splunk, Varonis, and VMware, among many others. We possess top-level engineering certifications with a broad range of leading IT vendors that enable us to offer multi-vendor IT solutions that are optimized for each of our customers’ specific requirements. Our hosted, proprietary software solutions are focused on giving our customers more control over their IT supply chain, by automating and optimizing the procurement and management of their owned, leased, and consumption-based assets.

Our scale and financial resources have enabled us to continue investing in engineering and technology resources to stay on 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 ePlus 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. We 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 ePlus to deploy sophisticated solutions enabling 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 accounts for most of our sales, and to customers in select international markets including the United Kingdom (“UK”), the European Union (“EU”), India, and Singapore. Our technology segment accounted for 97% of our net sales and 79% of our operating income, while our financing segment accounted for 3% of our net sales and 21% of our operating income, for the six months ended September 30, 2022.

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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, COVID variants, and global unrest may impact our customers’ willingness to spend on technology and services.

•

A worldwide shortage of certain IT products is resulting from, among other things, shortages in semiconductors and other product components. Like others, we are experiencing ongoing supply constraints that have affected, and could continue to further affect, lead times for delivery of products, our having to carry more inventory for longer periods, the costs of products, vendor return and cancellation policies, and our ability to meet customer demands. We continue to work closely with our suppliers to further mitigate disruptions outside our control. Despite these actions, we believe extended lead times will likely persist for at least the next few quarters.

•

We are experiencing increases in prices from our suppliers as well as rising wages and interest rates. We generally have been able to pass price increases to our customers. Our labor costs related to services we perform will take longer to pass to customers that have services engagements where prices may be set. Our financing quotes are generally indexed to market changes to enable us to change rates from time of quote to funding. Financing transactions funded with our cash flows, not debt, are subject to interest rate risk. If the market interest rate exceeds our internal rate of return, we may not fund the transaction to obtain the proceeds and lock in our profit on the transaction. There can be no assurances that inflation will not have a material impact on our sales, gross profit, or operating costs in the future.

•

Customers’ top focus areas include security, cloud solutions, hybrid work environments (work from home and return to office) as well as digital transformation and modernization. We have developed advisory services, solutions, and professional and managed services to meet these priorities and help our customers attain and maintain their desired state.

•

Modernizing legacy applications, data modernization, reducing operational complexity, securing workloads, the cost and performance of IT operations, and agility are changing the way companies are purchasing and consuming technology. These are fueling deployments of solutions on cloud, managed services and hybrid platforms and licensing models.

KEY BUSINESS METRICS

Our management monitors several financial and non-financial measures and ratios on a regular basis to track the progress of our business. We believe that the most important of these measures and ratios include net sales, gross margin, operating income margin, net earnings, net earnings per common share, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted gross billings, and Non-GAAP Net earnings per share. We use a variety of operating and other information to evaluate the operating performance of our business, develop financial forecasts, make strategic decisions, and prepare and approve annual budgets.

These key indicators include financial information that is prepared in accordance with US GAAP and presented in our unaudited consolidated financial statements, as well as Non-GAAP performance measurement tools. Generally, a Non-GAAP financial measure is a numerical measure of a company’s performance or financial position that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with US GAAP. Non-GAAP measures used by management may differ from similar measures used by other companies, even when similar terms are used to identify such measures.

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Our key business metrics for the three- and six-month periods ended September 30, 2022, and 2021 are summarized in the following tables (dollars in thousands):

	Three Months Ended September 30,						Six Months Ended September 30,
Consolidated	2022			2021			2022			2021
Net sales	$	493,706		$	458,017		$	952,065		$	874,666

Gross profit	$	133,304		$	123,002		$	246,827		$	228,514
Gross margin		27.0	%		26.9	%		25.9	%		26.1	%
Operating income margin		8.9	%		9.7	%		8.1	%		8.8	%

Net earnings	$	28,469		$	31,413		$	50,808		$	54,931
Net earnings margin		5.8	%		6.9	%		5.3	%		6.3	%
Net earnings per common share - diluted	$	1.07		$	1.17		$	1.91		$	2.04

Non-GAAP: Net earnings (1)	$	34,396		$	34,806		$	60,909		$	61,159
Non-GAAP: Net earnings per common share - diluted (1)	$	1.29		$	1.30		$	2.28		$	2.28

Adjusted EBITDA (2)	$	50,304		$	50,195		$	88,608		$	88,467
Adjusted EBITDA margin		10.2	%		11.0	%		9.3	%		10.1	%


Technology Segment
Net sales	$	471,478		$	436,301		$	920,263		$	836,659
Adjusted gross billings (3)	$	765,762		$	664,124		$	1,467,705		$	1,297,131

Gross profit	$	116,275		$	105,078		$	221,926		$	200,511
Gross margin		24.7	%		24.1	%		24.1	%		24.0	%

Operating income	$	31,903		$	30,251		$	61,122		$	55,474
Adjusted EBITDA (2)	$	38,012		$	36,059		$	72,266		$	67,017

Financing Segment
Net sales	$	22,228		$	21,716		$	31,802		$	38,007

Gross profit	$	17,029		$	17,924		$	24,901		$	28,003

Operating income	$	12,204		$	14,052		$	16,168		$	21,281
Adjusted EBITDA (2)	$	12,292		$	14,136		$	16,342		$	21,450

(1)	Non-GAAP Net earnings and Non-GAAP Net earnings per common share – diluted is based on net earnings calculated in accordance with GAAP, adjusted to exclude other income (expense), share-based compensation, and acquisition and integration expenses, and the related tax effects.

We use Non-GAAP Net earnings per common share as a supplemental measure of our performance to gain insight into our operating performance and performance trends. We believe that the exclusion of other income and acquisition-related amortization expense in calculating Non-GAAP Net earnings per common share provides management and investors a useful measure for period-to-period comparisons of our business and operating results by excluding items that management believes are not reflective of our underlying operating performance. Accordingly, we believe that Non-GAAP Net earnings per common share provide useful information to investors and others in understanding and evaluating our operating results. 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 GAAP. In addition, other companies, including companies in our industry, might calculate similar Non-GAAP Net earnings and Non-GAAP Net earnings per common share or similarly titled measures differently, which may reduce their usefulness as comparative measures.

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	Three Months Ended September 30,					Six Months Ended September 30,
	2022			2021		2022		2021
GAAP: Earnings before tax	$	40,241		$	43,978	$	71,271	$	76,553
Share based compensation		1,958			1,840		3,731		3,575
Acquisition related amortization expense		2,494			2,661		4,677		5,357
Other expense		3,866			325		6,019		202
Non-GAAP: Earnings before provision for income taxes		48,559			48,804		85,698		85,687

GAAP: Provision for income taxes		11,772			12,565		20,463		21,622
Share based compensation		572			528		1,080		1,024
Acquisition related amortization expense		720			750		1,337		1,507
Other expense		1,128			93		1,744		58
Tax benefit (expense) on restricted stock		(29	)		62		165		317
Non-GAAP: Provision for income taxes		14,163			13,998		24,789		24,528

Non-GAAP: Net earnings	$	34,396		$	34,806	$	60,909	$	61,159

	Three Months Ended September 30,				Six Months Ended September 30,
	2022		2021		2022			2021
GAAP: Net earnings per common share - diluted	$	1.07	$	1.17	$	1.91		$	2.04

Share based compensation		0.05		0.05		0.09			0.10
Acquisition related amortization expense		0.07		0.07		0.13			0.14
Other expense		0.10		0.01		0.16			0.01
Tax expense on restricted stock		-		-		(0.01	)		(0.01	)
Total non-GAAP adjustments - net of tax		0.22		0.13		0.37			0.24

Non-GAAP: Net earnings per common share - diluted	$	1.29	$	1.30	$	2.28		$	2.28

(2)

We define Adjusted EBITDA as net earnings calculated in accordance with GAAP, adjusted for the following: interest expense, depreciation and amortization, share-based compensation, acquisition and integration expenses, provision for income taxes, and other income. Segment Adjusted EBITDA is defined as operating income calculated in accordance with GAAP, adjusted for interest expense, share-based compensation, acquisition and integration expenses, and depreciation and amortization. We consider the interest on notes payable from our financing segment and depreciation expense presented within cost of sales, which includes depreciation on assets financed as operating leases, to be operating expenses. As such, they are not included in the amounts added back to net earnings in the Adjusted EBITDA calculation. We provide below a reconciliation of Adjusted EBITDA to net earnings, which is the most directly comparable financial measure to this Non-GAAP financial measure. Adjusted EBITDA margin is our calculation of Adjusted EBITDA divided by net sales. The presentation of Adjusted EBITDA has been changed from prior period presentations to include adjustments for expenses related to acquisitions such as legal, accounting, tax, and adjustments to the fair value of contingent purchase price consideration as well as stock compensation.

We use Adjusted EBITDA as a supplemental measure of our performance to gain insight into our operating performance and performance trends. We believe that the exclusion of other income in calculating Adjusted EBITDA and Adjusted EBITDA margin provides management and investors a useful measure for period-to-period comparisons of our business and operating results by excluding items that management believes are not reflective of our underlying operating performance. Accordingly, we believe that Adjusted EBITDA and Adjusted EBITDA margin provide useful information to investors and others in understanding and evaluating our operating results. However, our use of Adjusted EBITDA and Adjusted EBITDA margin as analytical tools has limitations, and you should not consider them in isolation or as substitutes for analysis of our financial results as reported under GAAP. In addition, other companies, including companies in our industry, might calculate Adjusted EBITDA and Adjusted EBITDA margin or similarly titled measures differently, which may reduce their usefulness as comparative measures.

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	Three Months Ended September 30,				Six Months Ended September 30,
Consolidated	2022		2021		2022		2021
Net earnings	$	28,469	$	31,413	$	50,808	$	54,931
Provision for income taxes		11,772		12,565		20,463		21,622
Share based compensation		1,958		1,840		3,731		3,575
Interest and financing costs		671		199		809		358
Depreciation and amortization		3,568		3,853		6,778		7,779
Other income		3,866		325		6,019		202
Adjusted EBITDA	$	50,304	$	50,195	$	88,608	$	88,467

Technology Segment
Operating income	$	31,903	$	30,251	$	61,122	$	55,474
Depreciation and amortization		3,540		3,825		6,722		7,723
Share based compensation		1,898		1,784		3,613		3,462
Interest and financing costs		671		199		809		358
Adjusted EBITDA	$	38,012	$	36,059	$	72,266	$	67,017

Financing Segment
Operating income	$	12,204	$	14,052	$	16,168	$	21,281
Depreciation and amortization		28		28		56		56
Share based compensation		60		56		118		113
Adjusted EBITDA	$	12,292	$	14,136	$	16,342	$	21,450

(3)

We define Adjusted gross billings as our technology segment net sales calculated in accordance with US GAAP, adjusted to exclude the costs incurred related to sales of third-party maintenance, software assurance, subscription/SaaS licenses, and services. We have provided below a reconciliation of Adjusted gross billings to technology segment net sales, which is the most directly comparable financial measure to this Non-GAAP financial measure.

	Three Months Ended September 30,				Six Months Ended September 30,
	2022		2021		2022		2021
Technology segment net sales	$	471,478	$	436,301	$	920,263	$	836,659
Costs incurred related to sales of third party maintenance, software assurance and subscription/SaaS licenses, and services		294,284		227,823		547,442	$	460,472
Adjusted gross billings	$	765,762	$	664,124	$	1,467,705	$	1,297,131

We use Adjusted gross billings as a supplemental measure of our performance to gain insight into the volume of business generated by our technology segment, and to analyze the changes to our accounts receivable and accounts payable. Our use of Adjusted gross billings as an analytical tool has limitations, and you should not consider them in isolation or as substitutes for analysis of our financial results as reported under US GAAP. In addition, other companies, including companies in our industry, might calculate Adjusted gross billings or a similarly titled measure differently, which may reduce its usefulness as a comparative measure.

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CONSOLIDATED RESULTS OF OPERATIONS

Net sales for the three months ended September 30, 2022, increased $35.7 million, or 7.8%, to $493.7 million, as compared to $458.0 million for the same period in the prior year. Product sales for the three months ended September 30, 2022, increased $31.4 million, or 7.9% to $428.6 million, as compared to $397.2 million for the same period in the prior year, due to increased demand and higher prices for some products in our technology segment. Service sales for the three months ended September 30, 2022, increased $4.3 million, or 7.1%, to $65.2 million, as compared to $60.9 million for the same period in the prior year, primarily due to growth in managed services volume. In the technology segment, we had increases in net sales to customers in technology, telecom, media, and entertainment, and SLED due to increases in demand and the timing of fulfilling orders from existing customers, which were partially offset by decreases in net sales to customers in healthcare due to the timing of fulfilling orders from existing customers during the three months ended September 30, 2022, compared to the same period in the prior year.

Net sales for the six months ended September 30, 2022, increased $77.4 million, or 8.8%, to $952.1 million, as compared to $874.7 million for the same period in the prior year. Product sales for the six months ended September 30, 2022, increased $65.6 million, or 8.6%, to $823.8 million, as compared to $758.2 million for the same period in the prior year, due to increased demand and higher prices for some products in our technology segment. Service sales for the six months ended September 30, 2022, increased $11.9 million, or 10.2%, to $128.3 million, as compared to $116.4 million for the same period in the prior year, primarily due to growth in managed services volume and increases in professional services volume and rates. In the technology segment, we had increases in net sales to customers in technology, telecom, media, and entertainment, and professional services due to increases in demand and the timing of fulfilling orders from existing customers, which were partially offset by decreases in net sales to customers in healthcare and manufacturing due to the timing of fulfilling orders from existing customers during the six months ended September 30, 2022, compared to the same period in the prior year.

Adjusted gross billings for the three months ended September 30, 2022, increased $101.7 million, or 15.3%, to $765.8 million, as compared to $664.1 million for the same period in the prior year. We had increases in adjusted gross billings to customers in technology, telecom, media and entertainment, financial services, and SLED, which were partially offset by decreases in adjusted gross billings to customers in the healthcare market.

Adjusted gross billings for the six months ended September 30, 2022, increased $170.6 million, or 13.2%, to $1,467.7 million, as compared to $1,297.1 million for the same period in the prior year. We had increases in adjusted gross billings to customers in technology, telecom, media and entertainment, financial services, and SLED, which were partially offset by decreases in adjusted gross billings to customers in the healthcare market.

Consolidated gross profit for the three months ended September 30, 2022, increased $10.3 million, or 8.4%, to $133.3 million, as compared to $123.0 million for the same period in the prior year. Our increase in gross margins was due to an increase in product margins, due to a higher volume of sales of third-party maintenance, software assurance and subscription/SaaS licenses, and services, offset by lower service margins due to increases in third-party costs. Consolidated gross margins for the three months ended September 30, 2022, increased 10 basis points to 27.0%, as compared to 26.9% for the same period in the prior year. Our increase in gross margins was primarily due to an increase in product margins, partially offset by a decrease in service margins.

Consolidated gross profit for the six months ended September 30, 2022, increased $18.3 million, or 8.0%, to $246.8 million, as compared to $228.5 million for the same period in the prior year. Our increase in gross margins was due to an increase in product margins, due to a higher volume of sales of third-party maintenance, software assurance and subscription/SaaS licenses, and services, offset by lower service margins due to increases in third party costs. Consolidated gross margins for the six months ended September 30, 2022, decreased 20 basis points to 25.9%, as compared to the same period in the prior year. Our decrease in gross margins was primarily due to a decrease in service margins.

Operating expenses for the three months ended September 30, 2022, increased $10.5 million, or 13.3%, to $89.2 million, as compared to $78.7 million for the same period in the prior year. Our increase in operating expenses was primarily due to $5.8 million in higher salaries and benefits, $3.7 million in higher general and administrative expenses including higher advertising and marketing fees and higher travel and entertainment costs, $0.7 million in a higher provision for credit losses caused by an increase in our receivables over this period compared to a decrease in our receivables over the same period in the prior year, $0.6 million in higher interest and financing costs, and partially offset by a $0.3 million decrease in depreciation and amortization. As of September 30, 2022, we had 1,729 employees, an increase of 175 from 1,554 as of September 30, 2021.

Operating expenses for the six months ended September 30, 2022, increased $17.8 million, or 11.7%, to $169.6 million, as compared to $151.8 million for the same period in the prior year. Our increase in operating expenses was primarily due to $9.8 million in salaries and benefits, $6.8 million in higher general and administrative expenses including higher advertising and marketing fees and higher travel and entertainment costs, $1.6 million in a higher provision for credit losses caused by an increase in our receivables over this period compared to a decrease in our receivables over the same period in the prior year, $0.6 million in higher interest and financing costs, and partially offset by a $1.0 million decrease in depreciation and amortization.

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As a result of the foregoing, operating income for the three months ended September 30, 2022, decreased $0.2 million, or 0.4%, to $44.1 million, as compared to $44.3 million for the same period in the prior year. Operating income for the six months ended September 30, 2022, increased $0.5 million, or 0.7%, to $77.3 million, as compared to $76.8 million for the same period in the prior year.

Our effective tax rate for the three and six months ended September 30, 2022, was 29.3% and 28.7% respectively, compared with 28.6% and 28.2%, respectively, for the same periods in the prior year. The change in our effective income tax rate for the three and six months ended September 30, 2022, compared to the same periods in the prior year was primarily due to foreign currency losses incurred in lower tax jurisdictions.

Consolidated net earnings for the three months ended September 30, 2022, decreased $2.9 million, or 9.4%, to $28.5 million, as compared to $31.4 million for the same period in the prior year, due to the increase in operating expenses and foreign exchange losses, partially offset by an increase in gross profit. Consolidated net earnings for the six months ended September 30, 2022, decreased $4.1 million, or 7.5%, to $50.8 million, as compared to $54.9 million for the same period in the prior year, due to the increase in operating expenses and foreign exchange losses, partially offset by an increase in gross profit.

Adjusted EBITDA for the three months ended September 30, 2022, increased $0.1 million, or 0.2%, to $50.3 million, as compared to $50.2 million for the same period in the prior year. Adjusted EBITDA margin for the three months ended September 30, 2022, decreased 80 basis points to 10.2%, as compared to the prior year period of 11.0%.

Adjusted EBITDA for the six months ended September 30, 2022, increased $0.1 million, or 0.2%, to $88.6 million, as compared to $88.5 million for the same period in the prior year. Adjusted EBITDA margin for the six months ended September 30, 2022, decreased 80 basis points to 9.3%, as compared to the prior year period of 10.1%.

Diluted earnings per share for the three months ended September 30, 2022, decreased $0.10, or 8.5%, to $1.07 per share, as compared to $1.17 per share for same period in the prior year. Non-GAAP diluted earnings per share for the three months ended September 30, 2022, decreased $0.01, or 0.8%, to $1.29, as compared to $1.30 for the same period in the prior year.

Diluted earnings per share for the six months ended September 30, 2022, decreased $0.13, or 6.4%, to $1.91 per share, as compared to $2.04 per share for same period in the prior year. Non-GAAP diluted earnings per share for the six months ended September 30, 2022, remained flat at $2.28, as compared to the same period in the prior year.

Cash and cash equivalents decreased $55.8 million, or 35.9%, to $99.5 million as of September 30, 2022, as compared to $155.4 million as of March 31, 2022. Our decrease in cash and cash equivalents was due to increases in our accounts receivable and inventory, and $13.0 million paid for the acquisition of Future Com, Ltd, partially offset by borrowings on our revolving credit facility. Additional uses of cash during the six months ended September 30, 2022, included cash paid of $7.2 million to repurchase outstanding shares of our common stock as part of our share repurchase plan and to satisfy the minimum tax withholding requirements on employee stock awards.

SEGMENT OVERVIEW

Our operations are conducted through two segments: technology and financing.

TECHNOLOGY SEGMENT

Our technology segment earns revenues from sales of IT products, professional services, managed services, and staff augmentation. Our technology segment sells primarily to corporations, state and local governments, and higher education institutions. We sell across the US, which accounts for most of our sales, and in select international markets. Our technology segment also provides business-to-business supply chain management solutions for IT products.

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Our customers generally purchase IT products and services from us under the terms and conditions of a customer master agreement (“CMA”). Our customers generally place orders for IT products using purchase orders. Customer orders from state and local governments may involve public bids and our written bid responses. Our customers generally purchase services from us under the terms of statements of work. Our charges for services may be fixed price or determined on time and materials.

We purchase IT products for resale from vendors and distributors. Our relationships with vendors are generally governed by our reseller authorization level. We achieve these authorization levels through purchase volume, certifications held by sales executives or engineers, and though contractual commitments. Our authorization level determines the types of products we can resell, variable discounts applied against the list price, funds provided for the marketing, and other special promotions.

We endeavor to minimize our cost of sales through vendor incentive programs. Our benefit from these programs is also determined by our reseller authorization level. These authorization levels are costly to maintain and vendors often change their incentive programs. As such, our ability to continue to reduce our costs of sales through participating in these programs is not guaranteed.

FINANCING SEGMENT

Our financing segment offers financing solutions to corporations, state and local governments, and higher education institutions. We provide financing across the US, which accounts for most of our sales, and in select international markets. Our financing segment earns revenues from leasing IT equipment, from financing purchases of third-party software licenses, software assurance, maintenance, and other services, and from selling IT equipment at the end of a lease.

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

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Portfolio income: Interest income from financing receivables and rents due under operating leases

•

Transactional gains: Net gains on the sale of financial assets

•

Post-contract earnings: Month-to-month rents; early termination, prepayment, make-whole, or buyout fees; and sales of off-lease equipment.

FLUCTUATIONS IN OPERATING RESULTS

Our operating results may fluctuate due to customer demand for our products and services, supplier costs, wage costs, product availability, changes in vendor incentive programs, interest rate fluctuations, the timing of sales of financial assets, general economic conditions, and differences between estimated residual values and actual amounts realized for leased equipment. We expect to continue to expand by hiring additional staff for specific targeted market areas whenever we can find both experienced personnel and desirable geographic areas over the longer term and opening new facilities, which may impact our operating results.

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 2022 Annual Report.

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SEGMENT RESULTS OF OPERATIONS

The three and six months ended September 30, 2022, compared to the three and six months ended September 30, 2021

TECHNOLOGY SEGMENT

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

	Three Months Ended September 30,				Six Months Ended September 30,
	2022		2021		2022		2021
Net sales
Product	$	406,317	$	375,444	$	791,993	$	720,210
Services		65,161		60,857		128,270		116,449
Total		471,478		436,301		920,263		836,659

Cost of sales
Product		311,928		293,837		614,436		564,852
Services		43,275		37,386		83,901		71,296
Total		355,203		331,223		698,337		636,148

Gross profit		116,275		105,078		221,926		200,511

Selling, general, and administrative		80,161		70,803		153,273		136,956
Depreciation and amortization		3,540		3,825		6,722		7,723
Interest and financing costs		671		199		809		358
Operating expenses		84,372		74,827		160,804		145,037

Operating income	$	31,903	$	30,251	$	61,122	$	55,474

Adjusted gross billings	$	765,762	$	664,124	$	1,467,705	$	1,297,131
Adjusted EBITDA	$	38,012	$	36,059	$	72,266	$	67,017

Net sales: Net sales for the three months ended September 30, 2022, increased $35.2 million, or 8.1%, to $471.5 million, as compared to $436.3 million for the same period in the prior year, due to increases in net sales from customers in technology, telecom, media, and entertainment, and SLED, which were partially offset by decreases in net sales to customers in healthcare. Product sales for the three months ended September 30, 2022, increased $30.9 million, or 8.2%, to $406.3 million. Service sales for the three months ended September 30, 2022, increased $4.3 million, or 7.1%, to $65.2 million, as compared to $60.9 million for the same period in the prior year, due to an increase in managed services.

Net sales for the six months ended September 30, 2022, increased $83.6 million, or 10.0%, to $920.3 million, as compared to $836.7 million for the same period in the prior year. Product sales for the six months ended September 30, 2022, increased 10.0%, or $71.8 million to $792.0 million, as compared to $720.2 million for the same period in the prior year, and service revenue increased by 10.2%, or $11.9 million, to $128.3 million, as compared to $116.4 million during the same period in the prior year.

Adjusted gross billings for the three months ended September 30, 2022, increased $101.7 million, or 15.3%, to $765.8 million, as compared to $664.1 million for the same period in the prior year. Our increase in adjusted gross billings was due to higher demand from our current customers and higher prices for some products.

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Adjusted gross billings for the six months ended September 30, 2022, increased $170.6 million, or 13.2%, to $1,467.7 million, as compared to $1,297.1 million for the same period in the prior year. The increase in adjusted gross billings is due to higher demand from the same customer end markets that were previously identified for the increase in net sales.

We rely on our vendors to fulfill a large majority of shipments to our customers. As of September 30, 2022, we had open orders of $1.0 billion and deferred revenue of $148.5 million. As of September 30, 2021, we had open orders of $707.1 million and deferred revenue of $110.0 million.

We analyze net sales by customer end market and by vendor, as opposed to discrete product and service categories. The percentage of net sales by industry and vendor for the twelve month periods ended September 30, 2022, and 2021 are summarized below:

	Twelve Months Ended September 30,
Net sales by customer end market:	2022			2021			Change
Telecom, Media & Entertainment		29	%		28	%		1	%
Technology		16	%		14	%		2	%
Healthcare		14	%		15	%		(1	%)
SLED		13	%		15	%		(2	%)
Financial Services		9	%		11	%		(2	%)
All others		19	%		17	%		2	%
Total		100	%		100	%

	Twelve Months Ended September 30,
Net sales by vendor:	2022			2021			Change
Cisco Systems		37	%		36	%		1	%
Dell EMC		9	%		8	%		1	%
Juniper Networks		6	%		6	%		0	%
NetApp		5	%		5	%		0	%
HPE		3	%		2	%		1	%
Arista Networks		2	%		3	%		(1	%)
All others		38	%		40	%		(2	%)
Total		100	%		100	%

Our revenues by customer end market have remained consistent over the year with over 80% of our revenues generated from customers within the five end markets identified above. During the trailing twelve month period ended September 30, 2022, we had an increase in the percentage of total revenues from customers in the telecom, media and entertainment, and technology industry, and decreases in the percentage of total revenues in healthcare, SLED, and the financial services industry. These changes were driven by changes in customer buying cycles, and the timing of specific IT related initiatives, rather than the acquisition or loss of a customer or set of customers.

The majority of our revenues by vendor is derived from our top six suppliers. None of the vendors included within the “All others” category exceeded 5% of total revenues.

Cost of sales: Cost of sales for the three months ended September 30, 2022, increased $24.0 million, or 7.2%, to $355.2 million, as compared to $331.2 million for the same period in the prior year. Our gross margin increased 60 basis points to 24.7% for the three months ended September 30, 2022, compared to 24.1% for the same period in the prior year. Our increase in gross margins was primarily due to higher product gross margin primarily from a higher proportion of sales of third-party maintenance, software assurance, subscription/SaaS licenses, and services which are recognized on a net basis, partially offset by lower service gross margin from higher third-party costs.

Cost of sales for the six months ended September 30, 2022, increased 9.8% or $62.2 million which is in-line with the increase in net sales. Our gross margin increased 10 basis points to 24.1% for the six months ended September 30, 2022, compared to 24.0% for the same period in the prior year, primarily due to higher product margin primarily from a higher proportion of sales of third-party maintenance, software assurance, subscription/SaaS licenses, and services which are recognized on a net basis, partially offset by lower service margin driven by higher third-party costs.

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Selling, general, and administrative: Selling, general, and administrative expenses for the three months ended September 30, 2022, increased $9.4 million, or 13.2%, to $80.2 million, as compared to $70.8 million for the same period in the prior year. Salaries and benefits for the three months ended September 30, 2022, increased $5.5 million, or 9.0% to $66.3 million, as compared to $60.8 million for the same period in the prior year, mainly due to an increase in salaries and variable compensation that was driven by increases in headcount. Our technology segment had 1,693 employees as of September 30, 2022, an increase of 171 from 1,522 as of September 30, 2021, driven by increased demand for our services and the acquisition of Future Com, Ltd. We added 145 additional customer facing employees, of which 100 were professional services and technical support personnel. General and administrative expenses for the three months ended September 30, 2022, increased $3.3 million, or 33.2%, to $13.2 million, as compared to $9.9 million for the same period in the prior year, due to higher advertising and marketing fees, professional service fees, and higher travel and entertainment costs.

Selling, general, and administrative expenses for the six months ended September 30, 2022, increased by $16.3 million, or 11.9%, to $153.3 million, as compared to $137.0 million for the same period in the prior year. Salaries and benefits for the six months ended September 30, 2022, increased $9.2 million, or 7.8% to $128.0 million, compared to $118.8 million during the same period in the prior year, mainly due to an increase in salaries and variable compensation that was driven by increases in headcount. General and administrative expenses for the six months ended September 30, 2022, increased $6.2 million, or 33.8%, to $24.3 million, as compared to $18.1 million for the same period in the prior year, due to higher advertising and marketing fees, professional service fees, software license and maintenance fees and higher travel and entertainment costs.

Depreciation and amortization: Depreciation and amortization for the three months ended September 30, 2022, decreased $0.3 million, or 7.5%, to $3.5 million, as compared to $3.8 million for the same period in the prior year, primarily due to less amortization from intangible assets acquired in past acquisitions as the rate of amortization declines each year. Depreciation and amortization for the six months ended September 30, 2022, decreased $1.0 million, or 13.0%, to $6.7 million, as compared to $7.7 million for the same period in the prior year.

Interest and financing costs: Interest and financing costs for the three and six months ended September 30, 2022, were $0.7 million and $0.8 million, respectively, an increase of $0.5 million and $0.4 million, respectively, as compared to $0.2 million and $0.4 million, respectively, for the same periods in the prior year. The increase in interest expense is primarily due to an increase in borrowings from our revolving credit facility, partially offset by a decrease in borrowings on an installment payment arrangement. We had $94.7 million of recourse debt in our technology segment as of September 30, 2022, compared to $44.9 million as of September 30, 2021.

Segment operating income: As a result of the foregoing, operating income for the three months ended September 30, 2022, increased $1.6 million, or 5.5%, to $31.9 million, as compared to $30.3 million for the same period in the prior year. Operating income for the six months ended September 30, 2022, increased $5.6 million, or 10.2%, to $61.1 million, as compared to $55.5 million for the same period in the prior year.

Adjusted EBITDA for the three months ended September 30, 2022, increased $1.9 million, or 5.4%, to $38.0 million, as compared to $36.1 million for the same period in the prior year. Adjusted EBITDA for the six months ended September 30, 2022, increased $5.3 million, or 7.8%, to $72.3 million, as compared to $67.0 million for the same period in the prior year.

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FINANCING SEGEMENT

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

	Three Months Ended September 30,				Six Months Ended September 30,
	2022		2021		2022		2021
Net sales	$	22,228	$	21,716	$	31,802	$	38,007

Cost of sales		5,199		3,792		6,901		10,004

Gross profit		17,029		17,924		24,901		28,003

Selling, general, and administrative		4,543		3,701		8,198		6,323
Depreciation and amortization		28		28		56		56
Interest and financing costs		254		143		479		343
Operating expenses		4,825		3,872		8,733		6,722

Operating income	$	12,204	$	14,052	$	16,168	$	21,281

Adjusted EBITDA	$	12,292	$	14,136	$	16,342	$	21,450

Net sales: Net sales for the three months ended September 30, 2022, increased $0.5 million, or 2.4%, to $22.2 million, as compared to $21.7 million for the same period in the prior year. The increase in net sales was due to higher post contract earnings partially offset by lower portfolio earnings and transactional gains. For the three months ended September 30, 2022, we recognized net gains on sales of financial assets of $8.1 million and proceeds from these sales were $376.4 million. For the three months ended September 30, 2021, net gains on the sale of financial assets were $10.1 million and the proceeds from these sales were $615.0 million.

Net sales for the six months ended September 30, 2022, decreased $6.2 million, or 16.3%, to $31.8 million, as compared to $38.0 million for the same period in the prior year. The decrease in net sales was due to lower portfolio earnings and transactional gains. For the six months ended September 30, 2022, we recognized net gains on sales of financial assets of $9.9 million and proceeds from these sales were $428.9 million. For the six months ended September 30, 2021, net gains on the sale of financial assets were $13.3 million and the proceeds from these sales were $690.3 million.

As of September 30, 2022, our financing segment had $128.1 million in financing receivables and operating leases, compared to $166.9 million as of September 30, 2021, a decrease of $38.8 million, or 23.2%.

Cost of sales: Cost of sales for the three months ended September 30, 2022, increased $1.4 million, or 37.1%, to $5.2 million, as compared to $3.8 million for the same period in the prior year, due to higher cost of sales on off-lease equipment offset by lower depreciation expense from operating leases. Gross profit for the three months ended September 30, 2022, decreased by 5.0% to $17.0 million, as compared to the same period in the prior year.

Cost of sales for the six months ended September 30, 2022, decreased $3.1 million, or 31.0%, to $6.9 million, as compared to $10.0 million for the same period in the prior year, due to lower cost of sales on off-lease equipment and depreciation expense from operating leases. Gross profit for the six months ended September 30, 2022, decreased by 11.1% to $24.9 million, as compared to the same period in the prior year.

Selling, general and administrative: Selling, general, and administrative expenses for the three months ended September 30, 2022, increased $0.8 million, or 22.8%, to $4.5 million, as compared to $3.7 million for the same period in the prior year, due to higher salaries and benefits consisting mostly of higher variable compensation, and higher general and administrative expenses consisting mostly of higher software, license and maintenance fees driven by the deployment of newly hosted software in August 2022.

Selling, general, and administrative expenses for the six months ended September 30, 2022, increased $1.9 million, or 29.7%, to $8.2 million, as compared to $6.3 million for the same period in the prior year, due to higher salaries and benefits consisting mostly of higher variable compensation, higher general and administrative expenses consisting mostly of higher software, license and maintenance fees driven by the deployment of newly hosted software in August 2022, and a higher provision for credit losses caused by changes in our net credit exposure.

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In August 2022, we completed the deployment of a new hosted software to manage our financing portfolio. As a result, we anticipate higher general and administrative costs of approximately $1.5 million per year related to amortizing the cost to implement the hosted software and annual fees paid to license the hosted software.

Interest and financing costs: Interest and financing costs for the three months ended September 30, 2022, increased by 77.6% to $0.3 million, and increased by 39.7% to $0.5 million for the six months ended September 30, 2022, compared to the prior year. As of September 30, 2022, our notes payable was $20.8 million, a decrease of $4.6 million, or 18.1% compared to notes payable of $25.4 million as of September 30, 2021. As of September 30, 2022, and 2021, our notes payable consisted entirely of non-recourse notes payable. Our weighted average interest rate for non-recourse notes payable was 4.09% and 3.59%, as of September 30, 2022, and 2021, respectively.

Segment operating income: As a result of the foregoing, both operating income and Adjusted EBITDA decreased $1.8 million to $12.2 million and $12.3 million, respectively, for the three months ended September 30, 2022, as compared to the prior year period. Operating income and Adjusted EBITDA for the six months ended September 30, 2022, decreased by $5.1 million to $16.2 million and $16.3 million, respectively, as compared to the same period in the prior year.

CONSOLIDATED

Other income: Other income and expense increased for both the three and six months ended September 30, 2022 to $3.9 million and $6.0 million, respectively, due to foreign exchange losses, compared to expense of $0.3 million and $0.2 million, respectively, in the prior year.

Income taxes: Our provision for income tax expense was $11.8 million and $20.5 million for the three and six months ended September 30, 2022, as compared to $12.6 million and $21.6 million for the same periods in the prior year. Our effective income tax rates for the three and six months ended September 30, 2022, were 29.3% and 28.7%, compared to 28.6% and 28.2% for the three and six months ended September 30, 2021, respectively. The change in our effective income tax rate was primarily due to foreign currency losses incurred in lower tax jurisdictions.

Net earnings: As a result of the foregoing, our net earnings for the three months ended September 30, 2022, decreased $2.9 million, or 9.4%, to $28.5 million, as compared to $31.4 million during the same period in the prior year. Net earnings for the six months ended September 30, 2022, decreased $4.1 million, or 7.5%, to $50.8 million, as compared to $54.9 million during the same period in the prior year.

Basic and fully diluted earnings per common share were both $1.07 for the three months ended September 30, 2022, a decrease of 9.3% and 8.5%, respectively, as compared to $1.18 and $1.17, respectively, for the three months ended September 30, 2021. Basic and fully diluted earnings per common share were both $1.91 for the six months ended September 30, 2022, a decrease of 7.3% and 6.4%, respectively, as compared to $2.06 and $2.04, respectively, for the six months ended September 30, 2021.

Non-GAAP diluted earnings per share for the three months ended September 30, 2022, decreased $0.01, or 0.8%, to $1.29, as compared to $1.30 for the three months ended September 30, 2021. Non-GAAP diluted earnings per share for the six months ended September 30, 2022, remained flat at $2.28, as compared to the six months ended September 30, 2021.

Weighted average common shares outstanding was 26.6 million in the calculation of both basic earnings per common share and diluted earnings per common share for the three-months ending September 30, 2022. Weighted average common shares outstanding was 26.5 million in the calculation of basic earnings per common share for the six-months ending September 30, 2022, and 26.7 million in the calculation of diluted earnings per common share for the six-months ending September 30, 2022. Weighted average common shares outstanding used in the calculation of basic earnings per common share, was 26.7 million for both the three- and six-months ending September 30, 2021, and 26.9 million in the calculation of diluted earnings per common share for both the three- and six-months ending September 30, 2021.

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LIQUIDITY AND CAPITAL RESOURCES

LIQUIDITY OVERVIEW

We finance our operations through funds generated from operations and through borrowings. We use those funds to meet our capital requirements, which have historically consisted primarily of working capital for operational needs, capital expenditures, purchases of equipment for lease, payments of principal and interest on indebtedness outstanding, acquisitions and the repurchase of shares of our common stock.

Our borrowings in our technology segment are primarily through a credit facility with Wells Fargo Commercial Distribution Finance, LLC (the “WFCDF Credit Facility”). The WFCDF Credit Facility has an accounts payable floor plan facility component and a revolving credit facility component. Our borrowings in our financing segment are primarily through secured borrowings that involve transferring all or part of the contractual payments due to us to third-party financing institutions.

We believe that cash on hand and funds generated from operations, together with available credit under our WFCDF Credit Facility, will be enough to finance our working capital, capital expenditures, and other standard business requirements for at least the next year.

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

CASH FLOWS

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

	Six Months Ended September 30,
	2022			2021
Net cash used in operating activities	$	(119,671	)	$	(135,004	)
Net cash used in investing activities		(12,294	)		(13,690	)
Net cash provided by financing activities		71,342			75,782
Effect of exchange rate changes on cash		4,776			300
Net decrease in cash and cash equivalents	$	(55,847	)	$	(72,612	)

Cash flows from operating activities: We used $119.7 million in operating activities during the six months ended September 30, 2022, compared to $135.0 million used by operating activities for the six months ended September 30, 2021. See below for a breakdown of operating cash flows by segment (in thousands):

	Six Months Ended September 30,
	2022			2021
Technology segment	$	(120,746	)	$	(127,361	)
Financing segment		1,075			(7,643	)
Net cash provided by (used in) operating activities	$	(119,671	)	$	(135,004	)

Technology segment: For the six months ended September 30, 2022, our technology segment used $120.7 million from operating activities primarily due to increases in our accounts receivable and inventories, partially offset by net earnings.

In the six months ended September 30, 2021, our technology segment used $127.4 million from operating activities primarily due to increases in our accounts receivable and inventories, partially offset by net earnings and a decrease in accounts payable-trade.

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

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

	As of Sepember 30,
	2022			2021
(DSO) Days sales outstanding (1)		65			64
(DIO) Days inventory outstanding (2)		36			18
(DPO) Days payable outstanding (3)		(47	)		(47	)
Cash conversion cycle		54			35

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

(2)	Represents the rolling three month average of the balance of inventory, net for our technology segment at the end of the period divided by cost of adjusted gross billings for the same three month period.

(3)	Represents the rolling three month average of the combined balance of accounts payable-trade and accounts payable-floor plan for our technology segment at the end of the period divided by cost of adjusted gross billings for the same three month period.

Our cash conversion cycle increased to 54 days as of September 30, 2022, as compared to 35 days as of September 30, 2021. Our standard payment term for customers is between 30-60 days; however, certain customer orders may be approved for extended payment terms. Our DPO remained the same at 47 days. Invoices processed through the accounts payable floor plan facility, are typically paid within 45-60 days from the invoice date, while accounts payable trade invoices are typically paid within 30 days from the invoice date. Our DSO increased by 1 day to 65 days. The DSO for both September 30, 2022, and 2021, reflects higher sales to customers with terms greater than or equal to net 60 days. Our DIO increased to 36 days due to higher inventory balance. Inventory, which represents equipment ordered by customers but not yet delivered, increased 77.3% to $274.9 million as of September 30, 2022, up from $155.1 million as of March 31, 2022, due to ongoing projects with customers and supply constraints that lengthen the time over which we receive all the parts in an order for a completed delivery to our customers.

Financing segment: For the six months ended September 30, 2022, our financing segment provided $1.1 million from operating activities, primarily due to net earnings, decreases in accounts receivable, and increases in accounts payable-trade offset by increases in financing receivables.

In the six months ended September 30, 2021, our financing segment used $7.6 million from operating activities, primarily due to increases in accounts receivable and financing receivables, offset by net earnings.

Cash flows related to investing activities: For the six months ended September 30, 2022, we used $12.3 million from investing activities, consisting of $13.0 million in cash used in acquiring Future Com, Ltd and $2.4 million for purchases of property, equipment, and operating lease equipment, and partially offset by $3.1 million of proceeds from the sale of property, equipment, and operating lease equipment.

In the six months ended September 30, 2021, we used $13.7 million from investing activities, consisting of $16.2 million for purchases of property, equipment and operating lease equipment offset by $2.6 million of proceeds from the sale of property, equipment, and operating lease equipment.

Cash flows from financing activities: For the six months ended September 30, 2022, cash provided by financing activities was $71.3 million, consisting of net borrowings of non-recourse and recourse notes payable of $87.7 million, partially offset by $7.2 million in cash used to repurchase outstanding shares of our common stock and $9.1 million in net repayments on the accounts payable floor plan facility.

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For the six months ended September 30, 2021, cash provided by financing activities was $75.8 million, consisting of net borrowings on the accounts payable floor plan facility of $47.2 million and net repayments of non-recourse and recourse notes payable of $35.4 million, partially offset by $6.9 million in cash used to repurchase outstanding shares of our common stock.

Our borrowing of non-recourse notes payable primarily arises from our financing segment when we transfer contractual payments due to us under lease and financing agreements to third-party financial institutions. When the transfers do not meet the requirements for a sale, the proceeds paid to us represent borrowings of non-recourse or recourse notes payable.

Non-cash activities: We transfer contractual payments due to us under lease and financing agreements to third-party financial institutions. As a condition of these agreements, certain financial institutions may request that the customer remit their contractual payments to a trust, rather than to us, and the trust pays the financial institution. Alternatively, the customer will make payments to us, and we will remit the payment to the financial institution. The economic impact to us under either structure is similar, in that the assigned contractual payments are paid by the customer and remitted to the lender. However, when our customer makes payments through a trust, such payments represent non-cash transactions. Also, in certain assignment agreements, we may direct the third-party financial institution to pay some of the proceeds from the assignment directly to the vendor or vendors that have supplied the assets being leased and or financed. In these situations, the portion of the proceeds paid directly to our vendors are non-cash transactions.

SECURED BORROWINGS – FINANCING SEGMENT

We may finance all or most of the cost of the assets that we finance for customers by transferring all or part of the contractual payments due to us to third-party financing institutions. When we account for the transfer as a secured borrowing, we recognize the proceeds as either recourse or non-recourse notes payable. Our customers are responsible for repaying the debt from a secured borrowing. The lender typically secures a lien on the financed assets at the time the financial assets are transferred and releases it upon collecting all the transferred payments. We are not liable for the repayment of non-recourse loans unless we breach our representations and warranties in the loan agreements. The lender assumes the credit risk and their only recourse, upon default by the customer, is against the customer and the specific equipment under lease. While we expect that the credit quality of our financing arrangements and our residual return history will continue to allow us to obtain such financing, such financing may not be available on acceptable terms, or at all.

CREDIT FACILITY – TECHNOLOGY SEGMENT

We finance the operations of our subsidiaries ePlus Technology, inc., ePlus Technology Services, inc. and SLAIT Consulting, LLC (collectively, the “Borrowers”) in our technology segment through the WFCDF Credit Facility. The WFCDF Credit Facility has an accounts payable floor plan facility component and a revolving credit facility component.

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

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

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As of September 30, 2022, and March 31, 2022, we had a maximum credit limit of $375.0 million, and an outstanding balance on the floor plan facility of $136.2 million and $145.3 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 September 30, 2022, the outstanding balance under the revolving credit facility was $85.0 million. As of March 31, 2022, we did not have any outstanding balance under the revolving credit facility. The maximum credit limit under this facility was $100.0 million as of both September 30, 2022, and March 31, 2022.

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

PERFORMANCE GUARANTEES

In the normal course of business, we may provide certain customers with performance guarantees, which are generally backed by surety bonds. In general, we would only be liable for these guarantees in the event of default in the performance of our obligations. We are in compliance with material performance obligations under all service contracts for which there is a performance guarantee, and we believe that any liability incurred in connection with these guarantees would not have a material adverse effect on our consolidated statements of operations.

OFF-BALANCE SHEET ARRANGEMENTS

As part of our ongoing business, we do not participate in transactions that generate relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements, or other contractually narrow or limited purposes. As of September 30, 2022, we were not involved in any unconsolidated special purpose entity transactions.

ADEQUACY OF CAPITAL RESOURCES

The continued implementation of our business strategy will require a significant investment in both resources and managerial focus. In addition, we may selectively acquire other companies that have attractive customer relationships and skilled sales and/or engineering forces. We may also open facilities in new geographic areas, which may require a significant investment of cash. We may also acquire technology companies to expand and enhance the platform of bundled solutions to provide additional functionality and value-added services. We may continue to use our internally generated funds to finance investments in leased assets or investments in notes receivables due from our customers. These actions may result in increased working capital needs as the business expands. As a result, we may require additional financing to fund our strategy, implementation, potential future acquisitions, and working capital needs, which may include additional debt and equity financing. The impacts of COVID-19 may limit or eliminate our access to capital. 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.

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Our quarterly results of operations are susceptible to fluctuations for a number of reasons, including, but not limited to the worldwide impacts from COVID-19, currency fluctuations, reduction in IT spending, shortages of product from our vendors due to material shortages, any reduction of expected residual values related to the equipment under our leases, the timing and mix of specific transactions, the reduction of manufacturer incentive programs, and other factors. Quarterly operating results could also fluctuate as a result of our sale of equipment in our lease portfolio to a lessee or third-party at the expiration of a lease term or prior to such expiration, and the transfer of financial assets. Sales of equipment and transfers of financial assets may have the effect of increasing revenues and net income during the quarter in which the sale occurs and reducing revenues and net income otherwise expected in subsequent quarters. See Part I, Item 1A, “Risk Factors,” in our 2022 Annual 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.

Item 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our cash flow may be adversely affected by the risks related to the COVID-19 pandemic, which may result in delays in the collections of our accounts receivables or non-payment.

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 September 30, 2022, the aggregate fair value of our recourse and non-recourse borrowings approximated their carrying value.

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

Item 4.

CONTROLS AND PROCEDURES

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer (“CEO”) and our Chief Financial Officer (“CFO”), of the effectiveness of the design and operation of our disclosure controls and procedures, or “disclosure controls,” as defined in the Exchange Act Rule 13a-15(e). Disclosure controls are controls and procedures designed to reasonably ensure that information required to be disclosed in our reports filed under the Exchange Act, such as this quarterly report, is recorded, processed, summarized, and reported within the periods specified in the SEC’s rules and forms. Disclosure controls include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to our management, including our CEO and CFO, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Our disclosure controls include some, but not all, components of our internal control over financial reporting. Based upon that evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective as of September 30, 2022.

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CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

During the quarter, we completed the implementation of a new ERP system within our Financing segment. As a result of this implementation, certain internal controls over financial reporting have been automated or modified to align with the new ERP system. While we believe this new system will strengthen our internal controls, there are inherent risks in implementing any new system, and we will continue to evaluate these control changes as part of our assessment of internal control over financial reporting throughout Fiscal 2023.

There have not been any other changes in our internal control over financial reporting during the quarter ended September 30, 2022, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

LIMITATIONS AND EFFECTIVENESS OF CONTROLS

Our management, including our CEO and CFO, do not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system cannot provide absolute assurance due to its inherent limitations; it is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. A control system also can be circumvented by collusion or improper management override. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of such limitations, disclosure controls and internal control over financial reporting cannot prevent or detect all misstatements, whether unintentional errors or fraud. However, these inherent limitations are known features of the financial reporting process; therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.

PART II. OTHER INFORMATION

Item 1.

LEGAL PROCEEDINGS

Please refer to Note 9, “Commitment and Contingencies” to the accompanying Consolidated Financial Statements included in “Part I, Item 1. Financial Statements”.

Item 1A.

RISK FACTORS

There has not been any material change in the risk factors disclosed in “Part I, Item 1A. Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended March 31, 2022.

Item 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table provides information regarding our total purchases of 128,553 shares of ePlus inc. common stock during the six months ended September 30, 2022, including a total of 70,473 shares purchased as part of the publicly announced share repurchase plans or programs.

Period	Total number of shares purchased (1)		Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs		Maximum number (or approximate dollar value) of shares that may yet be purchased under the plans or programs
April 1, 2022 through April 30, 2022		34,961	$	56.02		34,961		737,049	(2	)
May 1, 2022 through May 27, 2022		35,512	$	55.86		35,512		701,537	(3	)
May 28, 2022 through May 31, 2022		-	$	-		-		1,000,000	(4	)
June 1, 2022 through June 30, 2022		58,080	$	56.51		-		1,000,000	(5	)
July 1, 2022 through July 31, 2022		-	$	-		-		1,000,000	(6	)
August 1, 2022 through August 31, 2022		-	$	-		-		1,000,000	(7	)
September 1, 2022 through September 30, 2022		-	$	-		-		1,000,000	(8	)

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(1)

All shares acquired were in open-market purchases, except for 58,080 shares, which were repurchased in June 2022 to satisfy tax withholding obligations that arose due to the vesting of shares of restricted stock.

(2)

The share purchase authorization in place for the month ended April 30, 2022, had purchase limitations on the number of shares of up to 1,000,000 shares. As of April 30, 2022, the remaining authorized shares to be purchased were 737,049.

(3)

As of May 27, 2022, the authorization under the then-existing share repurchase plan expired.

(4)

On March 24, 2022, the board of directors authorized the company to repurchase up to 1,000,000 shares of our outstanding common stock commencing on May 28, 2022, and continuing to May 27, 2023. As of May 31, 2022, the remaining authorized shares to be purchased were 1,000,000.

(5)

The share purchase authorization in place for the month ended June 30, 2022, had purchase limitations on the number of shares of up to 1,000,000 shares. As of June 30, 2022, the remaining authorized shares to be purchased were 1,000,000.

(6)

The share purchase authorization in place for the month ended July 31, 2022, had purchase limitations on the number of shares of up to 1,000,000 shares. As of July 31, 2022, the remaining authorized shares to be purchased were 1,000,000.

(7)

The share purchase authorization in place for the month ended August 31, 2022, had purchase limitations on the number of shares of up to 1,000,000 shares. As of August 31, 2022, the remaining authorized shares to be purchased were 1,000,000.

(8)

The share purchase authorization in place for the month ended September 30, 2022, had purchase limitations on the number of shares of up to 1,000,000 shares. As of September 30, 2022, the remaining authorized shares to be purchased were 1,000,000.

The timing and expiration date of the current stock repurchase authorizations are included in Note 11, “Stockholders’ Equity” to our unaudited consolidated financial statements included elsewhere in this report.

Item 3.

DEFAULTS UPON SENIOR SECURITIES

Not Applicable.

Item 4.

MINE SAFETY DISCLOSURES

Not Applicable.

Item 5.

OTHER INFORMATION

Because this Quarterly Report on Form 10-Q is being filed within four business days from the date of the reportable event, we have elected to make the following disclosure in this Quarterly Report on Form 10-Q instead of in a Current Report on Form 8-K under Items 1.01 and 2.03.

Entry into a Material Definitive Agreement

ePlus Technology, inc., ePlus Technology Services, inc. and SLAIT Consulting, LLC (collectively, the “Borrowers”) are parties to that certain First Amended and Restated Credit Agreement, dated as of October 13, 2021 (the “Credit Agreement”) by and among the Borrowers, the various lenders who are parties thereto (collectively, the “Lenders”) and Wells Fargo Commercial Distribution Finance, LLC, acting as Administrative Agent thereunder (in such capacity, “Administrative Agent”), pursuant to which, among other things, the Lenders severally established in favor of the Borrowers a discretionary senior secured floorplan facility in the original aggregate principal amount of up to $375,000,000 (the “Floorplan Facility"), together with a submit thereunder for a discretionary senior secured revolving credit facility in the original aggregate principal amount of up to $100,000,000 (the “Revolving Facility”).

On October 31, 2022, the Borrowers entered into a certain First Amendment to Credit Agreement by and among the Borrowers, the Lenders who are parties thereto and the Administrative Agent (the “First Amendment to Credit Agreement”) (all capitalized terms not defined in this paragraph but defined in the First Amendment to Credit Agreement shall have the meanings given to such terms in the First Amendment to Credit Agreement) which amended the Credit Agreement to (a) increase the maximum aggregate amount of principal available under the Floorplan Facility from $375,000,000 to $425,000,000, (b) increase the maximum aggregate amount of principal available under the Revolving Facility from $100,000,000 to $150,000,000, (c) increase the maximum aggregate amount of principal available under the Swingline Loans from $25,000,000 to $35,000,000, and (d) change the interest rate on any Loans accruing interest at a rate per annum equal to the LIBOR Rate plus an Applicable Margin of 1.75%, with a rate per annum equal to the Term SOFR Rate plus a Term SOFR Adjustment of 0.10% plus an Applicable Margin of 1.75%.

The Administrative Agent, certain of the Lenders and their respective affiliates, have performed, and may in the future perform, various commercial banking, investment banking, brokerage, and other financial advisory services for ePlus and its subsidiaries for which they have received, and will receive, customary fees and expenses.

The foregoing description of the Amendment is a summary and is qualified in its entirety by reference to such agreement, a copy of which is filed as Exhibit 10.2 to this Quarterly Report on Form 10-Q, and incorporated herein by reference.

Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant

The information described above under “Entry into a Material Definitive Agreement" is incorporated herein by reference.

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Item 6.

EXHIBITS

Exhibit Number		Exhibit Description

3.1		ePlus inc. Amended and Restated Certificate of Incorporation, as last amended November 9, 2021 (Incorporated herein by reference to Exhibit 3.1 to our Quarterly Report on Form 10-Q for the period ended December 31, 2021).

3.2		Amended and Restated Bylaws of ePlus inc., as of March 2, 2022. (Incorporated herein by reference to Exhibit 3.2 to our Annual Report on Form 10-K for the fiscal year ended March 31, 2022).

10.1		ePlus inc. 2022 Employee Stock Purchase Plan (Incorporated herein by reference to Exhibit 10.1 to our Current Report in Form 8-K filed on September 20, 2022).

10.2		First Amendment to First Amended and Restated Credit Agreement, dated as of October 31, 2022, by and among ePlus Technology, inc., ePlus Technology Services inc., SLAIT Consulting, LLC, certain of ePlus inc. subsidiaries as guarantors, Wells Fargo Commercial Distribution Finance, LLC as administrative agent and the Lenders party thereto.*

31.1		Certification of the Chief Executive Officer of ePlus inc. pursuant to the Securities Exchange Act Rules 13a-14(a) and 15d-14(a).

31.2		Certification of the Chief Financial Officer of ePlus inc. pursuant to the Securities Exchange Act Rules 13a-14(a) and 15d-14(a).

32		Certification of the Chief Executive Officer and Chief Financial Officer of ePlus inc. pursuant to 18 U.S.C. § 1350.

99.1		Press Release dated November 1, 2022, issued by ePlus inc.

101.INS		Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)

101.SCH		Inline XBRL Taxonomy Extension Schema Document

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document

104		Cover Page Interactive Data File (embedded within the Exhibit 101 Inline XBRL document)

* Certain schedules and exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	ePlus inc.

Date: November 3, 2022	/s/ MARK P. MARRON
	By: Mark P. Marron
	Chief Executive Officer and President
	(Principal Executive Officer)

Date: November 3, 2022	/s/ ELAINE D. MARION
	By: Elaine D. Marion
	Chief Financial Officer
	(Principal Financial Officer)

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ePlus (PLUS) 10-Q2023 Q2 Quarterly report

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