UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549


FORM 10-K


☐☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 20162023
OR
☐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: 1-341671-34167


ePlusePlus 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, VA20171-3413
(Address of principal executive offices)
13595 Dulles Technology Drive, Herndon, VA 20171-3413
(Address 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 valuePLUSNASDAQ Global Select Market


Securities registered pursuant to Section 12(g) of the Act:
None


Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ☐☒  No ☒☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 of Section 15(d) of the Act.
Yes ☐ No ☒

 
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 and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes ☒No ☒  No ☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act (Check one):Act:


Large accelerated filer ☐☒
Accelerated filer ☒☐
Non-accelerated filer ☐(do not check if smaller reporting company)☐
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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262 (b)) by the registered public accounting firm that prepared or issued its audit report. ☒

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐  No ☒


The aggregate market value of the common stock held by non-affiliates of ePlus, computed by reference to the closing price at which the stock was sold as of September 30, 20152022, was $521,917,902.$1,091,738,162. The outstanding number of shares of common stock of ePlus as of May 23, 2016,22, 2023, was 7,177,196.26,827,465.


DOCUMENTS INCORPORATED BY REFERENCE


The following documents are incorporated by reference into the indicated parts of this Form 10-K:

Portions of the Company'sCompany’s definitive Proxy Statement relating to its 20162023 annual meeting of stockholders ( the “2016(the “2023 Proxy Statement”) are incorporated by reference into Part III of this Annual Report on Form 10-K where indicated. The 20162023 Proxy Statement will be filed with the Securities and Exchange Commission within 120 days after the Company'sCompany’s fiscal year end to which this report relates.

Table of Contents

  Page
   
Cautionary Language About Forward-Looking Statements
1
   
Part I
  
   
Item 1.
Business
3
Item 1A.
12
Item 1A.
Risk Factors
13
Item 1B.
Unresolved Staff Comments
21
23
Item 2.
21
23
Item 3.
Legal Proceedings
21
24
Item 4.
21
24
   
Part II
  
   
Item 5.
22
25
Item 6.
Selected Financial Data[RESERVED]
24
25
Item 7.
27
26
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
45
46
Item 8.
45
47
Item 9.
Changes in and Disagreements Withwith Accountants on Accounting and Financial Disclosure
45
47
Item 9.A9A.
45
47
Item 9B.
Other Information
46
48
Item 9C.
48
   
Part III
  
   
Item 10.
47
48
Item 11.
Executive Compensation
47
49
Item 12.
47
49
Item 13.
Certain Relationships and Related Transactions, and Director Independence
47
49
Item 14.
47
49
   
Part IV
  
   
Item 15.
48
49
Item 16.
Form 10-K Summary
52
52
53

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[This Page Intentionally Left Blank]
CAUTIONARY LANGUAGE ABOUT FORWARD-LOOKING STATEMENTS


This Annual Report on Form 10-K 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,” “hope,” “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:


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 Information Technology (“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;
our dependence on key personnel to maintain certain customer relationships, and our ability to hire, train, and retain sufficient qualified personnel;
maintaining and increasing advanced professional services by recruiting and retaining highly skilled, competent personnel, and vendor certifications;
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;
ongoing remote work trends, and the increase in cybersecurity attacks that have occurred while employees work remotely;
loss of our credit facility or credit lines with our vendors may restrict our current and future operations;

·•uncertainty and volatility in the global economy including exposure to fluctuation in foreign currency rates, and downward pressure on prices;
·significant adverse changes in, reductions in, or loss of our largest customer or one or more of our large customers, or vendors;
·the creditworthiness of our customers and our ability to reserve adequately for credit losses;
·reduction of vendor incentives provided to us;
·we offer a comprehensive set of solutions— integrating information technology (IT) product sales, third-party software assurance and maintenance, our advanced professional and managed services, our proprietary software, and financing, and may encounter some of the challenges, risks, difficulties and uncertainties frequently faced by companies offering a similar set of solutions, such as:
·managing a diverse product set of solutions in highly competitive markets with a number of key vendors;
·increasing the total number of customers utilizing integrated solutions by up-selling within our customer base and gaining new customers;
·adapting to meet changes in markets and competitive developments;
·maintaining and increasing advanced professional services by retaining highly skilled personnel and vendor certifications;
·increasing the total number of customers who utilize our managed services and professional services and continuing to enhance our managed services offerings to remain competitive in the marketplace;
·maintaining our proprietary software and updating our technology infrastructure to remain competitive in the marketplace; and
·reliance on third parties to perform some of our service obligations;
·changes in the IT industry and/or rapid changes in product offerings, including the proliferation of the cloud, infrastructure as a service and software as a service;
·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;
·failure to comply with public sector contracts or applicable laws;
·changes to or loss of members of our senior management team and/or failure to successfully implement succession plans;
·our dependence on key personnel to maintain certain customer relationships, and our ability to hire, train, and retain sufficient qualified personnel;
·our ability to implement comprehensive plans for the integration of sales forces, cost containment, asset rationalization, systems integration and other key strategies;
·a possible decrease in the capital spending budgets of our customers or a decrease in purchases from
us;
·our contracts may not be adequate to protect us and our professional and liability insurance policies coverage may be insufficient to cover a claim;
·disruptions in our IT systems and data and audio communication networks;
·our ability to secure our customers’ electronic and other confidential information, and remain secure during a cyber-security attack;
·our ability to raise capital, maintain or increase as needed our lines of credit with vendors or floor planning facility, or obtain debt for our financing transactions, or the effect of those changes on our common stock or its holders;price;
rising interest rates or the loss of key lenders or the constricting of credit markets;
our ability to manage a diverse product set of solutions in highly competitive markets with a number of key vendors;
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 possibility of a reduction of vendor incentives provided to us;
our dependency on continued innovations in hardware, software, and services offerings by our vendors and our ability to partner with them;
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;
our ability to identify acquisition candidates, or perform sufficient due diligence prior to completing an acquisition, or failure to integrate a completed acquisition our earnings may be affected;
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 that may impact the arrangements that have pricing commitments over the term of the agreement;
a natural disaster or other adverse event at one of our primary configuration centers, data center, or a third-party provider location could negatively impact our business;
a possible decrease in the capital spending budgets of our customers or a decrease in purchases from us;

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changes in the 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 ability to increase the total number of customers using integrated solutions by up-selling within our customer base and gaining new customers;
our ability to increase 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;
our ability to perform 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;

·•our ability to realize our investment in leased equipment;
domestic and international economic regulations uncertainty (e.g., tariffs, sanctions, and trade agreements);
our contracts may not be adequate to protect us, 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;
·our ability to successfully integrate acquired businesses;
failure to comply with public sector contracts, or applicable laws or regulations;
·the possibility of goodwill impairment charges in the future;
our ability to maintain our proprietary software and update our technology infrastructure to remain competitive in the marketplace;
·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;
fluctuations in foreign currency exchange rates may impact our results of operation and financial position; and
·exposure to changes in, interpretations of, or enforcement trends in legislation; and
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, the costs associated with licensing required technology.
·significant changes in accounting standards including changes to the financial reporting of leases which could impact the demand for our leasing services, or misclassification of products and services we sell resulting in the misapplication of revenue recognition policies.


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”Factors” and Item 7,2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”Operations” sections contained elsewhere in this report, as well as other reports that we file with the Securities and Exchange Commission (“SEC”).

Industry and Market Data

 This Form 10-K includes industry data that we obtained from periodic industry publications, which represent data, research opinion or viewpoints published as part of syndicated subscription services.

The Gartner Report(s) described herein, (the "Gartner Report(s)") represent(s) research opinion or viewpoints published, as part of a syndicated subscription service, by Gartner, Inc. ("Gartner"), and are not representations of fact. Each Gartner Report speaks as of its original publication date (and not as of the date of this 10-K) and the opinions expressed in the Gartner Report(s) are subject to change without notice

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PART I


ITEM 1.BUSINESS


GENERAL


Our company was founded in 1990 and is a Delaware corporation. ePlus inc. is, sometimes referred to in this Annual Report on Form 10-K as “we,” “our,” “us,” “ourselves,” or “ePlus.”

Our, was founded in 1990. We conduct our operations are conducted through two business segments. Our technology segment sells information technologyIT hardware products, third-party software and maintenance contracts, our own and third-party advanced professional and managed services, and our proprietary software. Our financing segment operations primarily consist of the financing of information technologyIT equipment, software, and related services. Both segments sell to commercial entities, state and local governments, government contractors, and educational institutions. See Note 15, “Segment Reporting” in the consolidated financial statements included elsewhere in this report.

ePlus inc. does not engage in any business other than serving as the parent holding company for the following operating companies:

Technology

·ePlus Technology, inc.;
·ePlus Systems, inc.;
·ePlus Content Services, inc.;
·ePlus Document Systems, inc.;
·ePlus Technology Services, inc.
·ePlus Cloud Services, inc., and
·IGXGlobal UK, Limited

Financing

·ePlus Group, inc.;
·ePlus Government, inc.;
·ePlus Canada Company;
·ePlus Capital, inc.;
·ePlus Jamaica, inc.;
·ePlus Iceland, inc., and
·IGX Capital UK, Ltd.

We began using the name ePlus inc. in 1999 after changing our name from MLC Holdings, Inc. ePlus Technology, inc. conducts our technology sales and services business. ePlus Systems, inc. and ePlus Content Services, inc. were incorporated on May 15, 2001 and provide consulting services and proprietary software for enterprise supply management. ePlus Capital, inc. owns 100 percent of ePlus Canada Company, which was created on December 27, 2001 to transact business within Canada. ePlus Government, inc. was incorporated on September 17, 1997 to transact business with governmental contractors servicing the federal government marketplace and other state and local governments. ePlus Document Systems, inc. was incorporated on October 15, 2003 and provides proprietary software for document management, ePlus Technology Services, inc. was incorporated on May 17, 2010 to provide professional and management services and IGXGlobal UK, Limited was acquired in December 2015.
OUR BUSINESS


We are a leading provider of information technology (IT) solutions which enable organizations to optimize their IT environmentacross the spectrum spanning security, cloud, data center, networking, collaboration, artificial intelligence, and supply chain processes. We deliver and integrate world-class IT products and software from top vendors, and provide private, hybrid, and public cloudemerging solutions, to meet customers’ evolving needs. We also provide consulting, professionaldomestic and managed services and complete lifecycle management services including flexible financing solutions. We have been in the businessforeign organizations across all industry segments.

Our solutions are comprised of selling, leasing, financing, and managing information technology and other assets for more than 26 years.

Our primary focus is to deliver secure, integrated technology solutions for our customers’ data center, network, security, maintenance, and collaboration needs, including hosted, on-premise, hybrid and cloud infrastructures. These solutions may encompass the full lifecycle of IT and include consulting, assessments, architecture, design, testing, implementation, and ongoing managed services and periodic consultative business reviews. We offer security, storage, cloud, mobility, hyper-converged infrastructure, and other advanced technologies. We design, implement and provide an array of IT solutionsworld class leading technologies from multiple leading IT vendors. We are an authorized reseller from over 1,000 vendors, but primarily from approximately 100 vendors, includingpartners such as Amazon Web Services, Arista Networks, Check Point, Cisco Systems, Citrix, Commvault, Crowdstrike, Deepwatch, Dell EMC, FireEye, F5 Networks, Hewlett-Packard,Foresite, Fortinet, Gigamon, HPE, Juniper McAfee,Networks, Lenovo, Microsoft, NetApp, Nimble,Nutanix, NVIDIA, Oracle, Palo Alto Networks, Proficio, Pure Storage, Rubrik, Splunk, Varonis, and VMware, among many others. We possess top-level engineering certifications with a broad range of leading IT vendorstechnologies that enable us to offer multi-vendor IT solutions that are optimized for each of our customers’ specific requirements. Underpinning the broader areas of cloud, security, networking, data center and collaboration are specific skills in orchestration and automation, application modernization, DevSecOps, zero-trust architectures, data management, data visualization, analytics, network modernization, edge compute and other advanced and emerging technologies.

We also provide consulting, professional, and managed services, IT staff augmentation, and complete lifecycle management services in the areas of security, cloud, networking, data center, collaboration, and emerging technologies.

For over 30 years, we have also offered a wide portfolio of technology and other capital asset financing solutions to customers across commercial and government enterprises, designing programs that are tailored to fit their unique processes, structures, and requirements. 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.

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

Our sizeowned, leased, and strong financial resultsconsumption-based assets. These solutions have enabled usexpanded to invest in the engineering and technology resources required to stay current with emerging technology trends and deliver leading edge IT solutions. We believe we are a trusted IT advisorinclude private marketplace experiences to our customers delivering turn-key IT solutions that incorporate hardware, software, security and both managed and professional services. In addition, we offer a wide range of leasing and financing optionsto support platforms such as those on AWS marketplace.

Our go-to-market strategy focuses primarily on diverse end-markets for technology and other capital assets. We believe our lifecycle approach offering of integrated IT products, services, financing, and our proprietary supply chain software, is unique in the industry. It allows us to offer a customer service strategy that spans the continuum from fast delivery of competitively priced products, services, subsequent management and upkeep, through to end-of-life disposal services. This selling approach also permits us to grow with our customers and solidify our relationships through hands-on engagement and understanding of their needs.

We focus exclusively on middle market andto 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. For the year ended March 31, 2016,2023, the percentage of revenue by customer end market within our technology segment includes 26% for the telecommunications, media and entertainment industry, 20% for the technology industry, 14% for healthcare, 14% for state and local government, and educational institutions 22%, technology industry 23%, telecommunications, media and entertainment 14%, financial services 12%(“SLED”), and healthcare 10%. The majority8% for financial services. Sales to Verizon Communications Inc. represented 22%, 24%, and 19% of our net sales for the years ended March 31, 2023, 2022, and 2021, respectively. We sell to customers in the United States (“US”), which accounts for most of our sales, were generated withinand to customers in select international markets including the United States, however, we haveKingdom (“UK”), the ability to support our customers nationallyEuropean Union (“EU”), India, Singapore, and internationally and this year we acquired our first international subsidiary which is located in the U.K. Israel. Our technology segment accountsaccounted for 97% of our net sales, and 84% of our operating income, while our financing segment accountsaccounted for 3% of our net sales, and 16% of our operating income for the year ended March 31, 2016.2023.


OUR INDUSTRY BACKGROUND AND MARKET OPPORTUNITY


We participate in the largehave identified and growing United States IT market which, according to Gartner, Inc. is estimated to generate sales of over $1.15 trillion in 2016, and is expected to grow at a compound annual rate of approximately 2.1% for 2015 through 20191.
1Gartner, “Market Databook, 1Q16 Update,” 2014-2020 End-User Spending on IT Products and Services, March 28, 2016 (U.S.).
We are focused on and have identified several specific trends that we believe will create higher growth thanin the broader U.S.US IT market:


·Increasing sophistication and incidences of IT security breaches and cyber-attacks. Over the last decade, cyber-attacks have become more sophisticated, more prevalent and difficult to safeguard against. We believe our customers are focused on all aspects of cyber security, including intellectual property, data and business processes, as well as compliance with an increasing number of general and industry-specific government regulations. In order to meet current and future security threats, enterprises must implement solutions that are fully-integrated and capable of monitoring, detecting, containing and remediating security threats and attacks.

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·Rapidly evolving technologies are creating complexity and challenges for customers and vendors. Historically, customers could procure and implement disparate hardware and software solutions to satisfy their IT needs. However, the emergence of complex IT offerings such as software defined infrastructure, cloud computing, converged and hyper-converged infrastructures, big data analytics, and flash storage, has made it difficult for customers to effectively design, procure, implement and manage their own IT systems. Moreover, increased budget pressures, fewer internal resources, a fragmented vendor landscape and fast time-to-value expectations make it challenging for customers to design, implement and manage secure, efficient and cost-effective IT environments.

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·Customer IT decision making is shifting from IT departments to line-of- business personnel. As IT consumption shifts from legacy, on-premise infrastructure to agile ‘on-demand’ and ‘as-a-service’ solutions, customer procurement decisions are being shifted from traditional IT personnel to lines-of-business personnel, which is changing the customer engagement model and types of consultative services required to fulfill customer needs. In addition, many of the services create recurring revenue streams paid over time, rather than upfront revenue.
MULTI-CLOUD STRATEGY


·Lack of sufficient internal IT resources at mid-sized and large enterprises, and scarcity of IT personnel in certain high-demand disciplines. We believe that IT departments at mid-sized and large enterprises are facing pressure to deliver emerging technologies and business outcomes without having properly trained personnel and an inability to hire personnel in high demand disciplines such as security and data analytics. At the same time the prevalence of security threats, increased use of cloud computing, proliferation of mobile devices, bring-your-own-device (BYOD) policies, and complexity of multi-vendor solutions, have made it difficult for IT departments to implement high-quality IT solutions.
Over the past several years, public, private and hybrid cloud architectures and cloud-enabled frameworks have become a core foundation of modern IT. Our strategy is to assist our customers in aligning cloud strategy with business objectives, creating an enterprise cloud foundation, enabling multi-cloud capabilities, accelerating cloud migrations, modernizing the datacenter, and optimizing cloud deployments for cost and security. We focus on being a guide to customers on their Journey to Modernization of applications, data, and platforms. This strategy leverages our strength in deploying private clouds, extending them to public cloud and incorporating the necessary elements of networking, security, and automation. By understanding our customers’ environment, applications, and business requirements, we deploy solutions that leverage the most appropriate technology on the most appropriate platform with the most appropriate consumption model. For example, we may build a private cloud solution to host mission critical applications, while utilizing a public cloud solution for development, collaboration, or disaster recovery. As the market matures, we will continue to build and acquire skills that align with DevOps, application refactoring, and analytics. Our cloud strategy is tightly aligned with all of our key strategic initiatives, including data center, security, networking, collaboration, and emerging technology.


·Reduction in the number of IT solutions providers. We believe that customers are seeking to reduce the number of vendors they do business with to improve supply chain and internal efficiencies, enhance accountability, improve supplier management practices and reduce costs. As a result, customers are required to select IT solutions providers that are capable of delivering complex multi-vendor IT solutions.
INCREASING SOPHISTICATION AND INCIDENCES OF IT SECURITY BREACHES AND CYBERATTACKS


·Increasing need for third-party services. We believe that customers are relying on third-party service providers to manage significant aspects of their IT environment, from design, implementation, pre- and post-sales support, maintenance, engineering, cloud management, security operations, and other services.
Over the last decade, cyberattacks have become more sophisticated, numerous, and invasive. Organizations are finding it increasingly difficult to effectively safeguard their information assets and business operations from a constant stream of advanced threats. Cyber threats have shifted from uncoordinated individual efforts to highly coordinated and well-funded attacks by criminal organizations and nation-state actors.Additional drivers include data privacy concerns of both user data and machine data as companies continue to pursue digital transformation via data science and analytics. We believe our customers are focused on maturing all aspects of cybersecurity, including information and physical security, data protection, threat management and compliance requirements related to industry and government regulations. To meet current and future security threats, enterprises must identify their risks, select and implement security controls and technology solutions that leverage integrated products and services to help monitor, mitigate, and remediate security threats and attacks while ensuring a data-centric security model that is scalable to meet today’s digital demands on premise, at the edge and in the cloud. Our ability to provide value-added and expert services to our customers in these areas helps us to create greater value for the customer via a security posture that extends across all digital technologies within an organization. The complex nature of security controls and their consumption opens opportunities for ePlus to engage in recurring subscription models with our customers that include both technology and the operational services designed and executed to help mitigate risk and mature an organization’s cybersecurity posture.


DISRUPTIVE TECHNOLOGIES ARE CREATING COMPLEXITY AND CHALLENGES FOR CUSTOMERS AND VENDORS

The rapid evolution of disruptive technologies, and the speed by which they impact organizations’ IT platforms, has made it difficult for customers to effectively design, procure, implement, and manage their own IT systems. Disruption also increases the likelihood of security gaps leaving organizations vulnerable to attacks both internally and externally. Moreover, increased budget pressures, fewer internal resources, a fragmented vendor landscape and faster time-to-value expectations make it challenging for customers to design, implement and manage secure, efficient, and cost-effective IT environments. Customers are increasingly turning to IT solutions providers such as ePlus to implement complex IT offerings, including managed services, security architecture, software-defined infrastructure, cloud platforms, converged and hyper-converged infrastructures, big data analytics, and data protection.

CUSTOMER IT DECISION-MAKING IS SHIFTING FROM IT DEPARTMENTS TO LINE-OF-BUSINESS PERSONNEL

As IT consumption shifts from legacy, on-premise infrastructure purchased upfront to agile “on-demand” and “as-a-service” solutions, customer procurement decisions are shifting from traditional IT personnel to lines-of-business personnel, which is changing the customer engagement model and types of consultative services required to fulfill customer needs. Many of these service delivery models are beginning to transition to recurring annuity revenue streams payable over time, rather than upfront revenue. Our partners are also evolving by developing more annuity models through subscription and consumption-based models operating both on-premise and in the cloud, which further enables our offerings.

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LACK OF SUFFICIENT INTERNAL IT RESOURCES AT MID-SIZED AND LARGE ENTERPRISES, AND SCARCITY OF IT PERSONNEL IN CERTAIN HIGH-DEMAND DISCIPLINES

We believe that IT departments at mid-sized and large enterprises are facing pressure to deliver business outcomes that rely on emerging technologies but lack the professionally trained staff and the ability to hire personnel with high in-demand disciplines such as security, solution architecture and data analytics. At the same time the prevalence of security threats, increased use of cloud platforms, software-defined networking, new architectures, rapid software development frameworks, the proliferation of mobile devices, dispersed workforces, employees working from anywhere, bring-your-own-device (BYOD) policies, and complexity of multi-vendor solutions have made it difficult for IT departments to implement high-quality IT solutions.

REDUCTION IN THE NUMBER OF IT SOLUTIONS PROVIDERS

We believe that customers are seeking to reduce the number of solutions providers they do business with to improve supply chain and internal efficiencies, enhance accountability, improve supplier management practices, and reduce costs. As a result, customers are selecting IT solutions providers that can deliver complex multi-vendor IT solutions. Vendor and tooling consolidation is also trending whereby solutions providers can bundle and enhance the value of offerings while simplifying technology footprints.

INCREASING NEED FOR THIRD-PARTY SERVICES

We believe that customers are relying on third-party service providers, such as ePlus, to manage significant aspects of their IT environment, from design, implementation, pre- and post-sales support, to maintenance, engineering, cloud management, security operations, and other services.

COMPETITION


The market for IT sales and professional servicessolutions is highly competitive, subject to economic conditionsmacro-economic cycles, and rapid change,the entry of new competitors. Additionally, the market is subject to disruption from consolidation of existing market participants that will create larger competitors, by the introduction of disruptive technologies, and significantly affected by new product introductions and other market activities of industry participants. We expect to continue to compete in all areas of our business against local, regional, national, and international firms, including:including vendors, other direct marketers,consulting firms, international, national, and regional resellers, and regional, national, and international servicesservice providers. ManySome of our competitors commoditizeare direct marketers with little value-add and sell products as commodities, which placescan place downward pressure on product pricing. In addition, many IT vendors may sell or lease directly to our customers, and our continued ability to compete effectively may be affected by the policies of such vendors. Some Original Equipment Manufacturers (OEMs) are building and launching their own adoption and managed services to better ensure customer satisfaction and retainment. We face indirect competition from potential customers’ internal development efforts and have to overcome potential customers’ reluctance to move away from legacy systems, processes, and processes.solutions providers. As IT consumption shifts from IT personnel and legacy infrastructure to line-of-business based outcomes utilizingusing off-premise, on-demand, and cloud solutions, the legacy resale model is shiftinghas continued to shift from an upfront salessale to a recurring revenue model.
The leasing market isand financing markets are also competitive and subject to changing economic conditions and market activities of leading industry participants. We expect to continue to compete against local, regional, national, and international firms, including banks, specialty finance companies, vendors'private-equity asset managers, vendors’ captive finance companies, and third-party leasing companies. Banks and other large financial services companies sell directly to business customers, particularly larger enterprise customers, and may provide other financial or ancillary services that we do not provide. Vendor captive leasing companies may utilizeuse internal transfer pricing to effectively lower lease rates and/or bundle equipment sales and leasing to provide highly competitive packages to customers. Third-party leasing companies may have deep customer relationships with contracts in place that are difficult to displace. However,displace; however, these competitors typically do not provide the breadth of product, service, and software offerings that we provide to our customers. The competitors have access to more capital to fund more originations than we do and may be better able to adapt to a rapidly changing interest rate environment.


In all of our markets, some of our competitors have longer operating histories and greater financial, technical, marketing, and other resources than we do. In addition, some of these competitors may be able to respond more quickly to new or changing opportunities, technologies, and customer requirements. Many current and potential competitors also have greater name recognition and engage in more extensive promotional marketing and advertising activities, offer more attractive terms to customers, and adopt more aggressive pricing policies than we do.


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OUR SOLUTIONS


Technology SegmentTECHNOLOGY SEGMENT


IT Sales: Our offerings consist of hardware, software, maintenance, software assurance and services. We believe that our customers view technology purchases as integrated solutions, rather than discrete product and service categories, and the majority of our sales are derived from integrated solutions involving our customers’ data center, network, and collaboration infrastructure. We hold various technical and sales related certifications that authorize us to market their products and enable us to provide advanced professional services. We actively engage with emerging vendors to offer their technologies to our customers. Our flexible platform and customizable catalogs facilitate the addition of new vendors’ products with minimal incremental effort.

Advanced Professional and Managed Services: We provide a range of IT products and advanced professional and managed services to help our customers improve productivity, profitability, and revenue growth while reducing operating costs. Our technology segment’s products, solutions and services include the following:


Product Revenue:

•
IT sales consists of hardware, perpetual and subscription software, maintenance, software assurance, and internally provided and outsourced services. We believe that our customers view technology purchases as integrated solutions, rather than discrete product and service categories, and the majority of our sales are derived from integrated solutions involving our customers’ data center, cloud, network, security, and collaboration infrastructure. We hold various technical and sales-related certifications from leading manufacturers and software publishers, which authorizes us to market their products and enables us to provide advanced professional and managed services. We actively engage with emerging vendors to offer their technologies to our customers. Our flexible platform and customizable catalogs facilitate the addition of new vendors’ products with minimal incremental effort.

Managed Services:

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Managed servicesproactively monitor and manage a broad range of technologies on-premises and in the cloud with services such as managed infrastructure, service desk, Managed Power Protection, and first call lifecycle support (i.e., eLSS), to ensure support of a broad cross-section of technologies spanning multiple Original Equipment Manufacturer (OEM) solutions. These solutions are built in a flexible subscription model to monitor, manage, and maximize business critical technologies—including cloud, security, data center, mobility, and collaboration based on an ITIL Framework with SOC 1 Type 2, SOC 2 Type 2, and HIPAA accreditation based. We also provide ePlus® Automated Virtual Assistant (AVA) for Collaboration Spaces. ePlus AVATM uses robotic process automation accompanied by ePlus Managed Services to present an exceptional experience for users in video-enabled conference rooms and workspaces.

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Service deskprovidesoutsourced functions including, but not limited to, server and desktop supportto respond to our customers’ business demands while minimizing overhead.

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Storage-as-a-Service is a solution powered by Pure Storage Evergreen//One that provides customers with on-premises storage in a consumption-based model with on-demand burst capacity, backed by Service Level Agreements (SLAs), and ePlus expert Enhanced Maintenance Support (EMS). This allows customers to consume storage in a cloud-like model in their data center in a time of uncertainty of what upcoming capacity needs will be due to ongoing cloud migrations.

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Cloud Hosted Services provide cloud-hosted offerings including Cloud Managed Backup and Cloud Disaster Recovery. These data protection offerings, delivered under SOC 2 Type 2 and HIPAA frameworks, are focused on delivering confidence to our customers in their ability to rapidly recover when incidents such as ransomware occur.

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Cloud Managed Services are focused on helping our customers consume public cloud in a way that reduces time-to-market for new applications, lowers their ongoing cloud costs, and increases security. By taking day-to-day cloud management off their hands, our clients can focus on the applications that drive their business.

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Managed Security Services help customers strengthen their information security profile with industry-leading tools, technology, and expertise - often at a fraction of the cost of in-house security resources. Services include Security Operations Center (SOC), Vulnerability Management, Managed Detection and Response (MDR), and Incident Response (IR).

Professional Services:

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Professional services focus on cloud infrastructure, unified communications, collaboration, networking, storage, hyper-converged infrastructure, and virtual desktop infrastructure, supported by security and managed services solutions.


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Staff augmentation services provide customers with flexible headcount options, which may range from service desk to infrastructure to software developer skills. Staff augmentation allows customers to access talent, fill specific technology skill gaps, or provide short-term or long-term IT professional help, which also includes services, such as Virtual Chief Information Officer (vCIO) and Virtual Chief Information Security Officer (vCISO), used to complement existing personnel and build three-to-five-year IT roadmaps.


•
Project management servicesenhance productivity and collaboration management and enable successful implementations and adoption of solutions for our customers.


•
Cloud Consulting Servicesis a global team of architects and consultants focused on assessing customer workloads for cloud, assisting with the selection of the appropriate cloud solution, design and build of cloud platforms, application modernization and migration, automation, and ongoing management and optimization of cloud platforms.


•
Security solutionshelp safeguard our customers’ business and information assets, including:


oGovernance, Risk, and Compliance (GRC) services help ensure customers are meeting governance and compliance requirements by leveraging regulatory frameworks, industry best practices, and supporting controls - thereby allowing customers to effectively identify, assess, and mitigate risk.


oTechnology Introduction and Deployment services help customers rapidly adopt and integrate key security controls and embrace efficiencies across technology types like network, endpoint, data, and cloud.

Data center solutions enable customers to streamline operations, reduce complexity and costs, and simplify vendor management;

Network services aim to improve network performance for our customers;

Collaboration and mobility services facilitate engagement between customer personnel and third-parties.

Security solutions help safeguard our customers’ IT infrastructure through environment analysis, risk identification and the implementation of security solutions and processes;

Managed services enable customers to reduce costs and burdens of their day-to-day IT tasks while monitoring availability, reliability and performance;

Staff augmentation services provide customers with flexible headcount options while allowing them to access talent, fill specific technology skill gaps, or provide short-term or long-term IT professional help, which also includes services, such as Virtual Chief Information Officer (vCIO) and Virtual Chief Information Security Officer (vCISO), used to help complement existing personnel and build three to five year IT roadmaps;

Server and desktop support provides outsourcing services to respond to our customers’ business demands while minimizing overhead;

Professional services focused on cloud infrastructure, unified communications, collaboration, networking, storage, hyper-converged infrastructure, virtual desktop infrastructure, supported by security and managed services solutions; and

Project management services enhance productivity and collaboration to enable successful implementations.
Proprietary Software: Our line of proprietary software products is called OneSource® and consists of the following products:
FINANCING SEGMENT


OneSource®IT is an online web based software portal for customers purchasing IT equipment, software, and services from us; OneSource®IT+ is an online web based software portal for customers purchasing IT products from other suppliers and/or from us;

·OneSource® Procurement is a complete web-based software tool to facilitate procurement of any type of asset;

OneSource® Asset Management is a software platform for managing and tracking corporate assets including vendor maintenance contracts; and

OneSource® DigitalPaper is a document management software application.

Financing Segment

Leasing and Financing:We specialize in financing arrangements, including direct financing, sales-type and operating leases; notes receivable,loans, and consumption-based financing arrangements; and underwriting and management and disposal of IT equipment and assets. Our financing operations include sales, pricing, credit, contracts, accounting, risk management, and asset management.


We primarily finance IT equipment, including accessories and software, communication-related equipment, and medical equipment. We may also finance industrial machinery and equipment, office furniture and general office equipment, transportation equipment, and other general business equipment. We offer our solutions both directly and through vendors.


We offer enhanced financing solutions, for our customers, and our business process services approach automates a significant portion of the IT procurement process and reduces our customers’ cost of doing business. The solution incorporates value-added services at every step in the process, including:


·Front-end processing, such as eProcurement, order aggregation, order automation, vendor performance measurement, ordering, reconciliation, and payment;
Front-end processing, such as procurement, order aggregation, order automation, vendor performance measurement, ordering, reconciliation, and payment.
·Lifecycle and asset ownership services, including asset management, change management, and property tax filing; and

·End-of-life services such as equipment audit, removal, and disposal.
Lifecycle and asset ownership services, including asset management, change management, and property tax filing.


End-of-life services such as equipment audit, removal, and disposal.

OUR COMPETITIVE STRENGTHS


Large Addressable Market with Substantial Growth Opportunities Driven by Increasing IT ComplexityBROAD SKILL SETS THAT CAN SCALE TO SUPPORT LARGE ADDRESSABLE MARKET


We participate in the large and growingsell IT market with specific focussolutions focusing on the data center, cloud, network, cloud, security, virtualization, and mobility segments of the industry, facilitated by our professional and managed service solutions. We believe we are well positioned in the complex high-growth IT solutions segmentprimarily target our sales efforts toward middle-market and can achieve outsized growth relative to the overall IT market.

We focus exclusively on enterprises, primarily large and middle market companies as well as state, local and educational entities. Our products and services are targeted at the approximately 50,000 middle market companies,commercial entities, state and local governmental organizationsgovernments, education, and educational institutionshealthcare customers throughout the US and in the United States.certain markets in Europe and Asia. We believe IT organizations withindepartments in these companiesorganizations are facing pressure to deliver higher service levels with fewer resources, increasing their reliance on third partiesthird-parties who can provide complex, multi-vendor technology solutions, such as our company.


Broad and Diverse Customer Base across a Wide Range of End MarketsBROAD AND DIVERSE CUSTOMER BASE ACROSS A WIDE RANGE OF END MARKETS


We have a broad and diverse customer base of over 3,1004,300 customers across a wide range of end markets. We serve a wide range of end markets,end-markets, including education, financial services, healthcare, media and entertainment, state and local government, technology, and telecommunications.

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Differentiated Business Model Serving Entire
DIFFERENTIATED BUSINESS MODEL SERVING ENTIRE IT LifecycleLIFECYCLE – Solutions, Services, Software, FinancingPROCUREMENT, SOLUTIONS, SERVICES, SOFTWARE, FINANCING


We believe we are a trusted IT advisor to our customers, delivering differentiated products and services to enable our customers to meet increasingly complex IT requirements. We are able tocan provide complete, turn-key solutions servingaligned to the entire IT lifecycle – procurement, products, services, software, and financing. We provide upfront assessments, design and configuration capabilities, installation and implementation, and ongoing services to support our customers’ solutions.


Deep Expertise in Advanced Technology to Address Emerging Data Center andDEEP EXPERTISE IN ADVANCED TECHNOLOGY TO ADDRESS CLOUD, SECURITY, SOFTWARE DEFINED NETWORKING, WIFI/5G, AND OTHER EMERGING IT Infrastructure TrendsTRENDS


We believe our customers choose us for their complex IT infrastructure needs based on our track record of delivering best-of-breed solutions, value-added services, and close relationships with both established and emerging vendors. We focus on obtaining and maintaining top-level engineering certifications and professional services expertise in advanced technologies of strategic vendors that we leverage to help our customers achieve positive business outcomes. Across our company, we have more than 700 employees that collectively hold over 5,500 certifications, including over 3,300 technical certifications. Our highly skilled, experienced personnel include account executives, pre-sales and inside-sales staff trained on our broad solutions capabilities and category-focused subject-matter experts. We have over 1,600 unique certification titles, with a heavy concentration in our top vendor partners.


Strategic Ability to Design and Integrate Cloud Solutions Across Multiple VendorsSTRATEGIC ABILITY TO DESIGN AND INTEGRATE CLOUD SOLUTIONS ACROSS MULTIPLE VENDORS


We believe our relationships with vendors focused on the designexpertise across both data center and integration of cloud systemsarchitectures allows us to provide differentiated market-leadingofferings in assisting our customers with their journey to the cloud. Combined with our established practices in networking and security, we are uniquely poised to help customers adopt a multi-cloud strategy utilizing our cloud offerings.cost management and FinOps framework to help overcome the inherent challenges. We have developed long standing,leverage our strategic partnerships with leading cloud systems vendors includingsuch as Amazon Web Services, Cisco Systems, Dell EMC, Hewlett Packard Enterprise, Microsoft, NetApp, Rubrik, and VMware.VMware in conjunction with our professional, managed and lifecycle services to help our customers achieve their desired business outcomes.


Our vendor agnostic approach allows usSTRATEGIC INVESTMENTS IN EXPERIENCED CYBERSECURITY PRACTITIONERS TO GUIDE CUSTOMERS RISK MITIGATION STRATEGIES

We believe our organizational structure and resources in both security advisory services and technology teams best enable our consulting teams to providedeliver clear business outcomes for our customers looking to identify and mitigate risk to their organizations. While developing threats, new regulations and cyber liability insurance premiums continue to increase, putting pressure on stake holders and stockholders, we continue to invest in our service delivery capabilities and align with industry leading cybersecurity OEMs to help ensure our customers are accelerating their security programs and leveraging the best customer-specific solutions. Our experienced professionals are trained in various product lines across vendorslatest capabilities to harden defenses and have achieved top-level certifications with multiple strategic partners. In additionensure preparedness against threats to providing initial products, our vendor certifications allow us to contract the assumption of many of the day-to-day maintenance and servicing functions for these products.their business.


Proven Track Record of Successfully Integrating Acquisitions and Accelerating GrowthPROVEN TRACK RECORD OF SUCCESSFULLY INTEGRATING ACQUISITIONS AND ACCELERATING GROWTH


We view acquisitions as an importanta crucial factor in our strategic growth plan. Since 1997, we have successfully identified and integrated 19nearly 30 acquisitions. Most recently, we have been active in tuck-in acquisitions to broaden our product offerings, sector reach, and geographic footprint, with recent acquisitions including:footprint.

·IGX Acquisition Global, LLC , and IGX Support, LLC, including IGX Acquisition’s wholly-owned subsidiary, IGXGlobal UK Limited (collectively, "IGX") – Expansion of sales presence in New York and New England, as well as an operating branch in London that serves United Kingdom and global customers.
·Granite Business Solutions, Inc. (“Evolve”)– West Coast operations expansion and broadened SLED customer base
·AdviStor – Upstate New York operations expansion and broadened storage offerings and expertise
·pbm (Pacific Blue Micro)– Expansion of West Coast operations
·Vanticore – Northern New England operations expansion, gained municipal contracts and customer contact center expertise
·NCC Networks – Midwest operations expansion and broadened security expertise.

We seamlesslygenerally integrate acquired firms into the ePlusePlus platform immediately, which allows us to maintain customerscustomer and vendor relationships, and retain key employees from acquired firms, and accelerate growth.


We continue to review new acquisition opportunities to growexpand our global footprint and expand our offerings.


Financial Performance Characterized by Growth and ProfitabilityFINANCIAL PERFORMANCE CHARACTERIZED BY GROWTH AND PROFITABILITY


We have focused on achieving top-line revenue growth while maintaining industry-leading gross margins – with a compound annual growth rate of 10.9%10.8% on net sales and 10.7%11.9% for consolidated gross profit, respectively, from April 1, 2011fiscal year 2019 to March 31, 2016.fiscal year 2023.


Through our organic expansion as well asand acquisitions, we have increased our employee basecount by 48%14.1% from April 1, 2011March 31, 2019, to March 31, 2016 while increasing revenue per employee by approximately 13%. Our2023. The increase in our employee base has largely been in customer facing roles.roles, which represented 81.6% of the total increase in headcount over the same period, as we continue to build our sales and services team while leveraging our operational infrastructure.

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GROWTH STRATEGY


Our goal is to continue to grow as a leading provider of technology solutions. The key elements of our strategy include the following:


Be Our Customers’ Partner of Choice forBE OUR CUSTOMERS’ PARTNER OF CHOICE FOR COMPREHENSIVE IT Solutions, Which May Include Services, and Financing NeedsAND LIFECYCLE SOLUTIONS, INCLUDING CONSULTING, MANAGED AND PROFESSIONAL SERVICES, AND FINANCING


We seek to become the primary provider of IT solutions and flexible financing solutions for each of our customers, by delivering IT solutions whether on-premise, cloud, hybrid or managed services-based.as a service provider. We strive to provide excellent customer service, pricing, availability, and advanced professional and managed services in an efficient manner. We believe the increasing complexity of the IT ecosystem and the emergence of new technologies, vendors, licensing, and vendorsservice options are factors that will lead to a growing demand from existing customers. We continue to focus on improving our sales efficiency by providing on-going training and targeted incentive compensation, as well as implementing better automation processes to reduce costs and improve productivity.have many experienced pre-sales engineers who engage with customers about the most advanced technologies. Our account executives are trained on our broad solutions capabilities andwith access to many category-focused subject-matter experts, which allow them to sell in a consultative business outcome-based manner that increases the likelihood of cross-selling our solutions. Our account executives are supported by experienced and professional inside sales representatives. Our Customer Experience (CX) lifecycle organization helps customers maximize the benefit of their purchases and to cultivate trusting long-term relationships that yield greater agility, better outcomes, faster ROI, and stronger resiliency. We believe that our bundled offerings are an important differentiating factor from our competitors. We also have experienced pre-sales engineers and inside sales representatives to support our outside sales representatives.


We focus on gaining top-level engineering certifications and professional services expertise in advanced technologies of strategic vendors. This expertise helps our customers develop their cloud capabilities including private, public, and hybrid infrastructures.deployments. We are providingprovide virtual desktop infrastructure, unified communications, collaboration, networking, security, storage, big-data,big data, mobility, converged and hyper-converged infrastructures, and managed services offerings, all of which remain in high demand. We believe our ability to deliver advanced professional services provides benefits in two ways. First, we gain recognition and mindshare of our strategic vendor partners and become the “go-to” partner in selected regional markets as well as the national market. This significantly increases direct and referral sales opportunities for our products and services and allows us to offer competitive pricing levels. Second, within our existing and potential customer base, our advanced professional services are a key differentiator against competitors who cannot provide services or advanced services for these key technologies or across multiple vendor product lines.


Our managed services portfolio expanded this year to include Azure, VMware Cloud on AWS, and Automated Virtual Assistant (AVA) for collaboration in addition to our offerings for Managed SDWAN, Service Desk, Carrier Expense Management, Cloud Cost Optimization, Vulnerability Management as a Service (VMaas), Managed Unified Communication Manager (UCM), Hyperflex, Nutanix, WebEx Calling, WebEx Contact Center, and numerous other managed infrastructure offerings. We continuously offer best-of-breedcontinue to increase our breadth and depth of engineering expertise through the integration of recent acquisitions, supplementing our Cisco service offerings, expanding our NetApp and Palo Alto Enhanced Maintenance Support (EMS) portfolio, and adding support for additional market leading security solutions. Our Managed Services portfolio continues to be enhanced so that ePlus annuity-based service solutions are represented within a single service management platform to provide our clients with next generation capabilities. During the last fiscal year,enhance customer experience. Likewise, we have expanded our managed services offeringsincreased automation of Service Level Target reporting to include Managed Flashstack, hybrid IT monitoring services,ensure remediation and managed video services.response are top-of-mind.


Build Our Geographic FootprintBUILD OUR GEOGRAPHIC FOOTPRINT


We intend to increase our direct sales and targeted marketing effortsgo-to-market capabilities in each of our geographic areas. We actively seek to acquire new account relationships through face-to-face field sales,personal relationships, electronic commerce, (especially OneSource®), leveraging our partnerships with vendors, and targeted direct marketingdemand-generation activities to increase awareness of our solutions. We also seek to broaden our customer base, expand our geographic reach, and improve our technical expertise,technology and scaleprofessional services delivery capabilities. During the last fiscal year, we continued to expand our existing operating structure through acquisitions.sales and delivery capabilities across multiple international markets as we see more demand for solutions within this market.


Recruit, Retain and Develop EmployeesRECRUIT, RETAIN, AND DEVELOP EMPLOYEES


Based on our prior experience, capital structure, and business systems and processes, we believe we are well positioned to take advantage of hiringhire experienced sales peoplerepresentatives and engineers, and make strategic acquisitions that expand our customer facing talent, broaden our customer base, expand our geographic reach, scale our existing operating structure, and/or enhance our product and service offerings. Part of our growth strategy is to hire purposefully and evaluateenhance our technical skill base through strategic hiring opportunities ifacquisitions. Once recruited, we believe that our culture, competitive performance-based compensation, policies, and when they become available.labor practices contribute to strong relations with our employees. We offer a range of affordable and flexible benefits options to assist with health and well-being. As our employees are an important resource to us, we invest in their ongoing professional development. Our education program provides financial support for employees who want to participate in undergraduate and graduate studies, continuing education, skill building including technical certifications, and other professional enrichment related to their position with ePlus. During theour previous fiscal year, ended March 31, 2016, as partour stockholders approved an employee stock purchase program (ESPP) pursuant to which our employees may purchase our common stock at a discount.

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Table of our expansion strategy, our customer facing sales and professional services team grew from 712 to 799.Contents

IMPROVE OPERATIONAL EFFICIENCIES
Improve Operational Efficiencies


We continue to invest in our internal technology infrastructure and software platforms to optimizescale our infrastructure for growth, while optimizing our operations and to engageengaging in process re-engineering efforts to become more streamlined and cost effective.
RESEARCH AND DEVELOPMENT


We incur software development costs associated with maintaining, enhancing, or upgrading our proprietary software, which may be performed by internal or external IT development resources or by an offshore software-development company that we use to supplement our internal development team.team or various US-based consultants.


SALES AND MARKETING


We focus our sales and marketing efforts on becoming the primary provider of IT solutions for each of our customers and by seekingcustomers. We actively seek to acquire new account relationships through face-to-face field salespersonal relationships, electronic commerce, and leveraging our partnerships with manufacturersvendors and targeted direct marketingdemand-generation activities to increase awareness of our solutions. We target enterprises, primarily middle market companies with annual revenues between $20 million and $2.5 billionmiddle-market and large companies. We believe there are over 50,000 potential customers in the middle marketcommercial entities and we currently have over 3,100 customers.state and local governments, and educational institutions. We undertake direct marketing and leverage digital marketing and social media campaigns to target certain markets in conjunction with our primary vendor partners, who may provide financial reimbursement, outsourced services, and personnel to assist us in these efforts.


Our sales representatives are compensated by a combination of salary and commission, with commission becoming the primary component of compensation as the sales representatives gain experience. To date, we acquired a majority of our customers through the efforts of our direct sales force.force and acquisitions. We market to different areas within a customer’s organization, including business units as well as the IT department, lines of business, or finance department, depending on the products or services. We also market to customers through our telesales group, which consists of experienced telesales sales professionals and engineers. This group is focused on marketing to existing and new customers primarily within the geographic reach of our existing service areas.solutions.


As of March 31, 2016,2023, our sales force consisted of 457644 sales, marketing and sales support personnel organized regionally in 32 office locations throughoutacross the United States.US, UK, India, and Singapore.


INTELLECTUAL PROPERTY RIGHTS


Our success depends in part upon proprietary business methodologies and technologies that we have licensed and modified. We own certain software programs or have entered into software licensing agreements to provide services to our customers. We rely on a combination of patents, copyrights, trademarks, service marks, trade secret protection, confidentiality and nondisclosure agreements, and licensing arrangements to establish and protect our intellectual property rights. We seek to protect our software, documentation and other written materials and confidential corporate information under trade secret and copyright laws, which afford only limited protection.


For example, we currently have patents in the United States we have six catalog management patents, three image transmission management patents, a patent for collaborative editing of electronic documents over a network, a hosted asset information management patent, and an eCatalog supplier portal patent, among others. The three image transmission patents are scheduled to expire in 2018; the earliest of the catalog management patents is scheduled to expire in 2024; and the patent for collaborative editing of electronic documents over a network is scheduled to expire in 2025, provided that all maintenance fees are paid in accordance with USPTO regulations. We also have certain patent rights in some European forums, Japan, and Canada.US. We cannot provide assurance that any patents, as issued, will prevent the development of competitive products or that our patents will not be successfully challenged by others or invalidated through the administrative process or litigation.


OurIn the US, our registered trademarks in the United States include ePlus®, eCloud ®, Procure+e+®, Manage+®, Docpak®, Viewmark®ePlus®, OneSource®, and Where Technology Means More ®.More® and GRIT: Girls Re-Imagining Tomorrow®. We also have registered IGXGlobal®, and IGXGlobal an ePlus Technology, inc. Company® and certain variations thereon in the UK and the EU. We intend to use and protect these and our other marks, including common-law marks, as we deem necessary. We have over 20 registered copyrights, in addition to unregistered copyrights in our website content, software, marketing and other written materials. We believe our trademarks and copyrights have significant value and are an important factor in the marketing of our products. In addition to our trademarks, we have over 20 registered copyrights and additional common-law trademarks and copyrights.


Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our products or to obtain and use information that we regard as proprietary. Policing unauthorized use of our products is difficult and can be expensive, and while we are unable to determine the extent to which piracy of our software products exists, software piracy could be expected to be a persistent problem. Our means of protecting our proprietary rights may not be adequate, and our competitors may independently develop similar technology, duplicate our products or design around our proprietary intellectual property.

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FINANCIAL AND RISK MANAGEMENT ACTIVITIES


Inventory Management: We do not purchase inventory as stock. We purchase inventory at our customer’s request to order products usually from a purchase order from our customer. In addition, we have drop-shipment arrangements with many of our vendors and distributors, which permit us to offer products to our customers without having to taketaking physical delivery of the equipment. Arrow Enterprises, Ingram Micro, and Tech Data are the largest distributors we utilize. Using the distribution systems available, we frequently sell products that are shipped from the vendors or distributors directly to our customers’ location,locations, which allowsassists us to keep ourin reducing inventory of any product and minimizing shipping expenses to a minimum.costs. For the year ended March 31, 2016,2023, our three largest distributors accounted for 34%over 20% of our purchases related to our technology segment net sales. Ingram Micro, Arrow Electronics, and TD SYNNEX are our largest distributors.


Sales of products manufactured by Cisco Systems, HPE, and NetApp, whether purchased directly from these vendors or through distributors, represented 49%, 7%, and 5%, respectively, of our technology segment net sales for the year ended March 31, 2016. Our flexible platform and customizable catalogs facilitate the addition of new vendors with minimal incremental effort.

Risk Management and Process Controls: We use and maintain conservative underwriting policies and disciplined credit approval processes in both our technology and financing segments. We have an executive management review process and other internal controls in place to evaluate the transactions’ potential risk.


In our technology segment, we manage our risk by using conservative credit quality analysis and periodic monitoring of customer financial results or third-party risk evaluation tools; monitoring customer accounts receivable balances and payment history; proactively pursuing delinquent accounts; ensuring we have appropriate contractual terms and conditions; perfecting purchase money security interestinterests when appropriate;practicable; requiring prepayment or deposits if indicated; performing fraud checks for new accounts; and evaluating general economic as well as industry specific trends. Our systems automatically decrease trade credit lines based on assigned risk ratings.


In our financing segment, we manage our risk in assets we finance by assigning the contractual payments due under the financing arrangement to third parties.third-parties and the continued monitoring of our customers’ credit profile. We also use agency purchase orders to procure equipment for lease to our customers and otherwise take measures to minimize our inventory of financed assets. When our technology segment is the supplier of the assets being financed, we maintainretain certain procurement risks. Our financing arrangements with our customers are generally fixed-rate.fixed rate.

Credit Risk Loss Experience: During the fiscal year ended March 31, 2016, we decreased our reserves for credit losses by $272 thousand, incurred actual credit losses of $188 thousand and had recoveries of $30 thousand. During the fiscal year ended March 31, 2015, we increased our reserves for credit losses by $125 thousand, incurred actual credit losses of $257 thousand and had recoveries of $3 thousand. During the fiscal year ended March 31, 2014, we increased our reserves for credit losses by $750 thousand, incurred actual credit losses of $127 thousand, and had no recoveries.


BACKLOG


We rely on our vendors or distributors to fulfill a large majority of our shipments to our customers. As of March 31, 2016,2023, our technology segment recorded customer commitments to purchase products or services that remain open until either executed or canceled (“open orders”) of $878.3 million and deferred revenue of $160.9 million. As of March 31, 2022, we had open orders of $109.4 million and deferred revenue of $20.2 million. As of March 31, 2015, we had open orders of $74.9$973.0 million and deferred revenues of $37.3$116.9 million. We expect that most of the open orders as of March 31, 2016 will be recognized within ninety days of that date. We also expect that 91% of the deferred revenues as of March 31, 20162023, will be recognized within the next twelve12 months. Our backlog has decreased year over year due to some improvement in the supply chain. A worldwide shortage of certain IT products is resulting from, among other things, shortages in semiconductors and other product components. Like others within our industry, we are experiencing ongoing supply constraints that have affected, and could continue to further affect, lead times for delivery of products, our having to carry more inventory for longer periods, the costs of products, vendor return and cancellation policies, and our ability to meet customer demands.


EMPLOYEESHUMAN CAPITAL


Our employees are an important resource for us, and their collective dedication and talent enable us to be a trusted advisor to our customers.

As of March 31, 2016,2023, we employed 1,074a total of 1,754 employees, who operated through 32 office locations, home officesincluding 1,702 in the US, 28 in India, 22 in the UK, and customer sites. No2 in Singapore. We believe we have a good relationship with our employees. More than one-third of our employees have a tenure of six or more years, and over 20% have a tenure of more than 10 years. None of our employees are represented by a labor unionunion.

OUR CULTURE

We are dedicated to fostering, cultivating, and preserving a culture that represents diversity, enables inclusion, and makes our employees feel comfortable bringing their full, unique selves to work. This includes providing a workplace free of unlawful harassment or discrimination based on race, color, religion/religious creed, sex (including pregnancy, childbirth, or related medical conditions), gender, gender expression, gender identity, transgender, sexual orientation, national origin (including ancestry), age, marital status (including same-sex marriages), genetic information/predisposition/carrier status, physical or mental disability or medical condition, military/veteran status, or any other legally protected characteristic. Through our policies, our training, and the everyday actions of our leadership, we expect our employees to treat each other, our customers, and all our business partners with respect and equality for all persons consistent with our “Be Safe, Be Smart, and Be Kind” motto.

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Corporate social responsibility is also an important part of our culture, and we believe thatfocus efforts around supporting the communities in which we live and work. A sample of our efforts include participating in One Tree Planted, Habitat for Humanity, Tech in Pink (which raises money to support the Breast Cancer Research Foundation) and Be the Match. Since 2017, we have good relationssponsored GRIT: Girls Re-Imagining Tomorrow® in partnership with our employees. Cisco Systems, Inc. GRIT introduces diverse groups of middle school girls to technology-focused career possibilities, with an emphasis on cybersecurity and artificial intelligence. Students have opportunities to learn about the many possibilities in technology-focused companies and participate in hands-on technology-focused learning with top industry representatives and community mentors. In 2023, GRIT kicked off a new program year at eight schools across the country, with more than 90 students participating. Since its inception, GRIT has graduated over 300 participants and continues to grow each year.

FUNCTIONAL AREAS OF OUR EMPLOYEE BASE

The functional areas of our employees are as follows:

  March 31, 
  2016  2015 
Sales and Marketing  457   404 
Professional Services  342   308 
Administration  195   188 
Software Development and Internal IT  73   78 
Executive Management  7   8 
   1,074   986 

U.S.

 As of March 31,    

 2023  2022  Change 
Sales and marketing  644   588   56 
Professional services  750   666   84 
Administration  354   317   37 
Executive management  6   6   - 

  1,754   1,577   177 

ATTRACTING TALENT

While we operate in a competitive labor environment, we believe that that our culture, policies and labor practices, and our competitive performance-based compensation contribute to strong relations with our employees. We offer a range of affordable and flexible benefits options to assist with health and well-being, and at the request of our employees, in 2022 we adopted an Employee Stock Purchase Plan.  We have continued the flexible work from home strategy we adopted during the COVID-19 pandemic, and we anticipate evolving to varied hybrid models for the future of work.

TRAINING AND DEVELOPMENT

As our employees are a crucial resource to us, we invest in their ongoing professional development. Our education program provides financial support for employees who want to participate in undergraduate and graduate studies, continuing education, skill building including technical certifications, and other professional enrichment related to their position with ePlus. New employees are assigned approximately 30 short training videos during their first eight months of employment, covering soft skills, compliance, and our specific business. All employees have access to ePlus University, which offers thousands of on-demand courses, from business and technical skills to leadership to compliance. We also provide live and recorded presentations from numerous in-house leaders and experts in a variety of topics, as well as in-person workshops on management skills and leadership. All employees are supported in, and expected to, remain current in the knowledge areas relevant to their position.

We recognize our employee successes in many ways. We award top performers in our sales and services departments with awards and gifts, including a “President’s Club” trip. We also promote employee engagement and recognition through our ePlus Recognition platform where employees can announce and/or thank other employees for their efforts and receive awards. In addition, we recognize support staff with our annual Executive Choice Awards, and we recognize employees who perform an exceptional act of community service with our CEO Degrees of Excellence award. In addition, we have developed career paths for most functional areas to illustrate the many career paths within ePlus.

SECURITIES AND EXCHANGE COMMISSION (“SEC”) REPORTS


Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and all amendments to those reports, filed with or furnished to the U.S. Securities and Exchange Commission (“SEC”),SEC, are available free of charge through our Internet website, www.eplus.com, as soon as reasonably practical after we have electronically filed such material with, or furnished it to, the SEC. The public may read and copy any materials filed by us with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Room 1580, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-202-551-8300. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov. The contents on or accessible through these websites are not incorporated into this filing. Further, our references to the URLs for these websites are intended to be inactive textual references only.

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EXECUTIVE OFFICERS

The following table sets forth the name, age and position of each person who was an executive officer of ePlus on March 31, 2016. There are no family relationships between any directors or executive officers of ePlus.

Name
Age
Position
Phillip G. Norton72Director, Chairman of the Board of Directors, President and Chief Executive Officer
Mark P. Marron54Chief Operating Officer
Elaine D. Marion48Chief Financial Officer
Steven J. Mencarini60Senior Vice President of Business Operations

The business experience of each executive officer of ePlus is described below:

Phillip G. Norton joined the Company in March 1993 and has served since as its Chairman of the Board and Chief Executive Officer. Since September 1, 1996, Mr. Norton has also served as President of the Company. Mr. Norton had extensive leasing experience prior to joining ePlus. With over thirty years of senior management experience in the equipment leasing and equipment sales markets, Mr. Norton brings leadership, vision, and extensive business, operating, and financing experience to the Company. He has tremendous knowledge of our markets, and since joining the Company in 1993, he has guided the expansion of our business lines and revenues. Today, we are a provider of advanced technology solutions, leasing, and software with $1.2 billion in revenues, as compared to our initial businesses of equipment leasing and brokerage with revenues of $40 million when the Company went public in 1996. As CEO, Mr. Norton has led several successful capital raising initiatives, including our IPO and secondary offerings and two private equity rounds; multiple accretive acquisitions in three different business lines; the hiring and retention of numerous highly qualified personnel; the successful litigation of multiple patent infringement lawsuits protecting our patent rights; and the development of strong industry relationships with key technology partners.

He was founder, Chairman of the Board of Directors, President and Chief Executive Officer of Systems Leasing Corporation, an equipment leasing and equipment brokerage company which he founded in 1978 and sold to PacifiCorp, Inc., a large Northwest utility, in 1986. From 1986 to 1990, Mr. Norton served as President and CEO of PacifiCorp Capital, Inc., the leasing entity of PacifiCorp, Inc., which had over $650 million of leased assets. From 1990 until 1993, Mr. Norton coached high school basketball and invested in real estate. From 1970-1975, he worked in various sales and management roles for Memorex Corporation, a vendor of storage and communication equipment and from 1975-1978, he was Vice President of Federal Leasing Corporation, a provider of financing and logistics to federal, state, and local governments. In June 2011, Mr. Norton began serving on the Board of Directors of The Northern Virginia Technology Council, the largest membership and trade association for technology in the United States. Mr. Norton is a 1966 graduate of the U.S. Naval Academy, with a Bachelor’s of Science degree in engineering, and served in the U.S. Navy from 1966-1970 as a Lieutenant in the Supply Corps.

Mark P. Marron, joined us in 2005 as Senior Vice President of Sales. Mr. Marron was appointed as Chief Operating Officer of ePlus inc. and President of ePlus Technology, inc. in 2010. Prior to joining us, from 2001-2005, Mr. Marron served as senior vice president of worldwide sales and services of NetIQ. Prior to joining NetIQ, Mr. Marron served as senior vice president and general manager of worldwide channel sales for Computer Associates International Inc. Mr. Marron has a Bachelor’s of Science degree in Computer Science from Montclair State University.

Elaine D. Marion joined us in 1998. Ms. Marion became our Chief Financial Officer on September 1, 2008. From  2004 to 2008, Ms. Marion served as our Vice President of Accounting. Prior to that, she was the Controller of ePlus Technology, inc., a subsidiary of ePlus, from 1998 to 2004. Ms. Marion is a graduate of George Mason University, where she earned a Bachelor’s of Science degree in Business Administration with a concentration in Accounting.

Steven J. Mencarini, joined us in June 1997. On September 1, 2008, he became our Senior Vice President of Business Operations. Prior to that, he served as our Chief Financial Officer. Prior to joining us, Mr. Mencarini was Controller of the Technology Management Group of Computer Sciences Corporation (CSC). Mr. Mencarini joined CSC in 1991 as Director of Finance and was promoted to Controller in 1996. Mr. Mencarini is a graduate of the University of Maryland and received a Masters of Taxation from American University in 1985.
ITEM 1A.RISK FACTORS


General Economic Weakness May Harm Our Operating Results and Financial Condition

OurMany factors could adversely affect our business, results of operations and cash flows, some of which are dependent,beyond our control. The following is a description of some important factors that may cause our business prospects, results of operations and cash flows in future periods to a large extent, upon the statediffer materially from those currently expected or desired. Factors not currently known to us or that we currently deem to be immaterial may also materially and adversely affect our business, results of the economy. Global economic weaknessoperations and uncertainty may result in decreased sales, gross margin, and earningscash flows.

RISKS SPECIFIC TO OUR BUSINESS

If we lost one or growth rates. Adverse economic conditions may decrease our customers’ demand for our products and services or impair the abilitymore of our large volume customers, to pay for products and services they have purchased. As a result, our sales could decrease and reserves for our credit losses and write-offs of receivablesearnings may increase.be affected.

If We Lost One or More of Our Large Customers, Our Earnings May be Affected


The contracts for the provision of products and services from us to our customers are generally non-exclusive agreements without volume purchase commitments and are terminable by either party upon 30 days’ notice. The loss of our largest customer or one or more of our largelarger customers, or the failure of such customers to pay amounts due to us, or a material reduction in the amount of purchases made by such customers could have a material adverse effect on our business, financial position, results of operations and cash flows. As of March 31, 2023, and 2022, our accounts receivable-trade balance included approximately 13% and 14%, respectively, concentration of invoices due from Verizon Communications Inc.


Supply chain issues, including a shortage of IT products, may increase our costs or cause a delay in fulfilling customer orders, 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.

We depend upon the supply of products available from our vendors to fulfill orders from our customers on a timely basis. At present, there is a worldwide shortage of certain IT products resulting from shortages in semiconductors and other components of those products. Like others in the industry, we are experiencing ongoing supply constraints that have affected, and could continue to further affect, lead times and the predictability of lead times for delivery of products, the cost of products, and our ability to meet customer demands. As a result of longer lead times, some sales to customers have been deferred and we are carrying more inventory which may result in higher warehouse and interest expenses. Delays in product shipments may delay the completion of related services as well. We believe extended lead times will likely persist through at least the end of the calendar year. As a result, we may be at risk for customers’ cancelling orders due to delays and we may not be able to cancel our order correspondingly with the supplier. If we are unable to mitigate these disruptions, our financial results may be adversely impacted.

Supply chain issues, including a shortage of IT products and available services, may increase our costs or cause a delay in purchasing IT products needed to support our internal infrastructure or operations, resulting in an impact on our technology operations and availability of our IT systems, which could result in a materially adverse effect on our operations and financial results.

We may not be able to hire and/or retain personnel that we need.

To increase market awareness and sales of our offerings, we may need to expand our marketing efforts and sales operations in the future. Our products and services require a sophisticated sales effort and significant technical engineering talent. For example, our sales and engineering candidates must have highly technical hardware and software knowledge to create a customized solution for our customers’ business processes. Competition for qualified sales, marketing and engineering personnel fluctuates depending on market conditions. We are currently experiencing a competitive labor market not only for our sales, marketing, and engineering roles, but for all of our roles including support and administrative positions, and as such are experiencing wage increases. New laws requiring public posting of compensation information may also contribute to wage increases. If we are unable to pass these increases to our customers, our financial results may be adversely affected. We provide certain professional and managed services under fixed price contracts. If we fail to accurately estimate our costs, including due to wage or other inflation, the yearprofitability of our contracts may be adversely affected. Wage inflation may adversely impact our ability to hire and retain personnel, which may impact our ability to obtain and serve our customers.

Additionally, the loss of senior leaders or the failure to successfully implement a succession plan could adversely affect our ability to manage operations and execute strategies.

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In addition, changes to immigration laws may impact our ability to hire or retain talent. Changes in laws relating to non-compete and non-solicitation agreements make it difficult to manage hiring and retention. In some cases, our competitors have required their employees to agree to non-compete and/or non-solicitation agreements as part of their employment, and in some cases, we may not be able to enforce similar restrictions. Both scenarios present challenges and costs. Additionally, in some cases our relationship with a customer may be impacted by turnover in our sales or engineering teams.

Breaches of data security and the failure to protect our information technology systems and confidential information from cybersecurity threats, our ability to maintain compliance with data privacy laws and regulations, or misuse of our customers’ or employees’ information could adversely impact our business.

Our business involves the storage and/or transmission of proprietary information and sensitive or confidential data, including personal information of our employees, customers, and others. In addition, we rely on our vendors that provide goods and services to us to maintain appropriate security measures in place to protect our operations. Also, we operate data centers for our customers that host their technology infrastructure and may store and transmit both business-critical data and confidential information. In connection with our services business, some of our employees also may have access to our customers’ confidential data and other information. We have privacy and data security policies in place that are designed to prevent security breaches; however, as newer technologies emerge, and the portfolio of the service providers with whom we share confidential information grows, we could be exposed to increased risk of breaches in data security and other illegal or fraudulent acts, including ransomware attacks and other types of cyberattacks. The evolving nature of such threats, considering new and sophisticated methods used by criminals and cyberterrorists, including computer viruses, malware, phishing, misrepresentation, social engineering, and forgery, are making it increasingly challenging to anticipate and adequately mitigate these risks.

As a high percentage of our employees work from home more often than in our offices, we are highly reliant on the availability and functionality of our information systems to enable our operations. Working from home may increase risk of data loss, including privacy-related events. If our information systems are not operational for reasons which may include cybersecurity attacks, data center failures, failures by telecom providers to provide services to our business and to our employees’ homes, as well as the home offices of our vendors’ and customers’ employees, power failures, or failures of off-premise software such as SaaS based software, our business and financial results may be adversely impacted.

If third-parties or our employees are able to maliciously penetrate our network security or otherwise misappropriate our customers’ information or employees’ personal information, or other information for which our customers may be responsible and for which we agree to be responsible in connection with service contracts into which we may enter, or if we give third-parties or our employees improper access to certain information, we could be subject to liability. This liability could include claims for unauthorized access to devices on our network; unauthorized access to our customers’ networks, hardware, applications, data, devices, or software; unauthorized purchases with credit card information; and identity theft or other similar fraud-related claims. This liability could also include claims for other misuses of or inappropriate access to personal information. Other liability could include claims alleging misrepresentation of our privacy and data security practices. Any such liability for misappropriation of this information could decrease our profitability. In addition, federal and state agencies have been investigating various companies regarding whether they misused or inadequately secured information. We could incur additional expenses when new laws or regulations regarding the use, safeguarding, or privacy of information are enacted, or if governmental agencies require us to substantially modify our privacy or security practices. We could fail to comply with international and domestic data privacy laws, the violation of which may result in audits, fines, penalties, litigation, or administrative enforcement actions with associated costs.

Third parties, such as hackers, could circumvent or sabotage the security practices and products used in our product and service offerings, and/or the security practices or products used in our internal IT systems, which could result in disclosure of sensitive or personal information, unauthorized procurement, or other business interruptions that could damage our reputation and disrupt our business, as well as that of our customers. Attacks may range from random attempts to coordinated and targeted attacks, including sophisticated computer crime and advanced persistent threats.

Advances in computer capabilities, new discoveries in the field of cryptography or quantum computing, or other events or developments may result in a compromise or breach of the security practices we use to protect sensitive customer transaction information and employee information. A party that can circumvent our security measures could misappropriate proprietary information or cause interruptions in our operations. Further, third parties may attempt to fraudulently induce employees or customers into disclosing sensitive information such as usernames, passwords, or other information or otherwise compromise the security of our internal networks and/or our customers’ information. Since techniques used to obtain unauthorized access change frequently and the impact and severity of security breaches are increasing, we may be unable to implement adequate preventative measures or timely identify or stop security breaches while they are occurring.

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We may be required to expend significant capital and other resources to protect against security breaches or to remediate the subsequent risks and issues caused by such breaches. Our security measures are designed to protect against security breaches, but our failure to prevent such security breaches could cause us to incur significant expense to investigate and respond to a security breach and remediate any problems caused by any breach, subject us to liability, damage our reputation, and diminish the value of our brand. There can be no assurance that the limitations of liability in our contracts would be enforceable or adequate or would otherwise protect us from any such liabilities or damages with respect to any particular claim. We also cannot be sure that our existing insurance coverage for errors and omissions or security breaches will continue to be available on acceptable terms or in sufficient amounts to cover one or more large claims, or that our insurers will not deny coverage as to any future claim. The successful assertion of one or more large claims against us that exceeds our available insurance coverage, or changes in our insurance policies, including additional exclusions, premium increases or the imposition of large deductible or co-insurance requirements, could have an adverse effect on our business, financial condition, and results of operations.

We depend on having creditworthy customers to avoid an adverse impact on our operating results and financial condition.

Our financing and technology segments require sufficient amounts of debt or equity capital to fund our equipment purchases. If the credit quality of our customer base materially decreases, or if we experience a material increase in our credit losses, including by the federal government’s actual or attempted termination for convenience or other contract termination, we may find it difficult to continue to obtain the required capital for our business, and our operating results and financial condition may be harmed. The current banking environment, particularly in the technology sector, is under regulatory and consumer scrutiny in the wake of recent bank failures such as Silicon Valley Bank, which may make it more difficult for us to obtain required capital and on desirable terms. In addition to the impact on our ability to attract capital, a material increase in our delinquency and default experience would itself have a material adverse effect on our business, operating results, and financial condition.

Many of our customers may be susceptible to economic slowdowns or recessions and may be unable to pay for their purchases or repay the leases or notes receivable to us or repayment may be extended by our customers or us. Therefore, our non-performing assets may increase, and the value of our portfolio may decrease during these periods as we are required to record our investments at their current fair value. Adverse economic conditions also may decrease the value of collateral securing some of our loans and the value of our equity investments. Economic slowdowns or recessions could lead to financial losses in our portfolio and a decrease in revenues, net earnings, and assets in our financing segment. Unfavorable economic conditions including inflation and/or an increase in interest rates also could increase our financing segment’s funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to us. These events could prevent us from increasing our financing portfolio and harm our operating results.

The terms of our Credit Facility or lines of credit with our vendors or loss thereof may restrict our current and future operations, which could adversely affect our ability to respond to changes in our business and to manage our operations.

Our technology segment, primarily through our subsidiary ePlus Technology, inc., finances its operations with funds generated from operations, and with a credit facility with Wells Fargo Commercial Distribution Finance, LLC and its agents or (“WFCDF”). This facility provides short-term capital for our technology segment. There are two components of the WFCDF credit facility (collectively, the “WFCDF Credit Facility”): (1) a floor plan facility and (2) a revolving credit facility. As of March 31, 2023, the facility agreement had an aggregate limit of the two components of $500 million, together with a sublimit for a revolving credit facility for up to $200 million.

The loss of the WFCDF Credit Facility could have a material adverse effect on our future results as we rely on this facility and its components for daily working capital and the operational function of our accounts payable process. Our credit agreement contains various covenants that must be met each quarter and either party may terminate the agreement for any reason with 90-days’ notice. There can be no assurance that we will continue to meet those covenants and failure to do so may limit availability of, or cause us to lose, such financing. There can be no assurance that such financing will continue to be available to us in the future on acceptable terms.

An economic downturn or recession may negatively impact WFCDF’s or its agents’ willingness to extend credit to us at the current credit limit or an increase in credit limit thus restricting our working capital. We also have lines of credit with our vendors for the purchase of goods and services for resale or internal use. The loss or decrease of our working capital facility or lines of credit with our vendors may have a material adverse effect on our business, results of operations and financial condition.

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We rely on a small number of key vendors in our supply chain, and do not have long-term supply or guaranteed price agreements or assurance of inventory availability with our vendors.

A substantial portion of our revenue within our technology segment depends on a small number of key vendors. Products manufactured by Cisco Systems represented approximately 40%, 39%, and 36% of our technology segment net sales for the years ended March 31, 20162023, 2022, and 2015, no single customer’s sales were greater than 10%2021, respectively. Products manufactured by NetApp, Hewlett Packard Enterprise, HP Inc., Juniper Networks, Dell/EMC, and Arista Networks, collectively represented approximately 23% - 25% of total net sales. For the year ended March 31, 2014, sales to a large telecommunications company were approximately 11% of totaltechnology segment net sales for the last three years. Manufacturing interruptions or delays, including as a result of the financial instability or bankruptcy of manufacturers, changes to or the addition of trade laws, duties or tariffs, currency fluctuations, significant labor disputes such as strikes, natural disasters, political or social unrest, international conflicts, such as Russia’s invasion of Ukraine, pandemics, other public health crises, or other adverse events affecting any aspect of our vendors’ business, could disrupt our supply chain. We are experiencing product constraints due to the unavailability of raw materials or components, delays in shipping, failure of vendors to accurately forecast customer demand or to manufacture or otherwise obtain sufficient quantities of product or component parts to meet customer demand, among other reasons. If we experience significant supply chain disruptions, we may not be able to develop alternate sourcing quickly on favorable terms, if at all, which could result in increased costs, loss of whichsales and a loss of customers, and adversely impact our financial condition and results of operations. In addition, we are experiencing price increases from our suppliers as a result of an inflationary environment. Our intention is to pass along the price increases to our customers but that may not be possible for all cost increases. Some manufacturers and suppliers have instituted policies to disallow order cancellations. We may be at risk if a customer cancels an order with us, and we cannot cancel our corresponding order with the supplier.

As we do not stock inventory that is not related to an order we have received from our technology segmentcustomers, we depend upon the supply of products available from our vendors to fulfill orders from our customers on a timely basis.


The loss of a key vendor or changes in its policies could adversely impact our financial results. Alleged or actual violations of a contract that results in either the termination of our ability to sell the product or a decrease in our certification level with the vendor could adversely impact our financial results. In addition, a reduction in the trade credit lines or the favorable terms granted to us by our vendors and financial partners could increase our need for, and cost of, working capital and have a material adverse effect on our business, results of operations and financial condition.

We May Experience A Reductiondepend on third-party companies to perform certain of our obligations to our customers, which if not performed adequately could cause significant disruption to our business.

We rely on arrangements with third parties to perform certain professional services, staffing services, managed services, maintenance, warranties, configuration services, and other services for our customers. If these third-parties do not perform these services in Incentives Offeredaccordance with the terms of our agreement and of a professional standard customary for the services, or if they cause disruption of, or security weaknesses in, our customers’ businesses, results to Usour organization could include legal claims and associated costs, monetary damages paid to our customers, and an adverse effect on our customer relationships, our brand, and our reputation, and our results of operations or cash flows could be affected. In addition, the acquisition of third-party companies that we are relying upon to perform certain of our customer obligations, by Our Vendors That Would Affect Our Earningsour competitors may impact our revenue.


We rely on independent shipping companies to deliver products from us and our vendors to our customers. The failure or inability of these shipping companies to deliver products, or the unavailability of their shipping services, even temporarily, could have an adverse effect on our business. We may also be adversely affected by an increase in freight surcharges that may result from economic, supply-chain, geopolitical, or other disruptions.

We may experience a reduction in incentives offered to us and earned by us from our vendors that would affect our earnings.

We receive payments and credits from vendors, including consideration pursuant to volume incentive programs, shared marketing expense programs, and early pay discounts. These programs are usually of finite terms and may not be renewed or may be changed in a way that has an adverse effect onadversely affects us. Vendor funding is used to offset inventory costs, costs of goods sold, marketing costs and other operating expenses. Certain of these funds are based on our volume of purchases, growth rate of purchases, and marketing programs. If we do not grow our sales over prior periods, or if we aredo not in compliancecomply with the terms of these programs, or do not sell certain products that earn the incentive, there could be a material negative effect on the amount of incentives offered or paid to us by vendors. Supply chain constraints and staffing challenges may affect our ability to meet these volume requirements and may affect our and our vendors’ ability to engage in marketing programs. We may not continue to receive such incentives or may not be able to collect outstanding amounts relating to these incentives in a timely manner, or at all. Any sizeable reduction in, the discontinuance of, a significant delay in receiving, or the inability to collect such incentives, particularly related to incentive programs with our largest partners, including Cisco Systems and Hewlett-Packard,vendors, could have a material adverse effect on our business, results of operations and financial condition. If we are unable to react timely to any fundamental changes in the programs of vendors, including the elimination of funding for some of the activities for which we have been compensated in the past, such changes could have a material adverse effect on our business, results of operations and financial condition.

For the fiscal years ended March 31, 2016, 2015, and 2014, vendor incentives earned remained a fairly stable component of our gross margins on consolidated sales of product and services. There was a decrease in the percentage of vendor incentives earned which resulted in a 30-basis point reduction to our gross margins for sales of product and services for the year ended March 31, 2016 compared to the prior year. The change in the amount of vendor incentives earned during the fiscal years ended March 31, 2015 as compared to 2014 resulted in an increase to our gross margins for sales of products and services of 10 basis points.

We Depend on Having Creditworthy Customers to Avoid an Adverse Impact on Our Operating Results and Financial Condition

Our financing and technology segments require sufficient amounts of debt or equity capital to fund our equipment purchases. If the credit quality of our customer base materially decreases, or if we experience a material increase in our credit losses, we may find it difficult to continue to obtain the required capital for our business, and our operating results and financial condition may be harmed. In addition to the impact on our ability to attract capital, a material increase in our delinquency and default experience would itself have a material adverse effect on our business, operating results and financial condition. We are also subject to changes, if any, in our lenders’ willingness to provide financing for different, particularly lower, credit quality lessees.

As of March 31, 2016 and 2015, we had reserves for credit losses of $5.2 million and $5.6 million, respectively, which included a specific reserve of $3.2 million, due to a customer that filed for bankruptcy in May 2012.

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Changes inWe may fail to innovate or create new solutions which align with changing market and customer demand, and we face substantial competition from other companies.

As a provider of a comprehensive set of solutions, which involves the offering of bundled solutions consisting of direct IT Industry and/or Rapid Changes in Product Standards May Result in Reduced Demand for the IT Hardware, Software and Services We Sell

Our results of operations are influenced by a variety of factors, including the condition of the IT industry, shifts in demand for, or availability of, IT hardware, software, peripherals and services, and industry introductions of new products, upgrades or methods of distribution. The IT industry is characterized by rapid technological change and the frequent introduction of new products, product enhancements and new distribution methods or channels, each of which can decrease demand for current products or render them obsolete. In addition, the proliferation of cloud technology, infrastructure as a service (“IaaS”), software as a service (“SaaS”), platform as a service (“PaaS”), software defined networking, or other emerging technologies may reduce the demand for products and services we sell to our customers. Cloud offerings may influence our customers to move workloads to cloud providers, which may reduce the procurement of products and services from us. Changes in the IT industry may also affect the demand for oursales, advanced professional and managed services. We have invested a significant amountservices, our propriety software, and financing, we expect to encounter some of capitalthe challenges, risks, difficulties, and uncertainties frequently encountered by companies providing bundled solutions in rapidly evolving markets. Some of these challenges include our ability to increase the total number of users of our services, adapt to meet changes in our services strategymarkets and itcompetitive developments, or continue to update our technology to enhance the features and functionality of our suite of products. Our personnel must continually stay current with vendor and marketplace technology advancements, create solutions which may fail due to competition or changes in the industry. If we fail to react in a timely manner to such changes, our results of operations may be significantly adversely affected. Our sales can be dependent on demand for specific product categories,integrate evolving vendor products and any change in demand for or supply of such products could have a material adverse effect on our results of operations.

We Are Dependent on Continued Innovations in Hardware, Software and Services Offerings by Our Vendors and the Competitiveness of Their Offerings, and Our Ability to Partner With New and Emerging Technology Providers

The technology industry is characterized by rapid innovation and the frequent introduction of new and enhanced hardware, software and services, offerings, such as cloud-based solutions, including IaaS, SaaS and PaaS. We are dependent on innovations in hardware, software and services offerings, as well as the acceptance of those innovations by our customers. A decrease in the rate of innovation, or the lack of acceptance of innovations by our customers, could have an adverse effectservices and solutions we provide, to meet changing marketplace and customer demand. Further, we may provide customized solutions and services that are solely reliant on our business, results of operations or cash flows.

In addition, if we are unable to keep up with changes in technologyown marketing, design, and new hardware, software and services offerings, for example by not providing the appropriate training to our account managers, sales technology specialists and engineers to enable them to effectively sell and deliver such new offerings to customers, our business, results of operations or cash flows could be adversely affected.

We also are dependent upon our vendors for the development and marketing of hardware, software and services to compete effectively with hardware, software and services of vendors whose products and services we do not currently offer or that we are not authorized to offer in one or more customer channels. In addition, our success is dependent on our ability to develop relationships with and sell hardware, software and services from new emerging vendors and vendors that we have not historically represented in the marketplace. To the extent that a vendor's offering that is highly in demand is not available to us for resale in one or more customer channels, and there is not a competitive offering from another vendor that we are authorized to sell in such customer channels, or we are unable to develop relationships with new technology providers or companies that we have not historically represented, our business, results of operations or cash flows could be adversely impacted.

We Rely on a Small Number of Key Vendors and Do Not Have Long-Term Supply or Guaranteed Price Agreements or Assurance of Stock Availability with Our Vendors

A substantial portion of our revenue within in our technology segment is dependent on a small number of key vendors including Cisco Systems, Hewlett-Packard companies, and NetApp. Products manufactured by Cisco Systems represented approximately 49%, 49% and 48% of our technology segment net sales for the years ended March 31, 2016, 2015 and 2014, respectively. Products manufactured by Hewlett-Packard companies represented approximately 7%, 8% and 10% of our technology segment net sales for the years ended March 31, 2016, 2015 and 2014, respectively. NetApp products represented approximately 5%, 7% and 8% of our technology segment net sales for the years ended March 31, 2016, 2015 and 2014, respectively.
Our industry frequently experiences periods of product shortages from our vendors as a result of our vendors’ difficulties in projecting demand for certain products sold by us, additional trade law provisions or regulations, additional duties, tariffs or other charges on imports or exports, natural disasters affecting our suppliers’ facilities, and significant labor disputes. As we do not stock inventory that is not related to an order we have received from our customer, we are dependent upon the supply of products available from our vendors in order to fulfill orders from our customers on a timely basis. The loss of, or change in business relationship with, any of these or any other key vendor partners, the diminished availability of their products, or backlogs for their products leading to manufacturer allocation, could reduce the supply and increase the cost of products we sell and negatively impact our competitive position.

We Depend on Third-Party Companies to Perform Certain of Our Obligations to Our Customers, Which if Not Performed Could Cause Significant Disruption to Our Business

We rely on arrangements with third parties to perform certain professional services, managed services, warranties, and configurationfulfillment services, and other services for our customers, which, if not performed by these third parties in accordance withwe may lack the terms of the agreementskills or if they cause disruption of or security weaknesses in our customers’ businesses, could result in legal claims or costspersonnel to our organization, including monetary damages paidexecute. Our failure to innovate and provide bespoke value to our customers may erode our competitive position, market share and an adverse effect on our customer relationships, our brandlead to reduced revenue and our business, results of operations, or cash flows could be affected.financial performance.


We rely on arrangements with independent shipping companies for the deliveryIn all of our products from usmarkets, some of our competitors have longer operating histories and our vendors to our customers. The failure or inabilitygreater financial, technical, marketing, and other resources than we do. In addition, some of these shipping companies to deliver products, or the unavailability of their shipping services, even temporarily, could have an adverse effect on our business. Wecompetitors may also be adversely affected by an increase in freight surcharges.

The loss of a key vendor or changes in its policies could adversely impact our financial results. Violation of a contract that results in either the termination of our ability to sell the product or a decrease in our certification level with the vendor could adversely impact our financial results. In addition, a reduction in the amount of credit granted to us by our vendors and financial partners could increase our need for and cost of working capital and have a material adverse effect on our business, results of operations and financial condition.

Loss of Services by Any of Our Executive Officers or Senior Management and/or Failure to Successfully Implement Our Succession Plan Could Adversely Affect Our Business

The loss of the services by our executive officers or senior management and failure to successfully implement a succession plan could disrupt management of our business and impair the execution of our business strategies. We believe that our success depends in part upon our ability to retain the services of our executive officers and senior management and successfully implement a succession plan. Our executive officers have been instrumental in determining our strategic direction and focus. The loss of our executive officers’ and senior management’s services without replacement by qualified successors could adversely affect our ability to manage effectively our overall operations and successfully execute current or future business strategies and could cause other instability within our workforce.

We May Not Be Able to Hire and/or Retain Personnel That We Need to Succeed

To increase market awareness and sales of our offerings, we may need to expand our sales operations and marketing efforts in the future. Our products and services require a sophisticated sales effort and significant technical engineering talent. For example, our sales and engineering candidates must have highly technical hardware and software knowledge in order to create a customized solution for our customers’ business processes. Competition for qualified sales, marketing and engineering personnel fluctuates depending on market conditions and we may not be able to hire or retain sufficient numbers of such personnelrespond more quickly to maintain and grow our business. Increasingly, our competitors are requiring their employees to agree to non-compete and non-solicitation agreements as part of their employment. This could result in making it more difficult for us to hire and increase our costs by reviewing and managing non-compete restrictions. Additionally, in some cases our relationship with a customer may be impacted by turnover in our sales or engineering team.
We Rely on Inventory and Accounts Receivable Financing Arrangements for Working Capital and Our Accounts Payable Processing

The loss of the technology segment’s credit facility could have a material adverse effect on our future results as we rely on this facility and its components for daily working capital and the operational function of our accounts payable process. Our credit agreement contains various covenants that must be met each quarter. There can be no assurance that we will continue to meet those covenants and failure to do so may limit availability of, or cause us to lose, such financing. There can be no assurance that such financing will continue to be available to us in the future on acceptable terms.

If We Fail to Integrate Acquisitions, Our Profitability May Be Adversely Affected

Our ability to successfully integrate the operations we acquire, reduce costs, or leverage these operations to generate revenue and earnings growth, could significantly impact future revenue and earnings. Integrating acquired operations is a significant challenge and there is no assurance that we will be able to manage the integrations successfully. Failure to successfully integrate acquired operations may adversely affect our cost structure thereby reducing our gross margins and return on investment. In addition, we may acquire entities with unknown liabilities, fraud, cultural or business environment issues or that may not have adequate internal controls as may be required by law.

We May Not Adequately Protect Ourselves Through Our Contract Vehicles or Our Insurance Policies May Not be Adequate to Address Potential Losses or Claims

Our contracts may not protect us against the risks inherent in our business including, but not limited to, warranties, limitations of liability, indemnification obligations, human resources and subcontractor-related claims, patent and product liability, data security and financing activities. Also, we face pressure from our customers for competitive pricing contract terms. Despite the non-recourse nature of the loans financing certain of our activities, non-recourse lenders may file suit when the underlying transaction turns out poorly for the lenders. We are subject to such suits and the cost of defending such suits due to the nature of our business.

Failure to Comply With Our Public Sector Contracts or Applicable Laws and Regulations Could Result in, Among Other Things, Termination, Fines or Other Liabilities, and Changes in Procurement Regulations Could Adversely Impact Our Business

Revenues in our public sector are derived from sales to state and local government and educational institution (SLED) customers, through various contracts and open market sales of products and services. Sales to SLED customers are highly regulated. Noncompliance with contract provisions, government procurement regulations or other applicable laws or regulations could result in civil, criminal and administrative liability, including substantial monetary fines or damages, termination of SLED sector customer contracts, and suspension, debarment or ineligibility from doing business with the government and other customers in the SLED sector. In addition, contracts in the SLED sector are generally terminable at any time for convenience of the contracting agency or upon default. The effect of any of these possible actions could adversely affect our business, results of operations or cash flows. In addition, the adoption of new or modified procurement regulationschanging opportunities, technologies, and other requirementscustomer requirements. Many current competitors may increase our compliance costshave, and reduce our gross margins, which couldpotential competitors may have, a negative effect on our business, results of operations or cash flows.greater name recognition, engage in more extensive promotional marketing and advertising activities, offer more attractive terms to customers, and adopt more aggressive pricing and credit policies than we do.

We Face Substantial Competition From Larger Companies That May be Difficult to Overcome


In our technology segment, we compete in all areas of our business against local, regional, national, and international firms, including other direct marketers; national and regional resellers; online marketplace competitors; and regional, national, and international service providers. In addition, we face competition from vendors, which may choose to market their products directly to end-users, rather than through channel partners such as our company, and this could adversely affect our future sales. Many competitors compete based principally on the basis of price and may have lower costs or accept lower selling prices than we do and, therefore, currentour gross margins may not be maintainable. Online marketplace competitors are continually improving their pricing and offerings to customers as well as ease of use of their online marketplaces. Our competitors may offer better or different products and services than we offer. In addition, we do not have guaranteed purchasing volume commitments from our customers and, therefore, our sales volume may be volatile.


In our financing segment, we face competition from many sources including much larger companies with greater financial resources. Our competition may originate from vendors of the products we finance or financial partners who choose to market directly to customers through the vendors’ captive leasing organization or large or regional financial institutions such as banks with substantially lower cost of funds. Our competition may lower lease rates in order to increase market share. Historically, our financing segment is very transaction-based and has had volatility in its results of operations primarily due to large transaction gains derived from large transactions with system integrators where the federal government is the end user, and customer-driven events such as early buyouts or terminations. These transactions are unpredictable and often outsized. There is no guarantee that we will continue to originate large transaction gains or that customers will drive large post contract earnings in the future. In addition, customers may decrease demand for leasing as a result of the adoption of Codification Topic 842, Leases (“Codification Topic 842”) which requires certain transactions be recorded on balance sheet.

We may not have adequately designed or maintained our IT platforms for internal use or solutions we offer to our customers or have adequate or competent IT personnel to support our business.

We depend heavily upon the accuracy and reliability of our information, telecommunication, cybersecurity, and other platforms which are used for customer management, sales, distribution, marketing, purchasing, inventory management, order processing and fulfillment, customer service and general accounting functions. We must continually maintain, secure, and improve our systems. We may not properly select or implement software which may result in the lack of data integrity within or between systems, increase our costs or impair our control environment or may lead to other negative impacts on our business or results. We may need to implement new software, or make changes to existing software and processes, to be compliant with rapidly evolving data privacy laws, which may incur costs and impact data integrity. The protections we have in place address a variety of threats to our information technology systems, both internal and external, including human error. Inadequate security practices or design of our IT systems, or IT systems from third parties which we utilize, or third-party service providers’ failure to provide adequate services could result in the disclosure of sensitive or confidential information or personal information or cause other business interruptions that could damage our reputation and disrupt our business. Inadequate design or interruption of our information systems, Internet availability, telecommunications systems or power failures could have a material adverse effect on our business, our reputation, financial condition, cash flows, or results of operations.

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Our Resultsmanaged services business requires us to monitor our customers’ devices on their networks across varying levels of Operationsservice. If we have not designed our IT systems to provide this service accurately or if there is a security breach in our IT system or the customers’ systems, we may be liable for claims. In addition, we rely on our managed services personnel to perform this monitoring service. Illness or insufficient staffing, or improper training, performance, or supervision may negatively affect the services we provide our customers resulting in decreased revenue and the potential for litigation.

Products as complex as those used to provide our solutions or cloud automation solutions can contain unknown and undetected errors, performance problems, or use open-source code. We may have serious defects following introduction of new products or enhancements to existing products. Undetected errors or performance problems may be discovered in the future and certain errors we consider to be minor may be serious to our customers.

Our products, or automation solutions, may be inadvertently harmed, such as during a product integration or upgrade, or may be circumvented or sabotaged by third parties such as hackers, which could result in the disclosure of sensitive information or personal information, unauthorized procurement, or cause other business interruptions that could damage our reputation and disrupt our business. Attacks may range from random attempts to coordinated and targeted attacks, including sophisticated computer crime and advanced persistent threats. In addition, our customers may experience a loss in connectivity to our proprietary solutions because of a power loss at our data center, interruption in internet availability, or defects in our solutions. This could result in lost revenues, delays in customer acceptance, security breaches, and unforeseen liabilities that could be detrimental to our reputation and to our business.

We rely on the competency of our internal IT personnel. Our failure to hire, develop, retain, and supervise competent IT personnel to secure our data, as well as design and maintain resilient technology systems including our data and voice networks, infrastructure, and applications, could significantly interrupt our business causing a negative impact on our results.

If we fail to identify acquisition candidates, or perform sufficient due diligence prior to completing an acquisition, or fail to integrate a completed acquisition our earnings may be affected.

Mergers and acquisitions are Subjectsignificant factors in our growth strategy. If we fail to Fluctuationsidentify businesses available for purchase or at an acceptable valuation, our growth strategy may be negatively affected and, as such, may negatively affect our results of operations.

Our ability to successfully integrate the operations we acquire, reduce costs, or leverage these operations to generate revenue and earnings growth, could significantly impact future revenue and earnings. Integrating acquired operations is a significant challenge particularly as the current remote work environment requires at least some tasks be completed remotely, and integration may divert management’s attention from other business concerns, and there is no assurance that we will be able to manage the integrations successfully. Failure to successfully integrate acquired operations may adversely affect our cost structure thereby reducing our earnings and return on investment. In addition, we may fail to perform adequate due diligence and acquire entities with unknown liabilities, fraud, cultural or business environment issues, or that may not have adequate internal controls as may be required by law.

If we acquire a company that does not fit culturally, strategically, or in Foreign Currency

In December 2015, we purchased 100%some other fashion, the acquisition may not produce the expected results or may negatively affect our reputation, which may negatively affect our business, results of operations, or cash flows. The unpredictability of the stockeconomy, order backlogs, and inflation will also make it difficult to properly value or anticipate the future success of IGXGlobal UK Ltd.acquisition targets and impact our overall growth strategy.

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Our results of operations are subject to fluctuations in January 2016 we created IGX Capital UK, Ltd., both of which are formedforeign currency.

We have several foreign subsidiaries and operateconduct business in the United Kingdom.various countries and currencies. As result of this U.K. presence,these foreign operations, we have additional exposure to fluctuations in foreign currency rates resultsresulting primarily from the translation exposure associated with the preparation of our consolidated financial statements. We also have a Canadian subsidiary, ePlus Canada Company. While our consolidated financial statements are reported in U.S.US dollars, the financial statements of our subsidiaries outside the U.S.US are prepared using the local currency as the functional currency and translated into U.S.US dollars. As a result, fluctuations in the exchange rate of the U.S.US dollar relative to the localfunctional currencies of our international subsidiaries in Canada and the United Kingdom could cause fluctuations in our results of operations. However, our operations in foreign countries are insignificant. We also have foreign currency exposure to the extent net sales and purchases are not denominated in a subsidiary’s functional currency, which could have an adverse effect on our business, results of operations, or cash flows.


A natural disaster or other adverse event at one of our primary configuration centers, data center, or a third-party provider location could negatively impact our business.

We Mayhave configuration centers and data centers in the US and third-party providers in the UK and Netherlands. The configuration centers contain inventory owned by us and our customers, which serve as distribution centers for orders we do not drop ship directly to the customer. We perform services in those configuration centers such as product configuration services, and warehouse and logistics services. If the configuration centers or surrounding infrastructure were to be Liable for Misappropriation of Our Customers’seriously damaged or Employees’ Information

The security practices anddisrupted by a natural disaster or other adverse event, including disruption related to political or social unrest, we could utilize another distribution center or third-party distributors to ship products usedto our customers. However, this may not be sufficient to avoid interruptions in our productservice or the loss of inventory at that location and service offerings ormay not enable us to meet all of the needs of our security practices or products usedcustomers and would cause us to incur incremental operating costs. In addition, we operate in facilities which may contain both business-critical data and confidential information of our internal information technology systems may be circumvented or sabotaged bycustomers and third parties, such as hackers, whichdata center colocation and hosted solution partners. A natural disaster or other adverse event at locations such as these or third-party provider locations could resultnegatively impact our business, results of operations or cash flows.

Actual or anticipated epidemics, pandemics, outbreaks, or other public health crises may adversely affect our customers’ and suppliers’ financial condition and the operations of our business.

Our business could be materially and adversely affected by the impact of any epidemic, pandemic, outbreak, or other public health crisis. The risk of any epidemic, pandemic, outbreak or other public health crisis could cause customers to delay or cancel orders and could cause temporary or long-term disruptions in our supply chains and/or delays in the disclosuredelivery of sensitive informationour products and services to our customers. Quarantines or private personal information, unauthorized procurement,other cancellations of public events as well as governmental containment actions could also adversely affect our customers’ financial condition, resulting in reduced spending for the products and services we sell or cause other business interruptions that could damage our reputation and disrupt our business. Attacks may range from random attempts to coordinated and targeted attacks, including sophisticated computer crime and advanced persistent threats.

If third partiesuncollectible accounts receivable, leases or notes receivable or our employees are ablecustomers’ ability to penetratereceive goods we ship to their locations. Moreover, any epidemic, pandemic, outbreak, or other public health crisis could adversely affect our network securityability to adequately staff and manage our businesses. Risks or otherwise misappropriateregulations related to an epidemic, pandemic, or other health crisis may continue to lead to the complete or partial closure of one or more of our customers’ informationoffices or employees’ personal information such as credit card information,configuration centers or such information for whichthe operations of our customers or our sourcing partners. Office closures of our customers may be responsiblereduce our ability to provide onsite professional services and staffing.

Our earnings may fluctuate, which could adversely affect the price of our common stock.

Our earnings are susceptible to fluctuations for whichseveral reasons, including, but not limited to, variability in the timing of large transactions in our technology and financing segments, product constraints, inflation, and the risk factors discussed herein. In addition, our cost structure is based, in part, on expected sales and gross profit. Therefore, if we agree to be responsible in connection with service contractsexperience any unexpected sales or gross profit shortfall for any reason, we may enter,not be able to adjust our cost structure rapidly which could have an adverse effect on our business, results of operations or if we give third partiescash flows. In the event our sales or our employees improper access to certain information, wenet earnings are less than the level expected by the market in general, such shortfall could be subject to liability. This liability could include claims for unauthorized purchases with credit card information, identity theft or other similar fraud-related claims. This liability could also include claims for other misuses of personal information, including for unauthorized marketing purposes. Other liability could include claims alleging misrepresentationhave an immediate and significant adverse impact on the market price of our privacy and data security practices. Any such liability for misappropriation of this information could decrease our profitability. In addition, federal and state agencies have been investigating various companies regarding whether they misused or inadequately secured information. We could incur additional expenses if new laws or regulations regarding the use of sensitive information are introduced or if governmental agencies require us to substantially modify our privacy or security practices.common stock.


Advances in computer capabilities, new discoveries in the field of cryptography or other events or developments may result in a compromise or breach of our security practices we use to protect sensitive customer transaction data and employee data. A party who is able to circumvent our security measures could misappropriate proprietary information or cause interruptions in our operations. We may be required to expend significant capital and other resources to protect against such security breaches or to alleviate problems caused by such breaches. Our security measures are designed to protect against security breaches, but our failure to prevent such security breaches could cause us to incur significant expense to investigate and respond to a security breach and correct any problems caused by any breach, subject us to liability, damage our reputation and diminish the value of our brand-name.

We May Not Have Designed Our Information Technology Systems to Support Our Business without Failure

We are dependent upon the reliability of our information, telecommunication and other systems, which are usedtake impairment charges for sales, distribution, marketing, purchasing, inventory management, order processing, customer service and general accounting functions. We must continually improve our systems to maintain efficiency. Poor security practices or design of our information technology systems, or third party service providers’ failure to provide adequate services could result in the disclosure of sensitive information or private personal information or cause other business interruptions that could damage our reputation and disrupt our business. Interruption or poor design of our information systems, Internet, telecommunications systems or power failures could have a material adverse effect on our business, financial condition, cash flows or results of operations.
Failure to Comply with New or Changes in Laws and Other Legislation May Adversely Impact Our Business

Our operations are subject to numerous U.S. and foreign laws and regulations in a number of areas including, but not limited to, areas of labor and employment, immigration, advertising, e-commerce, tax, import and export requirements, anti-corruption, data privacy requirements, anti-competition, and environmental, health, and safety. Compliance with these laws, regulations and similar requirements may be onerous and expensive, and they may be inconsistent from jurisdiction to jurisdiction, further increasing the cost of compliance and doing business, and the risk of noncompliance. We have implemented policies and procedures designed to help ensure compliance with applicable laws and regulations, but there can be no guarantee against employees, contractors, or agents violating such laws and regulations or our policies and procedures.

If We Publish Inaccurate Catalog Content Data, Our Business Could Suffer

Any defects or errors in our electronic catalog content data could harm our customers or deter businesses from participating in our offering, damage our business reputation, harm our ability to attract new customers, and potentially expose us to legal liability. In addition, from time to time vendors who provide us electronic catalog data could submit to us inaccurate pricinggoodwill or other catalog data. Even though such inaccuracies are not caused by our work and are not within our control, such inaccuracies could deter current and potential customers from using our products or result in inaccurate pricingintangible assets related to our customers.acquisitions.

We May Not Be Able to Realize Our Entire Investment in the Equipment We Lease

The realization of equipment values (residual values) during the life and predominantly at the end of the term of a lease is an important element in our financing segment. At the inception of each lease, we record a residual value for the leased equipment based on our estimate of the value of the equipment at the expected disposition date.

A decrease in the market value of leased equipment at a rate greater than the rate we projected, whether due to rapid technological or economic obsolescence, unusual wear and tear on the equipment, excessive use of the equipment, or other factors, would adversely affect the recoverability of the estimated residual values of such equipment. Further, certain equipment residual values are dependent on the vendor’s warranties, reputation and other factors, including market liquidity. In addition, we may not realize the full market value of equipment if we are required to sell it to meet liquidity needs or for other reasons outside of the ordinary course of business. Consequently, there can be no assurance that we will realize our estimated residual values for equipment.

The degree of residual realization risk varies by transaction type. Direct financing leases bear less risk because contractual payments typically cover 90% or more of the equipment’s lease cost at inception. Operating leases have a higher degree of risk because a smaller percentage of the equipment’s value is covered by contractual cash flows at lease inception.

We May Be Required to Take Impairment Charges for Goodwill or Other Intangible Assets Related to Acquisitions


We have acquired certain portions of our business and certain assets through acquisitions. Further, as part of our long-term business strategy, we may continue to pursue acquisitions of other companies or assets. In connection with prior acquisitions, we have accounted for the portion of the purchase price paid in excess of the book value of the assets acquired as goodwill or intangible assets, and we may be required to account for similar premiums paid on future acquisitions in the same manner.


Under the applicable accounting principles, goodwill is not amortized and is carried on our books at its original value, subject to annual review and evaluation for impairment, whereas intangible assets are amortized over the life of the asset. Changes in the business itself, the economic environment (including business valuation levels and trends), or the legislative or regulatory environment may trigger a review and evaluation of our goodwill and intangible assets for potential impairment outside of the normal review periods. These changes may adversely affect either the fair value of the business or the fair value of our individual reporting units and we may be required to take an impairment charge.


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If market and economic conditions deteriorate, this could increase the likelihood that we will need to record impairment charges to the extent the carrying value of our goodwill exceeds the fair value of our overall business. Such impairment charges could materially adversely affect our net earnings during the period in which the chargeimpairment is taken.realized. As of March 31, 2016,2023, we had a carrying value of goodwill and other intangible assets of $54.2 million.$136.1 million and $25.0 million, respectively.

We may not be able to realize our entire investment in the equipment we lease.

The realization of the residual value of the equipment we lease, predominantly at the end of the term of a lease, as well as during the life of the lease, is an important element in our financing segment. At the inception of certain leases, we record a residual value for the leased equipment based on our estimate of the value of the equipment at the expected disposition date.

A decrease in the market value of leased equipment at a rate greater than the rate we projected, whether due to rapid technological or economic obsolescence, excessive or unusual wear and tear on the equipment, or other factors, would adversely affect the recoverability of the estimated residual values of such equipment. Further, certain equipment residual values are dependent on the vendor’s warranties, reputation, rules regarding relicensing of software to operate the equipment, and other factors, including market liquidity. In addition, we may not realize the full market value of equipment if we need to sell it to meet liquidity needs or for other reasons outside of the ordinary course of business. Consequently, there can be no assurance that we will realize our estimated residual values for equipment.

The degree of residual realization risk varies by transaction type. Sales-type leases bear less risk because contractual payments typically cover 90% or more of the equipment’s lease cost at inception. Operating leases have a higher degree of risk because a smaller percentage of the equipment’s value is covered by contractual cash flows at lease inception.

RISKS RELATED TO THE ECONOMY AND OUR INDUSTRY

General economic weakness may harm our operating results and financial condition.

Our results of operations are largely dependent upon the state of the economy. Global economic weakness, inflation, rising cost and interest rates, and other economic uncertainties may result in decreased sales, gross margin, earnings and/or growth rates from our US based customers and from customers outside the US. Actions taken by central banks to counter inflation or weakness in the global banking industry, sustained uncertainty about global political conditions, periods of intense diplomatic or armed conflict (such as the ongoing conflict between Russia and Ukraine and responsive sanctions against Russia), government spending cuts and the impact of new government policies (including the introduction of new or increased taxes, the imposition of minimum taxes or new or increased limitations on deductions, credits or other tax benefits), or a tightening of credit markets, or rising interest rates, could cause our customers and potential customers to postpone or reduce spending on technology products or services which could have an adverse effect on our business, results of operations or cash flows.

Rising interest rates or the loss of key lenders or the constricting of credit markets may affect our future profitability and our ability to monetize our financing receivables and investments in operating leases.

We finance transactions with our customers utilizing fix-rate borrowing. If we fund such transactions at inception with a third-party lender, we are able to lock an interest rate spread on the transaction between the customer rate and third-party rate. However, we may delay funding the transaction, and if interest rates increase in the interim, the interest rate spread will decrease, which will adversely impact our profitability, or we may not choose to fund the transaction due to higher interest rates, thus inhibiting our ability to monetize our portfolio to generate cash.

We rely on lenders to fund financing transactions we originate with our customers. Loss of any lender or group of lenders may significantly impact our ability to originate financing transactions, which may negatively impact our financial condition. In addition, our lenders may no longer be willing to provide funding under our current terms and conditions and may demand updated terms and conditions that negatively impact our ability to consummate a financing transaction with our customers. The current banking environment, particularly in the technology sector, is under regulatory and consumer scrutiny in the wake of recent bank failures such as Silicon Valley Bank, which may make it more difficult for us to obtain required capital and on desirable terms. We are also subject to changes, if any, in our lenders’ willingness to provide financing for different, particularly lower, credit quality lessees, or lessees in certain market segments that may experience headwinds. Changes in interest rates, the federal government’s early termination of contracts, or other factors may make it more difficult or impossible for us to find or maintain lenders needed for us to profitably finance leasing solutions where the government is the end-user, which may have an adverse effect on our business, results of operations or cash flows.

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Changes in the IT industry, customers’ usage, or procurement of IT, and/or rapid changes in product standards may result in reduced demand for the IT hardware and software solutions and services we sell as well as financing.

Our results of operations are influenced by a variety of factors, including the condition of the IT industry, shifts in demand for, or availability of, IT hardware, software, peripherals and services, and industry introductions of new products, upgrades, methods of distribution, and the nature of how IT is consumed and procured. The IT industry is characterized by rapid technological change and the frequent introduction of new products, product enhancements and new distribution methods or channels, each of which can decrease demand for current products or render them obsolete. In addition, the proliferation of cloud technology, IaaS, SaaS, PaaS, software defined networking, or other emerging technologies may reduce the demand for products and services we sell to our customers. Cloud offerings may influence our customers to move workloads to cloud providers, which may reduce the procurement of products and services from us. Changes in the IT industry may also affect the demand for our advanced professional and managed services. These ‘as a service’ offerings in many cases are recorded on a net basis which results in a reduction of net sales and an increase in gross margin, or on a ratable basis. Over the past several years, we have seen a significant increase in gross billings recorded on a net basis and a ratable basis due to the industry shift to ‘as a service’ offerings. In addition, these ‘as a service’ offerings that are billed over time decrease the demand for financing these types of transactions and do not provide post contract revenue opportunities due to the intangible nature of the offering as well as similar other software offerings. We Face Riskshave invested a significant amount of Claims From Third Partiescapital in our strategy to provide certain products and services, and this strategy may adversely impact our financial position due to competition or changes in the industry or improper focus or selection of the products and services we decide to offer. If we fail to react in a timely manner to such changes, our results of operations may be adversely affected. Our sales can be dependent on demand for Intellectual Property Infringement That Could Harm specific product categories, and any change in demand for, or supply of, such products could have a material adverse effect on our results of operations.

We depend on continued innovations in hardware, software, and service offerings by our vendors, as well as the competitiveness of their offerings and our ability to partner with new and emerging technology providers.

The technology industry is characterized by rapid innovation and the frequent introduction of new and enhanced hardware, software, and service offerings, such as cloud-based solutions, including IaaS, SaaS, and PaaS. We depend on innovations in hardware, software, and service offerings by our vendors, as well as the acceptance of those innovations by our customers for the offerings we sell. A decrease in the rate of innovation by our vendors, or the lack of acceptance of innovations by our customers, or a shift by customers to technology platforms that we do not sell could have an adverse effect on our business, results of operations or cash flows.

In addition, if we are unable to keep up with changes in technology and new hardware, software, and service offerings––for example by not providing the appropriate training to our account managers, sales technology specialists and engineers to enable them to effectively sell and deliver such new offerings to customers––our business, results of operations or cash flows could be adversely affected.

We also depend upon our vendors for the development and marketing of hardware, software, and services to compete effectively with hardware, software, and services of vendors whose products and services we do not currently offer or are not authorized to offer in one or more customer channels. In addition, our success depends on our ability to develop relationships with and sell hardware, software, and services from emerging vendors, as well as vendors that we have not historically represented in the marketplace. To the extent that a vendor’s offering that is highly in demand is not available to us for resale in one or more customer channels, and there is not a competitive offering from another vendor that we are authorized to sell in such customer channels, or we are unable to develop relationships with new technology providers or companies that we have not historically represented, or we partner with a vendor that is not in demand or the demand for whose products significantly decreases, our business, results of operations, or cash flows could be adversely impacted.

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RISKS RELATED TO LAWS AND REGULATIONS

Failure to comply with new laws or changes to existing laws may adversely impact our business.

Our Businessoperations are subject to numerous US and foreign laws and regulations in a number of areas including, but not limited to, areas of labor and employment, immigration, advertising, e-commerce, patent and copyright, tax, import and export requirements, anti-corruption, data privacy requirements, anti-competition, and environmental, health, and safety. We are also subject to a vast number of pending laws, such as state privacy laws, and securities laws such as the SEC’s proposed rules on climate-related disclosures and proposed amended rules on cybersecurity risk management. Compliance with these laws, regulations, and similar requirements may be onerous and expensive. The laws and regulations may be inconsistent from jurisdiction to jurisdiction and may be repeatedly and unpredictably modified or rescinded by legislative bodies, regulatory agencies, and/or courts, further increasing the cost of compliance and doing business, and the risk of noncompliance. We have implemented policies and procedures designed to help comply with applicable laws and regulations, but there can be no certainty that our employees, contractors, or agents will fully comply with laws and regulations or our policies and procedures. Additionally, as our customers and vendors implement policies and processes for their own compliance with current, anticipated, and pending laws and regulations, they may impose requirements on us, which we may not be able to timely and cost-effectively fulfill.


We may not adequately protect ourselves through our contract vehicles, or our insurance policies may not be adequate to address potential losses or claims.

Our contracts may not protect us against the risks inherent in our business including, but not limited to, warranties, limitations of liability, indemnification obligations, human resources and subcontractor-related claims, patent and product liability, regulatory and compliance obligations, data security and privacy, and financing activities. Also, we face pressure from our customers for competitive pricing and contract terms. In addition, order cancellations by our customers may result from product constraints, or other economic concerns. While we may mitigate risk through our contracts, if orders are cancelled by our customers, we may have an increased risk of dispute resulting in non-payment. Such disputes may be complicated by novel legal arguments relating to contract enforceability, such as the application of force majeure, impossibility or impracticability of performance, and frustration of purpose. Despite the non-recourse nature of the loans financing certain of our activities, non-recourse lenders may file suit if the underlying transaction turns out poorly for the lenders. We are subject to such claims and the cost of defending such claims due to the nature of our business.

We also are subject to audits by various vendor partners and customers, including government agencies, relating to purchases and sales under various contracts. In addition, we are subject to indemnification claims under various contracts.

Failure to comply with our public-sector contracts or applicable laws and regulations could result in, among other things, termination, fines or other liabilities, and changes in procurement regulations could adversely impact our business.

Revenues in our public sector are derived from sales to SLED customers, through various contracts and open market sales of products and services. Sales to SLED customers are highly regulated and SLED customer purchases are subject to availability of funds from taxation, grants, or other sources. Noncompliance with contract provisions, government procurement regulations, or other applicable laws or regulations could result in civil, criminal, and administrative liability, including substantial monetary fines or damages, termination of SLED sector customer contracts, and suspension, debarment, or ineligibility from doing business with the government and other customers in the SLED sector. Contracts in the SLED sector are generally terminable at any time for convenience of the contracting agency or upon default and are subject to audits. In addition, most contracts require successfully bidding and award of the contract. These bid processes can be complex and require extensive review of terms and conditions and data compilation. Multiple bidders may win a product category, which creates aggressive competition even after contract award. The effect of any of these possible actions could adversely affect our business, results of operations or cash flows. In addition, the adoption of new or modified procurement regulations and other requirements may increase our compliance costs and reduce our gross margins, which could have a negative effect on our business, results of operations, or cash flows.

We face risks of claims from third parties for intellectual property infringement, including counterfeit products, that could harm our business.

We may be subject to claims onthat our products and services, or products that we resell, infringe on the intellectual property rights of third parties.parties and/or are counterfeit products. In addition, the current product constraint environment may foster more counterfeit product availability and we may be subject to claims by our customers, vendors, or suppliers for unknowingly selling these types of products. The vendor of certain products or services we resell may not provide us with indemnification for infringement;infringement or indemnification; however, our customers may seek indemnification from us. We could incur substantial costs in defending infringement claims against ourselves and our customers against infringement claims.customers. In the event of a claim of infringement,such claims, we and our customers may be required to obtain one or more licenses from third parties. We may not be able to obtain such licenses from third parties at a reasonable cost or at all. Defense of any lawsuit or failure to obtain any such required license could significantly increase our expenses and/or adversely affect our ability to offer one or more of our services.


The Soundness
22
Table of Financial Institutions With Which We Have Relationships Could Adversely Affect UsContents

We have relationships with many financial institutions, including the lender under our credit facility, and, from time to time, we execute transactions with counterparties in the financial services industry. Some of our balances that we maintain with various financial institutions may exceed the $250,000 maximum insured deposit amount by the FDIC. As a result, defaults by, or even rumors or questions about, financial institutions or the financial services industry generally, could result in losses or defaults by these institutions. In the event that volatility of the financial markets adversely affects these financial institutions or counterparties, we or other parties to the transactions with us may be unable to access credit facilities or complete transactions as intended, which could adverselyprotect our intellectual property and costs to protect our intellectual property may affect our business and results of operations.earnings.


Changes in Accounting Rules May Adversely Affect Our Future Financial Results

We prepare our financial statements in conformity with accounting principles generally accepted in the United States. These accounting principles are subject to interpretation by the Financial Accounting Standards Board, the Public Company Accounting Oversight Board, the Securities and Exchange Commission, the American Institute of Certified Public Accountants and various other bodies formed to interpret and create appropriate accounting policies. The voluminous number of products and services, and the manner in which they are bundled, are technologically complex and the characterization of these product and services require judgment in order to apply revenue recognition policies. Mischaracterization of these products and services could result in misapplication of revenue recognition polices. Future periodic assessments required by current or new accounting standards may result in noncash charges and/or changes in presentation or disclosure. In addition, any change in accounting standards may influence our customers’ decision to purchase from us or finance transactions with us, which could have a significant adverse effect on our financial position or results of operations.

Our Software Products and Services Subject Us to Challenges and Risks in a Rapidly Evolving Market

As a provider of a comprehensive set of solutions, which involves the bundling of direct IT sales, advanced professional and managed services and financing with our proprietary software, we expect to encounter some of the challenges, risks, difficulties and uncertainties frequently encountered by companies providing bundled solutions in rapidly evolving markets. Some of these challenges include our ability to: increase the total number of users of our services, adapt to meet changes in our markets and competitive developments or continue to update our technology to enhance the features and functionality of our suite of products. Our business strategy may not be successful or successfully address these and other challenges, risks and uncertainties.

In the software market a number of companies market business-to-business electronic commerce solutions similar to ours, and competitors are adapting their product offerings to a SaaS platform. We may not be able to compete successfully against current or future competitors, and competitive pressures faced by us may harm our business, operating results or financial condition. We also face indirect competition from potential customers’ internal development efforts and have to overcome potential customers’ reluctance to move away from legacy systems and processes.

In all of our markets, some of our competitors have longer operating histories and greater financial, technical, marketing, and other resources than we do. In addition, some of these competitors may be able to respond more quickly to new or changing opportunities, technologies, and customer requirements. Many current competitors may have, and potential competitors may have, greater name recognition and engage in more extensive promotional marketing and advertising activities, offer more attractive terms to customers, and adopt more aggressive pricing policies than we do. We may not be successful in achieving revenue growth and may incur additional costs associated with our software products, which may have a material adverse effect on our future operating results as a whole.
If Our Proprietary Software Products Contain Defects, Our Business Could Suffer

Products as complex as those used to provide our electronic commerce solutions often contain unknown and undetected errors or performance problems. We may have serious defects immediately following introduction of new products or enhancements to existing products. Undetected errors or performance problems may not be discovered in the future and errors considered by us to be minor may be considered serious by our customers. Our software products may be circumvented or sabotaged by third parties such as hackers which could result in the disclosure of sensitive information or private personal information, unauthorized procurement, or cause other business interruptions that could damage our reputation and disrupt our business. Attacks may range from random attempts to coordinated and targeted attacks, including sophisticated computer crime and advanced persistent threats. In addition, our customers may experience a loss in connectivity by our software solutions as a result of a power loss at our data center, Internet interruption or defects in our software. This could result in lost revenues, delays in customer acceptance or unforeseen liabilities that would be detrimental to our reputation and to our business.

We May Be Unable to Protect Our Intellectual Property and Costs to Protect Our Intellectual Property May Affect Our Earnings

The success of our business strategy depends, in part, upon proprietary technology and other intellectual property rights. To date, we have relied primarily on a combination of copyright, trademark, patent and trade secret laws, and contractual provisions with our customers, subcontractors, and employees to protect our proprietary technology. Issues regarding a patent’s validity can arise even subsequent to a patent’s issuance and can result in cancellation of the patent. It may be possible for unauthorized third parties to copy certain portions of our products or reverse engineer or obtain and use information that we regard as proprietary. Some of our agreements with our customers and technology licensors contain residual clauses regarding confidentiality and the rights of third parties to obtain the source code for our products. These provisions may limit our ability to protect our intellectual property rights in the future that could seriously harm our business and operating results. Our means of protecting our intellectual property rights may not be adequate.


The legal and associated costs to protect our intellectual property in the US and foreign jurisdictions may significantly increase our expenses and have a material adverse effect on our operating results. We may deem it necessary to protect our intellectual property rights and significant expenses could be incurred with no certainty of the results of these potential actions. Costs relative to lawsuits are usually expensed in the periods incurred and there is no certainty in recouping any of the amounts expended regardless of the outcome of any action.


RISKS RELATED TO OWNERSHIP OF OUR STOCK

If Securities Analysts Do Not Publish Researchsecurities analysts do not publish research or Reports About Our Company,reports about our company, or If They Issue Unfavorable Commentary About Usif they issue unfavorable commentary about us or Our Industryour industry or Downgrade Our Common Stock,downgrade our common stock, the Priceprice of Our Common Stock Could Declineour common stock could decline.


The trading market for our common stock depends in part on the research and reports that third-party securities analysts publish about us and our industry. One or more analysts could downgrade our common stock, or issue other negative commentary about us or our industry. If one or more of the analysts that coverspublish research about us cease coverage, we could lose visibility in the market, or such discontinuance may be viewed negatively by the market. As a result of one or more of these factors, the trading price of our common stock could decline.

Our Earnings May Fluctuate, Which Could Adversely Affect the Price of Our Common Stock

Our earnings are susceptible to fluctuations for a number of reasons, including, but not limited to, the risk factors discussed herein. In the event our revenues future performance does not meet the expectations of such analysts and/or net earnings are less thanestimates included in their reports, the level expected by the market in general, such shortfalltrading price of our common stock could have an immediate and significant adverse impact ondecline.

Future offerings of debt or equity securities, which would rank senior to our common stock, may adversely affect the market price of our common stock.

Future Offerings of Debt or Equity Securities, Which Would Rank Senior to Our Common Stock, May Adversely Affect the Market Price of Our Common Stock


If, in the future, we decide to issue debt or equity securities that rank senior to our common stock, it is likely that such securities will be governed by an indenture or other instrument containing covenants restricting our operating flexibility. Additionally, any convertible or exchangeable securities that we issue in the future may have rights, preferences, and privileges more favorable than those of our common stock and may result in dilution to owners of our common stock. We and, indirectly, our stockholders, will bear the cost of issuing and servicing such securities. Because our decision to issue debt or equity securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing, or nature of our future offerings, if any. Thus, holders of our common stock will bear the risk of our future offerings reducing the market price of our common stock and diluting the value of their stock holdings in our common stock.

ITEM 1B.UNRESOLVED STAFF COMMENTS


None.


ITEM 2.PROPERTIES


As of March 31, 2016,2023, we operated from 32 office locations, andleased a numbertotal of home offices or customer sites. Our total leased square footage as of March 31, 2016, was approximately 251326 thousand square feet for whichof office and warehouse space across 20 properties, primarily in the US, that are used in our technology segment and financing segment. Our leases expire at varying dates over the next 10 years. We have certain employees that work at customer sites or from their homes. Additionally, we incurred rent expense of approximately $359 thousand per month. Some of our subsidiaries operateutilize coworking spaces in shared office space to improve sales, marketing and cost efficiency. Eleven of our office locations include dedicated or shared space configuration centers; which include certain locations in California, New Hampshire, New York, North Carolina, Pennsylvania, Texas, and Virginia. Some sales and technical service personnel operate from either home offices or space that is provided for by another entity or are located on a customer site.

cities. Our largest office locationspace is our headquarters in Herndon, Virginia. The leasing contract extends toOur lease on this space terminates on December 31, 2017, and contains a renewal option to extend the2024.

We anticipate no difficulty in retaining occupancy through lease through December 31, 2019. For more information see Exhibit 10.1,renewals, month-to-month occupancy, or replacing leased properties with equivalent properties. We believe that suitable additional or substitute leased properties will be available as required.

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Table of our Form 8-K filed March 6, 2014.Contents

ITEM 3.LEGAL PROCEEDINGS


On May 23, 2011, the United States District Court for the Eastern DistrictFor a description of Virginia entered judgment in our favor, against Lawson Software, Inc. (“Lawson”), for $18.2 million, in a lawsuit we filed against Lawson alleging patent infringement. Subsequently, the United States Patent and Trademark Office canceled the patent, and the Federal Circuit Court of Appeals vacated the judgment. On February 29, 2016, the United States Supreme Court denied our petition for certiorari, in which we asked the court to hear our appeal. As a result, the lawsuit has concluded.

We are not currently a party to anymaterial pending legal proceedings, with loss contingencies that are expectedplease refer to be material. From time to time, we have been a plaintiff, or may be named as a defendant, in legal actions arising from our normal business activities, none of which has had a material effect on our business, results of operations or financial condition. Legal proceedings which may ariseNote 10, “Commitments and Contingencies” in the ordinary courseNotes to the Consolidated Financial Statements included in Part II, Item 8 of business including preference payment claims asserted in customer bankruptcy proceedings, tax audits, claims of alleged infringement of patents, trademarks, copyrights and other intellectual property rights, claims of alleged non-compliance with contract provisions, employment related claims, claims by competitors, vendors or customers, claims related to alleged violations of laws and regulations, and claims relating to alleged security or privacy breaches. We attempt to ameliorate the effect of potential litigation through insurance coverage and contractual protections such as rights to indemnifications and limitations of liability. We do not expect that the outcome in any of these matters, individually or collectively, will have a material adverse effectthis Annual Report on our financial condition or results of operations, however, litigation is inherently unpredictable. Therefore, judgments could be rendered or settlements entered that could adversely affect our results of operations or cash flows in a particular period. We provide for costs related to contingencies when a loss is probable and the amount is reasonably determinable.

Form 10-K.

ITEM 4.MINE SAFETY DISCLOSURES


Not Applicable

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Table of Contents
PART II


ITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES


MARKET INFORMATION


AtOn March 31, 2016,2023, our common stock traded on Thethe NASDAQ Global Select Market under the symbol “PLUS.” The following table sets forth the range of high and low sales prices for our common stock during each quarter of the two fiscal years ended March 31, 2016 and 2015.

Quarter Ended High  Low 
       
Fiscal Year 2016      
March 31, 2016 $96.20  $61.78 
December 31, 2015 $109.33  $77.71 
September 30, 2015 $81.80  $71.40 
June 30, 2015 $89.28  $74.17 
         
Fiscal Year 2015        
March 31, 2015 $91.38  $64.58 
December 31, 2014 $75.94  $54.05 
September 30, 2014 $60.80  $50.17 
June 30, 2014 $61.76  $49.23 


On May 23, 2016, the closing price of our common stock was $82.76 per share. On May 23, 2016,1, 2023, there were 157215 stockholders of record of our common stock. We believestock, although there are approximately 4,800 is a much larger number of beneficial holders of our common stock.owners.


DIVIDEND POLICIES AND RESTRICTIONS


We did not pay any cash dividends on our common stock during the fiscal years ended March 31, 2023, and 2022. Holders of our common stock are entitled to dividends if and when declared by our Board of Directors (“Board”), out of funds legally available. Generally, we have retained our earnings for use in the business.business and to repurchase our common stock. We currently intend to retain future earnings to fund ongoing operations, and finance the growth and development of our business.business and continue to repurchase our common stock. Any future determination concerning the payment of dividends will depend upon our financial condition, results of operations, capital requirements and any other factors deemed relevant by our Board.


PURCHASES OF OUR COMMON STOCK


The following table provides information regarding our purchases of ePlus inc.our common stock during the fiscal yearthree months ended March 31, 2016.2023. Please refer to Note 12, “Stockholders’ Equity” in the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information.

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, 2015 through April 30, 2015  -      -   351,960   (2)
May 1, 2015 through May 31, 2015  -      -   351,960   (3)
June 1, 2015 through June 15, 2015  18,284  $82.63   -   351,960   (4)
June 16, 2015 through August 16, 2015  12,163  $79.32   -   -   (5)
August 17, 2015 through August 31, 2015  -   -   -   500,000   (6)
September 1, 2015 through September 30, 2015  -   -   -   500,000   (7)
October 1, 2015 through October 31, 2015  -   -   -   500,000   (8)
November 1, 2015 through November 30, 2015  -   -   -   500,000   (9)
December 1, 2015 through December 31, 2015  -   -   -   500,000   (10)
January 1, 2016 through January 31, 2016  -   -   -   500,000   (11)
February 1, 2016 through February 28, 2016  51,165  $74.27   51,165   448,835   (12)
March 1, 2016 through March 31, 2016  65,137  $77.73   65,137   383,698   (13)
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
of shares that may
yet be purchased
under the plans or
programs (2)
 
January 1, 2023 through January 31, 2023  
0
  
$
-
   
0
   
1,000,000
 
February 1, 2023 through February 28, 2023  
0
  
$
-
   
0
   
1,000,000
 
March 1, 2023 through March 31, 2023  
2,500
  
$
48.65
   
2,500
   
997,500
 
Total  
2,500
       
2,500
     


(1)
All shares were acquired were in open-market purchases, except for 30,447 shares, which were repurchased to satisfy tax withholding obligations that arose due to the vesting of shares of restricted stock.purchases.

(2)
The share purchase authorizationamounts presented in place for the month ended April 30, 2015 had purchase limitations on the number of shares of up to 500,000 shares. As of April 30, 2015, the remaining authorized shares to be purchased were 351,960.
(3)The share purchase authorization in place for the month ended May 31, 2015 had purchase limitations on the number of shares of up to 500,000 shares. As of May 31, 2015, the remaining authorized shares to be purchased were 351,960.
(4)The share purchase authorization expired June 15, 2015 and had purchase limitations on the number of shares of up to 500,000 shares. As of June 15, 2015,this column are the remaining number of authorized shares that could have been purchased was 351,960.
(5)There was no share purchase authorization plan in place from June 16, 2015 to August 16, 2015. The previous plan expired on June 15, 2015.
(6)may be repurchased after repurchases during the month. On August 13, 2015, theMarch 24, 2022, our board of directors authorized the company to repurchase of up to 500,0001,000,000 shares of itsour outstanding common stock, commencing on August 17, 2015 through August 16, 2016. No stock purchases were made under this authorization duringover a 12-month period beginning May 28, 2022. On March 22, 2023, our board of directors authorized the period of August 17, 2015 through August 31, 2016.
(7)The share purchase authorization in place for the month ended September 30, 2015 had purchase limitations on the number of sharesrepurchase of up to 500,000 shares. As of September 30, 2015, no stock purchases were made under this authorization.
(8)The share purchase authorization in place for the month ended October 31, 2015 had purchase limitations on the number of1,000,000 shares of up to 500,000 shares. As of October 31, 2015, noour outstanding common stock, purchases were made under this authorization.over a 12-month period beginning May 28, 2023.
(9)The share purchase authorization in place for the month ended November 30, 2015 had purchase limitations on the number of shares of up to 500,000 shares. As of November 30, 2015, no stock purchases were made under this authorization.
(10)The share purchase authorization in place for the month ended December 31, 2015 had purchase limitations on the number of shares of up to 500,000 shares. As of December 31, 2015, no stock purchases were made under this authorization.
(11)The share purchase authorization in place for the month ended January 31, 2016 had purchase limitations on the number of shares of up to 500,000 shares. As of January 31, 2016, no stock purchases were made under this authorization.
(12)The share purchase authorization in place for the month ended February 28, 2016 had purchase limitations on the number of shares of up to 500,000 shares. As of February 28, 2016, the remaining authorized shares to be purchased were 448,835.
(13)The share purchase authorization in place for the month ended March 31, 2016 had purchase limitations on the number of shares of up to 500,000 shares. As of March 31, 2016, the remaining authorized shares to be purchased were 383,698.

The timing and expiration date of the share repurchase authorizations are included in Note 10, “Stockholders’ Equity” to our consolidated financial statements included elsewhere in this report.
 
ITEM 6.SELECTED FINANCIAL DATA[RESERVED]

The following selected financial data should be read in conjunction with “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and with the consolidated financial statements and related notes, which are included elsewhere in this Form 10-K. The selected consolidated statement of operations data for the years ended March 31, 2016, 2015 and 2014 and the selected consolidated balance sheet data as of March 31, 2016 and 2015 presented below was derived from our audited consolidated financial statements, which are included elsewhere herein. The selected financial data as of and for the years ended March 31, 2013 and 2012 have been derived from our audited consolidated financial statements, which are not included in this report.

  For the years ended March 31, 
Statement of Operations Data: 2016  2015  2014  2013  2012 
  (in thousands, except per share data) 
Net sales $1,204,199  $1,143,282  $1,057,536  $983,112  $825,581 
Cost of sales  942,142   898,735   840,623   778,339   654,066 
Gross profit  262,057   244,547   216,913   204,773   171,515 
Operating expense  186,306   173,837   156,815   146,028   131,941 
Operating income  75,751   70,710   60,098   58,745   39,574 
Other income  -   7,603   -   -   - 
Earnings before provision for income taxes  75,751   78,313   60,098   58,745   39,574 
                    
Provision for income taxes  31,004   32,473   24,825   23,915   16,207 
Net earnings $44,747  $45,840  $35,273  $34,830  $23,367 
                     
Net earnings per common share - basic $6.17  $6.26  $4.41  $4.37  $2.82 
                     
Net earnings per common share - diluted $6.09  $6.19  $4.37  $4.32  $2.79 
                     
Dividend per common share $-  $-  $-  $2.50  $- 
    
  As of March 31, 
Balance Sheet Data:  2016   2015   2014   2013   2012 
  (in thousands) 
                     
Cash and cash equivalents $94,766  $76,175  $80,179  $52,720  $33,778 
Accounts receivable—net $276,399  $249,803  $243,216  $192,254  $174,599 
Total financing receivables and operating leases—net $132,354  $143,900  $143,739  $122,603  $140,311 
Total assets $616,680  $568,275  $550,103  $437,872  $433,688 
                     
Total non-recourse and recourse notes payable $47,422  $56,564  $68,888  $41,739  $28,055 
Total liabilities $297,802  $289,013  $283,720  $199,640  $214,061 
Total stockholders' equity $318,878  $279,262  $266,383  $238,232  $219,627 

Other Financial Data:

Our management monitors a number of financial and non-financial measures and ratios on a regular basis in order to track the progress of our business. We believe that the most important of these measures and ratios include gross margin, gross margin on product and services, operating income margin, net earnings, net earnings per common share, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted gross billings of product and services, 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 GAAP and presented in our consolidated financial statements as well as non-GAAP performance measurement tools.

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Table of Contents
A summary of these key indicators which are not included in our consolidated financial statements is presented as follows, (dollars in thousands):

  For the years ended March 31, 
  2016  2015  2014  2013  2012 
                
Gross margin  21.8%  21.4%  20.5%  20.8%  20.8%
Gross margin, product and services  19.9%  19.4%  18.3%  18.0%  17.9%
Operating income margin  6.3%  6.2%  5.7%  6.0%  4.8%
                     
Adjusted gross billings of product and services (1) $1,556,463  $1,435,039  $1,276,133  $1,163,577  $978,180 
                     
Non-GAAP: Net earnings (2) $46,480   $42,529   $35,925   $35,423   $23,568  
Non-GAAP: Net earnings per common share - diluted (2) $6.33    5.75    4.45    4.40    2.82  
                     
Adjusted EBITDA (3) $81,299  $75,043  $62,890  $61,134  $41,239 
Adjusted EBITDA margin (3)  6.8%  6.6%  5.9%  6.2%  5.0%
                     
Purchases of property and equipment used internally $2,442  $3,610  $4,238  $1,436  $1,594 
Purchases of equipment under operating leases  12,026   8,163   5,714   14,148   6,061 
Total capital expenditures $14,468  $11,773  $9,952  $15,584  $7,655 

(1)We define Adjusted gross billings of product and services as our sales of product and services calculated in accordance with GAAP, adjusted to exclude the costs incurred related to sales of third party software assurance, subscription licenses, maintenance and services. We have provided below a reconciliation of Adjusted gross billings of product and services to Sales of product and services, which is the most directly comparable to this non-GAAP financial measure. In prior reports, Adjusted gross billings of product and services were referred to as non-GAAP gross sales of products and services.

We use Adjusted gross billings of product and services 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 of product and services 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 gross billings of product and services or similarly titled measures differently, which may reduce their usefulness as comparative measures.
  For the years ended March 31,    
  2016  2015  2014  2013  2012 
Sales of products and services $1,163,337  $1,100,884  $1,013,374  $936,228  $784,951 
Costs incurred related to sales of third party services  393,126   334,155   262,759   227,349   193,229 
Adjusted gross billings of product and services $1,556,463  $1,435,039  $1,276,133  $1,163,577  $978,180 
(2)Non-GAAP net earnings per common share are based on net earnings calculated in accordance with GAAP, adjusted to exclude other income and acquisition related amortization expense, net of taxes. We use Non-GAAP net earnings per common share as a supplemental measure of our performance to gain insight into our operating performance. We believe that the exclusion of other income and acquisition related amortization expense in calculating Non-GAAP net earnings per common share provides management and investors a useful measure for period-to-period comparisons of our core business and operating results by excluding items that are not comparable across reporting periods. 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 net earnings per common share 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 Non-GAAP net earnings per common share or similarly titled measures differently, which may reduce their usefulness as comparative measures.
  For the years ended March 31,    
  2016  2015  2014  2013  2012 
GAAP: Earnings before provision for income taxes $75,751  $78,313  $60,098  $58,745  $39,574 
Plus: Acquisition related amortization expense    2,917    1,888    1,110    1,000    340 
Less: Other income  -   (7,603)  -   -   - 
Non-GAAP: Earnings before provision for income taxes  78,668   72,598   61,208   59,745   39,914 
                     
Non-GAAP: Provision for income taxes  32,188   30,069   25,283   24,322   16,346 
Non-GAAP: Net Earnings $46,480  $42,529  $35,925  $35,423  $23,568 
                     
GAAP: Net earnings per common share - diluted $6.09  $6.19  $4.37  $4.32  $2.79 
Non-GAAP: Net earnings per common share - diluted $6.33  $5.75  $4.45  $4.40  $2.82 
(3)We define Adjusted EBITDA as net earnings calculated in accordance with GAAP, adjusted for the following:
interest expense, depreciation and amortization, provision for income taxes, and other income. 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.
We use Adjusted EBITDA as a supplemental measure of our performance to gain insight into our operating performance. We believe that the exclusion of other income in calculating Adjusted EBITDA and Adjusted EBITDA margin provides management and investors a useful measure for period-to-period comparisons of our core business and operating results by excluding items that are not comparable across reporting periods. 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.

  For the years ended March 31,    
  2016  2015  2014  2013  2012 
Net earnings $44,747  $45,840  $35,273  $34,830  $23,367 
Provision for income taxes  31,004   32,473   24,825   23,915   16,207 
Depreciation and amortization  5,548   4,333   2,792   2,389   1,665 
Less: Other income  -   (7,603)  -   -   - 
Adjusted EBITDA $81,299  $75,043  $62,890  $61,134  $41,239 
ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


The following discussion and analysis of the financial condition and results of operations (“financial(the “financial review”) of ePlus is intended to help investors understand our company and our operations. The financial review is provided as a supplement to, and should be read in conjunction with, the consolidated financial statementsConsolidated Financial Statements and the related notes included elsewhere in this report.


EXECUTIVE OVERVIEW


Business DescriptionBUSINESS DESCRIPTION


ePlus and its consolidated subsidiariesWe provide leading information technology (“IT”)IT products and services, flexible leasing and financing solutions, and enterprise supply management to enable our customers to optimize their IT infrastructure and supply chain processes.


We design, implement, and provide IT solutions for our customers. We are focusedfocus primarily on specialized IT segments including data center infrastructure, networking, security, cloud, and collaboration. Our solutions incorporate hardware and software products from multiple leading IT vendors. As our customers’ IT requirements have grown increasingly complex, we have evolved our offerings by investing in our professional and managed services capabilities and by expanding our relationships with existing and emerging key vendors.


We continue to strengthen our relationships withare an authorized reseller of over 1,500 vendors, focused on emerging technologies, which have enabled us to provide our customers with new and evolving IT solutions. We are an authorized reseller from over 1,000 vendors, but primarily from approximately 100 vendors, including Check Point, Cisco Systems, Dell, EMC, FireEye, F5 Networks, Hewlett-Packard, Juniper, McAfee, NetApp, Nimble, Oracle, Palo Alto Networks, Pure Storage, VMware, and among many others. We possess top-level engineering certifications with a broad range of leading IT vendors that enable us to offer IT solutions that are optimized for each of our customers’ specific requirements. Our proprietary software solutions allow our customers to procure, control and automate their IT solutions environment.


Financial SummaryBUSINESS TRENDS


DuringWe believe the year ended March 31, 2016,following key business trends are impacting our business performance and our ability to achieve business results:

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

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

We are experiencing increases in prices from our suppliers, as well as rising wages and interest rates. We generally have been able to pass price increases to our customers. Our labor costs related to services we perform will take longer to pass to customers that have service engagements where prices may be set. Our financing quotes are generally indexed to market changes to enable us to change rates from time of quote to funding. Financing transactions funded with our cash flows, not debt, are subject to interest rate risk. If the market interest rate exceeds our internal rate of return, we may not fund the transaction to obtain the proceeds and lock in our profit on the transaction. Accordingly, inflation could have a material impact on our sales, gross profit, or operating costs in the future.

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

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

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Rapid cloud adoption has led to customer challenges around increasing costs, security concerns, and skillset gaps. These challenges are consistent across all industries and sizes. We have developed a Cloud Managed Services portfolio to address these needs, allowing our clients to focus on driving business outcomes via optimized and secure cloud platforms.

KEY BUSINESS METRICS

Our management monitors several financial and non-financial measures and ratios on a regular basis to track the progress of our business. We believe that the most important of these measures and ratios include net sales, increased 5.3%gross margin, operating income margin, net earnings, and net earnings per common share, in each case based on information prepared in accordance with US GAAP, as well as the non-GAAP financial measures and ratios, including Adjusted EBITDA, Adjusted EBITDA margin, Non-GAAP: Net earnings and Non-GAAP: Net earnings per common share. We use a variety of operating and other information to $1.2 billion,evaluate the operating performance of our business, develop financial forecasts, make strategic decisions, and prepare and approve annual budgets. We use Gross billings as an operational metric to assess the volume of transactions within our Technology segment as well as to understand changes in our accounts receivable. We believe Gross billings will aid investors in the same manner.

These key indicators include financial information that is prepared in accordance with US GAAP and presented in our consolidated financial statements, as well as non-GAAP and operational performance measurement tools. Generally, a non-GAAP financial measure is a numerical measure of a company’s performance or an increasefinancial position that either excludes or includes amounts that are correspondingly not normally excluded or included in the most directly comparable measure calculated and presented in accordance with US GAAP. Our use of $60.9 million overnon-GAAP information as analytical tools has limitations, and you should not consider them in isolation or as substitutes for analysis of our financial results reported under GAAP, as these measures used by management may differ from similar measures used by other companies, even when similar terms are used to identify such measures.

Set forth in footnotes (1) and (2) of the prior fiscal year. tables that immediately follow this paragraph, we set forth our reasons for using and presenting Adjusted EBITDA, Adjusted EBITDA margin, Non-GAAP: Net earnings and Non-GAAP: Net earnings per common share-diluted in the tables and discussion that follow.

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

  Year Ended March 31, 
Consolidated 2023  2022  2021 

         
Financial Metrics         
Net sales $2,067,718  $1,821,019  $1,568,323 
             
Gross profit $517,524  $460,982  $393,554 
Gross margin  25.0%  25.3%  25.1%
Operating income margin  8.0%  8.1%  6.8%
             
Net earnings $119,356  $105,600  $74,397 
Net earnings margin  5.8%  5.8%  4.7%
Net earnings per common share - diluted $4.48  $3.93  $2.77 
             
Non-GAAP Financial Metrics            
Non-GAAP: Net earnings (1) $133,931  $117,964  $85,567 
Non-GAAP: Net earnings per common share - diluted (1) $5.02  $4.39  $3.19 
             
Adjusted EBITDA (2) $190,592  $170,004  $128,245 
Adjusted EBITDA margin  9.2%  9.3%  8.2%
             
Technology Segment            

            
Financial Metrics            
Net sales $2,015,245  $1,733,036  $1,507,954 
             
Gross profit $474,490  $408,153  $346,235 
Gross margin  23.5%  23.6%  23.0%
             
Operating income $140,110  $109,000  $75,665 
             
Non-GAAP Financial Metric            
Adjusted EBITDA (2) $164,184  $131,353  $97,219 
             
Operational Metric            
Gross billings (3)            
Data Center / Cloud $892,308  $828,002  $723,971 
Networking  927,319   709,687   590,690 
Security  639,416   476,339   418,499 
Collaboration  127,027   131,941   91,833 
Other  282,748   240,586   236,707 
Product gross billings  2,868,818   2,386,555   2,061,700 
Service billings  277,070   239,194   210,136 
Total gross billings $3,145,888  $2,625,749  $2,271,836 
             
Financing Segment            

            
Financial Metrics            
Net sales $52,473  $87,983  $60,369 
             
Gross profit $43,034  $52,829  $47,319 
             
Operating income $26,052  $38,316  $30,670 
             
Non-GAAP Financial Metric            
Adjusted EBITDA (2) $26,408  $38,651  $31,026 

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

We haduse Non-GAAP: Net earnings and Non-GAAP: Net earnings per common share – diluted as supplemental measures of our performance to gain insight into our operating performance and performance trends. We believe that the exclusion of other income and acquisition-related amortization expense in calculating Non-GAAP: Net earnings and Non-GAAP: Net earnings per common share – diluted provides management and investors a 8.5% increaseuseful measure for period-to-period comparisons of our business and operating results by excluding items that management believes are not reflective of our underlying operating performance. Accordingly, we believe that Non-GAAP: Net earnings and Non-GAAP: Net earnings per common share – diluted provide useful information to investors and others in understanding and evaluating our operating results. However, our use of non-GAAP information as analytical tools has limitations, and you should not consider them in isolation or as substitutes for analysis of our financial results as reported under US GAAP. In addition, other companies, including companies in our industry, might calculate similar Non-GAAP: Net earnings and Non-GAAP: Net earnings per common share – diluted or similarly titled measures differently, which may reduce their usefulness as comparative measures.

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The following table provides our calculation of Non-GAAP: Net earnings and Non-GAAP: Net earnings per common share – diluted (in thousands, except per share amounts):

  Year Ended March 31, 
  2023  2022  2021 
GAAP: Earnings before tax 
$
162,974
  
$
146,884
  
$
106,906
 
Share based compensation  
7,824
   
7,114
   
7,167
 
Acquisition and integration expense  
-
   
-
   
271
 
Acquisition related amortization expense  
9,411
   
10,072
   
9,116
 
Other (income) expense  
3,188
   
432
   
(571
)
Non-GAAP: Earnings before provision for income taxes  
183,397
   
164,502
   
122,889
 
             
GAAP: Provision for income taxes  
43,618
   
41,284
   
32,509
 
Share based compensation  
2,104
   
2,014
   
2,188
 
Acquisition and integration expense  
-
   
-
   
78
 
Acquisition related amortization expense  
2,527
   
2,803
   
2,730
 
Other (income) expense  
950
   
120
   
(143
)
Tax benefit (expense) on restricted stock  
267
   
317
   
(40
)
Non-GAAP: Provision for income taxes  
49,466
   
46,538
   
37,322
 
             
Non-GAAP: Net earnings 
$
133,931
  
$
117,964
  
$
85,567
 

  Year Ended March 31, 
  2023  2022  2021 
GAAP: Net earnings per common share - diluted 
$
4.48
  
$
3.93
  
$
2.77
 
             
Share based compensation  
0.21
   
0.20
   
0.19
 
Acquisition and integration expense  
-
   
-
   
0.01
 
Acquisition related amortization expense  
0.26
   
0.26
   
0.24
 
Other (income) expense  
0.08
   
0.01
   
(0.02
)
Tax benefit (expense) on restricted stock  
(0.01
)
  
(0.01
)
  
-
 
Total non-GAAP adjustments - net of tax  
0.54
   
0.46
   
0.42
 
             
Non-GAAP: Net earnings per common share - diluted 
$
5.02
  
$
4.39
  
$
3.19
 

(2)   We define Adjusted grossEBITDA as net earnings calculated in accordance with US GAAP, adjusted for the following: interest expense, depreciation and amortization, share-based compensation, acquisition and integration expenses, provision for income taxes, and other income. Segment Adjusted EBITDA is defined as operating income calculated in accordance with US GAAP, adjusted for interest expense, share-based compensation, acquisition and integration expenses, and depreciation and amortization. We consider the interest on notes payable from our financing segment and depreciation expense presented within cost of sales, which includes depreciation on assets financed as operating leases, to be operating expenses. As such, they are not included in the amounts added back to net earnings in the Adjusted EBITDA calculation. In the table below, we provide a reconciliation of Adjusted EBITDA to net earnings, which is the most directly comparable financial measure to this non-GAAP financial measure. Adjusted EBITDA margin is our calculation of Adjusted EBITDA divided by net sales.

We use Adjusted EBITDA as a supplemental measure of our performance to gain insight into our operating performance and performance trends. We believe that the exclusion of other income in calculating Adjusted EBITDA and Adjusted EBITDA margin provides management and investors a useful measure for period-to-period comparisons of our business and operating results by excluding items that management believes are not reflective of our underlying operating 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 US GAAP. In addition, other companies, including companies in our industry, might calculate Adjusted EBITDA and Adjusted EBITDA margin or similarly titled measures differently, which may reduce their usefulness as comparative measures.

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

  Year Ended March 31, 
Consolidated 2023  2022  2021 
Net earnings 
$
119,356
  
$
105,600
  
$
74,397
 
Provision for income taxes  
43,618
   
41,284
   
32,509
 
Share based compensation  
7,824
   
7,114
   
7,167
 
Interest and financing costs  
2,897
   
928
   
521
 
Acquisition and integration expense  
-
   
-
   
271
 
Depreciation and amortization  
13,709
   
14,646
   
13,951
 
Other (income) expense, net
  
3,188
   
432
   
(571
)
Adjusted EBITDA 
$
190,592
  
$
170,004
  
$
128,245
 
             
Technology Segment            
Operating income 
$
140,110
  
$
109,000
  
$
75,665
 
Depreciation and amortization  
13,598
   
14,535
   
13,839
 
Share based compensation  
7,579
   
6,890
   
6,923
 
Interest and financing costs  
2,897
   
928
   
521
 
Acquisition and integration expense  
-
   
-
   
271
 
Adjusted EBITDA 
$
164,184
  
$
131,353
  
$
97,219
 
             
             
Financing Segment            
Operating income 
$
26,052
  
$
38,316
  
$
30,670
 
Depreciation and amortization  
111
   
111
   
112
 
Share based compensation  
245
   
224
   
244
 
Adjusted EBITDA 
$
26,408
  
$
38,651
  
$
31,026
 

(3)  Gross billings are the total dollar value of productscustomer purchases of goods and services including shipping charges during the period, net of $1.56 billioncustomer returns and credit memos, sales, or other taxes. Gross billings includes the transaction values for certain sales transactions that are recognized on a net basis, and, therefore, includes amounts that will not be recognized as revenue.

FINANCIAL SUMMARY

Net sales: Net sales for the year ended March 31, 2016,2023, increased 13.5% to $2,067.7 million, or an increase of $246.7 million compared to $1.44 billion last$1,821.0 million in the prior fiscal year. ThisThe increase in demandnet sales was driven by higher revenues from our technology segment, offset by a shiftlower revenues from our financing segment. The increase in product mix, as a higher proportion of our sales consisted of third party software assurance, subscription licenses, maintenancefrom the technology segment was due to increases in both product and services which are presented on a net basis. We believe that our growth outpaced the overall industry due to gains in market share through capturing additional customer spend, and focusing on faster growing segments within the market, such as virtualization, collaboration, and security. In addition, we added new customerssales as a result of higher customer demand. The decline in revenues from our own organicfinancing segment was due to lower proceeds from early lease buyouts and sales and marketing efforts as well as through increased vendor referrals, and through acquisitions.of leased equipment.


Consolidated gross margins were 21.8%Gross billings from our technology segment for the year ended March 31, 2016,2023, increased by 19.8%, or $520.1 million, to $3,145.9 million compared to 21.4%$2,625.7 million in the prior fiscal year. Gross billings increased year over year at a faster rate than net sales due to a shift in mix to a higher proportion of third-party maintenance, software assurance, subscriptions/SaaS licenses, and services which we recognize revenue on a net basis.

Gross profit: Consolidated gross profit for the year ended March 31, 2015. The2023, increased 12.3%, to $517.5 million, compared to $461.0 million in the prior fiscal year due to increased net sales volume. Overall, gross margins were consistent year over year as higher product margins were offset by lower service margins.

Operating expenses: Operating expenses for the year ended March 31, 2023, increased $37.7 million, or 12.0%, to $351.4 million, as compared to $313.7 million in the prior year. Our increase in operating expenses was primarily due to an increase of $23.5 million in salaries and benefits and an increase of $12.2 million in general and administrative expenses. Salaries and benefits increased due to an increase in the number of employees as well as higher variable compensation corresponding to the increase in gross margins wasprofit. As of March 31, 2023, we had 1,754 employees, an increase of 11.2% from 1,577 as of March 31, 2022.

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General and administrative expenses also increased due to shifts in our product mix resulting from our continued focus on value added services for our customers, including the increase in salesemployees, as we had higher software, subscription and maintenance fees and travel and entertainment costs. Travel and entertainment increased due to the return of in person business meetings and events. The other categories of expenses increased from the increase in personnel. We had higher professional service fees, which was partially due to post go-live support for a new software platform within our advanced professionalfinancing segment.

Provision for credit losses increased $0.8 million primarily due to higher exposure within our financing portfolio. Interest and managed services,financing costs increased $2.2 million due to higher outstanding borrowings. Offsetting these increases, was a decrease of $1.0 million in depreciation and salesamortization.

Operating income: As a result of third party maintenance agreements on core elements of our customers’ IT environment.

Operatingthe foregoing, operating income for the year ended March 31, 2023, increased $5.0$18.9 million, or 7.1%12.8%, to $75.8$166.2 million and operating margin increaseddecreased by 10 basis points to 6.3%8.0%, as compared to $147.3 million for the year ended March 31, 2015. 2022. The increase in operating income was due to increases from our technology segment, which was offset by lower operating income from our financing segment.

Provision for income taxes: Our effective income tax rate for the year ended March 31, 2023, was 26.8% compared to 28.1% in the prior year. The decrease in our effective income tax rate year over year is primarily due to lower than forecasted non-deductible expenses, increased benefits from foreign sales along with favorable state return to provision adjustments.

Net earnings: Consolidated net earnings for the year ended March 31, 2016 decreased 2.4%2023, increased 13.0% to $44.7$119.4 million, as compared to the year ended March 31, 2015. Net earnings$105.6 million for the year ended March 31, 2015 included other non-operating income of $7.6 million, primarily2022, due to a $6.2 million payment received from a class action suit which alleged that a group of companies conspired to fix, raise, maintain or stabilize prices of certain flat panels usedan increase in many flat screen televisions, monitorsgross profit, offset by an increase in operating expenses and notebook computers.foreign exchange losses.


Adjusted EBITDA increased $6.3 million, or 8.3%, to $81.3 million and Adjusted EBITDA margin increased 20 basis points to 6.8% for the year ended March 31, 2016, as2023, was $190.6 million, an increase of $20.6 million, or 12.1%, compared to the prior period.

Diluted earnings per share decreased $0.10 or 1.6% to $6.09 per shareyear. Adjusted EBITDA margin for the year ended March 31, 2016,2023, decreased 10 basis points to 9.2%, as compared to $6.19the prior year period of 9.3%. The increase in Adjusted EBITDA was due to increases from our technology segment, which was offset by lower Adjusted EBITDA from our financing segment.

Net earnings per common share diluted for the year ended March 31, 2015. Non-GAAP diluted2023, increased $0.55, or 14.0%, to $4.48 per share, as compared to $3.93 per share in the prior year. Non-GAAP: Net earnings per common share diluted for the year ended March 31, 2023, increased 10.0%$0.63, or 14.4%, to $6.33 from $5.75$5.02 per share, as compared to $4.39 per share in the prior year.

27SEGMENT OVERVIEW
Cash and cash equivalents increased $18.6 million, or 24.4%, to $94.8 million at March 31, 2016 compared to March 31, 2015. The increase in our cash and cash equivalents was due to funds generated from operations, partially offset by $16.6 million used to acquired certain assets and assumed certain liabilities of IGX Acquisition Global, LLC (“IGX Acquisition”), and IGX Support, LLC, including IGX Acquisition’s wholly-owned subsidiary, IGXGlobal UK Limited (collectively, “IGX”). Our cash on hand, funds generated from operations, amounts available under our credit facility and the possible monetization of our investment portfolio provide sufficient liquidity for our business.

Segment Overview


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


Technology Segment


The technology segment sells IT equipmentderives revenue from sales of product, project-related advanced professional services, managed services, and software and related servicesstaff augmentation. The technology segment sells primarily to corporate customers, state and local governments, and higher education institutions on a nationwide basis, with geographic concentrations relating to our physical locations. The technology segment also provides Internet-basedinternet-based business-to-business supply chain management solutions for information technology products.


Customers who purchase IT equipment and services from us may have a customer master agreements, or CMAs,agreement (“CMA”) with our company, which stipulatestipulates the terms and conditions of the relationship. Some CMAs contain pricing arrangements, and most contain mutual voluntary termination clauses. Our other customers place orders using purchase orders without a CMA in place or with other documentation customary for the business. Often, our work with state and local governments is based on public bids and our written bid responses. Our service engagements are generally governed by statements of work and are primarily fixed price (with allowance for changes); however, some service agreements are based on time and materials.


Technology segment revenue generally falls into the following three categories:

Product revenue: Revenue generated from the sale of third-party hardware, perpetual and subscription software, maintenance, software assurance, and services.

Professional services: Revenue generated from our advanced professional services that are performed under time & materials, fixed fee, or milestone contracts. Professional services include cloud consulting, staff augmentation services, and project management services.

Managed services: Revenue generated from our advanced managed services that include managing various aspects of our customers environments and are billed in regular intervals over a contract term, usually between three to five years. Managed services include security solutions, storage-as-a-service, cloud hosted services, cloud managed services, and service desk.

We endeavor to minimize the cost of sales through incentive programs provided by vendors and distributors. The programs we qualify for are generally set by our reseller authorization level with the vendor. The authorization level we achieve and maintain governs the types of products we can resell as well as such items as pricing received,variable discounts applied against the list price, funds provided for the marketing of these products and other special promotions. These authorization levels are achieved by us through purchase volume, certifications held by sales executives or engineers and/or contractual commitments by us. The authorization levels are costly to maintain, and these programs continually change and, therefore, there is no guarantee of future reductions of costs provided by these vendor consideration programs.


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Financing Segment


Our financing segment offers financing solutions to corporations, governmental entities, and educational institutions nationwide and also in Canada, Iceland,the UK, and beginning in April, 2016, the United Kingdom.several other European countries. The financing segment derives revenue from leasing IT, medical equipment and medicalother equipment, and the disposition of that equipment at the end of the lease. The financing segment also derives revenues from the financing of third-party software licenses, software assurance, maintenance, and other services.


Financing segment revenue generally falls into the following three categories:


·Portfolio income: Interest income from financing receivables and rents due under operating leases;
Portfolio income: Interest income from financing receivables and rents due under operating leases.
·Transactional gains: Net gains or losses on the sale of financial assets; and

·Post-contract earnings: Month-to-month rents; early termination, prepayment, make-whole, or buyout fees; and net gains on the sale of off-lease (used) equipment.
Transactional gains: Net gains or losses on the sale of financial assets.


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

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


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

RESULTS OF OPERATIONS

The Year Ended March 31, 2023, Compared to the Year Ended March 31, 2022

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TECHNOLOGY SEGMENT

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

  Year Ended March 31,     Percent
 
  2023  2022  Change  Change 
Financial Metrics            
Net sales            
Product $1,750,802  $1,492,411  $258,391   17.3%
Services  264,443   240,625   23,818   9.9%
Total  2,015,245   1,733,036   282,209   16.3%
                 
Cost of sales                
Product  1,370,061   1,175,789   194,272   16.5%
Services  170,694   149,094   21,600   14.5%
Total  1,540,755   1,324,883   215,872   16.3%
                 
Gross profit  474,490   408,153   66,337   16.3%
                 
Selling, general, and administrative  317,885   283,690   34,195   12.1%
Depreciation and amortization  13,598   14,535   (937)  (6.4%)
Interest and financing costs  2,897   928   1,969   212.2%
Operating expenses  334,380   299,153   35,227   11.8%
                 
Operating income $140,110  $109,000  $31,110   28.5%
                 
                 
Key Metrics & Other Information                
Gross billings $3,145,888  $2,625,749  $520,139   19.8%
                 
Adjusted EBITDA $164,184  $131,353  $32,831   25.0%
                 
Net sales by customer end market:                
Telecom, Media & Entertainment $532,921  $502,408  $30,513   6.1%
Technology  393,594   250,485   143,109   57.1%
SLED  290,624   241,769   48,855   20.2%
Healthcare  274,936   270,481   4,455   1.6%
Financial Services  156,257   155,160   1,097   0.7%
All others  366,913   312,733   54,180   17.3%
Total $2,015,245  $1,733,036  $282,209   16.3%
                 
Net sales by type:                
Data Center / Cloud $587,097  $581,113  $5,984   1.0%
Networking  803,678   611,488   192,190   31.4%
Security  214,459   158,927   55,532   34.9
%
Collaboration  57,472   57,244   228   0.4%
Other  88,096   83,639   4,457   5.3%
ePlus services  264,443   240,625   23,818   9.9%
Total $2,015,245  $1,733,036  $282,209   16.3%

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Net sales: Net sales for the year ended March 31, 2023, increased due to an increase in Operating Resultscustomer demand, primarily from customers in technology and SLED industries, due to customer specific IT related initiatives. Product sales increased in networking due to our ability to leverage improvements in the global supply chain and an increase in security product sales as our customers’ focus on improving their security posture in their environments. Contributing to the increase in net sales was higher service revenues, due to increases in sales of our managed services offerings, as well as higher professional services due, in part, to improvements in the global supply chain. Also contributing to the increase in net sales were increases in the cost of equipment we incurred from our suppliers due, in part, to inflation, which we typically pass on to our customers.


Our net sales by customer end market have remained consistent with the prior year, with over 80% of our sales being generated from customers within the five end markets specified in the table above.

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

Cost of sales: Cost of sales for the year ended March 31, 2023, increased due to the increase in demand for both product and services. Cost of product increased slightly less than the increase in product sales due to a change in product sales mix, as a greater portion of our transaction volume consisted of sales of third-party maintenance, software assurance, subscription/SaaS licenses, and services, for which the revenues and cost of sales are presented on a net basis. Cost of services increased slightly more than the increase in service revenue due to higher third-party costs incurred.

Gross profit: Gross profit for the year ended March 31, 2023, increased consistent with the increase in net sales. Gross margins were consistent year over year as higher product margins were offset by lower service margins. Gross margin on product sales increased 50 basis points to 21.7% due to a shift in product mix to a greater proportion of sales of third-party maintenance, software assurance, subscription/SaaS licenses, and services, which are presented on a net basis. Also contributing to the increase in gross margin on product sales was higher vendor incentives which as a percentage of net sales for the year ended March 31, 2023, increased by 10 basis points.

Gross margin on service sales decreased 250 basis points to 35.5% for the year ended March 31, 2023, primarily due to a decrease in professional service margins. The decline in professional service margins was due to higher third party costs, as well as a few larger competitively priced contracts with existing customers.

Selling, general, and administrative expenses:Selling, general, and administrative expenses for the year ended March 31, 2023, increased mainly due to an increase in salaries and benefits.

Salaries and benefits, including variable compensation, increased $24.1 million or 9.8% to $270.0 million, compared to $245.9 million during the prior year, due to an increase in the number of employees and higher variable compensation as a result of the corresponding increase in gross profit. Our technology segment had 1,718 employees as of March 31, 2023, an increase of 175 from 1,543 as of March 31, 2022, driven by increased demand for our services and the acquisition of Future Com, Ltd. We added 139 additional customer-facing employees, of which 84 were professional services and technical support personnel.

General and administrative expenses increased $10.2 million, or 27.0%, to $47.8 million, as compared to $37.6 million in the prior year. General and administrative expenses increased in travel and entertainment, advertising and marketing fees, professional service fees, software license and maintenance fees, and warehouse and logistics costs.
Travel and entertainment increased due to the return of in-person business meetings and events. Warehouse and logistics costs increased due to the increase in inventory. The other categories of expenses increased primarily from increases in personnel.

Depreciation and amortization expense:Depreciation and amortization expense for the year ended March 31, 2023, decreased as higher amortization expense from our acquisition of Future Com, Ltd was offset by lower amortization from previous acquisitions.

Interest and financing costs: Interest and financing costs for the year ended March 31, 2023, increased due to higher average borrowings outstanding and higher interest rates during the year under our WFCDF Credit Facility, offset by paydowns on an installment payment arrangement. Our average month-end borrowing balance on the accounts receivable component of our WFCDF Credit Facility was $47.0 million over the year ended March 31, 2023, compared to $19.0 million over the prior year. Our weighted average interest rate on the accounts receivable component of our WFCDF Credit Facility was 5.35% during our year ended March 31, 2023, compared to 2.00% over the prior year.

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FINANCING SEGMENT

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

  Year Ended March 31,  
   Percent
 
  2023  2022  Change   Change 
Financial Metrics            
Portfolio earnings $11,356  $17,764  $(6,408)  (36.1%)
Transactional gains  16,125   18,181   (2,056)  (11.3%)
Post-contract earnings  23,581   50,495   (26,914)  (53.3%)
Other  1,411   1,543   (132)  (8.6%)
Net sales $52,473  $87,983  $(35,510)  (40.4%)
Cost of sales  9,439   35,154   (25,715)  (73.1%)
Gross profit  43,034   52,829   (9,795)  (18.5%)
                 
Selling, general, and administrative  15,635   13,427   2,208   16.4%
Depreciation and amortization  111   111   -   0.0%
Interest and financing costs  1,236   975   261   26.8%
Operating expenses  16,982   14,513   2,469   17.0%
                 
Operating income $26,052  $38,316  $(12,264)  (32.0%)
                 
Key Metrics & Other Information                
Adjusted EBITDA $26,408  $38,651  $(12,243)  (31.7%)

Net sales: Net sales for the year ended March 31, 2023, decreased due to lower post-contract and portfolio earnings. Post-contract revenue decreased due to lower proceeds from early lease buyouts and sales of equipment, as we had a few large, customer-driven transactions in the prior year. Portfolio revenue decreased mostly due to decreases in operating lease revenue as a portion of the early lease buyouts in fiscal year 2022 were from customers with operating lease contracts. Transactional gains decreased compared to the prior year due to a decline in the volume of financial assets sold during the year. Total proceeds from sales of financing receivables were $706.0 million and $855.1 million for the years ended March 31, 2023, and 2022, respectively.

Cost of sales: Cost of sales for the year ended March 31, 2023, decreased due to a decrease in the cost of equipment from early lease buyouts, and sales of off-lease equipment of $20.1 million and a decrease in operating lease depreciation of $5.6 million.

Selling, general, and administrative expenses:Selling, general, and administrative expenses for the year ended March 31, 2023, increased due to the deployment of hosted lease accounting software in August 2022, as we incurred higher professional fees following the implementation of this software platform, as well as higher software license and maintenance costs including amortization of the costs to implement the hosted software. In addition, we incurred additional provision for credit losses as a result of changes in our net credit exposure. These increases are offset by a slight decrease in salaries and benefits, mainly driven by a decrease in variable compensation due to the decline in gross profit.

Our financing segment employed 36 people as of March 31, 2023, compared to 34 people as of March 31, 2022. Certain support functions for the financing segment are shared resources with the technology segment.

Interest and financing costs: Interest and financing costs for the year ended March 31, 2023, increased due to higher borrowings during the year as well as higher interest rates. As of March 31, 2023, our non-recourse notes payable increased to $34.3 million from $21.2 million in the prior year. Our weighted average interest rate for non-recourse notes payable was 5.01% and 3.59% as of March 31, 2023, and 2022, respectively.

CONSOLIDATED

Other income (expense), net:Other income (expense), net, for the year ended March 31, 2023, was a net expense of $3.2 million, compared to a net expense of $0.4 million in the prior year. We incurred foreign currency transaction losses of $5.4 million during fiscal year 2023, up from $0.5 million last year. Offsetting this, was a $1.9 million gain recognized in fiscal year 2023 related to our receipt of funds resulting from our claim in a class action lawsuit.

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Income taxes: Our effective income tax rates for the years ended March 31, 2023, and 2022 were 26.8% and 28.1%, respectively. Our effective tax rate was lower for the year ended March 31, 2023, as compared to the prior year, primarily due to lower than forecasted non-deductible expenses, increased benefits from foreign sales along with favorable state return to provision adjustments.

Net earnings: Net earnings for the year ended March 31, 2023, were $119.4 million, an increase of 13.0% or $13.8 million, as compared to $105.6 million in the prior year. The net earnings increase was due primarily to the increase in operating profits from our technology segment.

Basic and fully diluted earnings per common share for the year ended March 31, 2023, were $4.49 and $4.48, respectively, an increase of 13.3% and 13.9% over the prior year. Basic and fully diluted earnings per common share were $3.96 and $3.93, respectively, for the year ended March 31, 2022.

Weighted average common shares outstanding used in the calculation of basic and diluted earnings per common share were 26.6 million and 26.7 million, respectively, for the year ended March 31, 2023. Weighted average common shares outstanding used in the calculation of basic and diluted earnings per common share were 26.6 million and 26.9 million, respectively, for the year ended and March 31, 2022.

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

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TECHNOLOGY SEGMENT

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

  Year Ended March 31,     Percent 
  2022  2021  Change  Change 
Financial Metrics            
Net sales            
Product $1,492,411  $1,305,789  $186,622   14.3%
Services  240,625   202,165   38,460   19.0%
Total  1,733,036   1,507,954   225,082   14.9%
                 
Cost of sales                
Product  1,175,789   1,036,627   139,162   13.4%
Services  149,094   125,092   24,002   19.2%
Total  1,324,883   1,161,719   163,164   14.0%
                 
Gross profit  408,153   346,235   61,918   17.9%
                 
Selling, general, and administrative  283,690   256,210   27,480   10.7%
Depreciation and amortization  14,535   13,839   696   5.0%
Interest and financing costs  928   521   407   78.1%
Operating expenses  299,153   270,570   28,583   10.6%
                 
Operating income $109,000  $75,665  $33,335   44.1%
                 
Key Metrics & Other Information             
Gross billings $2,625,749  $2,271,836  $353,913   15.6%
                 
Adjusted EBITDA $131,353  $97,219  $34,134   35.1%
                 
Net sales by customer end market:             
Telecom, Media & Entertainment $502,408  $371,912  $130,496   35.1%
Healthcare  270,481   200,067   70,414   35.2%
Technology  250,485   251,683   (1,198)  (0.5%)
SLED  241,769   245,919   (4,150)  (1.7%)
Financial Services  155,160   198,761   (43,601)  (21.9%)
All others  312,733   239,612   73,121   30.5%
Total $1,733,036  $1,507,954  $225,082   14.9%
                 
Net sales by type:                
Data Center / Cloud $581,113  $516,930  $64,183   12.4%
Networking  611,488   510,205   101,283   19.9%
Security  158,927   155,186   3,741   2.4%
Collaboration  57,244   47,504   9,740   20.5%
Other  83,639   75,964   7,675   10.1%
ePlus services  240,625   202,165   38,460   19.0%
Total $1,733,036  $1,507,954  $225,082   14.9%

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Net sales: Net sales for the year ended March 31, 2022, increased due to an increase in customer demand, primarily from customers in telecom, media and entertainment and healthcare industries, partially offset by a decrease in net sales to customers in the financial services sector. These changes were driven by growth in product sales in collaboration and networking, and peripherals and artificial intelligence included in the other category, which management, based on its industry knowledge, generally attributed to hybrid work models having become the prominent operating model for most of our customers. Timing of purchases by our existing customers are determined by their buying cycle and the timing of their specific IT related initiatives throughout the year.

Also contributing to the increase in net sales were increases in the cost of equipment we incurred from our suppliers due, in part, to inflation, which we typically pass on to our customers. Service revenues increased due to higher demand for both professional and managed services.

Our net sales by customer end market have remained consistent with the prior year, with over 80% of our sales being generated from customers within the five end markets specified in the table above.

Gross billings to our customers increased due to organic customer demand as well as our acquisition of Systems Management and Planning, Inc. (“SMP”) in December 2020, rather than the acquisition or loss of a specific customer or set of customers.

Cost of sales: The increase in cost of sales for the year ended March 31, 2022, was due to the increase in demand for both product and services. Cost of product increased slightly less than the increase in product sales due to a change in product sales mix, as a greater portion of our transaction volume consisted of sales of third-party maintenance, software assurance, subscription/SaaS licenses, and services, for which the revenues and cost of sales are presented on a net basis. Overall, cost of services increased 19.2%, consistent with the 19.0% increase in sales.

Gross profit:Gross profit increased for the 2022 fiscal year due to the increase in customer demand as well as higher margins. Gross margin in the Technology segment increased 60 basis points to 23.6%. Gross margin on product sales increased 60 basis points to 21.2% due to a shift in product mix to a greater proportion of sales of third-party maintenance, software assurance, subscription/SaaS licenses, and services. Also contributing to the increase in product margins was higher vendor incentives earned, which increased $9.0 million in fiscal year 2022.

Service margin decreased 10 basis points to 38.0% for the year ended March 31, 2022, due to changes in mix of services provided. The service margin decline was comprised of a 90 basis points improvement from managed services, due to ongoing growth and scale in this offering, offset by a 100 basis points decline from professional services due to higher third party costs.

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

Salaries and benefits, including variable compensation, increased $24.1 million or 10.9% to $245.9 million, compared to $221.8 million during the prior year, due to $14.2 million of additional variable compensation resulting from the increase in gross profit and $9.9 million due to higher salary and benefits expense. Our technology segment had 1,543 employees as of March 31, 2022, which is an increase of 17, or 1.1%, from 1,526 on March 31, 2021.

General and administrative expenses increased $3.8 million, or 11.2%, to $37.6 million during the year ended March 31, 2022, compared to $33.9 million the prior year. Contributing to the year over year increase in general and administrative expenses were increases in travel and entertainment, and software, subscription, and maintenance expenses of $2.5 million.

Depreciation and amortization expense: Depreciation and amortization expense increased for the year ended March 31, 2022, due to an increase in amortization of customer relationships as a result of the SMP acquisition in December 2020.

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

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FINANCING SEGMENT

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

  Year Ended March 31,  
   Percent 
  2022  2021  Change   Change 
Financial Metrics            
Portfolio earnings $17,764  $16,486  $1,278   7.8%
Transactional gains  18,181   14,506   3,675   25.3%
Post-contract earnings  50,495   23,771   26,724   112.4%
Other  1,543   5,606   (4,063)  (72.5%)
Net sales $87,983  $60,369  $27,614   45.7%
Cost of sales  35,154   13,050   22,104   
169.4
%
Gross profit  52,829   47,319   5,510   11.6%
                 
Selling, general, and administrative  13,427   15,053   (1,626)  (10.8%)
Depreciation and amortization  111   112   (1)  (0.9%)
Interest and financing costs  975   1,484   (509)  (34.3%)
Operating expenses  14,513   16,649   (2,136)  (12.8%)
                 
Operating income $38,316  $30,670  $7,646   24.9%
                 
Key Metrics & Other Information                
Adjusted EBITDA $38,651  $31,026  $7,625   24.6%

Net sales: For the year ended March 31, 2022, net sales increased due to higher post contract earnings and transactional gains, offset slightly by a decrease in other financing revenues. Post-contract revenue increased due to an increase of $22.8 million from proceeds from early lease buyouts and sales of off-lease equipment, as we had a few large customer driven transactions in fiscal year 2022. Portfolio revenue increased due to increases in operating lease income offset by decreased sales-type lease earnings over the prior fiscal year. Other financing revenues decreased due to lower profit recognized from signing new lease extensions with customers where the prior lease was classified as an operating lease and the new modified lease was determined to be a sales-type lease. Transactional gains increased due to higher volume of financing receivables sold. Total proceeds from sales of financing receivables were $855.1 million and $364.0 million for the years ended March 31, 2022, and 2021, respectively.

Cost of sales: Cost of sales for the year ended March 31, 2022, increased due to an increase of $18.2 million in the cost of equipment from early lease buyouts and off-lease equipment and an increase in operating lease depreciation of $3.7 million.

Selling, general, and administrative expenses: Selling, general, and administrative expenses decreased in the 2022 fiscal year due to a reduction in our allowance for credit losses by $1.2 million, and salaries and benefits of $0.6 million. Our financing segment employed 34 people as of March 31, 2022, and 2021. Certain support functions for the financing segment are shared resources with the technology segment.

Interest and financing costs: Interest and financing costs decreased due to lower borrowings during the year. Our total notes payable for the financing segment decreased as of March 31, 2022, to $21.2 million from $56.1 million for the prior year. Our weighted average interest rate for our non-recourse notes payable was 3.59% as of March 31, 2022, compared to 3.35% for March 31, 2021.

CONSOLIDATED

Other income (expense), net: Other income (expense), net during the year ended March 31, 2022, netted to an expense of $0.4 million and included foreign exchange rate loss of $0.5 million. Other income (expense), net during the year ended March 31, 2021, was income of $0.6 million and included foreign exchange rate gain of $0.5 million and interest income of $0.1 million.

Income taxes: Our effective income tax rates for the years ended March 31, 2022, and 2021 were 28.1% and 30.4%, respectively. The decrease in our effective income tax rate year over year is primarily due to prior year unfavorable adjustments to the federal benefit from state taxes and non-deductible executive compensation.

Net earnings: Net earnings were $105.6 million for the year ended March 31, 2022, an increase of 41.9% or $31.2 million as compared to $74.4 million in the prior fiscal year. The net earnings increase was due primarily to the increase in operating profits from our technology segment, and a lower income tax rate in the current year compared to the year ended March 31, 2021.

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Basic and fully diluted earnings per common share for the year ended March 31, 2022, were $3.96 and $3.93, respectively, and both increased 41.9% over the prior year. Basic and fully diluted earnings per common share were $2.79 and $2.77, respectively, for the year ended March 31, 2021.

Weighted average common shares outstanding used in the calculation of basic and diluted earnings per common share were 26.6 million and 26.9 million, respectively, for year ended March 31, 2022. Weighted average common shares outstanding used in the calculation of basic and diluted earnings per common share were 26.7 million and 26.8 million, respectively, for the year ended March 31, 2021.

LIQUIDITY AND CAPITAL RESOURCES

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 through our WFCDF Credit Facility. 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 credit facility, will be enough to finance our working capital, capital expenditures, and other requirements for at least the next year.

Our ability to continue to expand, both organically and through acquisitions, is dependent upon our ability to generate enough cash flow from operations or from borrowing or other sources of financing as may be required. While at this time we do not anticipate requiring any additional sources of financing to fund operations, if demand for IT products declines, or if our supply of products is delayed or interrupted, our cash flows from operations may be substantially affected.

CASH FLOWS

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

  Year Ended March 31, 
  2023  2022 
Net cash used in operating activities 
$
(15,425
)
 
$
(20,571
)
Net cash used in investing activities  
(18,926
)
  
(1,259
)
Net cash provided by (used in) financing activities  
(20,950
)
  
47,176
 
Effect of exchange rate changes on cash  
3,016
   
470
 
Net increase in cash and cash equivalents 
$
(52,285
)
 
$
25,816
 

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Cash flows from operating activities

We used $15.4 million in operating activities during the year ended March 31, 2023, compared to using $20.6 million during the year ended March 31, 2022. The following table provides a breakdown of operating cash flows by segment for the years ended March 31, 2023, and 2022 (in thousands):

  Year Ended March 31, 
  2023  2022 
Technology segment 
$
17,157
  
$
(20,243
)
Financing segment  
(32,582
)
  
(328
)
Net cash used in operating activities 
$
(15,425
)
 
$
(20,571
)

Technology Segment: During the year ended March 31, 2023, our technology segment provided $17.2 million from operating activities primarily due to net earnings and an increase in payables, partially offset by increases in accounts receivables and inventories.

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

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 March 31, 
  2023  2022 
(DSO) Days sales outstanding (1)  74   71 
(DIO) Days inventory outstanding (2)  38   25 
(DPO) Days payable outstanding (3)  (53)  (46)
Cash conversion cycle  59   50 

(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 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 the direct cost of products and services billed to our customers 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 the direct cost of products and services billed to our customers for the same three-month period.

Our standard payment term for customers is between 30-60 days; however, certain customers or orders may be approved for extended payment terms. Our DSOs for the quarters ended March 31, 2023, and 2022 were greater than our standard payment terms primarily due to a significant proportion of sales in those quarters to customers with payment terms greater than or equal to net 60 days. Invoices processed through our credit facility, or the A/P-floor plan balance, are typically paid within 45-60 days from the invoice date, while A/P trade invoices are typically paid within 30 days from the invoice date.

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

Inventory, which represents equipment ordered by customers but not yet delivered, increased 56.9% to $243.3 million as of March 31, 2023, up from $155.1 million as of March 31, 2022, partially due to ongoing projects with customers. Accounts receivable—trade, net increased by 17.1% to $504.1 million as of March 31, 2023, up from $430.4 million as of March 31, 2022, primarily due to a 17.6% increase in Gross billings to $733.1 million in the fourth quarter as compared to $623.6 million in the prior fiscal year. The increase in days payable outstanding is driven by our growth in sales volume.

Financing Segment: During the year ended March 31, 2023, our financing segment used $32.6 million in operating activities, primarily due to changes in financing receivables and deferred costs, partially offset by net earnings.

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

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Cash flows related to investing activities

During the year ended March 31, 2023, we used $18.9 million in investing activities, consisting of $9.4 million for purchases of property, equipment, and operating lease equipment and $13.3 million to acquire Future Com, Ltd., partially offset by $3.7 million of proceeds from the sale of operating lease equipment.

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

Cash flows from financing activities

During the year ended March 31, 2023, we used $21.0 million in financing activities. We had net repayments of notes payable and borrowings on our credit facility in our technology segment of $7.1 million, offset by net borrowings of non-recourse and recourse notes payable of $4.1 million by our financing segment. Additionally, we had cash inflows of $10.7 million from net borrowings on the floor plan facility and cash outflows of $7.2 million from the repurchase of common stock.

During the year ended March 31, 2022, financing activities provided $47.2 million. We had net repayments of notes payable in our technology segment of $6.7 million, offset by net borrowings of non-recourse and recourse notes payable of $20.8 million by our financing segment. Additionally, we had cash inflows of $46.7 million from net borrowings on the floor plan facility and cash outflows of $13.6 million from the repurchase of common stock.

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

Non-Cash Activities

We transfer contractual payments due to us under lease and financing agreements to third-party financial institutions. In certain assignment agreements, we may direct the third-party financial institution to pay some of the proceeds from the assignment directly to the vendor or vendors that have supplied the assets being leased or financed. In these situations, the portion of the proceeds paid directly to our vendors are non-cash transactions.

SECURED BORROWINGS – 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 financial 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 its only recourse, upon default by the customer, is against the customer and the specific equipment under lease. While we expect that the credit quality of our financing arrangements and our residual return history will continue to allow us to obtain such financing, such financing may not be available on acceptable terms, or at all. Interest rates have been rising and may continue to rise. To preserve our expected internal rate of return, we generally quote rates that are indexed. Some of our lenders will not commit to rates for a length of time, resulting in exposure to us if the rates rise and we cannot pass such exposure to the customer.

CREDIT FACILITY – TECHNOLOGY SEGMENT

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

Please refer to Note 9, “Notes Payable and Credit Facility” in the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information concerning our WFCDF Credit Facility.

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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.

Floor plan facility

We finance most purchases of products for sale to our customers through the floor plan facility. Once our customers place a purchase order with us and we have approved their credit, we place an order for the desired products with one of our vendors. Our vendors are generally paid by the floor plan facility and our liability is reflected in “accounts payable—floor plan” in our consolidated balance sheets.

Most customer payments to us are remitted to our lockbox accounts. Once payments are cleared, the monies in the lockbox accounts are automatically and daily transferred to our operating account. We pay down the floor plan facility on three specified dates each month, generally 30-60 days from the invoice date. Our borrowings and repayments under the floor plan component are included in “net borrowings (repayments) on floor plan facility” within cash flows from the financing activities in our consolidated statements of cash flows.

As of March 31, 2023, we had a maximum credit limit of $500.0 million, and an outstanding balance on the floor plan of $134.6 million. As of March 31, 2022, we had a maximum credit limit of $375.0 million, and the outstanding balance on the floor plan facility was $145.3 million. On our balance sheet, our liability under the floor plan facility is presented as part of accounts payable – floor plan.

Revolving credit facility

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 March 31, 2023, and March 31, 2022, we did not have any outstanding balance under the revolving credit facility. The maximum credit limit under this facility was $200.0 million as of March 31, 2023, compared to $100.0 million as of March 31, 2022.

PERFORMANCE GUARANTEES

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

OFF-BALANCE SHEET ARRANGEMENTS

As part of our ongoing business, we do not participate in transactions that generate relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As of March 31, 2023, and 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 our geographic footprint, or the platform of bundled solutions to provide additional functionality and value-added services. We may require additional capital due to increases in inventory to accommodate our customers’ IT installation schedules. We may continue to use our internally generated funds to finance investments in leased assets or investments in notes receivable due from our customers. These actions may result in increased working capital needs as the business expands. As a result, we may require additional financing to fund our strategy, implementation, potential future acquisitions, and working capital needs, which may include additional debt and equity financing. While the future is uncertain, we do not believe our WFCDF Credit Facility will be terminated by WFCDF or us. Additionally, while our lending partners in our financing segment have become more discerning in their approval processes, we currently have funding resources available for our transactions.

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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, major customers, or vendors of ours.

Our quarterly results of operations are susceptible to fluctuations for a number of reasons, including, without limitation, customer demand forbut not limited to currency fluctuations, reduction in IT spending, shortages of product from our products and services, supplier costs, changes in vendor incentive programs, interest rate fluctuations, general economic conditions, and differences between estimatedvendors due to material shortages, any reduction of expected residual values and actual amounts realized related to the equipment we lease. Operatingunder 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 sale prior tolessee or third-party at the expiration of thea lease term or prior to such expiration, and the transfer of financial assets. Sales of equipment and transfers of financial assets may have the effect of increasing revenues and net income during the quarter in which the sale occurs and reducing revenues and net income otherwise expected in subsequent quarters.

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

CONTRACTUAL OBLIGATIONS

Our material contractual obligations consist of payments on recourse and non-recourse notes payable and lease liabilities. Please refer to Note 5, “Lessee Accounting” and Note 9, “Notes Payable and Credit Facility” in the Notes to the lessee or to a third-party or from other post-term events.Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information regarding the maturities of these obligations. Additionally, we have contractual obligations of $10.5 million over the next 4 years for certain hosted software and data center services.
We expect to continue to expand by opening new sales locations and hiring additional staff for specific targeted market areas in the near future whenever we can find both experienced personnel and desirable geographic areas. These investments may reduce our results from operations in the short term.


CRITICAL ACCOUNTING ESTIMATES


The preparation of
Our consolidated financial statements have been prepared in conformityaccordance with U.S. GAAP requires management to use judgment in the application ofUS GAAP. Our significant accounting policies including making estimates and assumptions. If our judgment or interpretation of the facts and circumstances relating to various transactions had been different, or different assumptions were made, it is possible that alternative accounting policies would have been applied, resultingare described in a change in financial results. On an ongoing basis, we reevaluate our estimates, including those related to revenue recognition, residual values, vendor consideration, lease classification, goodwill and intangibles, reserves for credit losses and income taxes specifically relating to uncertain tax positions. We base estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. For all such estimates, we caution that future events rarely develop exactly as forecasted, and therefore, these estimates may require adjustment.

We consider the following accounting policies important in understanding the potential impact of our judgments and estimates on our operating results and financial condition. For additional information on these and other accounting policies, see Note 1, “Organization and Summary of Significant Accounting Policies” in the Notes to the consolidated financial statementsConsolidated Financial Statements included elsewhere in Part II, Item 8 of this report.Annual Report on Form 10-K. The accounting policies described below are significantly affected by critical accounting estimates. Such accounting policies require significant judgments, assumptions, and estimates, and actual results could differ materially from the amounts reported based on these policies.


REVENUE RECOGNITION. The majorityRECOGNITION — When we enter into contracts with customers, we are required to identify the performance obligations in the contract. We recognize most of our revenues are derived from the following sources: sales of third-party products, third-party software, third-party maintenance, software assurance, maintenancesupport, and services; sales of our advancedservices, ePlus professional and managed services; salesservices, and hosting ePlus proprietary software. Our recognition of licenses of our software, and financing revenues. For all these revenue sources, we determine whether we are the principal or agent in accordance with Codification Topic, Revenue Recognition, Subtopic Principal Agent Considerations. Our revenue recognition policies vary based upon these revenue sources and the mischaracterizationdiffers for each of these productsdistinct types of performance obligations and services could result in misapplication of revenue recognition polices.identifying each performance obligation appropriately may require judgment.


For arrangements withWhen a contract contains multiple elements,distinct performance obligations, we allocate the total considerationtransaction price to the deliverableseach performance obligation based on an estimatedits relative standalone selling price. We determine standalone selling prices using expected cost-plus margin. When we finance sales of third-party software and third-party maintenance, software support, and services, we reduce the estimated sellingtransaction price using cost plus a reasonable margin for each deliverable, which is based on our established policies and procedures for providing customers with quotes, as well as on historical data.by the financing component.


Generally,We recognize revenue from sales of third-party products and third-party software are recognized on a gross basis withat the selling pricepoint in time that control passes to the customer, recorded as sales and the acquisition costwhich is typically upon delivery of the product or software recorded as cost of sales. Revenue is recognized when the title and risk of loss are passed to the customer, there is persuasive evidence ofcustomer. We perform an arrangement for sale, delivery has occurred, the sales price is fixed or determinable and collectability is reasonably assured. Delivery for products is typically performed via drop-shipment by the vendor or distributoranalysis to our customers’ location, and for software via electronic delivery. Using these tests, the vast majority of our sales are recognized upon delivery due to our sales terms with our customers. We estimate the product delivered to our customersamount of sales in-transit at the end of each quarterthe period and adjust revenue and the related costs to reflect only what has been delivered to the customer. This analysis is based upon an analysis of current quarter and historical delivery dates.


We sell software assurance, subscription licenses, maintenance and service contracts where the services are performed by a third party. Software assurance is a service that allows customers to upgrade at no additional cost to the latest technology, if new applications are introduced during the period for which the software assurance is in effect. As we enter into contracts with third-party service providers, we evaluate whether we are acting as a principal or agent in the transaction. We conclude that we are acting as an agent and recognize revenue on a net basis atfrom sales of third-party maintenance, software support, and services when our customer and vendor accept the dateterms and conditions of sale when we are not responsible for the day-to-day provisionarrangement. On occasion, judgment is required to determine this point in time.

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Table of services in these arrangements and our customers are aware that the third-party service provider will provide the services to them.Contents

We provide ePlus advanced professional services under both time and materials and fixed price contracts. UnderWhen services are provided on a time and materials contracts,basis, we recognize revenuesales at agreed-upon billing rates at the timeas services are performed. Under certainWhen services are provided on a fixed price contracts,fee basis, we recognize revenue based on thesales over time in proportion to our progress toward complete satisfaction of the services delivered to date as a percentage of the total services to deliver over the contract term. performance obligation. Using this method requires a determination of the appropriate input or output method to measure progress. We most often measure progress based on costs incurred in proportion to total estimated costs, commonly referred to as the “cost-to-cost” method. When using an inputthis method, such as costs, we mustsignificant judgment may be required to estimate the inputs required overtotal costs to complete the entire term. Under other fixed price contracts, weperformance obligation. We typically recognize revenue upon completion. Revenues from other sales of ePlus services, such as maintenance, managed services and hosting services are recognized on a straight-line basis over the term of the arrangement.period services are provided.

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FinancingWe recognize financing revenues include income earned from investments in leases, leased equipment, and financed third-party software and services. We classify our investments in leases and leased equipment as either direct financing lease, sales-type lease, or operating lease, as appropriate. Revenue on direct financing and sales-type leases is deferred at the inception of the leases and is recognized over the term of the lease using the interest method. Revenue on operating leases is recorded on a straight line basis over the lease term.notes receivable. We classify third-party software, maintenances, and services that we finance for our customers as notes receivable and recognize interest income over the term of the arrangementon our notes-receivable using the effective interest method.


We classify our leases as either sales-type leases or operating leases. For sales-type leases, upon lease commencement, we recognize the present value of the lease payments and the residual asset discounted using the rate implicit in the lease. When we are financing equipment provided by another dealer, we typically do not have any selling profit or loss arising from the lease. When we are the dealer of the equipment being leased, we typically recognize revenue in the amount of the lease receivable and cost of sales in the amount of the carrying value of the underlying asset minus the unguaranteed residual asset. We may need to use judgment to determine the fair value of the equipment. After the commencement date, we recognize interest income as part of net sales using the effective interest method. For operating leases, we recognize the underlying asset as an operating lease asset. We depreciate the asset on a straight-line basis to its estimated residual value over its estimated useful life. We recognize the lease payments over the lease term on a straight-line basis as part of net sales.

We account for the transfer of financial assets as sales or secured borrowings in accordance with Transfers and Servicing in the Codification. For transfers that qualify for sale treatment, we recognizeborrowings. When a net gain on the later of the effective date of the transfer or the date that the transfer meets all the criteriarequirements for sale accounting, we derecognize the financial asset and record a sale.net gain or loss that is included in net sales. We utilize qualified attorneys to provide a true-sale-at-law opinion to support the conclusion that transferred financial assets have been legally isolated.


RESIDUAL VALUES. Residual values represent our estimated value ofASSETS — Our estimate for the equipment atresidual asset in a lease is the amount we expect to derive from the underlying asset following the end of the initial lease term. Our estimated residual values willestimates vary, both in amount and as a percentage of the original equipment cost, and depend upon several factors, including the equipment type, vendor'svendor’s discount, market conditions, lease term, equipment supply and demand, and new product announcements by vendors.

We evaluate residual values for impairment on a quarterly basis and record any required impairmentsbasis. We do not recognize upward adjustments due to changes in estimates of residual value, in the period in which thevalues.

GOODWILL — We test goodwill for impairment is determined. No upward adjustment to residual values is made subsequent to lease inception.

GOODWILL. Goodwill represents the premium paid overon an annual basis, as of October 1, and between annual tests if an event occurs, or circumstances change, that would more likely than not reduce the fair value of net tangible and intangible assets we have acquired in business combinations. We review our goodwilla reporting unit below its carrying amount. Goodwill is tested for impairment annually, or more frequently if indicatorsat a level of impairment exist. A significant amount of judgment is involved in determining if an indicator of impairment has occurred. Such indicators may includereporting referred to as a sustained, significant decline in our share price and market capitalization,reporting unit.

In a decline in our expected future cash flows, a significant adverse change in legal factors or in the business climate, unanticipated competition, and/or slower growth rates, among others.

We firstqualitative assessment, we assess qualitative factors to determine whether it is more likely than not that the fair value(that is, a likelihood of a reporting unit is lessmore than its carrying amount. Qualitative factors we consider include, but are not limited to, macroeconomic conditions, industry and market conditions, company specific events, changes in circumstances, after tax cash flows and market capitalization.

If the qualitative factors indicate that it is more likely than not50 percent) that the fair value of a reporting unit is less than its carrying amount, we performincluding goodwill. A significant amount of judgment is involved in determining if an event representing an indicator of impairment has occurred between annual test dates. Such indicators may include: a significant decline in expected future cash flows; a sustained, significant decline in stock price and market capitalization; a significant adverse change in legal factors or in the two step process to assess our goodwillbusiness climate; unanticipated competition; the testing for impairment. First,recoverability of a significant asset group within a reporting unit; and reductions in revenue or profitability growth rates.

In the quantitative impairment test, we compare the fair value of each of oura reporting unitsunit with its carrying value.amount, including goodwill. We estimate the fair value of theeach reporting unit using various valuation methodologies, includinga combination of the income approach and market approaches.

The income approach incorporates the use of a discounted expectedcash flow method in which the estimated future cash flows. Ifflows and terminal values for each reporting unit are discounted to a present value using a discount rate. Cash flow projections are based on management’s estimates of economic and market conditions which drive key assumptions of revenue growth rates, operating margins, capital expenditures and working capital requirements. The discount rate in turn is based on the specific risk characteristics of each reporting unit, the weighted average cost of capital and its underlying forecast.

The market approach estimates fair value ofby applying performance metric multiples to the reporting unit exceeds its carrying value, goodwill is not impaired,unit’s prior and no further testing is necessary. Ifexpected operating performance. The multiples are derived from comparable publicly traded companies with similar operating and investment characteristics as the net book valuereporting unit.

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Table of a reporting unit exceeds itsContents
The fair value, we perform a second testvalues determined by the market approach and income approach, as described above, are weighted to measure the amount of impairment loss, if any. To measure the amount of any impairment loss, we determine the fair value of goodwill infor each reporting unit. Although we have consistently used the same manner as if our reporting unit were being acquiredmethods in a business combination. Specifically, we allocatedeveloping the assumptions and estimates underlying the fair value of the reporting unit to all of the assetscalculations, such estimates are uncertain and liabilities of that unit, including any unrecognized intangible assets, in a hypothetical calculation that would yield the estimated fair value of goodwill. If the estimated fair value of goodwill is less than the goodwill recorded on our balance sheet, we record an impairment charge for the difference.may vary from actual results.

During the quarter ended December 31, 2015, we performed a qualitative assessment for goodwill and concluded that the fair value of our reporting units, more likely than not, significantly exceed their respective carrying amounts as of October 1, 2015. During the quarter ended December 31, 2014, we elected to bypass the qualitative assessment of goodwill and estimate the fair values of the reporting units. The fair value of our reporting units substantially exceeded their respective carrying values, and our conclusions regarding the recoverability of goodwill would not be impacted by a ten percent change in their fair values.


VENDOR CONSIDERATION.CONSIDERATION — We receive payments and credits from vendors and distributors, including consideration pursuant to volume incentive programs, and shared marketing expense programs. Many of these programs extend over one or more quarters’ sales activities. Different programs have different vendor/program specific goals to achieve. We estimaterecognize the amount of vendor consideration earnedrebates pursuant to volume incentive programs, when itthe rebate is probable and reasonably estimable, using the best information available, including historical data.
Vendor consideration received pursuant to volume incentive programs is allocated to inventories based on the applicable incentives from each vendora systematic and is recorded in cost of sales of product and services, as the inventory is sold. Vendor consideration received pursuant to shared marketing expense programs is recorded as a reductionrational allocation of the related selling and administrative expensescash consideration offered to each of the underlying transactions that results in our progress towards earning the period the program takes place only if the consideration represents a reimbursement of specific, incremental, identifiable costs. Consideration that exceeds the specific, incremental, identifiable costs is classified as a reduction of cost of sales, product and services onrebate. Should our consolidated statements of operations.actual performance be different from our estimates, we may be required to adjust our receivables.


RESERVESALLOWANCE FOR CREDIT LOSSES.LOSSES — We maintain our reservesan allowance for credit losses at a level believedrelated to be adequate to absorb potential losses inherentour accounts receivable and financing receivables. We record an expense in the respective balances. We assign an internal credit quality ratingamount necessary to all new customers and update these ratings regularly, but no less than annually. Management’s determination ofadjust the adequacy of the reserveallowance for credit losses forto our accounts receivable iscurrent estimate of expected credit losses on financial assets. We estimate expected credit losses based on the ageour internal rating of the receivable balance, the customer’s credit quality, rating, an evaluation ofour historical credit losses, current economic conditions, and other relevant factors.

Management’s determination of the adequacy of the reserve Prior to providing credit, we assign an internal rating for each customer’s credit losses for financing receivables may bequality based on the following factors:customer’s financial status, rating agency reports and other financial information. We review our internal ratings for each customer at least annually or when there is an internally assignedindicator of a change in credit quality, rating, historical credit loss experience, current economic conditions, volume, growth, the composition of the lease portfolio, the fair value of the underlying collateral, and the funding status (i.e. not funded, funded onsuch as a recoursedelinquency or partial recourse basis, or funded on non-recourse basis), and other relevant factors.

The reserve for credit losses asbankruptcy. We write off financing receivables when we deem them to be uncollectable. As of March 31, 20162023, we estimated lower expected credit loss rates related to both our accounts receivable and financing receivables as compared to March 31, 2015 included a specific reserve of $3.2 million due to one specific customer, which filed for bankruptcy in May 2012.2022.


INCOME TAXES.TAXES — We make certain estimates and judgments in determining income tax expense for financial statement reporting purposes. These estimates and judgments occur in the calculation of certain tax assets and liabilities, which principally arise from differences in the timing of recognition of revenue and expense for tax and financial statement reporting purposes. We also must analyze income tax reserves, as well as determine the likelihood of recoverability of deferred tax assets and adjust any valuation allowances accordingly.


Considerations with respect to the recoverability of deferred tax assets include the period of expiration of the tax asset, planned use of the tax asset, and historical and projected taxable income as well as tax liabilities for the tax jurisdiction to which the tax asset relates. Valuation allowances are evaluated periodically and will be subject to change in each future reporting period as a result of changes in one or more of these factors. The calculation of our tax liabilities also involves considering uncertainties in the application of complex tax regulations. We recognize liabilities for uncertain income tax positions based on our estimate of whether, and the extent to which, additional taxes will be required.


BUSINESS COMBINATIONS.COMBINATIONS — We account for business combinations using the acquisition method, which requires that the total purchase price ofmethod. For each of the acquired entities be allocated to theacquisition, we recognize most assets acquired, and liabilities assumed based onat their fair values at the acquisition date. Our valuations of certain assets acquired, including customer relationships and trade names, and certain liabilities assumed, involve significant judgment and estimation. Additionally, our determination of the purchase price for the acquired business may include an estimate offor the fair value of contingent consideration. The allocation process requires an analysisWe utilize independent valuation specialists to assist us in determining the fair value of intangiblecertain assets customer relationships, trade names, acquired contractual rights and assumed contractual commitmentsliabilities. Our valuations utilize significant estimates, such as forecasted revenues and legal contingencies to identify and record all assets acquired and liabilities assumed at their fair value.

Any excess of consideration transferred over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed is recorded as goodwill. The results of operations for an acquired company are includedprofits. Changes in our financial statements fromestimates could significantly impact the datevalue of acquisition. See Note 14, “Business Combinations” of this Form 10-K for additional information on current acquisitions.certain assets and liabilities.


RECENT ACCOUNTING PRONOUNCEMENTS


The information set forth in Please refer to Note 2, “Recent Accounting Pronouncements” in the Notes to the accompanying Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K is incorporated herein by reference.10-K.

RESULTS OF OPERATIONS

The Year Ended March 31, 2016 Compared to the Year Ended March 31, 2015

Technology Segment

The results of operations for our technology segment for the years ended March 31, 2016 and 2015 were as follows (in thousands):

  Year Ended March 31, 
  2016  2015  Change 
Sales of product and services $1,163,337  $1,100,884  $62,453   5.7%
Fee and other income  5,728   7,565   (1,837)  (24.3%)
Net sales  1,169,065   1,108,449   60,616   5.5%
Cost of sales, product and services  931,782   887,673   44,109   5.0%
Gross profit  237,283   220,776   16,507   7.5%
                 
Professional and other fees  5,505   5,340   165   3.1%
Salaries and benefits  140,086   128,945   11,141   8.6%
General and administrative  22,401   21,127   1,274   6.0%
Depreciation and amortization  5,532   4,310   1,222   28.4%
Interest and financing costs  70   96   (26)  (27.1%)
Operating expenses  173,594   159,818   13,776   8.6%
                 
Operating income $63,689  $60,958  $2,731   4.5%
                 
Adjusted EBITDA $69,221  $65,268  $3,953   6.1%
Net sales: Net sales for the year ended March 31, 2016 increased by $60.6 million or 5.5% to $1,169.1 million due to an increase in demand for products and services from our large and middle-market customers. Sales of product and services increased 5.7% due to an 8.5% increase in Adjusted gross billings of product and services to $1.56 billion from $1.44 billion last year, which was offset by a shift in product mix, as a higher proportion of our sales consisted of third party software assurance, maintenance and services, which are presented on a net basis.

We realized year over year growth for sales of product and services for two quarters during the year ended March 31, 2016, and small declines for the remaining two quarters. We experienced a large sequential increase in the quarterly sales of product and services during the second the quarter for the year ended March 31, 2016, followed by a decrease during the third quarter of the fiscal year, and a small increase in fourth quarter sales of product and services. Fourth quarter sales of product and services was 13.3% higher than prior year primarily due to increased customer demand from our technology, financial services, and health care customers as compared to prior year.

The sequential and year over year change in sales of product and services is summarized below:

Quarter Ended Sequential  Year over Year 
March 31, 2016  1.3%  13.3%
December 31, 2015  (11.2%)  (2.6%)
September 30, 2015  24.9%  13.1%
June 30,2015  0.9%  (0.6%)
March 31, 2015  (13.0%)  3.2%
We rely on our vendors or distributors to fulfill a large majority of our shipments to our customers. As of March 31, 2016, we had open orders of $109.4 million and deferred revenue of $19.5 million. As of March 31, 2015, we had open orders of $74.9 million and deferred revenues of $37.0 million. The decrease of $17.5 million in deferred revenues as of March 31, 2016 as compared to the prior year is due to purchases of equipment that had been invoiced to our customers but had not yet been delivered as of March 31, 2015.
We analyze sales of products and services by customer end market and by manufacturer, as opposed to discrete product and service categories. The percentage of sales of product and services by industry and vendor are summarized below:

  FY16 FY15  Change
Revenue by customer end market:
           
Technology 23% 19%   4%  
Telecom, Media & Entertainment 14% 18%   (4%)  
Financial Services 12% 10%   2%  
SLED 22% 22%   -  
Health Care 10% 10%   -  
Other 19% 21%   (2%)  
Total 100% 100%      
            
Revenue by vendor:
           
Cisco Systems 49% 49%   -  
Hewlett Packard 7% 8%   (1%)  
NetApp 5% 7%   (2%)  
Sub-total 61% 64%   (3%)  
Other 39% 36%   3%  
Total 100% 100%      

Our revenues by customer end market have remained consistent over the year as approximately 80% of our revenues were generated from customers within the five end markets identified above. In fiscal year 2016 we had an increase in revenues from customers in the technology and financial services industries, offset by decreases in the telecommunications, media and entertainment industry. These changes were driven by changes in customer buying cycles and specific IT related initiatives, rather than the acquisition or loss of a customer or set of customers. No customer accounted for more than 10% of our revenues in fiscal year 2016 or 2015.

The majority of our revenues by vendor are derived from Cisco Systems, Hewlett Packard and NetApp, which in total, declined to 61% of our in fiscal year 2016 from 64% last year. This decrease is due to competition and developments in the IT industry. None of the vendors included within the “other” category exceeded 3% of total revenues

Cost of sales, product and services: The 5.0% increase in cost of sales, product and services was due to the increase in sales of product and services, combined with an improvement in gross margins. Our gross margin on the sale of product and services increased 50 basis points to 19.9% for the year ended March 31, 2016, from 19.4% in the prior year due to an increase in sales of third-party software assurance, maintenance, and services, for which the revenues are presented on a net basis, as well as increases in revenues from our professional and managed service. The change in product mix added 30 basis points to the gross margin and increases in professional and managed services revenues improved gross margin by 50 basis points. This was partially offset by a 30 basis point decrease in vendor incentives earned as a percentage of sales of product and services for the year ended March 31, 2016 compared to the prior year.

There are ongoing changes to the incentive programs offered to us by our vendors. Accordingly, if we are unable to maintain the level of vendor incentives we are currently receiving, gross margins may decrease.

Operating expenses: Total operating expenses of $173.6 million for the year ended March 31, 2016 increased by $13.8 million or 8.6% from the prior year. Professional and other fees increased $0.2 million, or 3.1%, to $5.5 million, compared to $5.3 million during the prior year due in part to outside services related to the IGX acquisition.

Salaries and benefits increased $11.1 million or 8.6% to $140.1 million, compared to $128.9 million during the prior year. Approximately 21% of this increase was due to higher variable compensation due to the increase in gross profit, and the remaining increase was due to an increase in the number of employees. Our technology segment had 1,020 employees as of March 31, 2016, an increase of 84, or 9.0%, from 936 at March 31, 2015, of which 83 of the positions added in the past year relate to sales, marketing, and professional services personnel.

General and administrative expenses increased $1.3 million, or 6.0%, to $22.4 million during the fiscal year ended March 31, 2016 compared to $21.1 million the prior year. The additional costs are substantially due to our expanding geographical presence. We also incurred additional expenses due to increases in personnel, including communications, and travel and entertainment expenses.
Depreciation and amortization expense: Depreciation and amortization expense increased $1.2 million, or 28.4%, to $5.5 million during the fiscal year ended March 31, 2016 compared to $4.3 million in the prior year. The increase in depreciation and amortization expense is related to the acquisition of IGX in December, 2015 and Evolve in August, 2014.

Segment earnings: As a result of the foregoing, operating income increased $2.7 million, or 4.5%, to $63.7 million for the year ended March 31, 2016 and Adjusted EBITDA increased 6.1% to $69.2 million for the year ended March 31, 2016.

Financing Segment

The results of operations for our financing segment for the years ended March 31, 2016 and 2015 were as follows (in thousands):

  Year Ended March 31, 
  2016  2015  Change 
Financing revenue $35,091  $34,728  $363   1.0%
Fee and other income  43   105   (62)  (59.0%)
Net sales  35,134   34,833   301   0.9%
Direct lease costs  10,360   11,062   (702)  (6.3%)
Gross profit  24,774   23,771   1,003   4.2%
                 
Professional and other fees  1,041   1,168   (127)  (10.9%)
Salaries and benefits  9,218   9,141   77   0.8%
General and administrative  729   1,404   (675)  (48.1%)
Depreciation and amortization  16   23   (7)  (30.4%)
Interest and financing costs  1,708   2,283   (575)  (25.2%)
Operating expenses  12,712   14,019   (1,307)  (9.3%)
                 
Operating income $12,062  $9,752  $2,310   23.7%
                 
Adjusted EBITDA $12,078  $9,775  $2,303   23.6%

Net sales: Net sales increased by $0.3 million, or 0.9%, to $35.1 million for the year ended March 31, 2016 due to an increase in financing revenue partially offset by slightly lower fees and other income. The increase in financing revenues was due to both higher post-contract earnings, and higher transactional gains, which were mostly offset by lower portfolio earnings. Post-contract earnings increased by $1.6 million to $11.9 million due mainly to higher renewal rentals over the prior year. Transactional gains increased $1.2 million for the year ended March 31, 2016 from $5.9 million in the prior year due to gains on an increased volume of sales of financing receivables. Total proceeds from sales of financing receivables were $223.3 million and $181.3 million for the years ended March 31, 2016 and 2015, respectively. Portfolio earnings decreased $1.9 million to $15.8 million for the year ended March 31, 2016 compared to the prior year, mainly due to a decrease in operating lease revenues.

Our total financing receivables and operating leases decreased as of March 31, 2016 to $132.4 million from $143.9 million in the prior year, which was mostly due to a reduction in our holdings of notes receivables that decreased $13.4 million to $43.4 million.

Direct lease costs: Direct lease costs decreased 6.3% or $0.7 million for the year ended March 31, 2016 as compared to the prior year, due to a decrease in depreciation expense related to a lower volume of operating lease revenues. Gross profit increased $1.0 million or 4.2% due to higher post contract earnings and higher transactional gains, partially offset by lower portfolio earnings compared to the prior year.

Operating expenses: For the year ended March 31, 2016, operating expenses decreased $1.3 million or 9.3%, primarily due to both lower interest and financing costs and higher reserves for credit losses in the prior year stemming from an increase in our portfolio balance. Professional and other fees decreased by $0.1 million or 10.9% to $1.0 million due to lower outside services fees. Salaries and benefits increased by $0.1 million, or 0.9%, to $9.2 million due to an increase in personnel in the second half of the fiscal year. Our financing segment employed 54 people as of March 31, 2016 compared to 50 employees as of March 31, 2015. General and administrative expenses decreased $0.7 million primarily due to lower reserves for credit losses and cost control.
Interest and financing costs: Costs decreased $0.6 million or 25.2% to $1.7 million during the year ended March 31, 2016, as compared to $2.3 million during the prior year. Our total notes payable decreased as of March 31, 2016, and our average balance of notes payable outstanding during the year was lower than during the year ended March 31, 2015. Our weighted average interest rate for our notes payable was 3.13% as of March 31, 2016 compared to 3.23% for March 31, 2015.

Segment earnings: As a result of the foregoing, operating income increased $2.3 million, or 23.7%, to $12.1 million for the year ended March 31, 2016 and Adjusted EBITDA increased 23.6% to $12.1 million for the year ended March 31, 2016.

Consolidated

Other income: We reported no other income for the year ended March 31, 2016 compared to $7.6 million in the prior year. On October 31, 2014, we received payment in the amount of $6.2 million related to our claim in a class action suit which alleged that a group of companies conspired to fix, raise, maintain or stabilize prices of certain flat panels used in many flat screen televisions, monitors and notebook computers.

In April 2014, we entered into an arrangement to repurchase the rights, title, and interest to payments due under a financing arrangement. This financing arrangement was previously assigned to a third party financial institution and accounted for as a secured borrowing. In conjunction with the repurchase agreement, we recognized a gain of $1.4 million.

Income taxes: Our effective income tax rates for the years ended March 31, 2016 and 2015 were 40.9% and 41.5%, respectively. The decrease in effective income tax rate is primarily due to changes in state apportionment factors.

Net earnings: Net earnings were $44.7 million for the year ended March 31, 2016, a decrease of 2.4% or $1.1 million as compared to $45.8 million in the prior fiscal year, due to $7.6 million in other income in the prior year.

Basic and fully diluted earnings per common share were $6.17 and $6.09, respectively, for the year ended March 31, 2016. Basic and fully diluted earnings per common share were $6.26 and $6.19, respectively, for the year ended March 31, 2015.

Weighted average common shares outstanding used in the calculation of basic and diluted earnings per common share for the year ended March 31, 2016 were 7.3 million. Weighted average common shares outstanding used in the calculation of basic and diluted earnings per common share for the year ended March 31, 2015 were 7.3 million and 7.4 million, respectively.
The Year Ended March 31, 2015 Compared to the Year ended March 31, 2014

Technology Segment

The results of operations for our technology segment for the years ended March 31, 2015 and 2014 were as follows (in thousands):

  Year Ended March 31, 
  2015  2014  Change 
Sales of product and services $1,100,884  $1,013,374  $87,510   8.6%
Fee and other income  7,565   8,037   (472)  (5.9%)
Net sales  1,108,449   1,021,411   87,038   8.5%
Cost of sales, product and services  887,673   827,875   59,798   7.2%
Gross profit  220,776   193,536   27,240   14.1%
                 
Professional and other fees  5,340   7,557   (2,217)  (29.3%)
Salaries and benefits  128,945   113,481   15,464   13.6%
General and administrative  21,127   18,334   2,793   15.2%
Depreciation and amortization  4,310   2,769   1,541   55.7%
Interest and financing costs  96   84   12   14.3%
Operating expenses  159,818   142,225   17,593   12.4%
                
Operating income $60,958  $51,311  $9,647   18.8%
                 
Adjusted EBITDA $65,268  $54,080  $11,188   20.7%

Net sales: Net sales for the year ended March 31, 2015 increased by $87.0 million to $1,108.4 million due to an increase in demand for products and services from our large and middle-market customers. Sales of product and services increased 8.6% due to a 12.5% increase in Adjusted gross billings of product and services to $1.44 billion from $1.28 billion last year, which was offset by a shift in product mix, as a higher proportion of our sales consisted of third party software assurance, maintenance and services, which are presented on a net basis. We had year over year growth in our quarterly sales of product and services for all quarters during the year ended March 31, 2015.

We experienced sequential increases in quarterly sales of product and services during the first three quarters of the year ended March 31, 2015 and a decrease during the fourth quarter. The sequential decrease in net sales for our fourth quarter over the prior quarter is primarily due to changes in customer demand as the IT spending cycle for many of our commercial customers tends to increase towards the end of their fiscal (calendar) years.

The sequential and year over year change in sales of product and services is summarized below:

Quarter Ended Sequential  Year over Year 
March 31, 2015  (13.0%)  3.2%
December 31, 2014  3.2%  15.6%
September 30, 2014  9.7%  9.7%
June 30, 2014  4.8%  5.8%
March 31, 2014  (2.5%)  11.4%
We rely on our vendors or distributors to fulfill a large majority of our shipments to our customers. As of March 31, 2015, we had open orders of $74.9 million and deferred revenue of $37.0 million. As of March 31, 2014, we had open orders of $81.4 million and deferred revenues of $23.2 million. The increase of $13.8 million in deferred revenues as of March 31, 2015 over the prior year is due to purchases of equipment that have been invoiced to our customers but had yet to be delivered as of March 31, 2015.
We analyze sales of products and services by customer end market and by manufacturer, as opposed to discrete product and service categories. The percentage of sales of product and services by industry and vendor is summarized below:

  FY15  FY14  Change
Revenue by customer end market:
           
Technology 19%   21%   (2%) 
Telecom, Media & Entertainment 18%   18%   - 
Financial Services 10%   11%   (1%) 
SLED 22%   20%   2% 
Health Care 10%   11%   (1%) 
Other 21%   19%   2% 
Total 100%   100%     
            
Revenue by vendor :
           
Cisco Systems 49%   48%   1% 
Hewlett Packard 8%   10%   (2%) 
NetApp 7%   8%   (1%) 
Sub-total 64%   66%   (2%) 
Other 36%   34%   2% 
Total 100%   100%     

Our revenues by customer end market have remained consistent over the year as approximately 80% of our revenues were generated from customers within the five end markets identified above. In fiscal year 2015 we had an increase in revenues from customers in the SLED industry, offset by decreases in the technology industry. These changes were driven by changes in customer buying cycles and specific IT related initiatives; rather than the acquisition or loss of a customer or set of customers. No customer accounted for more than 10% of our revenues in fiscal year 2015 or 2014.

The majority of our revenues by vendor are derived from Cisco Systems, Hewlett Packard and NetApp, which in total, declined to 64% of our in fiscal year 2015 from 66% last year. This decrease is due to competition and developments in the IT industry. None of the vendors included within other exceeded 3% of total revenues.

Cost of sales, product and services: The 7.2% increase in cost of sales, product and services, was due to the increase in sales of product and services, combined with an increase in margins. Our gross margin on the sale of product and services increased to 19.4% for the year ended March 31, 2015, from 18.3% in the prior year due to an increase in sales of third-party software assurance, maintenance, and services, for which the revenues are presented on a net basis, as well as increases in revenues from our professional and managed service. There was a 0.1% increase in the percentage of vendor incentives earned as a percentage of sales of product and services for the year ended March 31, 2015 compared to the prior year.

There are ongoing changes to the incentive programs offered to us by our vendors. Accordingly, if we are unable to maintain the level of vendor incentives we are currently receiving, gross margins may decrease.

Operating expenses: Total operating expenses of $159.8 million for the year ended March 31, 2015 increased by $17.6 million or 12.4% from the prior year. Professional and other fees decreased $2.2 million, or 29.3%, to $5.3 million, compared to $7.6 million during the prior year due to $1.9 million of fees incurred in the prior period related to a patent infringement litigation.

Salaries and benefits increased $15.5 million or 13.6% to $128.9 million, compared to $113.5 million during the prior year. Approximately 48% of this increase was due to higher variable compensation due to the increase in gross profit, and the remaining increase was due to an increase in the number of employees. Our technology segment had 936 employees as of March 31, 2015, an increase of 57, or 6.5%, from 879 at March 31, 2014, of which 88% of the positions added in the past year relate to sales, marketing, and professional services personnel.

General and administrative expenses increased $4.3 million, or 20.5%, to $25.4 million during the fiscal year ended March 31, 2015 compared to $21.1 million the prior year.
Depreciation and amortization expense:  The increase in depreciation and amortization expense is primarily due to $1.5 million of additional costs due related to the acquisition of Evolve in August, 2014, the acquisition of AdviStor in November, 2013 and our next generation data center that went live in February, 2014. We also incurred additional expenses due to increases in personnel, including communications, and travel and entertainment expenses.

Segment earnings: As a result of the foregoing, operating income increased $9.6 million, or 18.8%, to $61.0 million and Adjusted EBITDA increased $11.2 million or 20.7% to $65.3 million for the year ended March 31, 2015.

Financing Segment

The results of operations for our financing segment for the years ended March 31, 2015 and 2014 were as follows (in thousands):

  Year Ended March 31, 
  2015  2014  Change 
Financing revenue $34,728  $35,896  $(1,168)  (3.3%)
Fee and other income  105   229   (124)  (54.1%)
Net sales  34,833   36,125   (1,292)  (3.6%)
Direct lease costs  11,062   12,748   (1,686)  (13.2%)
Gross profit  23,771   23,377   394   1.7%
                 
Professional and other fees  1,168   1,484   (316)  (21.3%)
Salaries and benefits  9,141   9,670   (529)  (5.5%)
General and administrative  1,404   1,549   (145)  (9.4%)
Depreciation and amortization  23   23   -   0.0%
Interest and financing costs  2,283   1,864   419   22.5%
Operating expenses  14,019   14,590   (571)  (3.9%)
                 
Operating income $9,752  $8,787  $965   11.0%
                 
Adjusted EBITDA $9,775  $8,810  $965   11.0%

Net sales: Net sales decreased by $1.3 million, or 3.6%, to $34.8 million for the year ended March 31, 2015 due to a decrease in both financing revenue and fee and other income. The decrease in financing revenues was due to lower transactional gains, partially offset by higher post-contract earnings. Transactional gains decreased to $5.9 million for the year ended March 31, 2015 from $8.5 million in the prior year due to lower margins realized on sales of financing receivables. Total proceeds from sales of financing receivables were $181.3 million and $187.2 million for the years ended March 31, 2015 and 2014, respectively. Post-contract earnings increased to $10.3 million for the year ended March 31, 2015 from $8.8 million in the prior year, due to an increase in renewal rent.

Our total financing receivables and operating leases increased slightly as of March 31, 2015 to $143.9 million from $143.7 million in the prior year, which was due to originations during the year, offset by repayments and sales of financial assets.

Direct lease costs: Direct lease costs decreased 13.2% or $1.7 million for the year ended March 31, 2015 as compared to the prior year, due to a decrease in depreciation expense related to a lower volume of operating lease revenues. Gross profit increased $0.4 million due to a reduction in direct lease cost for the year ended March 31, 2015 of $1.7 million principally due to lower depreciation for assets under operating leases compared to the prior year. Lower revenue of $1.3 million mostly offset the decrease in direct lease costs for the year ended March 31, 2015.

Operating expenses: For the year ended March 31, 2015, operating expenses decreased $0.6 million, or 3.9% as decreases in professional fees and salaries and benefits were offset by higher interest and financing costs. Professional and other fees decreased by $0.3 million or 21.3% to $1.2 million due to lower legal fees. Salaries and benefits decreased by $0.5 million, or 5.5%, to $9.1 million due a slight decrease in personnel. Our financing segment employed 50 people as of March 31, 2015 compared to 55 employees as of March 31, 2014. General and administrative expenses decreased $0.1 million primarily due to lower reserves for credit losses.
Interest and financing costs increased $0.4 million or 22.5% to $2.3 million during the year ended March 31, 2015, as compared to $1.9 million during the prior year. While total notes payable decreased as of March 31, 2015, our average balance of notes payable outstanding during the year was higher due to additional borrowings in the fourth quarter of fiscal year 2014. Our weighted average interest rate for our notes payable was 3.23% as of March 31, 2015 compared to 3.48% for March 31, 2014.

Segment earnings: As a result of the foregoing, both operating income and Adjusted EBITDA increased $1.0 million, or 11.0%, to $9.8 million.

Consolidated

Other income: On October 31, 2014, we received payment in the amount of $6.2 million related to our claim in a class action suit which alleged that a group of companies conspired to fix, raise, maintain or stabilize prices of certain flat panels used in many flat screen televisions, monitors and notebook computers.

In April 2014, we entered into an arrangement to repurchase the rights, title, and interest to payments due under a financing arrangement. This financing arrangement was previously assigned to a third party financial institution and accounted for as a secured borrowing. In conjunction with the repurchase agreement, we recognized a gain of $1.4 million.

Income taxes: Our effective income tax rates for the years ended March 31, 2015 and 2014 were 41.5% and 41.3%, respectively. The increase in effective income tax rate is primarily due to changes in state apportionment factors.

Net earnings: Net earnings were $45.8 million for the year ended March 31, 2015, an increase of 30.0% as compared to $35.3 million in the prior fiscal year.

Basic and fully diluted earnings per common share were $6.26 and $6.19, respectively, for the year ended March 31, 2015. Basic and fully diluted earnings per common share were $4.41 and $4.37, respectively, for the year ended March 31, 2014.

Weighted average common shares outstanding used in the calculation of basic and diluted earnings per common share for the year ended March 31, 2015 were 7.3 million and 7.4 million and for the year ended March 31, 2014 were, 7.9 million and 8.0 million, respectively.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity Overview

Our primary sources of liquidity have historically been cash and cash equivalents, internally generated funds from operations, and borrowings, both non-recourse and recourse. We have used 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 subsidiary ePlus Technology, inc., part of our technology segment, finances its operations with funds generated from operations, and with a credit facility with Wells Fargo Commercial Distribution Finance, LLC or (“WFCDF”). (f/k/a GE Commercial Distribution Finance LLC). ePlus Technology, inc’s agreement with WFCDF has an aggregate credit limit of $250 million. There are two components of this facility: (1) a floor plan component; and (2) an accounts receivable component. After a customer places a purchase order with us and we have completed our credit check, we place an order for the equipment with one of our vendors. Generally, most purchase orders from us to our vendors are first financed under the floor plan component and reflected in “accounts payable—floor plan” in our consolidated balance sheets. Payments on the floor plan component are due on three specified dates each month, generally 30-60 days from the invoice date. On the due date of the invoices financed by the floor plan component, the invoices are paid by the accounts receivable component of the credit facility. The balance of the accounts receivable component is then reduced by payments from our available cash. The outstanding balance under the accounts receivable component is recorded as recourse notes payable on our consolidated balance sheets. There was no outstanding balance at March 31, 2016 or March 31, 2015, while the maximum credit limit was $30.0 million for both periods. The borrowings and repayments under the floor plan component are reflected as “net borrowings on floor plan facility” in the cash flows from financing activities section of our consolidated statements of cash flows.
Most customer payments in our technology segment are remitted to our lockboxes. Once payments are cleared, the monies in the lockbox accounts are automatically transferred to our operating account on a daily basis. On the due dates of the floor plan component, we make cash payments to WFCDF. These payments from the accounts receivable component to the floor plan component and repayments from our cash are reflected as “net borrowings on floor plan facility” in the cash flows from financing activities section of our consolidated statements of cash flows. We engage in this payment structure in order to minimize our interest expense and bank fees in connection with financing the operations of our technology segment.

We believe that cash on hand, and funds generated from operations, together with available credit under our credit facility, will be sufficient to finance our working capital, capital expenditures and other requirements for at least the next twelve calendar months.

Our ability to continue to fund our planned growth, both internally and externally, is dependent upon our ability to generate sufficient cash flow from operations or to obtain additional funds through equity or debt financing, or from other sources of financing, as may be required. While at this time we do not anticipate requiring any additional sources of financing to fund operations, if demand for IT products declines, our cash flows from operations may be substantially affected.

Cash Flows

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

  Year Ended March 31, 
  2016  2015  2014 
Net cash provided by (used in) operating activities $13,382  $13,847  $(8,223)
Net cash used in investing activities  (50,179)  (30,592)  (28,797)
Net cash provided by financing activities  55,176   12,820   64,459 
Effect of exchange rate changes on cash  212   (79)  20 
             
Net increase (decrease) in cash and cash equivalents $18,591  $(4,004) $27,459 

Cash flows from operating activities. Cash provided by operating activities totaled $13.4 million in the year ended March 31, 2016. Net earnings adjusted for the impact of non-cash items was $54.3 million. Net changes in assets and liabilities resulted in a decrease to cash of $40.9 million, primarily due to cash used for financing receivables of $9.3 million, and additional working capital needs in our technology segment. The change in financing receivables included within cash flows from operations consists of assets financed by our financing segment that were purchased through our technology segment.

Cash provided by operating activities totaled $13.8 million in the year ended March 31, 2015. Net earnings adjusted for the impact of non-cash items was $45.5 million. Net changes in assets and liabilities resulted in a decrease to cash of $31.6 million, primarily due to cash used for financing receivables of $19.6 million, and additional working capital needs in our technology segment. The change in financing receivables included within cash flows from operations consists of assets financed by our financing segment that were purchased through our technology segment.

Cash used in operating activities totaled $8.2 million in the year ended March 31, 2014. Net earnings adjusted for the impact of non-cash items was $33.7 million. Net changes in assets and liabilities resulted in a decrease to cash of $41.9 million, primarily due to cash used for financing receivables of $30.8 million, which is used by our financing segment for investments in notes receivables and leases, and additional working capital needs in our technology segment.
In order 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 March 31, 
  2016  2015  2014 
          
Days sales outstanding (1)  56 �� 60   53 
Days inventory outstanding (2)  7   8   7 
Days payable outstanding (3)  (45)  (45)  (41)
Cash conversion cycle  18   23   19 

(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 of product and services 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 of product and services 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, product and services for the same three-month period.

Our standard payment term for customers is between 30-60 days; however, certain customers or orders may be approved for extended payment terms. Invoices processed through our credit facility, or the A/P-floor plan balance, are typically paid within 45-60 days from the invoice date, while A/P trade invoices are typically paid within 30 days from the invoice date.

Our cash conversion cycle decreased to 18 days at March 31, 2016, compared to 23 days at March 31, 2015, primarily driven by a decrease in DSO. Our DSO as of March 31, 2016 was impacted by an increase in Adjusted gross billings of product and services of 17.4% over the prior year’s fourth quarter, while the average accounts receivable trade balance only increased 9.4% for the same period. The remaining decrease in our DSO was due to timing of collections.

Our cash conversion cycle increased to 23 days at March 31, 2015, compared to 19 days at March 31, 2014, primarily driven by an increase in DSO, which was partially offset by an increase in DPO. Our DSO as of March 31, 2015 was negatively impacted by an increase in deferred revenues, which was due to certain equipment orders for which delivery had not occurred as of March 31, 2015. The remaining increase in our DSO was due to timing of collections. The increase in DPO was due to an increase in the average balance of invoices processed through our credit facility.

Cash flows related to investing activities. Cash used in investing activities was $50.2 million during the year ended March 31, 2016, primarily due to net issuances of financing receivables of $14.6 million, purchases of property, equipment, and operating lease equipment, and assets to be leased of $25.9 million and cash used in acquisitions, net of cash acquired of $16.6 million, partially offset by proceeds from sale of property, equipment, and operating lease equipment of $6.9 million. The net issuance of financing receivables included within cash flows from investing activities consists of assets financed by our financing segment that were purchased from third party vendors.

Cash used in investing activities was $30.6 million during the year ended March 31, 2015, primarily due to net issuances of financing receivables of $21.7 million, purchases of property, equipment, and operating lease equipment, and assets to be leased of $11.9 million and cash used in acquisitions, net of cash acquired of $8.1 million, partially offset by proceeds from sale of property, equipment, and operating lease equipment of $8.6 million and maturities of supplemental benefit plan investments of $2.5 million. The net issuance of financing receivables included within cash flows from investing activities consists of assets financed by our financing segment that were purchased from third party vendors.

Cash used in investing activities was $28.8 million during the year ended March 31, 2014, primarily due to net issuances of notes receivable of $20.0 million, purchases of property, equipment, and operating lease equipment, and assets to be leased of $15.4 million and cash used in acquisitions, net of cash acquired of $2.8 million, partially offset by proceeds from sale of property, equipment, and operating lease equipment of $4.1 million.

Cash flows from financing activities. Cash provided by financing activities was $55.2 million for the year ended March 31, 2016, driven by net borrowings of non-recourse and recourse notes payable of $44.6 million.

Cash provided by financing activities was $12.8 million for the year ended March 31, 2015, driven by net borrowings of non-recourse and recourse notes payable of $50.5 million. This cash provided by financing activities is partially offset by repurchases of common stock of $37.7 million.
Cash provided by financing activities was $64.5 million for the year ended March 31, 2014, driven by net borrowings of non-recourse and recourse notes payable of $49.3 million and net borrowings on the floor plan facility of $27.2 million. This cash provided by financing activities is partially offset by repurchases of common stock of $13.2 million.

Non-Cash Activities

We assign contractual payments due under lease and financing agreements to third-party financial institutions, which are accounted for as non-recourse notes payable. As a condition to the assignment agreement, 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, if the structure of the agreement does not require a trustee, the customer will continue to make payments to us, and we will remit the payment to the financial institution. The economic impact to us under either assignment structure is similar, in that the assigned contractual payments are paid by the customer and remitted to the lender to pay down the corresponding non-recourse notes payable. However, these assignment structures are classified differently within our consolidated statements of cash flows. More specifically, we are required to exclude non-cash transactions from our consolidated statement of cash flows, so certain contractual payments made by the customer to the trust are excluded from our operating cash receipts and the corresponding repayment of the non-recourse notes payable from the trust to the third-party financial institution are excluded from our cash flows from financing activities. Contractual payments received by the trust and paid to the lender on our behalf are disclosed as a non-cash financing activity.

Liquidity and Capital Resources

We may utilize non-recourse notes payable to finance approximately 80% to 100% of the purchase price of the assets being leased or financed by our customers. Any balance of the purchase price remaining after non-recourse funding and any upfront payments received from the customer (our equity investment in the equipment) must generally be financed by cash flows from our operations, the sale of the equipment leased to third parties, or other internal means. Although 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.

The financing necessary to support our lease and financing activities has been provided by our cash and non-recourse borrowings. We monitor our exposure closely. Historically, we have obtained mostly non-recourse borrowings from third party banks and finance companies. We continue to be able to obtain financing through our traditional lending sources. Non-recourse financings are loans whose repayment is the responsibility of a specific customer, although we may make representations and warranties to the lender regarding the specific contract or have ongoing loan servicing obligations. Under a non-recourse loan, we borrow from a lender an amount based on the present value of the contractually committed lease payments under the lease at a fixed rate of interest, and the lender secures a lien on the financed assets. When the lender is fully repaid from the lease payments, the lien is released and all further rental or sale proceeds are ours. 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 of each lease, and the lender’s only recourse, upon default by the lessee, is against the lessee and the specific equipment under lease.

At March 31, 2016, our non-recourse notes payable portfolio decreased 16.6% to $44.1 million, as compared to $52.9 million at March 31, 2015. Our recourse notes payable decreased 9.4% to $3.3 million as of March 31, 2016, compared to $3.7 million as of March 31, 2015.

Whenever desirable, we arrange for equity investment financing, which includes selling lease payments, including the residual portions, to third parties and financing the equity investment on a non-recourse basis. We generally retain customer control and operational services, and have minimal residual risk. We usually reserve the right to share in remarketing proceeds of the equipment on a subordinated basis after the investor has received an agreed-to return on its investment.

Credit Facility — Technology

Our subsidiary, ePlus Technology, inc., has a financing facility from WFCDF to finance its working capital requirements for inventories and accounts receivable. There are two components of this facility: (1) a floor plan component; and (2) an accounts receivable component. This facility has full recourse to ePlus Technology, inc. and is secured by a blanket lien against all its assets, such as chattel paper, receivables and inventory. As of March 31, 2016, the facility had an aggregate limit of the two components of $250.0 million with an accounts receivable sub-limit of $30.0 million.
Availability under the facility may be limited by the asset value of equipment we purchase or accounts receivable, and may be further limited by certain covenants and terms and conditions of the facility. These covenants include but are not limited to a minimum excess availability of the facility and minimum earnings before interest, taxes, depreciation and amortization of ePlus Technology, inc. We were in compliance with these covenants as of March 31, 2016. Interest on the facility is assessed at a rate of the One Month LIBOR plus two and one half percent if the payments are not made on the three specified dates each month. The facility also requires that financial statements of ePlus Technology, inc. be provided within 45 days of each quarter and 90 days of each fiscal year end and also requires other operational reports be provided on a regular basis. Either party may terminate the facility with 90 days advance written notice.

We are not, and do not believe that we are reasonably likely to be, in breach of the WFCDF credit facility. In addition, we do not believe that the covenants of the WFCDF credit facility materially limit our ability to undertake financing. In this regard, the covenants apply only to our subsidiary, ePlus Technology, inc. This credit facility is secured by the assets of only ePlus Technology, inc. and the guaranty as described below.

The facility provided by WFCDF requires a guaranty of $10.5 million by ePlus inc. The guaranty requires ePlus inc. to deliver its annual audited financial statements by a certain date. We have delivered the annual audited financial statements for the year ended March 31, 2015, as required. 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.

Floor Plan Component

The traditional business of ePlus Technology, inc. as a seller of computer technology, related peripherals and software products, is in part financed through a floor plan component in which interest expense for the first thirty to sixty days, in general, is not charged. The floor plan liabilities are recorded as accounts payable—floor plan on our consolidated balance sheets, as they are normally repaid within the fifteen to sixty-day time frame and represent assigned accounts payable originally generated with the manufacturer/distributor. In some cases we are able to pay invoices early and receive a discount, but if the fifteen to sixty-day obligation is not paid timely, interest is then assessed at stated contractual rates.

The respective floor plan component credit limits and actual outstanding balance payables for the dates indicated were as follows (in thousands):
Maximum Credit Limit
at March 31, 2016
  
Balance as of
March 31, 2016
  
Maximum Credit Limit
at March 31,2015
  
Balance as of
March 31, 2015
 
$250,000  $121,893  $225,000  $99,418 

Accounts Receivable Component

Included within the credit facility, ePlus Technology, inc. has an accounts receivable component from WFCDF, which has a revolving line of credit. On the due date of the invoices financed by the floor plan component, the invoices are paid by the accounts receivable component of the credit facility. The balance of the accounts receivable component is then reduced by payments from our available cash. The outstanding balance under the accounts receivable component is recorded as recourse notes payable on our consolidated balance sheets. There was no balance outstanding for the accounts receivable component at March 31, 2016 or March 31, 2015, while the maximum credit limit was $30.0 million for both periods.

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 the amount of these guarantees in the event of default in the performance of our obligations. We are in compliance with the performance obligations under all service contracts for which there is a performance guarantee, and we believe that any liability incurred in connection with these guarantees would not have a material adverse effect on our consolidated statements of operations.

Off-Balance Sheet Arrangements

As part of our ongoing business, we do not participate in transactions that generate relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K or other contractually narrow or limited purposes. As of March 31, 2016 and 2015, 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 forces. We may also start offices in new geographic areas, which may require a significant investment of cash. We may also acquire technology companies to expand and enhance the platform of bundled solutions to provide additional functionality and value-added services. As a result, we may require additional financing to fund our strategy, implementation and potential future acquisitions, which may include additional debt and equity financing.

Inflation

For the periods presented herein, inflation has been relatively low and we believe that inflation has not had a material effect on our results of operations.

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, major customers or vendors of ours.

Our quarterly results of operations are susceptible to fluctuations for a number of reasons, including, but not limited to currency fluctuations, reduction in IT spending, 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 at the expiration of a lease term or prior to such expiration, to a lessee or to a third party and the transfer of financial assets. Sales of equipment and transfers of financial assets may have the effect of increasing revenues and net income during the quarter in which the sale occurs, and reducing revenues and net income otherwise expected in subsequent quarters. See Part I, Item 1A, “Risk Factors,” in our 2015 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.

Contractual Obligations

The impact that our contractual obligations as of March 31, 2016 are expected to have on our liquidity and cash flow in future periods is as follows (in thousands):

     Payments Due by Period 
  Total  1 year  Years 2 & 3  Years 4 & 5  More than 5 years 
                
Recourse & non-recourse notes payable (1) $47,422  $28,330  $17,555  $1,537  $- 
Interest payments on recourse and non-recourse notes payable  1,724   1,148   525   51   - 
Operating lease obligations  10,808   4,207   5,268   1,333   - 
Total $59,954  $33,685  $23,348  $2,921  $- 

(1)Payments reflected principal amounts related to the recourse and non-recourse notes payable.
ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


Our financial position is exposed to a variety of risks, including interest rate risks and foreign currency. Additionally, we have seen an increase in these risks and related uncertainties with increased volatility in the financial markets in the current environment with supply chain shortages.

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INTEREST RATE RISK

Although a substantial portion of our liabilities are non-recourse, fixed-interest-rate instruments, we utilize our lines of credit and other financing facilities which are subject to fluctuations in short-term interest rates. These non-recourse instruments, which are denominated in U.S.US dollars, were entered into for other than trading purposes and, with the exception ofexcept for amounts drawn under the WFCDF facility,Credit Facility, 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. Our financing transactions are funded with our cash flows, not debt, and may be 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 facilityCredit Facility bear interest at a market-based variable rate. As of March 31, 2016, the aggregate fair value of our recourse and non-recourse borrowings approximated their carrying value.


In December 2015, we purchased 100% of the stock of IGXGlobal UK, Ltd, a company formed and operatedFOREIGN CURRENCY RISK

We have transactions in the United Kingdom with a functional currency offoreign currencies, primarily in British Pounds. In addition, the company also transacts inPounds, Euros, and U. S. Dollars.Indian Rupees. There is a potential for exposure to fluctuations in foreign currency rates resulting primarily from the translation exposure associated with the preparation of our consolidated financial statements. In addition, we have foreign currency exposure when transactions are not denominated in theour subsidiary’s functional currency. To date, our United Kingdomforeign operations are insignificant in relation to total consolidated operations, and we believe that potential fluctuations in currency exchange rates will not have a material effect on our financial position.


We have operationslease assets in foreign countries, including Canada, the UK, and Iceland.several other European countries. As such,a lessor, we have entered into lease contracts and non-recourse, fixed-interest-rate financing denominated in Canadian dollars and in Icelandic krona. In our fiscal year beginning April 1, 2016, we began entering in financing transactions and non-recourse, fixed-interest-rate financingassets for amounts denominated in British Pounds, in the United Kingdom. To date,Euros, and Canadian dollars. As our foreign operations have been insignificant andsmaller compared to our domestic operations, we believe that potential fluctuations in currency exchange rates will not have a material effect on our financial position.


ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


See the consolidated financial statements and schedules listed in the accompanying “Index to Financial Statements and Schedules.”


ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE


None.


ITEM 9A.CONTROLS AND PROCEDURES


EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
Evaluation
The Company’s management, with the participation of Disclosure Controlsthe Chief Executive Officer (“CEO”) and Procedures

Asthe Chief Financial Officer (“CFO”), has evaluated the effectiveness of the Company’s disclosure controls and procedures, or “disclosure controls”, 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 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 Form 10-K annual report, is recorded, processed, summarized, and reported within the time periods specified in the U.S. Securities and Exchange Commission’sSEC’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 on the evaluation described above, the Chief Executive OfficerCEO and Chief Financial OfficerCFO concluded that disclosure controls and procedures as of March 31, 20162023, were effective in ensuring information required to be disclosed in our SEC reports was recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information was accumulated and communicated to our management, including our Chief Executive OfficerCEO and Chief Financial Officer,CFO, as appropriate, to allow timely decisions regarding required disclosure.

45MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Management’s Report on Internal Control Over Financial Reporting


Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Exchange Act Rule 13a-15(f). This system is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles.


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Our internal control over financial reporting includes those policies and procedures that: (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect our transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the consolidated financial statements.


Our management performed an assessment of the effectiveness of our internal control over financial reporting as of March 31, 2016,2023, utilizing the criteria described in the “Internal Control — Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). The objective of this assessment was to determine whether our internal control over financial reporting was effective as of March 31, 2016.2023.


Management’s assessment included evaluation of such elements as the design and operating effectiveness of key financial reporting controls, process documentation, accounting policies, and our overall control environment. Based on this assessment, management determined that, as of March 31, 2016,2023, the Company maintained effective internal control over financial reporting.


Deloitte & Touche LLP, an independent registered public accounting firm, who audited the consolidated financial statements of the Company included in this Annual Report on Form 10-K, , has also audited the effectiveness of the Company’s internal control over financial reporting as stated in its report appearing on page F-3.F-5.


Changes in Internal Control Over Financial ReportingCHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING


There have not been any changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934) that occurred during the quarter ended March 31, 2016,2023, which have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


Limitations on the Effectiveness of ControlsLIMITATIONS ON THE EFFECTIVENESS OF CONTROLS


Our management, including our CEO and CFO, does 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.


ITEM 9B.OTHER INFORMATION


None.

ITEM 9C.DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

46None.

PART III


Except as set forth below, the information required by Items 10, 11, 12, 13 and 14 is incorporated by reference from our definitive 2023 Proxy Statement to be filed with the Securities and Exchange CommissionSEC pursuant to Regulation 14A not later than 120 days after the close of our fiscal year.


ITEM 10.DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE


Information about our directors may be found under the caption “Proposals – Proposal“Proposal 1 – Election of Directors” in our Proxy Statement for the 20162023 Annual Meeting of Stockholders (the “Proxy Statement”). The information in the 2023 Proxy Statement set forth under the captions of “Section 16 (a) Beneficial Ownership Reporting Compliance, Related Person Transactions“Corporate Governance – Code of Conduct” and Indemnification”, “Committees of the Board of Directors” and “Corporate Governance”“Board Committees” is incorporated herein by reference.


The information under the heading “Executive Officers” in Item 1 of this report is incorporated in this section by reference.


Code
48
Table of EthicsContents

CODE OF ETHICS

We have a code of ethics that applies to all of our employees, including our principal executive officer, principal financial officer, principal accounting officer and our Board. The Code of Conduct is available on our website at www.ePlus.com/ethicswww.eplus.com/investors/corporate-governance-legal/code-of-conduct. We will disclose on our website any amendments to or waivers from any provision of the Code of Conduct that applies to any of the directors or executive officers.


ITEM 11.EXECUTIVE COMPENSATION


The information in the 2023 Proxy Statement set forth under the captions “Directors’ Compensation”“Director Compensation,” “Compensation Discussion and “Executive Compensation”Analysis,” “2023 Executive Compensation,” and “Corporate Governance – Compensation Committee Interlocks and Insider Participation” is incorporated herein by reference.


ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS


The information in the 2023 Proxy Statement set forth under the captions “Executive Compensation – Equity“Equity Compensation Plan Information,” “Security Ownership of Certain Beneficial Owners”Information” and “Security Ownership by Management”“Stock Ownership” is incorporated herein by reference.


ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE


The information in the 2023 Proxy Statement set forth under the caption “Section 16(a) Beneficial Ownership Reporting Compliance,“Corporate Governance - Related Person TransactionsTransactions” and Indemnification” and “Corporate Governance”“Independence of Our Board of Directors” is incorporated herein by reference.


ITEM 14.PRINCIPAL ACCOUNTING FEES AND SERVICES


The information in the 2023 Proxy Statement set forth under the caption “Proposals – Proposal“Proposal 3 – Ratification of the appointmentSelection of Deloitte and& Touche LLP as our independent auditorsIndependent Registered Public Accounting Firm for our fiscal year endingFiscal Year Ending March 31, 2017”2023” is incorporated herein by reference.
PART IV


ITEM 15.EXHIBITS AND FINANCIAL STATEMENT SCHEDULES


(a)(1) Financial StatementsFINANCIAL STATEMENTS


The consolidated financial statements listed in the accompanying Index to Financial Statements and Schedules are filed as a part of this report and incorporated herein by reference.


(a)(2) Financial Statement ScheduleFINANCIAL STATEMENT SCHEDULE




(a)(3) Exhibit ListEXHIBIT LIST


Exhibits 10.2 through 10.1610.12 are management contracts or compensatory plans or arrangements.


Exhibit
No.
Exhibit Description
ePlus inc. Amended and Restated Certificate of Incorporation, filed on September 19, 2008 (Incorporated herein by reference to Exhibit 3.1 to our Quarterly Report on Form 10-Q for the period ended September 30, 2008)as last amended November 9, 2021 (filed herewith).
  
Amended and Restated Bylaws ofePlus inc., as amended February 17, 2016 (Incorporatedof March 2, 2022. (Incorporated herein by reference to Exhibit 3.13.2 to our CurrentAnnual Report on Form 8-K filed on February 19, 2016)10-K for the fiscal year ended March 31, 2022).
  
4Specimen Certificate of Common Stock (Incorporated herein by reference to Exhibit 4.1 to our Registration Statement on Form S-1 (File No. 333-11737) originally filed on September 11, 1996).

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Description of ePlus inc.’s securities registered under Section 12 of the Securities Exchange Act of 1934. (Incorporated herein by reference to Exhibit 4.2 to our Annual Report on Form 10-K for the fiscal year ended March 31, 2022).
  
Form of Indemnification Agreement entered into by and between ePlus and its directors and officers (Incorporated herein by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on February 19,August 23, 2016).
  
Employment Agreement dated September 27, 2011, by and between ePlus inc. and Phillip G. Norton (Incorporated herein by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on September 28, 2011).
10.3
Amendment No. 1 to Employment Agreement effective August 1, 2012 by and between ePlus inc. and Phillip G. Norton (Incorporated herein by reference to Exhibit 10.5 to our Current Report on Form 8-K filed on August 3, 2012).
10.4
Amendment No. 2 to Employment Agreement effective July 1, 2013, by and between ePlus inc. and Phillip G. Norton (Incorporated herein by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on June 20, 2013).
10.5
Amendment No. 3 to Employment Agreement dated February 14, 2014, by and between ePlus inc. and Phillip G. Norton (Incorporated herein by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on February 18, 2014).
10.6Amendment No. 4 to Employment Agreement dated June 9, 2015, by and between ePlus inc. and Phillip G. Norton (Incorporated herein by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on June 15, 2015).
10.7
Amended and Restated Employment Agreement effective August 1, 2013,September 6, 2017, by and between ePlus inc. and Mark P. Marron (Incorporated herein by reference to Exhibit 10.1 to our CurrentQuarterly Report on Form 8-K filed on August 2, 2013)10-Q for the period ended December 31, 2017).
  
10.8
Amendment No. 1#1, effective July 16, 2018, to Amended and Restated Employment Agreement effective June 9, 2015,September 6, 2017, by and between ePlus inc. and Mark P. Marron (Incorporated herein by reference to Exhibit 10.2 to our Current Report on Form 8-K filed on June 15, 2015)July 18, 2018).
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Amendment #2, effective November 14, 2019, to Amended and Restated Employment Agreement effective September 6, 2017, by and between ePlus inc. and Mark P. Marron (Incorporated herein by reference to Exhibit 10.2 to our Quarterly Report on Form 10-Q for the period ended December 31, 2019).
10.9
Amended and Restated Employment Agreement effective August 1, 2013,September 6, 2017, by and between ePlus inc. and Steven J. MencariniElaine D. Marion (Incorporated herein by reference to Exhibit 10.410.3 to our Quarterly Report on Form 10-Q for the period ended December 31, 2017).
Amendment #1, effective November 14, 2019, to Amended and Restated Employment Agreement, effective September 6, 2017, by and between ePlus inc. and Elaine D. Marion (Incorporated herein by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q for the period ended December 31, 2019).
Employment Agreement, effective May 7, 2018, by and between ePlus inc. and Darren S. Raiguel. (Incorporated herein by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on August 2, 2013)May 9, 2018).
  
10.10
Amendment No. 1, effective November 14, 2019, to Amended and Restated Employment Agreement, effective August 1, 2013,May 7, 2018, by and between ePlus inc. and Elaine D. MarionDarren S Raiguel. (Incorporated herein by reference to Exhibit 10.3 to our Current Report on Form 10-Q filed on February 6, 2020).
ePlus inc. 2017 Non-Employee Director Long-Term Incentive Plan (updated to reflect the stock split effected December 13, 2021) as amended (Incorporated herein by reference to Exhibit 10.6 to our Current Report on Form 10-Q for the period ended December 31, 2021).
ePlus inc. 2012 Employee Long-term Incentive Plan (updated to reflect stock split effected March 31, 2017) (Incorporated herein by reference to Exhibit 10.8 to our Annual Report on Form 10-K for the fiscal year ended March 31, 2015)2017).
  
Amendment No.ePlus inc. Cash Incentive Plan, effective April 1, 2018, (Incorporated herein by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on July 18, 2018).
ePlus 2021 Employee Long-Term Incentive Plan (updated to reflect the stock split effected December 13, 2021) as amended (Incorporated herein by reference to Exhibit 10.1 to our Current Report on Form 10-Q for the period ended December 31, 2021).
ePlus inc. 2022 Employee Stock Purchase Plan (Incorporated herein by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on September 20, 2022).
First Amended and Restated EmploymentCredit Agreement, effective June 9, 2015,dated as of October 13, 2021, by and between 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 Elaine D. Marionthe Lenders party thereto (Incorporated herein by reference to Exhibit 10.1 to our Current Report in Form 8-K filed on October 19, 2021). *

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Guaranty and Security Agreement, dated as of October 13, 2021, by and among ePlus Technology, inc., ePlus Technology Services, inc., SLAIT Consulting, LLC, certain future subsidiaries of ePlus inc., as guarantors, Wells Fargo Commercial Distribution Finance, LLC as administrative agent for the benefit of Secured Parties (Incorporated herein by reference to Exhibit 10.2 to our Current Report on Form 8-K filed on October 19, 2021). *
First Amended and Restated Collateralized Guaranty, dated as of October 13, 2021, by and among ePlus Group, inc. and Wells Fargo Commercial Distribution Finance, LLC as agent for the benefit of Secured Parties (Incorporated herein by reference to Exhibit 10.3 to our Current Report on Form 8-K filed on June 15, 2015)October 19, 2021). *
  
10.122008 Non-Employee Director Long-Term Incentive Plan
First Amended and Restated Limited Guaranty, dated as amendedof October 13, 2021, by and between ePlus inc. and Wells Fargo Commercial Distribution Finance, LLC as agent for the benefit of Secured Parties (Incorporated herein by reference to Exhibit 10.110.4 to our Current Report on Form 8-K filed on October 19, 2021). *
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. (Incorporated herein by reference to Exhibit 10.2 to our Quarterly Report on Form 10-Q for the periodquarter ended December 31, 2012)September 30, 2022, filed on November 3, 2022).*
  
10.13
Second Amendment to First Amended and Restated Credit Agreement, dated as of March 10, 2023, by and among ePlus Technology, inc., ePlus Technology Services inc., SLAIT Consulting, LLC, certain of ePlus inc. Executive Incentive Plan effective April 1, 2011subsidiaries as guarantors, Wells Fargo Commercial Distribution Finance, LLC as administrative agent and the Lenders party thereto. (Incorporated herein by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on March 3, 2011)14, 2023). *
Subsidiaries of ePlus inc. (filed herewith).
  
10.14
ePlus inc. 2012 Employee Long-term Incentive Plan (Incorporated by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q for the period ended September 30, 2012).
10.15
Form of Award Agreement – Restricted Stock Agreement (for awards granted under and subject to the provisions of the ePlus inc. 2012 Employee Long-Term Incentive Plan) (Incorporated herein by reference to Exhibit 10.24 to our Annual Report on Form 10-K for the fiscal year ended March 31, 2014).
10.16
Form of Award Agreement – Restricted Stock Unit Award Agreement (for awards granted under and subject to the provisions of the ePlus inc. 2012 Employee Long-Term Incentive Plan) (Incorporated herein by reference to Exhibit 10.25 to our Annual Report on Form 10-K for the fiscal year ended March 31, 2014).
10.17
Limited Guaranty dated June 24, 2004 by and between GE Commercial Distribution Finance Corporation and ePlus inc. (Incorporated herein by reference to Exhibit 10.10 to our Current Report on Form 8-K filed on November 17, 2005).
10.18
Collateralized Guaranty, dated March 30, 2004, by and between GE Commercial Distribution Finance Corporation and ePlus Group, inc. (Incorporated herein by reference to Exhibit 10.11 to our Current Report on Form 8-K filed on November 17, 2005).
10.19
Amendment to Collateralized Guaranty, dated November 14, 2005, by and between GE Commercial Distribution Finance Corporation and ePlus Group, inc. (Incorporated herein by reference to Exhibit 10.12 to our Current Report on Form 8-K filed on November 17, 2005).
10.20
Amended and Restated Business Financing Agreement, dated July 23 2012, by and between General Electric Commercial Distribution Finance and ePlus Technology, inc. (Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on July 26, 2012).
10.21
Amendment No. 1, dated July 31, 2014, to Amended and Restated Business Financing Agreement by and between General Electric Commercial Distribution Finance and ePlus Technology, inc. (Incorporated by reference to Exhibit 10.2 to our Quarterly Report on Form 10-Q for the period ended September 30, 2014).
10.22
Amendment No. 2, dated July 24, 2015, to Amended and Restated Business Financing Agreement by and between General Electric Commercial Distribution Finance and ePlus Technology, inc. (Incorporated herein by reference to Exhibit 10.2 to our Current Report on Form 8-K filed on July 30, 2015).
10.23Amendment No. 3, dated October 20, 2015, to Amended and Restated Business Financing Agreement by and among ePlus Technology, inc. and its subsidiary ePlus Technology Services, inc. and GE Commercial Distribution Finance Corporation (Incorporated herein by reference to Exhibit 10.2 to our Quarterly Report on Form 10-Q for the period ended September 30, 2015).
10.24
Amended and Restated Agreement for Wholesale Financing, dated July 23, 2012, by and between General Electric Commercial Distribution Finance and ePlus Technology, inc. (Incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K filed on July 26, 2012).
10.25
Amendment No. 1, dated July 31, 2014, to Amended and Restated Agreement for Wholesale Financing by and between General Electric Commercial Distribution Finance and ePlus Technology, inc. (Incorporated by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q for the period ended September 30, 2014).
10.26
Amendment No. 2, dated July 24, 2015, to Amended and Restated Agreement for Wholesale Financing by and between General Electric Commercial Distribution Finance and ePlus Technology, inc. (Incorporated herein by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on July 30, 2015).
10.27Amendment No. 3, dated October 20, 2015, to Amended and Restated Agreement for Wholesale Financing by and among ePlus Technology, inc. and its subsidiary ePlus Technology Services, inc. and GE Commercial Distribution Finance Corporation (Incorporated herein by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q for the period ended September 30, 2015).
10.28
Deed of Lease by and between ePlus inc. and Norton Building I, LLC dated as of December 23, 2004 (Incorporated herein by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on December 27, 2004).
10.29
Amendment #1 to Deed of Lease by and between ePlus inc. and Norton Building I, LLC, dated as of July 1, 2007 (Incorporated herein by reference to Exhibit 10.45 to our Annual Report on Form 10-K for the fiscal year ended March 31, 2014).
10.30
Amendment #2 to Deed of Lease by and between ePlus inc. and Norton Building I, LLC, dated as of June 18, 2009 (Incorporated herein by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on June 23, 2009).
10.31
Amendment #3 to Deed of Lease by and between ePlus inc. and Norton Building I, LLC, dated as of June 22, 2010 (Incorporated herein by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q for the period ended June 30, 2010).
10.32
Amendment #4 to Deed of Lease by and between ePlus inc. and H/F Techpointe, LLC, dated as of March 4, 2014 (Incorporated herein by reference to Exhibit 10.1 to our Current Report on Form 8-K filed March 6, 2014).
12Ratio of Earnings to Fixed Charges
21
Subsidiaries of ePlus inc.
23Consent of Independent Registered Public Accounting Firm. (filed herewith).
  
Certification of the Chief Executive Officer of ePlusePlus inc. pursuant to the Securities Exchange Act Rules 13a-14(a) and 15d-14(a). (filed herewith).
  
Certification of the Chief Financial Officer of ePlusePlus inc. pursuant to the Securities Exchange Act Rules 13a-14(a) and 15d-14(a). (filed herewith).
  
Certification of the Chief Executive Officer and Chief Financial Officer of ePlusePlus inc. pursuant to 18 U.S.C. § 1350.
1350 (furnished herewith).
 
 101.INSXBRL Instance Document
  
101.INSInline 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.SCHInline XBRL Taxonomy Extension Schema Document
  
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document
  
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document
  
101.LABInline XBRL Taxonomy Extension Label Linkbase Document
  
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document
104Cover 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. The registrant agrees to furnish a copy of any omitted schedule or exhibit to the SEC upon request; provided, however, that the registrant may request confidential treatment pursuant to Rule 24b-2 of the Exchange Act for any document so furnished.
(b) See item 15(a)(3) above.

(c) See Item 15(a)(1) and 15(a)(2) above.

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ITEM 16.FORM 10-K SUMMARY

None.

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SIGNATURES


Pursuant to the requirements of Section 13 or Section 15(d) 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.
  
 
/s/ PHILLIP G. NORTON
MARK P. MARRON
 By: Phillip G. Norton, Chairman of the Board,Mark P. Marron
 President and Chief Executive Officer and President
 Date: May 25, 201624, 2023


Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.


 
/s/ PHILLIP G. NORTON
MARK P. MARRON
 By: Phillip G. Norton, Chairman of the Board,Mark P. Marron
 
President, Chief Executive Officer, President, and Director
(Principal Executive Officer)
 Date: May 25, 201624, 2023
  
 
/s/ ELAINE D. MARION
 By: Elaine D. Marion, Chief Financial Officer
 (Principal Financial and Accounting Officer)
 Date: May 25, 201624, 2023
  
 /s/ RENEE BERGERON
By: Renée Bergeron, Director
Date: May 24, 2023
/s/ BRUCE M. BOWEN
 By: Bruce M. Bowen, Director
 Date: May 25, 201624, 2023
  
 
/s/ JOHN E. CALLIES
 By: John E. Callies, Director
 Date: May 25, 201624, 2023
  
 
/s/ C. THOMAS FAULDERS, III
 By: C. Thomas Faulders, III, DirectorChairman
 Date: May 25, 201624, 2023
  
 
/s/ LAWRENCE S. HERMAN
By: Lawrence S. Herman, Director
Date: May 25, 2016
/s/ ERIC D. HOVDE
 By: Eric D. Hovde, Director
 Date: May 25, 201624, 2023
  
 
/s/ IRA A. HUNT
 By: Ira A. Hunt, Director
 Date: May 25, 201624, 2023
  
 
/s/ TERRENCE O’DONNELLMAUREEN F. MORRISON
By: Maureen F. Morrison
Date: May 24, 2023
/s/ BEN XIANG
 By: Terrence O’Donnell,Ben Xiang, Director
 Date: May 25, 201624, 2023

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ePlus inc. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES


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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Board of Directors and Stockholders of
ePlus inc.
Herndon, Virginia


Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of ePlusePlus inc. and subsidiaries (the "Company"“Company”) as of March 31, 20162023, and 2015,2022, and the related consolidated statements of operations, comprehensive income, stockholders'stockholders’ equity, and cash flows for each of the three years in the period ended March 31, 2023, and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of March 31, 2023, and 2022, and the results of its operations and its cash flows for each of the three years in the period ended March 31, 2016. Our audits also included the financial statement schedule listed2023, in conformity with accounting principles generally accepted in the TableUnited States of Contents at Item 15. These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statements and financial statement schedule based on our audits.America.


We conducted our auditshave also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States). (PCAOB), the Company’s internal control over financial reporting as of March 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated May 24, 2023, expressed an unqualified opinion on the Company’s internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includesmisstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence supportingregarding the amounts and disclosures in the financial statements. An auditOur audits also includes assessingincluded evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statement presentation.statements. We believe that our audits provide a reasonable basis for our opinion.


InCritical Audit Matters

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion such consolidated financial statements present fairly, in all material respects,on the financial position of ePlus inc. and subsidiaries as of March 31, 2016 and 2015, and the results of their operations and their cash flows for each of the three years in the period ended March 31, 2016, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements, taken as a whole, presents fairly,and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Revenue Recognition – Gross Versus Net Recognition of Sales of Third-Party Software – Refer to Note 1 to the financial statements

Critical Audit Matter Description

The Company is typically the principal in sales of third-party software. Sales are recognized on a gross basis with the selling price to the customer recorded as sales and the acquisition cost of the product recognized as cost of sales. The Company recognizes revenue from these sales at the point in time that control passes to the customer, which is typically upon delivery of the software to the customer. The Company is also the agent in sales of third-party maintenance, software support, and services as the third-party controls the service until it is transferred to the customer. Similarly, the Company is the agent in sales of third-party software and accompanying third-party support when the third-party software benefits the customer only in conjunction with the accompanying support. In these sales, the Company considers the third-party software and support as inputs to a single performance obligation. In all material respects,these sales where the information set forth therein.Company is the agent, the Company recognizes sales on a net basis at the point that its customer and vendor accept the terms and conditions of the arrangement.


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Auditing the Company’s determination of gross or net recognition of third-party software and support sales involved a high degree of subjectivity as it required the evaluation of whether the third-party software benefits the customer only in conjunction with the accompanying support. When the support is determined to be critical or essential to the software, the transaction is viewed as one combined performance obligation, and revenue is recognized net of related costs.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to management’s conclusion related to the recognition of sales of third-party software included the following, among others:

We have also audited,tested the design and operating effectiveness of management’s controls over the determination of gross or net recognition of third-party software and support sales.
For a selection of contracts, we performed the following procedures:
–Inspected the customer invoice and purchase order to determine whether the sale represented a valid transaction with a customer.
–Compared the cost per the Company’s records to the cost per the vendor invoice.
–Evaluated the sale to determine whether it constituted a single or multiple performance obligation(s) through inspection of the customer invoice, purchase order, and information on vendor websites accessed through third-party search engines.
–Evaluated the sale to determine whether there was accompanying third-party support related to the software, and whether the support was separately identifiable or essential to the functionality of the software through inspection of customer invoices, purchase orders, information on vendor websites accessed through third-party search engines and inquiries with management, as necessary.

Transfers of Financial Assets – Refer to Note 4 to the financial statements

Critical Audit Matter Description

The Company enters into arrangements to transfer the contractual payments due under financing receivables and operating lease agreements, which are accounted for in accordance with Codification Topic 860. These transfers are accounted for as either a sale or as a pledge of collateral in a secured borrowing. For transfers accounted for as a secured borrowing, the standardscorresponding investments serve as collateral for non-recourse notes payable. For transfers accounted for as sales, the Company derecognizes the carrying value of the Public Company Accounting Oversight Board (United States), the Company's internal control over financial reporting as of March 31, 2016, basedasset transferred plus any liability and recognizes a net gain or loss on the criteria establishedsale, which are presented within net sales in Internal Control—Integrated Framework (2013) issued by the Committeeconsolidated statement of Sponsoring Organizationsoperations.

Auditing the Company’s determination of whether the transfer should be accounted for as a secured borrowing or a sale involved a high degree of subjectivity. This subjectivity stems from management’s assessment of whether the transferred assets have been isolated from the transferor.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to management’s conclusion related to the transfer of financial assets included the following, among others:

We tested the design and operating effectiveness of management’s controls over the transfer of financial assets, including management’s controls over the evaluation of the Treadway Commissionterms of loan documents and our report dated May 25, 2016 expressed an unqualified opinion onaccompanying investor data, assignment agreements, and the calculation of the gain or loss.

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For a selection of transactions, we evaluated the Company’s internal control over financial reporting.determination of sale or secured borrowing, by evaluating, among other factors, if the transferred assets have been isolated from the Company. Specifically, we performed the following procedures:
–Obtained the executed transfer agreement and evaluated whether the Company:
■Assigned its rights, titles, interests, estates, claims, and demands to the third-party assignee.
■Retained any rights with respect to the payments assigned to the third-party assignee or had been appropriately isolated from the assets. We evaluated opinions from outside legal counsel, when applicable.

–Obtained and inspected the cash proceeds support from the transfer and compared the cash received to the selling price.
–Tested the mathematical accuracy of management’s calculation of the gain or loss based on the cash proceeds and the receivable balance as of date of sale.


/s/ DELOITTE & TOUCHE LLP


McLean, Virginia

May 24, 2023
May 25, 2016
We have served as the Company’s auditor since 1990.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Board of Directors and Stockholders of
ePlus inc.
Herndon, Virginia


Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of ePlus inc. and subsidiaries (the “Company”) as of March 31, 2016,2023, based on criteria established in Internal Control—Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of March 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended March 31, 2023, of the Company and our report dated May 24, 2023, expressed an unqualified opinion on those financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Overover Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.


We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.


Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.


Because of theits inherent limitations, of internal control over financial reporting including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be preventedprevent or detected on a timely basis.detect misstatements. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.


In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of March 31, 2016, based on the criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement schedule as of and for the fiscal year ended March 31, 2016 of the Company and our report dated May 25, 2016 expressed an unqualified opinion on those financial statements and financial statement schedule.

/s/ DELOITTE & TOUCHE LLP


McLean, Virginia

May 24, 2023
May 25, 2016

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PART I. FINANCIAL INFORMATION
Item 1.Financial Statements

ePlus inc. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)
  
As of
March 31, 2016
  
As of
March 31, 2015
 
ASSETS (in thousands, except per share data) 
       
Current assets:      
Cash and cash equivalents $94,766  $76,175 
Accounts receivable—trade, net  234,628   218,458 
Accounts receivable—other, net  41,771   31,345 
Inventories—net  33,343   19,835 
Financing receivables—net, current  56,448   66,909 
Deferred costs  6,371   20,499 
Other current assets  10,649   7,413 
Total current assets  477,976   440,634 
         
Financing receivables and operating leases—net  75,906   76,991 
Deferred tax assets—net  -   604 
Property, equipment and other assets  8,644   9,248 
Goodwill and other intangible assets—net  54,154   40,798 
TOTAL ASSETS $616,680  $568,275 
         
LIABILITIES AND STOCKHOLDERS' EQUITY        
         
LIABILITIES        
         
Current liabilities:        
Accounts payable $76,780  $66,420 
Accounts payable—floor plan  121,893   99,418 
Salaries and commissions payable  14,981   14,860 
Deferred revenue  18,344   34,363 
Recourse notes payable—current  2,288   889 
Non-recourse notes payable—current  26,042   28,560 
Other current liabilities  13,118   13,575 
Total current liabilities  273,446   258,085 
         
Recourse notes payable—long term  1,054   2,801 
Non-recourse notes payable—long term  18,038   24,314 
Deferred tax liability—net  3,001   - 
Other liabilities  2,263   3,813 
TOTAL LIABILITIES  297,802   289,013 
         
COMMITMENTS AND CONTINGENCIES  (Note 8)        
         
STOCKHOLDERS' EQUITY        
         
Preferred stock, $.01 per share par value; 2,000 shares authorized; none issued or outstanding  -   - 
Common stock, $.01 per share par value; 25,000 shares authorized; 13,237 issued and 7,365 outstanding at March 31, 2016 and 13,114 issued and 7,389 outstanding at March 31, 2015  132   131 
Additional paid-in capital  117,511   111,072 
Treasury stock, at cost, 5,872 and 5,725 shares at March 31, 2016 and March 31, 2015, respectively  (129,518)  (118,179)
Retained earnings  331,224   286,477 
Accumulated other comprehensive income—foreign currency translation adjustment  (471)  (239)
Total Stockholders' Equity  318,878   279,262 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $616,680  $568,275 


 March 31, 2023  March 31, 2022 
ASSETS      
       
Current assets:      
Cash and cash equivalents $103,093  $155,378 
Accounts receivable—trade, net  504,122   430,380 
Accounts receivable—other, net  55,508   48,673 
Inventories  243,286   155,060 
Financing receivables—net, current  89,829   61,492 
Deferred costs  44,191   32,555 
Other current assets  55,101   13,944 
Total current assets  1,095,130   897,482 
         
Financing receivables and operating leases—net  84,417   64,292 
Deferred tax asset  3,682   5,050 
Property, equipment, and other assets  70,447   45,586 
Goodwill  136,105   126,543 
Other intangible assets—net  25,045   27,250 
TOTAL ASSETS $1,414,826  $1,166,203 
         
LIABILITIES AND STOCKHOLDERS’ EQUITY        
         
LIABILITIES        
         
Current liabilities:        
Accounts payable $220,159  $136,161 
Accounts payable—floor plan  134,615   145,323 
Salaries and commissions payable  37,336   39,602 
Deferred revenue  114,028   86,469 
Recourse notes payable—current  5,997   7,316 
Non-recourse notes payable—current  24,819   17,070 
Other current liabilities  24,372   28,095 
Total current liabilities  561,326   460,036 
         
Recourse notes payable - long-term  -   5,792 
Non-recourse notes payable - long-term  9,522   4,108 
Deferred tax liability
  715   - 
Other liabilities  60,998   35,529 
TOTAL LIABILITIES  632,561   505,465 
         
COMMITMENTS AND CONTINGENCIES  (Note 10)
      
         
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; 26,905 outstanding at March 31, 2023 and 26,886 outstanding at March 31, 2022
  272   270 
Additional paid-in capital  167,303   159,480 
Treasury stock, at cost, 261 shares at March 31, 2023 and 130 shares at March 31, 2022
  (14,080)  (6,734)
Retained earnings  627,202   507,846 
Accumulated other comprehensive income—foreign currency translation adjustment  1,568   (124)
Total Stockholders’ Equity  782,265   660,738 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $1,414,826  $1,166,203 

See Notes to Consolidated Financial Statements.

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ePlus inc. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)
  Year Ended March 31, 
  2016  2015  2014 
          
  (amounts in thousands, except per share data) 
          
Net sales $1,204,199  $1,143,282  $1,057,536 
Cost of sales  942,142   898,735   840,623 
Gross profit  262,057   244,547   216,913 
             
Professional and other fees  6,546   6,508   9,041 
Salaries and benefits  149,304   138,086   123,151 
General and administrative expenses  23,130   22,531   19,883 
Depreciation and amortization  5,548   4,333   2,792 
Interest and financing costs  1,778   2,379   1,948 
Operating expenses  186,306   173,837   156,815 
             
Operating income  75,751   70,710   60,098 
             
Other income  -   7,603   - 
             
Earnings before tax  75,751   78,313   60,098 
             
Provision for income taxes  31,004   32,473   24,825 
             
Net earnings $44,747  $45,840  $35,273 
             
Net earnings per common share—basic $6.17  $6.26  $4.41 
Net earnings per common share—diluted $6.09  $6.19  $4.37 
             
Weighted average common shares outstanding—basic  7,256   7,318   7,927 
Weighted average common shares outstanding—diluted  7,344   7,393   7,999 


 Year Ended March 31, 
 2023  2022  2021 
          
Net sales         
Product $1,803,275  $1,580,394  $1,366,158 
Services  264,443   240,625   202,165 
Total  2,067,718   1,821,019   1,568,323 
Cost of sales            
Product  1,379,500   1,210,943   1,049,677 
Services  170,694   149,094   125,092 
Total  1,550,194   1,360,037   1,174,769 
             
Gross profit  517,524   460,982   393,554 
             
Selling, general, and administrative  333,520   297,117   271,263 
Depreciation and amortization  13,709   14,646   13,951 
Interest and financing costs  4,133   1,903   2,005 
Operating expenses  351,362   313,666   287,219 
             
Operating income  166,162   147,316   106,335 
             
Other income (expense), net
  (3,188)  (432)  571 
             
Earnings before tax  162,974   146,884   106,906 
             
Provision for income taxes  43,618   41,284   32,509 
             
Net earnings $119,356  $105,600  $74,397 
             
Net earnings per common share—basic $4.49  $3.96  $2.79 
Net earnings per common share—diluted $4.48  $3.93  $2.77 
             
Weighted average common shares outstanding—basic  26,569   26,638   26,674 
Weighted average common shares outstanding—diluted  26,654   26,866   26,834 

See Notes to Consolidated Financial Statements.

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ePlus inc. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)
  Year Ended March 31, 
  2016  2015  2014 
          
          
NET EARNINGS $44,747  $45,840  $35,273 
             
OTHER COMPREHENSIVE INCOME, NET OF TAX:            
Foreign currency translation adjustments (net of tax effect of $40, $10, $21, respectively)  (232)  (425)  (224)
Other comprehensive income (loss)  (232)  (425)  (224)
             
TOTAL COMPREHENSIVE INCOME $44,515  $45,415  $35,049 


 
Year Ended March 31,
 
 2023  2022  2021 
   
NET EARNINGS $119,356  $105,600  $74,397 
             
OTHER COMPREHENSIVE INCOME, NET OF TAX:            
             
Foreign currency translation adjustments  1,692   (779)  1,646 
             
Other comprehensive income (loss)  1,692   (779)  1,646 
             
TOTAL COMPREHENSIVE INCOME $121,048  $104,821  $76,043 

See Notes to Consolidated Financial Statements.

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ePlus inc. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)
  Year Ended March 31, 
  2016  2015  2014 
  (in thousands) 
Cash Flows From Operating Activities:         
Net earnings $44,747  $45,840  $35,273 
             
Adjustments to reconcile net earnings to net cash (used in) provided by operating activities:            
Depreciation and amortization  15,980   15,575   14,755 
Reserve for credit losses, inventory obsolescence and sales returns  (216)  125   853 
Share-based compensation expense  5,711   4,585   3,968 
Excess tax benefit from share-based compensation  (728)  (564)  (1,762)
Deferred taxes  3,515   (1,863)  (3,536)
Payments from lessees directly to lenders—operating leases
  (4,646)  (7,685)  (7,539)
Gain on disposal of property, equipment and operating lease equipment  (3,104)  (3,112)  (2,473)
Gain on sale of financing receivables  (7,103)  (5,884)  (5,843)
Excess increase in cash value of life insurance  -   -   (103)
Gain on settlement  -   (1,434)  - 
Other  185   (127)  109 
Changes in:            
Accounts receivable—trade  (8,564)  1,372   (36,751)
Accounts receivable—other  (2,498)  (2,407)  (2,621)
Inventories  (13,405)  3,161   (7,724)
Financing receivables—net  (9,310)  (19,560)  (30,792)
Deferred costs, other intangible assets and other assets  11,189   (10,060)  (1,179)
Accounts payable—trade
  (738)  (16,810)  33,090 
Salaries and commissions payable, deferred revenue and other liabilities  (17,633)  12,695   4,052 
Net cash provided by (used in) operating activities $13,382  $13,847  $(8,223)
             
Cash Flows From Investing Activities:            
Maturities of short-term investments $-  $-  $982 
Maturities of supplemental benefit plan investments  -   2,544   - 
Proceeds from sale of property, equipment and operating lease equipment  6,931   8,562   4,138 
Purchases of property, equipment and operating lease equipment  (14,468)  (11,773)  (9,952)
Purchases of assets to be leased or financed  (11,403)  (143)  (5,445)
Issuance of financing receivables  (137,008)  (128,125)  (104,298)
Repayments of financing receivables  58,067   60,619   42,514 
Proceeds from sale of financing receivables  64,351   45,828   46,249 
Premiums paid on life insurance  -   (47)  (140)
Cash used in acquisitions, net of cash acquired  (16,649)  (8,057)  (2,845)
Net cash used in investing activities $(50,179) $(30,592) $(28,797)
 
 Year Ended March 31, 
 2023  2022  2021 
Cash flows from operating activities:         
Net earnings $119,356  $105,600  $74,397 
             
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:
            
Depreciation and amortization  18,589   24,305   19,991 
Provision for credit losses  666   (102)  1,436 
Share-based compensation expense  7,825   7,114   7,169 
Deferred taxes  2,083   (3,581)  (4,198)
Payments from lessees directly to lenders—operating leases  -   (32)  (34)
Gain on disposal of property, equipment, and operating lease equipment  (3,479)  (4,136)  (2,742)
Changes in:            
Accounts receivable  (78,679)  (50,803)  (5,056)
Inventories-net  (88,097)  (85,453)  (16,798)
Financing receivables—net  (41,015)  8,832   (42,104)
Deferred costs and other assets  (73,980)  (10,560)  (16,503)
Accounts payable-trade  75,270   (25,187)  76,772 
Salaries and commissions payable, deferred revenue, and other liabilities  46,036   13,432   37,177 
Net cash provided by (used in) operating activities  (15,425)  (20,571)  129,507 
             
Cash flows from investing activities:            
Proceeds from sale of property, equipment, and operating lease equipment  3,742   21,923   2,791 
Purchases of property, equipment and operating lease equipment  (9,380)  (23,182)  (11,513)
Cash used in acquisitions, net of cash acquired  (13,288)  -   (27,034)
Net cash used in investing activities  (18,926)  (1,259)  (35,756)
             
Cash flows from financing activities:            
Borrowings of non-recourse and recourse notes payable  193,051   114,105   66,403 
Repayments of non-recourse and recourse notes payable  (196,069)  (99,991)  (74,328)
Repurchase of common stock  (7,224)  (13,608)  (6,948)
Repayments of financing of acquisitions  -   -   (556)
Net borrowings (repayments) on floor plan facility  (10,708)  46,670   (34,373)
Net cash provided by (used in) financing activities  (20,950)  47,176   (49,802)
             
Effect of exchange rate changes on cash  3,016   470   (618)
             
Net increase (decrease) in cash and cash equivalents  (52,285)  25,816   43,331 
             
Cash and cash equivalents, beginning of period  155,378   129,562   86,231 
             
Cash and cash equivalents, end of period $103,093  $155,378  $129,562 

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CONSOLIDATED STATEMENTS OF CASH FLOWS - continued

(in thousands)
  Year Ended March 31, 
  2016  2015  2014 
  (in thousands) 
Cash Flows From Financing Activities:         
Borrowings of non-recourse and recourse notes payable $44,807  $52,237  $51,547 
Repayments of non-recourse and recourse notes payable  (257)  (1,688)  (2,252)
Repurchase of common stock  (11,339)  (37,685)  (13,188)
Dividends paid  (80)  (90)  (108)
Proceeds from issuance of capital stock through option exercise  -   -   560 
Payments of contingent consideration  (1,158)  -   (1,027)
Excess tax benefit from share-based compensation  728   564   1,762 
Net borrowings (repayments) on floor plan facility  22,475   (518)  27,165 
Net cash provided by financing activities  55,176   12,820   64,459 
             
Effect of exchange rate changes on cash  212   (79)  20 
             
Net Increase (Decrease) in Cash and Cash Equivalents  18,591   (4,004)  27,459 
             
Cash and Cash Equivalents, Beginning of Period  76,175   80,179   52,720 
             
Cash and Cash Equivalents, End of Period $94,766  $76,175  $80,179 
             
Supplemental Disclosures of Cash Flow Information:            
Cash paid for interest $84  $239  $105 
Cash paid for income taxes $29,789  $35,436  $25,517 
             
Schedule of Non-Cash Investing and Financing Activities:            
Proceeds from sales of operating lease equipment included in accounts receivable $7,650  $443  $861 
Purchase of property, equipment, and operating leases included in accounts payable $(10,562) $(432) $(123)
Purchase of assets to be leased or financed included in accounts payable $(9,827) $(20,022) $(1,140)
Issuance of financing receivables $(101,718) $(73,881) $(98,616)
Repayment of financing receivables $16,873  $-  $- 
Proceeds from sale of financing receivables $98,753  $73,881  $98,616 
Borrowing of recourse and nonrecourse notes payable $42,840  $-  $- 
Repayments of non-recourse and recourse notes payable $(29,059) $(34,584) $(22,146)
Vesting of share-based compensation $7,799  $6,474  $7,838 
Contingent consideration $-  $(1,980) $- 


 Year Ended March 31, 
  2023  2022  2021 
          
Supplemental disclosures of cash flow information:         
Cash paid for interest $4,065  $1,714  $1,436 
Cash paid for income taxes $51,984  $47,143  $31,690 
Cash paid for amounts included in the measurement of lease liabilities $4,610  $4,653  $5,780 
             
Schedule of non-cash investing and financing activities:            
Proceeds from sale of property, equipment, and leased equipment $21  $18  $2,045 
Purchases of property, equipment, and operating lease equipment $(1,453) $(98) $(372)
Borrowing of non-recourse and recourse notes payable $39,558  $58,619  $121,826 
Repayments of non-recourse and recourse notes payable $-  $(32) $(34)
Vesting of share-based compensation $9,897  $8,481  $7,937 
Repurchase of common stock
 $(122) $-  $- 
New operating lease assets obtained in exchange for lease obligations $11,886  $2,653  $1,146 

See Notes to Consolidated Financial Statements.

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ePlus inc. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(amounts in thousands)

 Common Stock  
Additional
Paid-In
  Treasury  Retained  
Accumulated
Other
Comprehensive
                    Accumulated    
 Shares  Par Value  Capital  Stock  Earnings  Income  Total        Additional        Other    
    Common Stock
  Paid-In  Treasury  Retained  Comprehensive    
Balance, April 1, 2013  8,150  $129  $99,641  $(67,306) $205,358  $410  $238,232 
Issuance of shares for option exercises  40   -   559   -   -   -   559 
Excess tax benefit of share- based compensation  -   -   1,762   -   -   -   1,762 
 Shares  Par Value  Capital  Stock  Earnings  Income  Total 
Balance, March 31, 2020  27,000  $144  $145,197  $(68,424) $410,219  $(991) $486,145 
Issuance of restricted stock awards  87   1   -   -   -   -   1   200   1   -   -   -   -   1 
Share-based compensation          3,962   -   6   -   3,968   -   -   7,169   -   -   -   7,169 
Repurchase of common stock  (241)  -   -   (13,188)  -   -   (13,188)  (194)  -   -   (6,948)  -   -   (6,948)
Net earnings  -   -   -   -   35,273   -   35,273   -   -   -   -   74,397   -   74,397 
Foreign currency translation adjustment  -   -   -   -   -   (224)  (224)  -   -   -   -   -   1,646   1,646 
Balance, March 31, 2014  8,036  $130  $105,924  $(80,494) $240,637  $186  $266,383 
                            
Excess tax benefit of share- based compensation  -   -   564   -   -   -   564 
Balance, March 31, 2021
  27,006  $145  $152,366  $(75,372) $484,616  $655  $562,410 
Issuance of restricted stock awards  163   1   -   -   -   -   1 
Share-based compensation  -   -   7,114   -   -   -   7,114 
Repurchase of common stock  (283)  -   -   (13,608)  -   -   (13,608)
Stock split effected in the form of a dividend      135   -   -   (135)  -   - 
Retirement of treasury stock      (11)  -   82,246   (82,235)  -   - 
Net earnings  -   -   -   -   105,600   -   105,600 
Foreign currency translation adjustment  -   -   -   -   -   (779)  (779)
Balance, March 31, 2022
  26,886  $270  $159,480  $(6,734) $507,846  $(124) $660,738 
Issuance of restricted stock awards  88   1   -   -   -   -   1   150   2   -   -   -   -   2 
Share-based compensation  -   -   4,584   -   -   -   4,584   -   -   7,823   -   -   -   7,823 
Repurchase of common stock  (735)  -   -   (37,685)  -   -   (37,685)  (131)  -   -   (7,346)  -   -   (7,346)
Net earnings  -   -   -   -   45,840   -   45,840   -   -   -   -   119,356   -   119,356 
Foreign currency translation adjustment  -   -   -   -   -   (425)  (425)  -   -   -   -   -   1,692   1,692 
Balance, March 31, 2015  7,389  $131  $111,072  $(118,179) $286,477  $(239) $279,262 
                            
Excess tax benefit of share- based compensation  -   -   728   -   -   -   728 
Issuance of restricted stock awards  123   1   -   -   -   -   1 
Share-based compensation  -   -   5,711   -   -   -   5,711 
Repurchase of common stock  (147)  -   -   (11,339)  -   -   (11,339)
Net earnings  -   -   -   -   44,747   -   44,747 
Foreign currency translation adjustment  -   -   -   -   -   (232)  (232)
Balance, March 31, 2016  7,365  $132  $117,511  $(129,518) $331,224  $(471) $318,878 
Balance, March 31, 2023
  26,905  $
272  $
167,303  $
(14,080) $
627,202  $
1,568  $
782,265 


See Notes to Consolidated Financial Statements

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ePlus inc. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of and for the Years ended March 31, 2016, 20152023, 2022, and 20142021


1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


DESCRIPTION OF BUSINESS — Our company was founded in 1990 and is a Delaware corporation. ePlusePlus inc. is sometimes referred to in this Annual Report on Form 10-K as "we," "our," "us," "ourselves,"“we,” “our,” “us,” “ourselves,” or "ePlus." ePlus“ePlus.” ePlus inc. is a holding company that through its subsidiaries provides information technology solutions which enable organizations to optimize their IT environment and supply chain processes. We also provide consulting, professional, and managed services and complete lifecycle management services including flexible financing solutions. We focus on middle marketselling to medium and large enterprises in North America and the United Kingdom.States (“US”) and to customers in select international markets including the United Kingdom (“UK”), the European Union (“EU”), India, Singapore, and Israel.

BASIS OF PRESENTATION — The consolidated financial statements include the accounts of ePlusePlus inc. and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. The accounts of businesses acquired during fiscal year 2016, 2015 and 2014businesses are included in the consolidated financial statements from the dates of acquisition.

USE OF ESTIMATES — The preparation of financial statements in conformity with accounting principles generally accepted in the United StatesUS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at 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 asset values, vendor consideration, lease classification, goodwill and intangibles, reservesallowance 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.


REVENUE RECOGNITIONALLOWANCE FOR CREDIT LOSSES — The majority ofWe maintain an allowance for credit losses related to our revenues are derived from the following sources: sales of third-party products, software, software assurance, maintenance and services; sales of our services and softwareaccounts receivable and financing revenues. For all these revenue sources,receivables. We record an expense in the amount necessary to adjust the allowance for credit losses to our current estimate of expected credit losses on financial assets. We estimate expected credit losses based on our internal rating of the customer’s credit quality, our historical credit losses, current economic conditions, and other relevant factors. Prior to providing credit, we determine whetherassign an internal rating for each customer’s credit quality based on the customer’s financial status, rating agency reports and other financial information. We review our internal ratings for each customer at least annually or when there is an indicator of a change in credit quality, such as a delinquency or bankruptcy. We write off financing receivables when we aredeem them to be uncollectable.

BUSINESS COMBINATIONS — We account for business combinations using the principal or agent in accordance withacquisition method, which requires that the total purchase price for the acquired entity be allocated to the assets acquired and liabilities assumed. With limited exceptions, we measure most assets acquired and liabilities assumed based on their fair values at the acquisition date. We apply Accounting Standards Codification (“Codification”) Topic Revenue Recognition606, Contracts with customers (“Codification Topic 606”), Subtopic Principal Agent Considerations.to recognize and measure contract assets and contract liabilities from contracts with customers. Our revenue recognition policies vary based upon these revenue sources.allocation process requires an analysis of intangible assets, such as customer relationships, trade names, acquired contractual rights and legal contingencies to identify and record all assets acquired and liabilities assumed.


For arrangements with multiple elements, we allocateWe record any premium paid over the total consideration to the deliverables based on an estimated selling price of our products and services. We determine the estimated selling price using cost plus a reasonable margin for each deliverable, which was based on historical data.

Sales of Product and Services

Generally, sales of third-party product and software are recognized on a gross basis with the selling price to the customer recorded as sales and the acquisition costfair value of the product or software recordedacquired net assets as cost of sales. Revenue is recognized whengoodwill. Our initial purchase price allocations are subject to revision within the title and risk of loss are passedmeasurement period, not to the customer, there is persuasive evidence of an arrangement for sale, delivery has occurred, the sales price is fixed or determinable and collectability is reasonably assured. Delivery for products is typically performed via drop-shipment by the vendor or distributor to our customers’ location, and for software via electronic delivery. The vast majority of our product and software sales are recognized upon delivery due to our sales terms with our customers and with our vendors.

We provide ePlus advanced professional services under both time and materials and fixed price contracts. Under time and materials contracts, we recognize revenue at agreed-upon billing rates at the time services are performed. Under certain fixed price contracts, we recognize revenue based on the proportion of the services delivered to date as a percentage of the total services to deliver over the contract term. Under other fixed price contracts, we recognize revenue upon completion. Revenuesexceed one year from other ePlus services, such as maintenance, managed services and hosting services are recognized on a straight-line basis over the term of the arrangement.

We sell software assurance, subscription licenses, maintenance and service contracts where the services are performed by a third-party. Software assurance is a maintenance product that allows customers to upgrade at no additional cost to the latest technology if new applications are introduced during the period that the software assurance is in effect. As we enter into contracts with third-party service providers, we evaluate whether we are acting as a principal or agent in the transaction. As our customers are aware that the third-party service provider is to provide the services to them and that we are not responsible for the day-to-day provision of services in these arrangements, we concluded that we are acting as an agent and recognize revenue on a net basis at the date of sale. Under net revenue recognition,acquisition. We include the cost paid toresults of operations for the vendor or third-party service provider is recorded as a reduction to sales, resulting in revenue being equal to the gross profit on the transaction.

We present freight billed to our customers within sales and the related freight charged to us within cost of sales. Sales tax amounts collected from customers for remittance to governmental authorities are presented on a net basis.
Financing Revenue

We lease products to customers that are accounted for in accordance with Codification Topic, Leases. We may also finance third-party software and services for our customers, which are classified as notes receivable. The terms of the notes receivable are often similar to the terms of the leases of IT equipment; that is, receivables are interest bearing and are often due over a period of time that corresponds with the terms of the leased IT equipment.

The accounting for investments in leases and leased equipment is different depending on the type of lease. Each lease is classified as either a direct financing lease, sales-type lease, or operating lease, as appropriate. If a lease meets one or more of the following four criteria, the lease is classified as either a sales-type or direct financing lease; otherwise, it will be classified as an operating lease:

·the lease transfers ownership of the property to the lessee by the end of the lease term;
·the lease contains a bargain purchase option;
·the lease term is equal to 75 percent or more of the estimated economic life of the leased property; or
·the present value at the beginning of the lease term of the minimum lease payments equals or exceeds 90 percent of the fair value of the leased property at the inception of the lease.

Revenue on direct financing and sales-type leases is deferred at the inception of the leases and is recognized over the term of the lease using the interest method. Revenue from operating leases is recognized ratably on a straight line basis over the term of the lease agreement.

Codification Topic Transfers and Servicing, Subtopic Sales of Financial Assets, establishes criteria for determining whether a transfer of financial assets in exchange for cash or other consideration should be accounted for as a sale or as a pledge of collateral in a secured borrowing. Certain assignments of notes receivable and direct finance and sales-type leases we make on a non-recourse basis meet the criteria for surrender of control set forth by this subtopic and have therefore been treated as salesacquired company in our financial results. We recognize a net gain or loss on these transactions, which is included within revenue in our consolidated statements of operations.

Revenues on the sales of equipment at the end of a lease are recognized at the date of sale. The net gain or loss on sales of such equipment is presented within net sales in our consolidated statements of operations.

Software License Sales

We recognize revenue for the licensing and hosting of our software in accordance with Codification Topic Software, Subtopic Revenue Recognition. We recognize revenue when all the following criteria exist:

·there is persuasive evidence that an arrangement exists;
·delivery has occurred;
·no significant obligations by us remain, which relate to services essential to the functionality of the software with regard to implementation;
·the sales price is determinable; and
·it is probable that collection will occur.

The majority of our agreements are fixed term license agreements and the revenue is recognized over the contract term. Revenue from the sale of a perpetual license is recognized upon installation of the software. We recognize revenue from hosting our proprietary software for our customers over the contract term. Our hosting arrangements do not contain a contractual right to take possession of the software.acquisition date.

Revenue from Other Transactions

Other sources of revenue are derived from: (1) income from events that occur after the initial sale of a financial asset; (2) remarketing fees; (3) agent fees received from various vendors in the technology segment; and (4) interest and other miscellaneous income.
Reserves for Sales Returns

Sales are reported net of allowances for returns which are maintained at a level believed by management to be adequate to absorb potential returns of sales of product and services in accordance with Codification Topic Revenue, Subtopic Product. Management's determination of the adequacy of the reserve is based on an evaluation of historical sales returns, current economic conditions, volume and other relevant factors. These determinations require considerable judgment in assessing the ultimate potential for sales returns and include consideration of the type and volume of products and services sold.


CASH AND CASH EQUIVALENTS — Cash and cash equivalents consist primarily of interest-bearing accounts and money market funds that consist of short-term US treasury securities. We consider all highly liquid investments, including those with an original maturity of three months or less at the date of acquisition, to be cash equivalents. CashWe have a lockbox account whose purpose is to collect and cash equivalents consist primarilydistribute customer payments under financing arrangements. As of interest-bearing accountsMarch 31, 2023, and money market funds that consist of short-term U.S. treasury securities. ThereMarch 31, 2022, we were not holding any amounts in trust for third-party recipients, and there were no restrictions on the withdrawal of funds from our money market accounts as of March 31, 2016 and March 31, 2015.funds.

FINANCING RECEIVABLES AND OPERATING LEASES — Financing receivables and operating leases consists of notes receivable, direct financing, sales-type leases and operating leases. The terms of lease and financing arrangements are typically between 3 to 7 years, with an average term of 42 to 48 months.

Notes receivables consist of software and services that we finance for our customers. Interest income is recognized using the effective interest method and reported within net sales in our consolidated statement of operations.

At the inception of our direct financing and sales-type leases, we record the net investment in leases, which consists of the sum of the minimum lease payments, initial direct costs (direct financing leases only), and unguaranteed residual value (gross investment) less the unearned income. For direct financing leases, the difference between the gross investment and the cost of the leased equipment is recorded as unearned income at the inception of the lease. Under sales-type leases, the difference between the fair value and cost of the leased property plus initial direct costs (net margins) is recorded as unearned revenue at the inception of the lease. We recognize contingent rental income, if any, when the changes in the factors on which the contingent lease payments are based actually occur.

At the inception of an operating lease, equipment under operating leases is recorded at cost and depreciated on a straight-line basis over its useful life to the estimated residual value. The estimated useful lives for equipment under operating leases ranges based on the nature of the equipment. The estimated useful life for information technology equipment is 36 to 84 months, while that of medical equipment is between 48 and 60 months.

RESIDUAL VALUES — Residual values, representing the unguaranteed estimated value of equipment at the termination of a lease, are recorded at the inception of each lease. The estimated residual values vary, both in amount and as a percentage of the original equipment cost, and depend upon several factors, including the equipment type, vendor's discount, market conditions, term of the lease, equipment supply and demand and by new product announcements by vendors.

Unguaranteed residual values for direct financing and sales-type leases are recorded at their net present value and the unearned income is amortized over the life of the lease using the interest method. The residual values for operating leases are included in the leased equipment’s net book value.

Residual values are evaluated on a quarterly basis and any impairment, other than temporary, is recorded in the period in which the impairment is determined. No upward revision of residual values is made subsequent to lease inception.

RESERVES FOR CREDIT LOSSES — Our receivables consist of trade and other accounts receivable and financing receivables. We maintain our reserves for credit losses at a level believed to be adequate to absorb potential losses inherent in the respective balances. The reserve for credit losses is increased by provisions for potential credit losses, which increases expenses, and decreased by subsequent recoveries. The reserve for credit losses is decreased by write-offs and reductions to the provision for potential credit losses. Accounts are either written off or written down when the loss is both probable and determinable.

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Management’s determination of the adequacy of the reserves for credit losses for accounts receivable is based on the age of the receivable balance, the customer’s credit quality rating, an evaluation of historical credit losses, current economic conditions, and other relevant factors. Management’s determination of the adequacy of the reserve for credit losses for financing receivables may be based on the following factors: an internally assigned credit quality rating, historical credit loss experience, current economic conditions, volume, growth, the composition of the lease portfolio, the fair value of the underlying collateral, and the funding status (i.e. not funded, funded on a recourse or partial recourse basis, or funded on non-recourse basis). We assign an internal credit quality rating to each customer at the inception of the lease based on the customer’s financial status, rating agency reports and other financial information. We update the internal credit quality rating at least annually or when an indicator of a change in credit quality arises, such as a delinquency or bankruptcy. Also, management regularly reviews financing receivables to assess whether any balances should be impaired or placed on nonaccrual status.

CONCENTRATIONS OF RISK—RISK — Financial instruments that potentially subject us to concentrations of credit risk include cash and cash equivalents, short-term investments, accounts receivable, notes receivable and investments in direct financing and sales-type leases.receivables. Cash and cash equivalents andmay include short-term investments that are maintained principally with financial institutions in the United States, which have high credit ratings. RiskUS. Our accounts receivable-trade balance as of March 31, 2023, and 2022 included approximately 13% and 14%, respectively, concentration of invoices due from Verizon Communications Inc. The risk on our accounts receivable notes receivable and investments in direct financing and sales-type leasesreceivables is reduced by the large numberhaving a broad customer base in a diverse range of diverse industries comprising our customer base and through the ongoing evaluation of collectability of our portfolio. OurThe credit risk is further mitigated throughby transferring certain of our financing receivables to financial institutions on a non-recourse basis and, for our lease receivables, by owning the underlying collateral and whether the lease is funded with recourse or non-recourse notes payable.

asset. A substantial portion of our sales are products from Cisco Systems, Hewlett-Packard companies, and NetApp products, which represented approximately 49%40%, 7%39%, and 5%36%, respectively, of our technology segment net sales for the yearyears ended March 31, 2016, as compared2023, 2022, and 2021, respectively.

DEFERRED COSTS — When a contract is within the scope of the scope of Codification Topic 606, we defer costs of fulfilling the contract when they generate or enhance resources that will be used by us in satisfying performance obligations in the future. Additionally, we capitalize costs that are incremental to 49%, 8%,obtaining the contracts, predominately sales commissions, and 7%, respectively,expense them in proportion to each completed contract performance obligation.

DEFERRED REVENUE — We recognize deferred revenue when cash payments are received or due in advance of our performance.

EARNINGS PER SHARE — Basic earnings per share is calculated by dividing net earnings attributable to common stockholders by the basic weighted average number of shares of common stock outstanding during each period. Diluted earnings per share reflects the potential dilution of securities that could participate in our earnings, including restricted stock awards during each period.

FAIR VALUE MEASUREMENT — We follow the guidance in Codification Topic 820 Fair Value Measurements (“Codification Topic 820”) which governs how to measure fair value for financial reporting. This topic defines fair value as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date. This topic also establishes a fair value hierarchy that categorizes into three levels the inputs to valuation techniques used to measure fair value:


●Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity can access at the measurement date.


●Level 2 – Inputs other than quoted prices included within Level 1, such as quoted prices for similar assets or liabilities in active markets, that are observable for the asset or liability, either directly or indirectly.


●Level 3 – Unobservable inputs for the asset or liability. The fair values are determined based on model-based techniques such as discounted cash flow models using inputs that we could not corroborate with market data.

FINANCIAL INSTRUMENTS — For financial instruments such as cash, short-term investments, accounts receivables, accounts payable and other current liabilities, we consider the recorded value of the financial instruments to approximate the fair value due to their short maturities. On March 31, 2023, the carrying amounts of our notes receivable, recourse and non-recourse payables were $109.2 million, $6.0 million, and $34.3 million, respectively, and their fair values were $109.5 million, $6.0 million, and $34.5 million, respectively. On March 31, 2022, the carrying amounts of our notes receivable, recourse and non-recourse payables were $80.5 million, $13.1 million, and $21.2 million, respectively, and their fair values were $80.0 million, $13.1 million, and $21.2 million, respectively.

FINANCING RECEIVABLES AND OPERATING LEASES — Financing receivables and operating leases consist of notes receivable, sales-type leases, and operating leases. We issue financing receivables for periods generally between 2 to 6 years, with most terms ranging between 3 to 4 years. When we lease equipment under an operating lease, we recognize the underlying asset at cost and depreciate it on a straight-line bases over its estimated useful life. We estimate that the useful life for most information technology segment(“IT”) equipment under lease is 4 years.

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FOREIGN CURRENCY MATTERS — Our functional currency is the US dollar. Our international subsidiaries typically use their local currency as their functional currency. We translate the assets and liabilities of our international subsidiaries into US dollars at the spot rate in effect at the applicable reporting date. We translate the revenues and expenses of our international subsidiaries into US dollars at the average exchange rates in effect during the applicable period. We report the resulting foreign currency translation adjustment as accumulated other comprehensive income (loss), which is reflected as a separate component of stockholders’ equity. We report all foreign currency transaction gains or losses in other income (expense), net sales foron our consolidated statement of operations. For the yearyears ended March 31, 2015,2023, 2022, and 48%, 10%,2021, we recognized a loss of $5.4 million, a loss of $0.5 million, and 8%,a gain of $0.5 million, respectively, for the year ended March 31, 2014.due to foreign currency transactions.

INVENTORIES — Inventories are stated at the lower of cost and net realizable value. Cost is determined using a weighted average cost method. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Inventories are shown net of allowance for obsolescence of $147 thousand and $161 thousand as of March 31, 2016 and 2015, respectively.

DEFERRED COSTS AND DEFERRED REVENUES — Deferred costs include internal and third party costs associated with deferred revenue arrangements. Deferred revenue relates to professional, managed and hosting services.


GOODWILL — Goodwill represents the premium paid overWe test goodwill for impairment on an annual basis, as of October 1, and between annual tests if an event occurs, or circumstances change, that would more likely than not reduce the fair value of net tangible and intangible assets we have acquired in business combinations. Goodwill is assigned to a reporting unit on the acquisition date.below its carrying amount.


Goodwill is tested for impairment atIn a level of reporting referred to as a reporting unit. We review our goodwill for impairment annually in the third quarter of our fiscal year, or more frequently if indicators of impairment exist. A significant amount of judgment is involved in determining if an indicator of impairment has occurred. Such indicators may include a sustained, significant decline in our share price and market capitalization, a decline in our expected future cash flows, a significant adverse change in legal factors or in the business climate, unanticipated competition, and/or slower growth rates, among others.

We firstqualitative assessment, we assess qualitative factors to determine whether it is more likely than not (that is, a likelihood of more than 50 percent) that the fair value of a reporting unit is less than its carrying amount, including goodwill. If, after assessing the totality of events or circumstances, we determine that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount. Qualitative factorsamount, then the quantitative goodwill impairment test is unnecessary.

If, after assessing the totality of events or circumstances, we consider include, but are not limited to, macroeconomic conditions, industry and market conditions, company specific events, changes in circumstances, after tax cash flows and market capitalization. If the qualitative factors indicatedetermine that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then we perform the two step processquantitative goodwill impairment test. We may also elect the unconditional option to assess ourbypass the qualitative assessment for any reporting unit in any period and proceed directly to performing the quantitative goodwill for impairment. First,impairment test.

In the quantitative impairment test, we compare the fair value of oura reporting unitsunit with its carrying value. We estimate the fair value of the reporting unit using various valuation methodologies,amount, including discounted expected future cash flows. The assumptions included in the these valuation methodologies include forecasted revenues, gross profit margins, operating income margins, working capital cash flow, forecasted capital expenditures, perpetual growth rates, and long-term discount rates, among others, all of which require significant judgments by management.
goodwill. If the fair value of thea reporting unit exceeds its carrying value,amount, goodwill of the reporting unit is considered not impaired, and no further testing is necessary. Ifimpaired. Conversely, if the net book valuecarrying amount of oura reporting unit exceeds its fair value, we perform a second testan impairment loss shall be recognized in an amount equal to measurethat excess, limited to the total amount of impairment loss, if any. To measuregoodwill allocated to that reporting unit.

IMPLEMENTATION COSTS OF A HOSTING ARRANGEMENT- We capitalize implementation costs incurred in a hosting arrangement that is a service contract with the amount of any impairment loss, we determine the fair value of goodwillrequirements for capitalizing implementation costs incurred to develop or obtain internal-use software. We classify these capitalized costs in the same manner as if our reporting unit were being acquired in a business combination. Specifically, we allocate the fair value of the reporting unit to all of the assets and liabilities of that unit, including any unrecognized intangible assets, in a hypothetical calculation that would yield the estimated fair value of goodwill. If the estimated fair value of goodwill is less than the goodwill recorded on our balance sheet we record an impairment chargeline item as the amounts prepaid for the difference.

CAPITALIZATION OF COSTS OF SOFTWARE FOR INTERNAL USE — We capitalizerelated hosting arrangement and we present the amortization of these capitalized costs in the same income statement line item as the service fees for the development of internal use software under the guidelines of Codification Topic Intangibles—Goodwill and Other Intangibles, Subtopic Internal-Use Software. Software capitalized for internal use was $16 thousand and $77 thousand during the years ended March 31, 2016 and March 31, 2015, respectively, and isrelated hosting arrangement. Our long-term prepaids are included in the accompanyingour consolidated balance sheets as a componentpart of goodwillproperty, equipment, and other intangible assets. We hadamortize the capitalized implementation costs net of amortization, of approximately $381 thousand and $675 thousand at March 31, 2016 and March 31, 2015, respectively.

CAPITALIZATION OF COSTS OF SOFTWARE TO BE MADE AVAILABLE TO CUSTOMERS — In accordance with Codification Topic Software, Subtopic Costs of Software to Be Sold, Leased, or Marketed, software development costs are expensed as incurred until technological feasibility has been established. At such time, such costs are capitalized untilover the product is made available for release to customers. No amounts were capitalized for the year ended March 31, 2016 and 2015. We had $414 thousand and $566 thousand of capitalized costs, net of amortization, at March 31, 2016 and March 31, 2015, respectively, which is included within goodwill and other intangible assets in the accompanying balance sheets.

PROPERTY AND EQUIPMENT — Property and equipment are stated at cost, net of accumulated depreciation and amortization. Property and equipment obtained through an acquisition are stated at the fair market value asterm of the acquisition date. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the related assets, which range from three to ten years. Information technology equipment is depreciated over three years. Perpetual software licenses are depreciated over five years. Furniture and certain fixtures are depreciated over five to ten years. Telecommunications equipment is depreciated over seven years.hosting arrangement.

TREASURY STOCK — We account for treasury stock under the cost method and include treasury stock as a component of stockholders’ equity on the accompanying consolidated balance sheets.

VENDOR CONSIDERATION — We receive payments and credits from vendors pursuant to volume incentive programs and shared marketing expense programs. Many of these programs extend over one or more quarters’ sales activities. Different programs have different vendor/program specific milestones to achieve. Amounts due from vendors as of March 31, 2016 and 2015 were $15.6 million and $13.9 million, respectively, which were included within accounts receivable-other, net in the accompanying balance sheets.

Vendor consideration received pursuant to volume purchase incentive programs is allocated to inventory based on the applicable incentives from each vendor and is recorded in cost of sales, product and services, as the inventory is sold. If a rebate is probable and reasonably estimable, it is recognized based on a systematic and rational allocation of the cash consideration offered to the underlying transactions that result in our progress toward earning the rebate. If a rebate is not probable and reasonably estimable, it is recognized as the milestones are achieved.

Vendor consideration received pursuant to shared marketing expense programs is recorded as a reduction of the related selling and administrative expenses in the period the program takes place only if the consideration represents a reimbursement of specific, incremental, identifiable costs. Consideration that exceeds the specific, incremental, identifiable costs is classified as a reduction of cost of sales, product and services.

SHARE-BASED COMPENSATION — We account for share-based compensation in accordance with Codification Topic Compensation—Stock Compensation. We recognize compensation cost for awards of restricted stock with graded vesting on a straight line basis over the requisite service period and we estimate forfeitures based on historical experience. There are no additional conditions for vesting other than service conditions.


INCOME TAXES — Deferred income taxes are accounted for in accordance with Codification Topic 740 Income Taxes (“Codification Topic 740”). Under this method, deferred income tax assets and liabilities are determined based on the temporary differences between the financial statement reporting and tax bases of assets and liabilities, using tax rates currently in effect. Future tax benefits, such as net operating loss carry-forwards, are recognized to the extent that realization of these benefits is considered to be more likely than not. We review our deferred tax assets at least annually and make necessary valuation adjustments.
In addition, we account for uncertain tax positions in accordance with Codification Topic Income Taxes.740. Specifically, the Topic prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The interpretation also provides guidance on the related de-recognition, classification, interest and penalties, accounting for interim periods, disclosure, and transition of uncertain tax positions. In accordance with our accounting policy, we recognize accrued interest and penalties related to unrecognized tax benefits as a component of tax expense.


BUSINESS COMBINATIONSINVENTORIES — Inventories are stated at the lower of cost and net realizable value. Cost is determined using a weighted average cost method. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Our determination of the net realizable value for inventories is based on the terms of underlying purchase commitments from our customers, current economic conditions, and other relevant factors.

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LESSEE ACCOUNTING — We lease office space for periods up to six years and lease warehouse space for periods of up to 10 years, and we have some lease options that can be exercised to extend beyond those lease term limits. At the lease commencement date, we recognize operating lease liabilities based on the present value of the future minimum lease payments. In determining the present value of future minimum lease payments, we use our incremental borrowing rate based on the information available at the commencement date. When the future minimum payments encompass non-lease components, we account for the lease and non-lease components as a single lease component. We elected not to recognize right-of-use assets and lease liabilities for leases with an initial term of 12 months or less. We recognize lease expense on a straight-line basis over the lease term beginning on the commencement date.

PROPERTY AND EQUIPMENT — Property and equipment are stated at cost, net of accumulated depreciation and amortization. We recognize property and equipment obtained through a business combination at its fair market value as of the acquisition date. We compute depreciation and amortization using the straight-line method over the estimated useful lives of the related assets, which range from three to seven years. We typically depreciate internal use IT equipment over three years, perpetual software licenses over five years, furniture and fixtures over five years, and telecommunications equipment over seven years.

RESIDUAL ASSETS — Our estimate for the residual asset in a lease is the amount we expect to derive from the underlying asset following the end of the lease term. In a sales-type lease, we recognize the unguaranteed residual asset, measured on a discounted basis, upon lease commencement. In our subsequent accounting for the lease, we increase the unguaranteed residual asset using the effective interest method. We evaluate residual values for impairment on a quarterly basis. We recognize impairments as incurred. We do not recognize upward adjustments due to changes in estimates of residual values.

REVENUE RECOGNITION — We recognize most of our revenues from the sales of third-party products, third-party software, third-party maintenance, software support, and services, ePlus professional and managed services, and hosting ePlus proprietary software. We recognize revenue from these sales under the guidance in Codification Topic 606.

The core principle of Codification Topic 606 is that an entity should recognize revenue for the transfer of goods and services equal to an amount it expects to be entitled to receive for those goods and services. We account for business combinationsa contract under Codification Topic 606 when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are established, the contract has commercial substance, and collectability of consideration is probable.

Revenues are reported net of sales refunds, including an estimate of future returns based on an evaluation of historical sales returns, current economic conditions, volume, and other relevant factors.

Our contracts with customers may include multiple promises that are distinct performance obligations. For such arrangements, we allocate the transaction price to each performance obligation based on its relative standalone selling price. We determine standalone selling prices using expected cost-plus margin.

We recognize revenue when (or as) we satisfy a performance obligation by transferring a promised good or service to a customer. A good or service is transferred when (or as) the acquisition methodcustomer obtains control of that good or service. Depending on the nature of each performance obligation, this may be at a point in time or over time, as further described below.
We typically invoice our customers for third-party products upon shipment, unless our customers lease the equipment through our financing segment, in which case the arrangement is accounted for as a lease in accordance with Codification Topic Business Combinations,842, Leases (“Codification Topic 842”). We typically invoice our customers for third-party software upon delivery and third-party services at the point of sale, unless our customers finance these products through our financing segment, in which requirescase we record a financing receivable based on the terms of the arrangement. 

Product revenue

Sales of third-party products

We are the principal in sales of third-party products. As such, we recognize sales on a gross basis with the selling price to the customer recorded as sales and the acquisition cost of the product recognized as cost of sales. We recognize revenue from these sales at the point in time that control passes to the customer, which is typically upon delivery of the product to the customer.

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In some instances, our customers may request that we bill them for a product but retain physical possession of the product until later delivery, commonly known as “bill-and-hold” arrangements. We have warehousing agreements with select customers wherein title to products ordered through the agreements transfers to our customer at the point we invoice the customer and after the product arrives at our warehouse. In these “bill-and-hold” arrangements, we recognize revenue when the customer has ordered the product through their warehousing agreement with us or signed a bill-and-hold agreement with us, the customer has legal title, the product is identified separately as belonging to the customer, and the product is ready for delivery to the customer.

We recognize sales of off-lease equipment within our financing segment when control passes to the customer, which is typically the date that title to the equipment is transferred per the sales agreement.

Sales of third-party software

We are typically the principal in sales of third-party software. Sales are recognized on a gross basis with the selling price to the customer recorded as sales and the acquisition cost of the product recognized as cost of sales. We recognize revenue from these sales at the point in time that control passes to the customer, which is typically upon delivery of the software to the customer.

Sales of third-party maintenance, software support, and services

We are the agent in sales of third-party maintenance, software support, and services as the third-party controls the service until it is transferred to the customer. Similarly, we are the agent in sales of third-party software and accompanying third-party support when the third-party software benefits the customer only in conjunction with the accompanying support. In these sales, we consider the third-party software and support as inputs to a single performance obligation. In all these sales where we are the agent, we recognize sales on a net basis at the point that our customer and vendor accept the terms and conditions of the arrangement.

Freight and sales tax

We present freight billed to our customers within sales and the related freight charged to us within cost of sales. We present sales tax collected from customers and remittances to governmental authorities on a net basis.

Financing revenue and other

We account for leases to customers in accordance with Codification Topic 842. We utilize a portfolio approach by grouping together many similar assets being leased to a single customer.

We classify our leases as either sales-type leases or operating leases. We classify leases as sales-type leases if any one of five criteria are met, each of which indicate that the total purchase price of eachlease transfers control of the acquired entities be allocatedunderlying asset to the assets acquired and liabilities assumed based on their fair values atlessee. We classify our other leases as operating leases.

For sales-type leases, upon lease commencement, we recognize the acquisition date. The allocation process requires an analysis of intangible assets, such as customer relationships, trade names, acquired contractual rights and assumed contractual commitments and legal contingencies to identify and record all assets acquired and liabilities assumed at their fair value.

Any premium paid over the fairpresent value of the net tangiblelease payments and intangible assetsthe residual asset discounted using the rate implicit in the lease. When we are financing equipment provided by another dealer, we typically do not have any selling profit or loss arising from the lease. When we are the dealer of the acquired business is recordedequipment being leased, we typically recognize revenue in the amount of the lease receivable and cost of sales in the amount of the carrying value of the underlying asset minus the unguaranteed residual asset. After the commencement date, we recognize interest income as goodwill.part of net sales using the effective interest method.

For operating leases, we recognize the underlying asset as an operating lease asset. We depreciate the asset on a straight-line basis to its estimated residual value over its estimated useful life. We recognize the lease payments over the lease term on a straight-line basis as part of net sales.

In all of our leases, we recognize variable lease payments, primarily reimbursement for property taxes associated with the leased asset, as part of net sales in the period in which the changes in facts and circumstances on which the variable lease payments are based occur. We exclude from revenues and expenses any sales taxes reimbursed by the lessee.

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We also finance third-party software and third-party services for our customers, which we classify as notes-receivable. We recognize interest income on our notes-receivable using the effective interest method.

We account for transfers of our financial assets, under Codification Topic 860 Transfers and Servicing (“Codification Topic 860”). When a transfer meets all the requirements for sale accounting, we derecognize the financial asset and record a net gain in our income statement to the extent the purchase priceor loss that is less than the fair value of assets acquired and liabilities assumed. The results of operations for an acquired company are included in net sales.

Service revenue

Sales of ePlus professional, managed services, and staffing

ePlus professional services offerings include assessments, project management, and staging, configuration, and integration. ePlus managed service offerings range from monitoring and notification to a fully outsourced network management or service desk solution. ePlus staffing delivers a full range of staffing solutions, including short-term, long-term, temporary-to-hire, and direct-hire IT professionals. In all these arrangements, we satisfy our financial statementsperformance obligation and recognize revenue over time.

In arrangements for ePlus professional services and staffing, we provide services under both time and materials and fixed price contracts. When services are provided on a time and materials basis, we recognize sales at agreed-upon billing rates as services are performed. When services are provided on a fixed fee basis, we recognize sales over time in proportion to our progress toward complete satisfaction of the performance obligation. We typically measure progress based on costs incurred in proportion to total estimated costs, commonly referred to as the “cost-to-cost” method.

In arrangements for ePlus managed services, our arrangement is typically a single performance obligation comprised of a series of distinct services that are substantially the same and that have the same pattern of transfer (i.e., distinct days of service). We typically recognize sales from these services on a straight-line basis over the date of acquisition.period services are provided.


FAIR VALUE MEASUREMENTSHARE-BASED COMPENSATION — We follow the guidanceaccount for share-based compensation in accordance with Codification Topic Fair Value Measurements 718 Compensation—Stock Compensation.We account for forfeitures when they occur. There are no additional conditions for vesting other than service conditions.

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.

We recognize compensation cost for our employee stock purchase plan on a straight-line basis over the offering period, which governs fair value accounting for financial assets and liabilities and non-financial assets and liabilities that are recognized or disclosedis 6 months. We measure the award on the grant date at fair value inusing the financial statements. The Company defines fair valueBlack-Scholes option pricing model.

SOFTWARE DEVELOPMENT COSTS — We capitalize costs for the development of internal use software under the Codification Topic 350-40 Intangibles—Goodwill and Other Intangibles, Subtopic Internal-Use Software. We did not have significant capitalized development costs for internal use software for either of the years ended March 31, 2023, or March 31, 2022. We capitalized development costs for internal use software of $0.2 million for the year ended March 31, 2021. We had capitalized costs, net of amortization, of approximately $1.0 million and $2.1 million as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. When determining the fair value measurements for assets and liabilities, which are required to be disclosed at fair value, the Company considers the principal or most advantageous market in which the Company would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability, such as risk inherent in valuation techniques, transfer restrictions and credit risk. Topic Fair Value Measurements and Disclosures establishes a three-tier value hierarchy, which prioritizes the inputs used in measuring fair value and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement as follows:

·Level 1 – Observable inputs such as quoted prices for identical assets and liabilities in active markets;
·Level 2 – Inputs other than quoted prices, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.
·Level 3 – Unobservable inputs reflecting the Company’s own assumptions, consistent with reasonably available assumptions made by other market participants.

This hierarchy requires us to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. As of March 31, 2016, we measure money market funds2023, and contingent consideration at fair valueMarch 31, 2022, respectively, that is included in the accompanying consolidated balance sheets as a component of other intangible assets-net.

TREASURY STOCK — We account for treasury stock under the cost method and include treasury stock as a component of stockholders’ equity on the accompanying consolidated balance sheets.
VENDOR CONSIDERATION — We receive payments and credits from vendors pursuant to volume incentive programs and shared marketing expense programs. Many of these programs extend over one or more quarters’ sales activities. Different programs have different vendor/program specific milestones to achieve. Amounts due from vendors as of March 31, 2023, and 2022 were $21.9 million and $12.9 million, respectively, which were included within accounts receivable-other, net in the accompanying balance sheets.
We recognize rebates pursuant to volume incentive programs, when the rebate is probable and reasonably estimable, based on a recurring basis, whichsystematic and rational allocation of the cash consideration offered to the underlying transactions that result in our progress toward earning the rebate. When a rebate is based on quoted net asset values.

FINANCIAL INSTRUMENTS — For financial instruments suchnot probable or not reasonably estimable, we recognized the rebate as the milestones are achieved or as cash short-term investments, accounts receivables, accounts payable and other current liabilities, we consider the recorded value of the financial instruments to approximate the fair value due to their short maturities.

At March 31, 2016, the carrying amount of notes receivables, recourse and non-recourse payables were $43.4 million, $3.3 million and $44.1 million, respectively and the fair value of notes receivables, recourse and non-recourse payables were $42.4 million, $3.3 million and $43.9 million, respectively. At March 31, 2015, the carrying amount of notes receivables, recourse and non-recourse payables were $56.8 million, $3.7 million and $52.9 million, respectively and the fair value of notes receivables, recourse and non-recourse payables were $59.4 million, $3.6 million and $52.3 million.

FOREIGN CURRENCY TRANSLATION— The Company’s functional currency is the U.S. dollar. The functional currency of the Company’s international operating subsidiaries is generally the same as the corresponding local currency. Assets and liabilities of the international operating subsidiaries are translated at the spot rate in effect at the applicable reporting date. Revenues and expenses of the international operating subsidiaries are translated at the average exchange rates in effect during the applicable period. The resulting foreign currency translation adjustment is recorded as accumulated other comprehensive loss, which is reflected as a separate component of Stockholders’ equity.
received.
EARNINGS PER SHARE — Basic earnings per share is calculated by dividing net earnings attributableWe recognize rebates pursuant to common stockholders byshared marketing expense programs as a reduction of the basic weighted average numberrelated selling and administrative expenses in the period the program occurs when the consideration represents a reimbursement of sharesspecific, incremental, identifiable costs. We recognize consideration that exceeds the specific, incremental, identifiable costs as a reduction of common stock outstanding during each period. Diluted earnings per share reflects the potential dilutioncost of securities that could participate in our earnings, including incremental shares issuable upon the assumed exercise of “in-the-money” stock options and other common stock equivalents during each period.sales.


2. RECENT ACCOUNTING PRONOUNCEMENTS


RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS — In November 2015,October 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2015-17, Balance Sheet Classification of Deferred Taxes. To simplify the presentation of deferred income taxes, the amendments in this ASU require2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, that deferred taxrequires companies to apply Accounting Standards Codification Topic 606, Contracts with Customers, to recognize and measure contract assets and contract liabilities be classified as noncurrentfrom contracts with customers acquired in a classified balance sheet. As permitted, we elected tobusiness combination. We early adoptadopted this ASU usingupdate beginning in the retrospective approach, during thesecond quarter ended December 31, 2015. As a result of adopting this ASU, we recast our fiscal year ending March 31, 2015 balance sheet by decreasing deferred tax assets-current, property, equipment2023, and other assets, and deferred tax liability by $3,643 thousand, $232 thousand, and $3,271 thousand, respectively, and creating a new line item for non-current deferred tax assets in the amount of $604 thousand. There is no impact to our consolidated statement of operations or statement of cash flows.

In September 2015, the FASB issued ASU 2015-16, Business Combinations: Simplifying the Accounting for Measurement-Period Adjustments. This main provision in this ASU is that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. As permitted, we elected to early adopt this ASU during the quarter ended March 31, 2016. The adoption of this updateit did not have a material impact on our consolidated financial statements.Consolidated Financial Statements. The ongoing impact of this standard will be fact dependent on the transactions within its scope.


RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED — In May 2014,September 2022, the FASB issued ASU 2014-09, Revenue from Contracts with Customers(Topic 606), which will supersede all current U.S. GAAP on this topic. The FASB subsequently issued ASU 2016-08, Principal versus Agent Considerations, ASU 2016-10, Identifying Performance2022-04, Liabilities—Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations. This update requires buyers in a supplier finance program to disclose certain qualitative and Licensing, and ASU 2016-12, Narrow-Scope Improvements and Practical Expedients, in March 2016, April 2016 and May 2016, respectively, to amendquantitative information about the guidance in ASU 2014-09. The core principle of ASU 2014-09program. This update is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which entity expects to be entitled in exchange for those goods or services. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, to defer the effective date of ASU 2014-09 by one year. Including the one-year deferral, these updates becomes effective for us beginning in the first quarter of our quarterfiscal year ending June 30, 2018, and early adoptionMarch 31, 2024, except for a requirement to provide a roll forward of our obligations during the annual period, which is permittedeffective for us beginning in the first quarter of our quarterfiscal year ending June 30, 2017. The ASU can be applied either retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption.March 31, 2025. We are currently evaluating the impact of this update will have on our financial statementsdisclosures.

3. REVENUES

CONTRACT BALANCES

Accounts receivable – trade consists entirely of amounts due from contracts with customers. In addition, we had $70.4 million, $47.5 million, and have not yet selected our planned transition approach.$54.6 million of receivables from contracts with customers included within financing receivables as of March 31, 2023, 2022, and 2021, respectively. The following table provides the balance of contract liabilities from contracts with customers (in thousands):


  March 31, 
 2023  2022  2021 
Current (included in deferred revenue) $113,713  $85,826  $72,299 
Non-current (included in other liabilities) $47,217  $30,086  $26,042 

In February 2016,Revenue recognized from the FASB issued ASU No. 2016-02, Leases, which will supersedebeginning contract liability balance was $70.3 million and $57.5 million for the current U.S. GAAP on this topic. The core principle of ASU 2016-02 is that a lessee should recognize the assetsfiscal years ended March 31, 2023, and liabilities that arise from leases. This ASU requires adoption under the modified retrospective approach and becomes effective for us in our quarter ending June 30, 2019. Early adoption is permitted. We are currently evaluating the impact of this update on our financial statements.2022, respectively.

In March 2016, the FASB issued ASU No. 2016-09, Stock Compensation. This ASU is intended to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The provisions of this ASU are effective for becomes effective for us in our quarter ending June 30, 2017. Early application is permitted. We are currently evaluating the impact of this update on our financial statements.

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3. 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):

Year ending March 31, 2024
 
64,863 
2025
  28,269 
2026
  12,855 
2027
  4,132 
2028 and thereafter
  1,442 
Total remaining performance obligations $111,561 

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

The following table provides the profit recognized for sales-type leases at their commencement date, including modifications that are recognized on a net basis, for the years ended March 31, 2023, and 2022 (in thousands):

 
Year Ended March 31,
 
  2023  2022 
Net sales $22,677  $14,943 
Cost of sales  19,009   12,478 
Gross profit $3,668  $2,465 

The following table provides interest income in aggregate on our sales-type leases and lease income on our operating leases for the years ended March 31, 2023, and 2022 (in thousands):

 
Year Ended March 31,
 
  2023  2022 
Interest income on sales-type leases $3,943  $3,904 
Lease income on operating leases $17,421  $24,711 

FINANCING RECEIVABLES—NET


OurThe following tables provide a disaggregation of our financing receivables - net consist of the following (in thousands):


March 31, 2016 
Notes
Receivables
  
Lease-Related
Receivables
  
Total Financing
Receivables
 
Minimum payments $44,442  $66,303  $110,745 
Estimated unguaranteed residual value (1)  -   12,693   12,693 
Initial direct costs, net of amortization (2)  312   475   787 
 Notes  Lease  Financing 
March 31, 2023 Receivable  Receivables  Receivables 
Gross receivables $117,008  $60,157  $177,165 
Unguaranteed residual value (1)  -   8,161   8,161 
Unearned income  -   (5,543)  (5,543)  (5,950)  (8,050)  (14,000)
Reserve for credit losses (3)  (3,381)  (685)  (4,066)
Allowance for credit losses (2)  (801)  (981)  (1,782)
Total, net $41,373  $73,243  $114,616  $110,257  $59,287  $169,544 
Reported as:                        
Current $24,962  $31,486  $56,448  $65,738  $24,091  $89,829 
Long-term  16,411   41,757   58,168   44,519   35,196   79,715 
Total, net $41,373  $73,243  $114,616  $110,257  $59,287  $169,544 

(1)Includes estimated unguaranteed residual values of $6,722$4,222 thousand for direct financing leases, which have been accounted for as sales under Codification Topic Transfers and Servicing.that we retained after selling the related lease receivable.
(2)Initial direct costs are shown net of amortization of $612 thousand.
(3)For details on reserve for credit losses, referRefer to Note 5, “Reserves7, “Allowance for Credit Losses.”Losses” for details.


March 31, 2015 
Notes
Receivables
  
Lease-Related
Receivables
  
Total Financing
Receivables
 
Minimum payments $59,943  $66,415  $126,358 
Estimated unguaranteed residual value (1)  -   8,376   8,376 
Initial direct costs, net of amortization (2)  429   495   924 
Unearned income  -   (5,233)  (5,233)
Reserve for credit losses (3)  (3,573)  (881)  (4,454)
Total, net $56,799  $69,172  $125,971 
Reported as:            
Current $33,484  $33,425  $66,909 
Long-term  23,315   35,747   59,062 
Total, net $56,799  $69,172  $125,971 
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  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 estimated unguaranteed residual values of $3,977$6,424 thousand for direct financing leases which have been accounted for as sales under Codification Topic Transfers and Servicing.that we retained after selling the related lease receivable.
(2)Initial direct costs are shown net of amortization of $647 thousand.
(3)For details on reserve for credit losses, referRefer to Note 5, “Reserves7, “Allowance for Credit Losses.”Losses” for details.


FutureThe following table provides the future scheduled minimum lease payments for investments in direct financing and sales-type leases as of March 31, 2016 are as follows2023 (in thousands):


Year ending March 31, 2017 $34,566 
2018  19,247 
2019  10,673 
2020  1,582 
2021 and thereafter  235 
Total $66,303 
Year ending March 31, 2024
 $28,478 
2025  17,216 
2026  9,662 
2027  3,547 
2028 and thereafter
  1,254 
Total $60,157 
OPERATING LEASES—NET


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


 
March 31,
2016
  
March 31,
2015
  
March 31,
2023
  
March 31,
2022
 
Cost of equipment under operating leases $36,635  $36,283  $15,301  $13,044 
Accumulated depreciation  (18,897)  (18,354)  (10,599)  (7,985)
Investment in operating lease equipment—net (1) $17,738  $17,929  $4,702  $5,059 

(1)Amounts include estimated unguaranteed residual values of $3,417 thousand and $4,340$1,717 thousand as of both March 31, 20162023, and 2015, respectively.2022.


FutureThe following table provides the future scheduled minimum lease rental payments for operating leases as of March 31, 2016 are as follows2023 (in thousands):


Year ending March 31, 2017 $8,293 
2018  5,935 
2019  2,501 
2020  1,025 
2021 and thereafter  755 
Total $18,509 
Year ending March 31, 2024 $1,618 
2025  829 
2026  269 
2027  38 
Total $2,754 

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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 in accordance with Codification Topic, Transfers and Servicing.

For transfers accounted for as a secured borrowing, the corresponding investments serve as collateral for non-recourse notes payable. As of March 31, 20162023, and 2015March 31, 2022, we had financing receivables of $35.7 million and $21.1 million, respectively, and operating leases of $50.0$2.5 million and $61.9$2.0 million, respectively thatwhich were collateral for non-recourse notes payable. See Note 7, "Notes9, “Notes Payable and Credit Facility."”


For transfers accounted for as sales, 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. For the years ended March 31, 2016, 2015,2023, 2022, and 2014,2021, we recognized net gains of $7.4$16.1 million, $5.9$18.2 million, and $8.5$14.5 million, respectively, and total proceeds from these sales were $223.3$706.0 million, $181.3$855.1 million, and $187.2$364.0 million, respectively. For certain assignments of financial assets,

When we retain a servicing obligation. For assignmentsobligations in transfers accounted for as sales, we allocate a portion of the proceeds to deferred revenues, which is recognized as we perform the services. As of both March 31, 2023, and March 31, 2022, we had deferred revenue of $0.5 million for servicing obligations.

In a limited number of suchtransfers accounted for as sales, we indemnified the assignee in the event that the lessee electedelects to early terminate the lease. Our maximumAs of March 31, 2023, our total potential liability that could result from these indemnities is immaterial.

5. LESSEE ACCOUNTING

We lease office space for periods up to six years and lease warehouse space for periods of up to 10 years, and we have some lease options that can be exercised to extend beyond those lease term limits. We recognize our right-of-use assets as part of property, equipment, and other assets. As of March 31, 2023, and 2022, we had right-of-use assets of $14.6 million and $6.9 million, respectively.

We recognize the current and long-term portions of our lease liability as part of other current liabilities and other liabilities, respectively.As of March 31, 2023, and 2022, we had current lease liabilities of $2.7 million and $3.6 million, respectively, and long-term lease liabilities of $12.0 million and $3.3 million, respectively. We recognized rent expense of $5.2 million and $5.3 million as part of selling, general, and administrative expenses during the years ended March 31, 2023, and March 31, 2022, respectively.

Supplemental information about the remaining lease terms and discount rates applied as of March 31, 2023, and March 31, 2022, are as follows:

 
Year Ended March 31,
 
Lease term and Discount Rate 2023  2022 
Weighted average remaining lease term (months)  81   29 
Weighted average discount rate  4.8%  3.2%

The following table provides our future lease payments relatedunder our operating leases as of March 31, 2023 (in thousands):

Year ending March 31, 2024 $2,796 
2025  3,861 
2026  1,884 
2027  1,640 
2028 and thereafter  7,775 
Total lease payments  17,956 
Less: interest  (3,191)
Present value of lease liabilities $14,765 

As of March 31, 2023, we were committed to such guarantees is $0.8one office lease that had not yet commenced with a total commitment of $0.3 million. We believe the possibility

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4.
6. GOODWILL AND OTHER INTANGIBLE ASSETS


OurGOODWILL

The following table summarizes the changes in the carrying amount of goodwill for the years ended March 31, 2023, and other intangible assets consist of the followingMarch 31, 2022, respectively (in thousands):


  March 31, 2016  March 31, 2015 
  
Gross
Carrying
Amount
  
Accumulated
Amortization
 / Impairment
Loss
  
Net
Carrying
Amount
  
Gross
Carrying
Amount
  
Accumulated
Amortization
/ Impairment
Loss
  
Net
Carrying
Amount
 
                   
Goodwill $50,824  $(8,673) $42,151  $42,785  $(8,673) $34,112 
Customer relationships & other intangibles  20,401   (9,193)  11,208   12,005   (6,560)  5,445 
Capitalized software development  2,709   (1,914)  795   2,693   (1,452)  1,241 
Total $73,934  $(19,780) $54,154  $57,483  $(16,685) $40,798 
 Year ended March 31, 2023  Year ended March 31, 2022 
  Goodwill  
Accumulated
Impairment
Loss
  
Net Carrying
Amount
  Goodwill  
Accumulated
Impairment
Loss
  
Net Carrying
Amount
 
Beginning balance $135,216  $(8,673) $126,543  $135,318  $(8,673) $126,645 
Acquisitions  9,694   -   9,694   -   -   - 
Foreign currency translations  (132)  -   (132)  (102)  -   (102)
Ending balance $144,778  $(8,673) $136,105  $135,216  $(8,673) $126,543 

F - 18
GOODWILL

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. Customer relationships and capitalized software development costs are amortized over an estimated useful life, which is generally between 3 to 7 years. Trade names and trademarks are amortized over an estimated useful life of 10 years. All of our goodwillOur entire balance as of March 31, 20162023, and March 31, 2015 is related2022, relates to our technology segment.

Goodwillreportable segment, which we also determined to be one reporting unit. The carrying value of goodwill was $136.1 million and $126.5 million as of March 31, 2023, and March 31, 2022, respectively. Our goodwill balance increased by $8.0$9.6 million for the year ended March 31, 20162023, due to the addition$9.7 million in goodwill additions from our acquisition of $8.1 million from the acquisition of the businesses of IGX Acquisition Global, LLC, IGXGlobal UK Limited, and IGX Support, LLC (collectively, “IGX”) in December, 2015 andFuture Com, Ltd., offset by $0.2 million in foreign currency translation. See translation of $0.1 million. Please refer to Note 14,16, “Business Combinations,”Combinations” for additional information.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 amount.value.


During the quarter ended December 31, 2015,In our annual test as of October 1, 2022, we performed a qualitativequantitative assessment forof goodwill in accordance with the provisions of Codification Topic Intangibles – Goodwill and Other, and concluded that the fair value of our technology reporting units, more likely than not,unit exceeded their respectiveits carrying amounts as of October 1, 2015.

During the quarter ended December 31, 2014, we elected to bypass the qualitative assessment of goodwill and estimate the fair values of the reporting units. The fair value of our reporting units substantially exceeded their respective carrying values as of October 1, 2014, and ourvalue. Our conclusions regarding the recoverability of goodwill would not be impacted by a ten percent change in theirour estimate of the fair values.value of the reporting unit.


In our 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 as of March 31, 2023, and March 31, 2022 (in thousands):

 March 31, 2023  March 31, 2022 
  
Gross
Carrying
Amount
  
Accumulated
Amortization
  
Net Carrying
Amount
  
Gross
Carrying
Amount
  
Accumulated
Amortization
  
Net Carrying
Amount
 
Purchased intangibles $85,449  $(61,376) $24,073  $77,224  $(52,087) $25,137 
Capitalized software development  10,516   (9,544)  972   10,517   (8,404)  2,113 
Total $95,965  $(70,920) $25,045  $87,741  $(60,491) $27,250 

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

Total amortization expense for customer relationships and other intangible assets was $3.3$9.3 million, $2.4$10.1 million, and $1.5$10.3 million for the years ended March 31, 2016, 2015 and 2014, respectively. Amortization expense is estimated to be $4.4 million, $2.9 million, $2.2 million, $1.5 million, and $0.9 million for the years ended March 31, 2017, 2018, 2019, 2020,2023, 2022 and 2021, respectively.


5. RESERVES
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The following table provides the future amortization expense for customer relationships and other intangible assets as of March 31, 2023 (in thousands):

Year ending March 31, 2024 $8,104 
2025  6,235 
2026  4,448 
2027  2,882 
2028  1,658 
2029 and thereafter  746 
Total $24,073 

7. ALLOWANCE FOR CREDIT LOSSES

Activity
The following table provides the activity in our reservesallowance for credit losses for the years ended March 31, 2016, 20152023, 2022, and 2014 were as follows2021 (in thousands):


 
Accounts
Receivable
  
Notes
Receivable
  
Lease-Related
Receivables
  Total  
Accounts
Receivable
  
Notes
Receivable
  
Lease
Receivables
  Total 
Balance April 1, 2015 $1,169  $3,573  $881  $5,623 
Balance as of March 31, 2020  1,781   798  
610   3,189 
Provision for credit losses  126   (172)  (196)  (242)  367   503   566   1,436 
Write-offs and other  (168)  (20)  -   (188)  (84)  (89)  (5)  (178)
Balance March 31, 2016 $1,127  $3,381  $685  $5,193 
Balance as of March 31, 2021
  2,064   1,212   1,171   4,447 
Provision for credit losses  482   (312)  (272)  (102)
Write-offs and other  (135)  (192)  (218)  (545)
Balance as of March 31, 2022
  2,411   708   681   3,800 
Provision for credit losses  273   93   300   666 
Write-offs and other  (112)  -   -   (112)
Balance as of March 31, 2023
  2,572   801  
981   4,354 

  
Accounts
Receivable
  
Notes
Receivable
  
Lease-Related
Receivables
  Total 
Balance April 1, 2014 $1,364  $3,364  $1,024  $5,752 
Provision for credit losses  28   209   (112)  125 
Write-offs and other  (223)  -   (31)  (254)
Balance March 31, 2015 $1,169  $3,573  $881  $5,623 

  
Accounts
Receivable
  
Notes
Receivable
  
Lease-Related
Receivables
  Total 
Balance April 1, 2013 $1,147  $3,137  $845  $5,129 
Provision for credit losses  344   227   179   750 
Write-offs and other  (127)  -   -   (127)
Balance March 31, 2014 $1,364  $3,364  $1,024  $5,752 

F - 19
Our reserve for credit losses and minimum lease payments associated withWe evaluate our investment in direct financing and sales- type lease balances disaggregated on the basis of our impairment method were as follows (in thousands):

  March 31, 2016  March 31, 2015 
  
Notes
Receivable
  
Lease-
Related
Receivables
  
Notes
Receivable
  
Lease-
Related
Receivables
 
Reserves for credit losses:            
Ending balance: collectively evaluated for impairment $279  $562  $440  $740 
Ending balance: individually evaluated for impairment  3,102   123   3,133   141 
Ending balance $3,381  $685  $3,573  $881 
                 
Minimum payments:                
Ending balance: collectively evaluated for impairment $41,340  $66,161  $56,525  $66,255 
Ending balance: individually evaluated for impairment  3,102   142   3,418   160 
Ending balance $44,442  $66,303  $59,943  $66,415 

The net credit exposure for the balance evaluated individually for impairment as of March 31, 2016 was $3.2 million, which is related to a customer in bankruptcy. The note and lease receivables associated with this customer are on non-accrual status.

The age of the recorded minimum lease payments and net credit exposure associated with our investment in direct financing and sales-type leases that are past due disaggregated based on ourcustomers using an internally assigned credit quality rating (“CQR”) were as follows“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 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 in the range of 1% to 8%.

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 greater than 8% and up to 100%.

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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, 20162023(in thousands):

 
Amortized cost basis by origination year ending March 31,
             
  2023  2022  2021  2020  2019  
2018
and prior
  Total  
Transfers
(2)
  
Net
credit
exposure
 
                            
Notes receivable:                           
High CQR $72,155  $11,378  $11,267  $370  $30  $-  $95,200  $(28,115) $67,085 
Average CQR  12,793   2,675   213   115   61   1   15,858   (1,432)  14,426 
Total $84,948  $14,053  $11,480  $485  $91  $1  $111,058  $(29,547) $81,511 
                                     
Lease receivables:                                    
High CQR $21,629  $3,842  $1,916  $565  $51  $9  $28,012  $(1,437) $26,575 
Average CQR  23,796   3,430   770   35   3   -   28,034   (1,594)  26,440 
Total $45,425  $7,272  $2,686  $600  $54  $9  $56,046  $(3,031) $53,015 
                                     
Total amortized cost (1) $130,373  $21,325  $14,166  $1,085  $145  $10  $167,104  $(32,578) $134,526 

(1)
Unguaranteed residual values of $4,222 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.

The following table provides the amortized cost basis of our financing receivables by CQR and 2015by credit origination year as of March 31, 2022 (in thousands):


 
31-60
Days
Past
Due
  
61-90
Days
Past
Due
  
Greater
than 90
Days
Past
Due
  
Total
Past
Due
  Current  
Unbilled
Minimum
Lease
Payments
  
Total
Minimum
Lease
Payments
  
Unearned
Income
  
Non-
Recourse
Notes
Payable
  
Net
Credit
Exposure
  
Amortized cost basis by origination year ending March 31,
            
                               2022  2021  2020  2019  2018  2017  Total  
Transfers
(2)
  
Net
credit
exposure
 
March 31, 2016                            
                                                        
Notes receivable:                          
High CQR $575  $52  $94  $721  $984  $46,157  $47,862  $(2,705) $(22,914) $22,243  $35,264  $28,005  $1,297  $345  $2  $4  $64,917  $(30,274) $34,643 
Average CQR  15   17   78   110   159   18,030   18,299   (1,387)  (8,714)  8,198   8,922   2,976   758   213   3   -   12,872   (4,763)  8,109 
Low CQR  -   -   142   142   -   -   142   (19)  -   123 
Total $590  $69  $314  $973  $1,143  $64,187  $66,303  $(4,111) $(31,628) $30,564  $44,186  $30,981  $2,055  $558  $5  $4  $77,789  $(35,037) $42,752 
                                                                            
March 31, 2015 ��                                   
                                        
Lease receivables:                                    
High CQR $70  $185  $133  $388  $430  $41,213  $42,031  $(2,340) $(16,561) $23,130  $14,549  $5,002  $2,499  $902  $50  $
11  $23,013  $(3,385) $19,628 
Average CQR  15   68   19   102   75   24,047   24,224   (1,742)  (9,397)  13,085   10,936   3,092   741   47   72   -   14,888   (347)  14,541 
Low CQR  -   -   -   -   -   160   160   (19)  -   141 
Total $85  $253  $152  $490  $505  $65,420  $66,415  $(4,101) $(25,958) $36,356  $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 March 31, 2023 (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 $1,020  $862  $473  $2,355  $7,703  $10,058  $101,000 $111,058 
Lease receivables  1,068   463   864   2,395   5,413   7,808   48,238  56,046 
Total $2,088  $1,325  $1,337  $4,750  $13,116  $17,866  $149,238 $167,104 

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The agefollowing table provides an aging analysis of the recorded notes receivable balance disaggregated based on our internally assigned CQR werefinancing receivables as follows asof March 31, 2016 and 20152022 (in thousands):


  
31-60
Days
Past
Due
  
61-90
Days
Past
Due
  
Greater
than 90
Days
Past Due
  
Total
Past
Due
  Current  
Unbilled
Notes
Receivable
  
Total
Notes
Receivable
  
Non-
Recourse
Notes
Payable
  
Net
Credit
Exposure
 
                            
March 31, 2016                         
                            
High CQR $399  $305  $2,168  $2,872  $301  $24,092  $27,265  $(11,644) $15,621 
Average CQR  -   -   -   -   202   13,873   14,075   (9,942)  4,133 
Low CQR  -   -   3,102   3,102   -   -   3,102   -   3,102 
Total $399  $305  $5,270  $5,974  $503  $37,965  $44,442  $(21,586) $22,856 
                                     
March 31, 2015                                 
                                     
High CQR $338  $260  $161  $759  $2,455  $35,996  $39,210  $(18,255) $20,955 
Average CQR  57   -   -   57   376   16,882   17,315   (11,665)  5,650 
Low CQR  -   -   656   656   -   2,762   3,418   -   3,418 
Total $395  $260  $817  $1,472  $2,831  $55,640  $59,943  $(29,920) $30,023 
 
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 

We estimate lossesOur financial assets on our net credit exposure to be between 0% - 5% for customers with high CQR,nonaccrual status were not significant as these customers are investment grade or the equivalent of investment grade. We estimate losses on our net credit exposure to be between 2% - 15% for customers with average CQR,March 31, 2023, and between 15% - 100% for customers with low CQR, which includes customers in bankruptcy.March 31, 2022.


6. PROPERTY, EQUIPMENT, AND OTHER ASSETS AND LIABILITIES

8. PROPERTY AND EQUIPMENT—NET


Property and equipment—net is a component of Property, equipment, and other assets. Our balance consists of the following (in thousands):


 March 31,  March 31, 
 
March 31,
2016
  
March 31,
2015
  2023  2022 
Furniture, fixtures and equipment $15,033  $13,781  $29,818  $28,640 
Leasehold improvements  10,398   7,615 
Capitalized software  3,235   3,822 
Vehicles  370   370   445   476 
Capitalized software  4,018   4,007 
Leasehold improvements  3,978   3,497 
Total assets  23,399   21,655   43,896   40,553 
        
Accumulated depreciation and amortization  (17,133)  (15,528)  (31,963)  (32,642)
Property and equipment - net $6,266  $6,127  $11,933  $7,911 

ForDepreciation and amortization expense on property and equipment, including amounts recognized in cost of sales, was $5.5 million for the year ended March 31, 2023, and $5.4 million for both the years ended March 31, 2016, 20152022, and 2014, depreciation expense on property and equipment was $2.3 million, $1.5 million, and $1.3 million, respectively.March 31, 2021.

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OTHER ASSETS AND LIABILITIES

Our other assets and liabilities consist of the following (in thousands):

  
March 31,
2016
  
March 31,
2015
 
Other current assets:
      
Deposits & funds held in escrow $3,116  $4,281 
Prepaid assets  6,683   2,652 
Other  850   480 
Total other current assets $10,649  $7,413 
         
Other assets:
        
Deferred costs $1,831  $2,308 
Property and equipment, net  6,266   6,127 
Other  547   813 
Total other assets - long term $8,644  $9,248 
  
March 31,
2016
  
March 31,
2015
 
Other current liabilities:
      
Accrued expenses $7,109  $5,302 
Deferred compensation  -   222 
Other  6,009   8,051 
Total other current liabilities $13,118  $13,575 
         
Other liabilities:
        
Deferred revenue $1,866  $2,923 
Other  397   890 
Total other liabilities - long term $2,263  $3,813 
7. 9. NOTES PAYABLE AND CREDIT FACILITY

Recourse and non-recourse obligations consist of the following (in thousands):

  
March 31,
2016
  
March 31,
2015
 
       
Recourse notes payable with interest rates ranging from 2.70% and 4.13% at March 31, 2016 and ranging from 2.24% and 4.13% at March 31, 2015.      
Current $2,288  $889 
Long-term  1,054   2,801 
Total recourse notes payable $3,342  $3,690 
         
Non-recourse notes payable secured by financing receivables and investments in operating leases with interest rates ranging from 1.70% to 8.50% at March 31, 2016 and ranging from 1.70% to 10.00% as of March 31, 2015.        
Current $26,042  $28,560 
Long-term  18,038   24,314 
Total non-recourse notes payable $44,080  $52,874 

Principal and interest payments on the non-recourse notes payable are generally due monthly 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 3.13% and 3.23%, as of March 31, 2016 and March 31, 2015, respectively. The weighted average interest rate for our recourse notes payable was 3.24% and 3.19%, as of March 31, 2016 and March 31, 2015, respectively. Under recourse financing, in the event of a default by a customer, the lender has recourse against the customer, the assets serving as collateral, and us. Under non-recourse financing, 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.

F - 22CREDIT FACILITY

TableWe finance the operations of Contents
In May 2014, we entered into an agreement to repurchaseour subsidiaries ePlus Technology, inc., ePlus Technology Services, inc., and SLAIT Consulting, LLC (collectively, the rights, title and interest to payments due under a financing agreement. The financing agreement was previously assigned to a third party financial institution and accounted for as a secured borrowing. In conjunction with the repurchase agreement, we recognized a gain of $1.4 million, which is presented within other income“Borrowers”) in our consolidated statement of operations.

Our technology segment through our subsidiary ePlus Technology, inc., finances its operations with funds generated from operations, and with a credit facility with Wells Fargo Commercial Distribution Finance, LLC or WFCDF. This facility provides short-term capital for our technology segment. There are two components of the(“WFCDF”). The WFCDF credit facility: (1)facility (the “WFCDF Credit Facility”) has a floor plan componentfacility and (2) an accounts receivable component.a revolving credit facility.

On October 13, 2021, the Borrowers amended, restated, and replaced in entirety their then-existing credit agreements with WFCDF. On October 31, 2022, the Borrowers entered into the First Amendment to the credit agreement. Under this agreement and its amendment, the credit facility is provided by a syndicate of banks for which WFCDF acts as administrative agent and consists of a discretionary senior secured floor plan facility in favor of the Borrowers in the aggregate principal amount of up to $425.0 million, together with a sublimit for a revolving credit facility for up to $150.0 million.

On March 10, 2023, the Borrowers entered into a Second Amendment to the credit agreement which amended the Credit Agreement to increase the maximum aggregate amount of principal available under the floor plan component,facility from $425.0 million to $500.0 million and increase the maximum aggregate amount of principal available under the Revolving Facility from $150.0 million to $200.0 million.

Under the accounts payable floor plan facility, we had an outstanding balancesbalance of $121.9$134.6 million and $99.4$145.3 million as of March 31, 20162023, and 2015,March 31, 2022, respectively. On our balance sheet, our liability under the accounts payable floor plan facility is presented as accounts payable – floor plan.

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Under the revolving credit facility, we had no balance outstanding as of March 31, 2023, and 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 March 31, 2023, 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 Term SOFR Rate plus a Term SOFR Adjustment of 0.10% plus an Applicable Margin of 1.75%. Our weighted average interest rate on the accounts receivable component we had no outstanding balances as of our WFCDF Credit Facility was 5.35% during our year ended March 31, 2016 and 2015. As of March 31, 2016,2023, compared to 2.00% over the facility agreement had an aggregate limit of the two components of $250 million, and the accounts receivable component had a sub-limit of $30 million, which bears interest assessed at a rate of the One Month LIBOR plus two and one half percent.prior year.


The credit facility has full recourse to ePlus Technology, inc. and is secured by a blanket lien against all its assets, such as receivables and inventory. AvailabilityOur borrowings under the facility may be limited by the asset value of equipment we purchase or accounts receivable, and may be further limited by certain covenants and terms and conditions of the facility. These covenants include butWFCDF Credit Facility are not limited to a minimum excess availability of the facility and minimum earnings before interest, taxes, depreciation and amortization (“EBITDA”) of ePlus Technology, inc. We were in compliance with these covenants as of March 31, 2016. In addition, the facility restricts the ability of ePlus Technology, inc. to transfer funds to its affiliates in the form of dividends, loans or advances with certain exceptions for dividends to ePlus inc. The facility also requires that financial statements of ePlus Technology, inc. be provided within 45 days of each quarter and 90 days of each fiscal year end and also includes that other operational reports be provided on a regular basis. Either party may terminate with 90 days’ advance notice. We are not, and do not believe that we are reasonably likely to be, in breach of the WFCDF credit facility. In addition, we do not believe that the covenants of the WFCDF credit facility materially limit our ability to undertake financing. In this regard, the covenants apply only to our subsidiary, ePlus Technology, inc. This credit facility is secured by the assets of only ePlus Technology, inc. and the guaranty as described below.

The facility provided byBorrowers. Additionally, the WFCDF Credit Facility requires a guaranty of $10.5 million by ePlusePlus inc.

Under the WFCDF Credit Facility, the Borrowers are restricted in their ability to pay dividends to ePlus inc. The guaranty requires ePlus inc. to deliver its annual audited financial statements byunless their available borrowing meets or met certain dates. We have delivered the annual audited financial statements for the year endedthresholds. As of March 31, 2015, as required. 2023, 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 the WFCDF Credit Facility at any time by providing a written termination notice to the other party no less than 90 days prior to such termination.

The loss of the WFCDF credit facilityCredit 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.


RECOURSE NOTES PAYABLE

Recourse notes payable consist of borrowings that, in the event of default, the lender has recourse against us. As of March 31, 2023, and 2022 we had $6.0 million and $13.1 million, respectively, in recourse borrowings arising 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 March 31, 2023, and March 31, 2022.

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 March 31, 2023, and March 31, 2022, we had $34.3 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 periodically in amounts that are approximately equal to the total payments due from the customer under the leases or notes receivable that collateralize the notes payable. The weighted average interest rate for our non-recourse notes payable was 5.01% and 3.59%, as of March 31, 2023, and March 31, 2022, respectively.

Our recourse and non-recourse notes payable as of March 31, 2016,2023, mature as follows (in thousands):follows:


  
Recourse Notes
Payable
  
Non-Recourse
Notes Payable
 
       
Year ending March 31, 2017 $2,288  $26,042 
2018  1,054   12,513 
2019  -   3,988 
2020  -   1,055 
2021 and thereafter  -   482 
  $3,342  $44,080 
  Recourse notes   Non-recourse 
  payable  notes payable 
Year ended March 31, 2024
 $5,997  $24,819 
2025  -   5,880 
2026  -   2,589 
2027  -   1,053 
Total maturities $5,997  $34,341 

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8. COMMITMENTS
10. COMMITMENTS AND CONTINGENCIES


LEGAL PROCEEDINGS

We lease office spaceare subject to various legal proceedings, as well as demands, claims and certain office equipmentthreatened litigation, that arise in the normal course of our business and have not been fully resolved. The ultimate outcome of any litigation or other legal dispute is uncertain. When a loss related to conducta legal proceeding or claim is probable and reasonably estimable, we accrue our business. Annual rent expense relating to these operating leases was $4.9 million, $4.7 million, and $3.8 millionbest estimate for the years ended March 31, 2016, 2015ultimate resolution of the matter. If one or more legal matters are resolved against us in a reporting period for amounts above our expectations, our financial condition and 2014, respectively.operating results for that period may be adversely affected. As of March 31, 2016,2023, we do not believe that there is a reasonable possibility that any material loss exceeding the amounts already recognized for these proceedings and matters, if any, has been incurred. 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 us in the future, minimum lease payments are due as follows (in thousands):
Contractual Obligations
  
    
Year ending March 31, 2017 $4,207 
2018  3,393 
2019  1,875 
2020  951 
2021 and thereafter  382 
Operating lease obligations (1) $10,808 

(1)Excluding taxes, insurance and common area maintenance charges.

Legal Proceedings

On May 23, 2011, the United States District Court for the Eastern District of Virginia entered judgment in our favor, against Lawson Software, Inc. (“Lawson”), for $18.2 million, in a lawsuit we filed against Lawson alleging patent infringement. Subsequently, the United States Patent and Trademark Office canceled the patent, and the Federal Circuit Court of Appeals vacated the judgment. On February 29, 2016 the United States Supreme Court denied our petition for certiorari, in which we asked the court to hear our appeal. As a result, the lawsuit has concluded.

We are not currently a party to any legal proceedings with loss contingencies that are expected to be material. From time to time, we have been a plaintiff, or may be named as a defendant, in legal actions arising from our normal business activities, none of which has had a material effect on our business, results of operations or financial condition. Legal proceedings which may arise in the ordinary course of business including preference payment claims asserted in customer bankruptcy proceedings, tax audits, claims of alleged infringement of patents, trademarks, copyrights and other intellectual property rights, claims of alleged non-compliance with contract provisions, employment related claims, claims by competitors, vendors or customers, claims related to alleged violations of laws and regulations, and claims relating to alleged security or privacy breaches. We attempt to ameliorate the effect of potential litigation through insurance coverage and contractual protections such as rights to indemnifications and limitations of liability. We do not expect that the outcome in any of these matters individuallycould relate to prior, current, or collectively, will have a material adverse effect on our financial conditionfuture transactions or results of operations, however, litigation is inherently unpredictable. Therefore, judgments could be rendered or settlements entered that could adversely affect our results of operations or cash flows in a particular period. We provide for costs related to contingencies when a loss is probable and the amount is reasonably determinable.

events.
Contingencies Related to Third-Party Review

From time to time, we are subject to potential claims and assessments from third parties. We are also subject to various governmental, customer and partner audits. We continually assess whether or not such claims have merit and warrant accrual. Where appropriate, we accrue estimates of anticipated liabilities in our consolidated financial statements. Such estimates are subject to change and may affect our results of operations and our cash flows.

Employment Contracts and Severance Plans

We have employment contracts with, and plans covering certain members of management under which severance payments would become payable in the event of specified terminations without cause or terminations under certain circumstances after a change in control. In addition, vesting of non-vested restricted stock awards would accelerate following a change in control. If severance payments under the current employment agreements or plan payments were to become payable, the severance payments would generally range from twelve to twenty-six months of salary.
F - 24
9. 11. EARNINGS PER SHARE


Basic earnings per share is computed by dividing net earnings attributable to common shares by the weighted average number of common shares outstanding for the period. Diluted net earnings per share include the potential dilution of securities that could participate in our earnings, but not securities that are anti-dilutive. Certain unvested shares of restricted stock awards (“RSAs”) contain non-forfeitable rights to dividends, whether paid or unpaid. As a result, these RSAs are considered participating securities because their holders have the right to participate in earnings with common stockholders. We use the two-class method to allocate net income between common shares and other participating securities. As of March 31, 2016, we had no unvested shares of RSAs that contained non-forfeitable rights to dividends. We no longer grant RSAs that contain non-forfeitable rights to dividends.


The following table provides a reconciliation of the numerators and denominators used to calculate basic and diluted net earnings per common share as disclosed in our consolidated statements of operations for the fiscal years ended March 31, 2016, 2015,2023, 2022 and 20142021 (in thousands, except per share data).:


  Year Ended March 31, 
  2016  2015  2014 
Basic and diluted common shares outstanding:
         
Weighted average common shares outstanding — basic  7,256   7,318   7,927 
Effect of dilutive shares  88   75   72 
Weighted average shares common outstanding — diluted  7,344   7,393   7,999 
             
Calculation of earnings per common share - basic:
            
Net earnings $44,747  $45,840  $35,273 
Net earnings attributable to participating securities  -   59   307 
Net earnings attributable to common shareholders $44,747  $45,781  $34,966 
             
Earnings per common share - basic $6.17  $6.26  $4.41 
             
Calculation of earnings per common share - diluted:
            
Net earnings attributable to common shareholders— basic $44,747  $45,781  $34,966 
Add: undistributed earnings attributable to participating securities  -   1   3 
Net earnings attributable to common shareholders— diluted $44,747  $45,782  $34,969 
             
Earnings per common share - diluted $6.09  $6.19  $4.37 
 2023  2022  2021 
          
Net earnings attributable to common shareholders - basic and diluted $119,356  $105,600  $74,397 
             
Basic and diluted common shares outstanding:            
Weighted average common shares outstanding — basic  26,569   26,638   26,674 
Effect of dilutive shares  85   228   160 
Weighted average shares common outstanding — diluted  26,654   26,866   26,834 
             
Earnings per common share - basic $4.49  $3.96  $2.79 
             
Earnings per common share - diluted $4.48  $3.93  $2.77 


There were no unexercised stock options during the years ended March 31, 2016 and 2015. All unexercised stock options were included in the computations of diluted earnings per common share for the year ended March 31, 2014.
10.
12. STOCKHOLDERS’ EQUITY


SHARE REPURCHASE PLAN

On August 13, 2015, March 22, 2023, our board of directors authorized the Company to repurchase of up to 500,0001,000,000 shares of our outstanding common stock, over a 12-month period beginning on August 17, 2015 through August 16, 2016. The planMay 28, 2023. On March 24, 2022, our board of directors authorized the repurchase of up to 1,000,000 shares of our outstanding common stock, over a 12-month period beginning May 28, 2022. On March 18, 2021, our board of directors authorized the repurchase of up to 1,000,000 shares of our outstanding common stock, adjusted for the stock split, over a 12-month period beginning May 28, 2021. These plans authorized purchases to 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. This new authorization replaced the company’s previous repurchase plan which expired on June 15, 2015.

During the year ended March 31, 2016,2023, we repurchased 116,302purchased 72,973 shares of our outstanding common stock at an average cost of $76.21$55.69 per share for a total purchase price of $8.9$4.1 million under the share repurchase plans. Weplan; we also purchased 30,447acquired 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.

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During the year ended March 31, 2015,2022, retroactively adjusted for the stock split, we repurchased 700,113purchased 227,990 shares of our outstanding common stock at an average cost of $50.93$48.48 per share for a total purchase price of $35.7$11.1 million under the share repurchase plan, and 35,158 were repurchasedplan; we also acquired 55,430 shares of common stock at a value of $2.6 million to satisfy tax withholding obligations duerelating to the vesting of employees’ restricted stock.

Since the inception
13. SHARE-BASED COMPENSATION

SHARE-BASED PLANS

As of our initial repurchase program on September 20, 2001 to March 31, 2016,2023, we have repurchased approximately 5.7 million shares of our outstanding common stock at an average cost of $21.15 per share for a total purchase price of $120.5 million.

11. SHARE-BASED COMPENSATION

 Share-Based Plans

We havehad share-based awards outstanding under the following plans: (1) the 20082017 Non-Employee Director Long-Term Incentive Plan (“20082017 Director LTIP”), and (2) the 2012 Employee Long-Term Incentive Plan (“2012 Employee LTIP”). For, and (3) the year ended March 31, 2016, awards were issued under the 2008 Director LTIP and the 20122021 Employee LTIP. All theLong-Term Incentive Plan (“2021 Employee LTIP”).


These share-based plans defineddefine fair market value as the previousclosing sales price of a share of common stock as quoted on any established stock exchange for such date or the most recent trading day's closing price whenday preceding such date if there were no trades on such date.

2012 Employee LTIP and 2021 Employee LTIP

The 2021 Employee LTIP was approved by our stockholders on September 16, 2021 and became effective October 1, 2021. Under the 2021 Employee LTIP, 3,000,000 shares were authorized for grant date fallsof incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance awards, or other share-based awards to ePlus employees.


The 2021 Employee LTIP replaced the 2012 Employee LTIP that had previously been approved by our stockholders on September 13, 2012. Beginning September 16, 2021, we permanently ceased granting any additional shares under the 2012 Employee LTIP.


The purpose of these plans is to encourage our employees to acquire a dateproprietary interest in the stock wasgrowth and performance of ePlus, thus enhancing the value of ePlus for the benefit of its stockholders, and to enhance our ability to attract and retain exceptionally qualified individuals. These plans are administered by the Compensation Committee.

Shares issuable under these plans may consist of authorized but unissued shares or shares held in our treasury. Under these plans, the Compensation Committee will determine the time and method of exercise or vesting of the awards. Shares under these plans will not traded.be used to compensate our outside directors, who may be compensated under the separate 2017 Director LTIP, as discussed below.


20082017 Director LTIP


On September 15, 2008,12, 2017, our stockholders approved the 20082017 Director LTIP that was adopted by the Board on June 25, 2008.July 24, 2017. Under the 20082017 Director LTIP, 250,000300,000 shares, retroactively adjusted for the stock split, were authorized for grant to non-employee directors. The purpose of the 20082017 Director LTIP is to align the economic interests of the directors with the interests of stockholders by including equity as a component of pay and to attract, motivate and retain experienced and knowledgeable directors. In addition, eachEach director will receivereceives an annual grant of restricted stock having a grant-date fair value equal to the cash compensation earned by an outside director during our fiscal year ended immediately before the respective annual grant-date. Directors may elect to receive their cash compensation in restricted stock. These restricted shares are prohibited from being sold, transferred, assigned, pledged, or otherwise encumbered or disposed of. Half of theseThe shares will vesthalf on the one-year anniversary and another half of these shares will vest on the second-year anniversary from the date of the grant. In addition, each director may also elect to receive stock in lieu of their cash compensation. Stock received in lieu of cash vests immediately.


2012 Employee LTIPRESTRICTED STOCK ACTIVITY


On September 13, 2012, our stockholders approved the 2012 Employee LTIP that was adopted by the Board on July 10, 2012. Under the 2012 Employee LTIP, 750,000 shares were authorized for grant of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance awards, or other share-based awards to ePlus employees. The purpose of the 2012 Employee LTIP is to encourage our employees to acquire a proprietary interest in the growth and performance of ePlus, thus enhancing the value of ePlus for the benefit of its stockholders, and to enhance our ability to attract and retain exceptionally qualified individuals. The 2012 Employee LTIP is administered by the Compensation Committee. Shares issuable under the 2012 Employee LTIP may consist of authorized but unissued shares or shares held in our treasury. Shares under the 2012 Employee LTIP will not be used to compensate our outside directors, who may be compensated under the separate 2008 Director LTIP, as discussed above. Under the 2012 Employee LTIP, the Compensation Committee will determine the time and method of exercise of the awards.

Stock Option Activity

During the yearsyear ended March 31, 20162023, we granted 19,804 restricted shares under the 2017 Director LTIP and 2015, there were no stock options granted to employees and we had no outstanding stock options.
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Restricted Stock Activity138,643 restricted shares under the 2021 Employee LTIP.

We estimate the forfeiture rate of the restricted stock to be zero. AsCumulatively, as of March 31, 2016,2023, we have granted 122,951a total of 101,280 restricted shares under the 20082017 Director LTIP, and 274,2542,144,578 restricted shares under the 2012 Employee LTIP, and 138,643 restricted shares under the 2021 Employee LTIP.

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The following table provides a summary of the non-vested restricted shares is as follows:for the year ended March 31, 2023:


 
Number of
Shares
  
Weighted
Average Grant-
date Fair Value
  
Number of
Shares
  
Weighted Average
Grant-date Fair Value
 
            
Non-vested April 1, 2015  176,514  $52.75 
Nonvested April 1, 2022  343,806  $41.01 
Granted  125,562  $81.78   158,447  $56.50 
Vested  (95,927) $48.87   (179,336) $39.49 
Forfeited  (2,321) $64.06   (8,057) $42.28 
Non-vested March 31, 2016  203,828  $72.33 
Non-vested March 31, 2023
  314,860  $49.57 

In each of the years ended March 31, 2023, 2022 and 2021, we used the closing stock price on the grant date or, if the grant date fell on a date the stock was not traded, the previous day’s closing stock price for the fair value of the award.

The weighted-average grant date fair value of restricted shares granted during the years ended March 31, 2023, 2022, and 2021 was $56.50, $46.56, and $35.95, respectively.

The aggregated fair value of restricted shares that vested during the years ended March 31, 2023, 2022, and 2021 was $7.1 million, $7.1 million, and $7.7 million, respectively.

Upon each vesting period of the restricted stock awards to employees, participants are subject to minimum tax withholding obligations. The 2008 Director2012 Employee LTIP, the 2021 Employee LTIP, and the 2012 Employee2017 Director LTIP allow the Company, at the participant’s election,allows us to withhold a sufficient number of shares due to the participant to satisfy their minimum tax withholding obligations. For the year ended March 31, 2016, the Company had2023, we withheld 30,44758,080 shares of common stock at a value of $2.5$3.3 million, which was included in treasury stock. For the year ended March 31, 2015, the Company had2022, we withheld 35,15855,430 shares of common stock at a value of $2.0$2.6 million, which was included in treasury stock.


Compensation Expense
EMPLOYEE STOCK PURCHASE PLAN


We recognize
On September 15, 2022, our stockholders approved the 2022 Employee Stock Purchase Plan (“2022 ESPP”) through which eligible employees may purchase shares of our stock at 6-month intervals at a discount off the lesser of the closing market price on the first or the last trading day of each offering period. The aggregate number of shares of our stock that may be issued to participants under the plan is 2.5 million. Our inaugural offering period under the 2022 ESPP is January 1, 2023, to June 30, 2023. Through March 31, 2023, we had not yet issued any shares under the 2022 ESPP.

COMPENSATION EXPENSE

The following table provides a summary of our total share-based compensation costexpense, including for awards of restricted stock with graded vesting on a straight line basis overawards and our 2022 ESPP, and the requisite service period and estimate the forfeiture rate to be zero, based on historical experience. There are no additional conditionsrelated income tax benefit for vesting other than service conditions. During the years ended March 31, 2016, 20152023, 2022 and 2014 we2021 (in thousands):


  Year Ended March 31, 
  2023  2022  2021 
          
Equity-based compensation expense
 $7,825  $7,114  $7,169 
Income tax benefit
  (2,097)  (1,999)  (2,179)

We recognized $5.7 million, $4.6 million and $4.0 million, respectively,the income tax benefit as a reduction to our provision for income taxes. As of March 31, 2023, the total share-based compensation expense. Unrecognizedunrecognized compensation expense related to non-vested restricted stock was $10.0 $9.7 million, which willis expected to be fully recognized over the next 51a weighted-average period of 27 months.


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We also provide our employees with a contributory 401(k)401(k) profit sharing plan. Employer contribution percentagesWe may make contributions, which are determined by us andfully vested when they are discretionary each year.made, to the plan. These contributions are not required. The employerdecision whether to make contributions vest pro-ratably over a four-year service period by the employees, after which, all employer contributions will be fully vested.is entirely within our discretion. For the years ended March 31, 2016, 20152023, 2022, and 2014, our2021, we recognized expense for employer contributions forto the plan were approximately $1.4of $4.2 million, $1.4$3.4 million, and $1.1$3.0 million, respectively.


12.
14. INCOME TAXES


We account for our tax positions in accordance with Codification Topic Income Taxes.740. Under the guidance, we evaluate uncertain tax positions based on the two-step approach. The first step is to evaluate each uncertain tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained in an audit, including resolution of related appeals or litigation processes, if any. For tax positions that are not likely of being sustained upon audit, the second step requires us to estimate and measure the tax benefit as the largest amount that is more than 50 percent likely of being realized upon ultimate settlement.


As of March 31, 2015,2023, we had $72 thousanddo not have any unrecognized tax benefits for uncertain tax positions. As of March 31, 2022, our total gross unrecognized tax benefits recorded for uncertain income tax, position in accordance with Income Taxes in the Codification. During the year ended March 31, 2016, we had no additions or reductions for uncertain income tax positions therefore our balance remains unchanged at $72 thousand.
A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows (in thousands):

  Year Ended March 31, 
  2016  2015 
       
Beginning balance $72  $149 
Reductions to uncertain tax positions  -   (77)
Ending balance $72  $72 
At March 31, 2016, if the unrecognized tax benefits of $72 thousandinterest and penalties thereon, were to be recognized, including the effect of interest, penalties and federal tax benefit, the impact would have been $104 thousand. At March 31, 2015, if the unrecognized tax benefits of $72 thousand were to be recognized, including the effect of interest, penalties and federal tax benefit, the impact would have been $101 thousand.

In accordance with our accounting policy, wenegligible. We recognize accrued interest and penalties related to unrecognized tax benefits inas part of income tax expense. During the fiscal years ended March 31, 2016 and 2015, we recognized $4 thousand of interest in both years related to uncertain tax positions, and did not recognize any additional penalties. We had $48 thousand and $43 thousand accrued for the payment of interest at March 31, 2016 and 2015, respectively.


We file income tax returns, including returns for our subsidiaries, with federal, state, local, and foreign jurisdictions. TaxThe tax years 2012, 2013ended March 31, 2020, March 31, 2021, and 2014March 31, 2022, are subjectedsubject to examination by federal and state taxing authorities. Various state and local income tax returns are also under examination by taxing authorities. We do not believe that the outcome of any examination will have a material impact on our financial statements.


A reconciliation of income taxes computed at the statutory federal income tax rate of 35%21.0% to the provision for income taxes included in the consolidated statements of operations is as follows (in thousands, except percentages):


 Year Ended March 31,  Year Ended March 31, 
 2016  2015  2014  2023  2022  2021 
                  
Statutory federal income tax rate  35%  35%  35%
Income tax expense computed at the U.S. statutory federal rate $26,513  $27,410  $21,040  $34,224  $30,845  $22,450 
State income tax expense—net of federal benefit  3,544   4,193   3,080   8,754   8,937   6,941 
Non-deductible executive compensation  331   222   248   1,708   1,749   2,052 
Other  616   648   457   (1,068)  (247)  1,066 
Provision for income taxes $31,004  $32,473  $24,825  $43,618  $41,284  $32,509 
Effective income tax rate  40.9%  41.5%  41.3%  26.8%  28.1%  30.4%


The components of the provision for income taxes are as follows (in thousands):


 Year Ended March 31,  Year Ended March 31, 
 2016  2015  2014  2023  2022  2021 
Current:
                  
Federal $21,361  $27,665  $23,313  $30,928  $32,309  $26,054 
State  6,114   6,667   5,033   10,110   11,681   9,882 
Foreign  13   3   15   499   894   770 
Total current expense  27,488   34,335   28,361   41,537   44,884   36,706 
                        
Deferred:
                        
Federal  3,727   (1,591)  (3,274)  1,301   (3,289)  (3,067)
State  (211)  (271)  (262)  970   (370)  (1,096)
Foreign  (190)  59   (34)
Total deferred expense (benefit)  3,516   (1,862)  (3,536)  2,081   (3,600)  (4,197)
                        
Provision for income taxes $31,004  $32,473  $24,825  $43,618  $41,284  $32,509 

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Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of our deferred tax assets and liabilities were as follows (in thousands):


  March 31, 
  2016  2015 
Deferred Tax Assets:
      
Accrued vacation $2,116  $1,955 
Deferred compensation  -   89 
Deferred revenue  1,046   369 
Foreign net operating loss carryforward  461   - 
Reserve for credit losses  1,929   2,066 
Restricted stock  1,778   1,431 
Other credits and carryforwards  1,275   1,235 
Other accruals and reserves  1,556   687 
Gross deferred tax assets  10,161   7,832 
Less: valuation allowance  (1,270)  (1,223)
Net deferred tax assets  8,891   6,609 
         
Deferred Tax Liabilities:
        
Basis difference in fixed assets  (1,170)  (1,238)
Basis difference in operating leases  (7,749)  (2,356)
Basis difference in tax deductible goodwill  (2,973)  (2,411)
Total deferred tax  liabilities  (11,892)  (6,005)
         
Net deferred tax (liabilities) assets $(3,001) $604 
 March 31, 
  2023  2022 
Deferred tax assets:      
Accrued vacation $2,251  $2,391 
Deferred revenue  5,448   5,090 
Allowance for credit losses  1,063   951 
Restricted stock  654   616 
Other deferred tax assets  1,697   743 
Accrued bonus  2,323   2,532 
Lease liabilities  3,939   1,857 
Other credits and carryforwards  277   249 
Gross deferred tax assets  17,652   14,429 
Less: valuation allowance  (112)  (250)
Net deferred tax assets  17,540   14,179 
         
Deferred tax liabilities:        
Property and equipment  (2,926)  (2,295)
Operating leases  (3,789)  (2,759)
Prepaid expenses  (1,729)  (887)
Right-of-use assets  (3,885)  (1,869)
Tax deductible goodwill  (2,244)  (1,319)
Total deferred tax  liabilities  (14,573)  (9,129)
         
Net deferred tax asset $2,967  $5,050 

The effectiveManagement assesses the available positive and negative evidence to estimate whether sufficient future taxable income tax rate for the year ended March 31, 2016 was 40.9%, comparedwill be generated to 41.5%permit use of the previous fiscal year.

Asexisting deferred tax assets. Based on this evaluation as of March 31, 2016, we have state capital loss carryforwards of approximately $1.3 million, which have been fully reserved. The2023, a valuation allowance resulted from management's determination, based on available evidence,of $0.1 million was recorded, to offset gross deferred tax assets primarily attributable to net operating losses at certain of the foreign subsidiaries and foreign tax credit carry forwards. We believe that it wasis more likely than not that we will realize the state capital lossremaining gross deferred tax asset balance may not be realized. If not realized,assets through generating taxable income or the state capital loss carryforwards will generally expire in 5 years.

Asreversal of March 31, 2016, we have a foreign net operating loss of approximately $0.5 million relatedexisting temporary differences attributable to operations in the United Kingdom. No valuation allowance was recognized as a result of management's determination, based on available evidence, that it was more likely than not that the foreign net operating lossgross deferred tax asset balance will be realized. The foreign net operating loss is not set to expire.liabilities.

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13. 15. FAIR VALUE MEASUREMENTS


We account for the fair values of our assets and liabilities in accordance with Codification Topic Fair Value Measurement and Disclosure. Accordingly, we establishedutilizing a three-tier value hierarchy, which prioritizes the inputs used in measuring fair value.


The following tables summarize the fair value hierarchy of our financial instruments as of March 31, 2016 and 2015 (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)
 
March 31, 2016
            
Assets:            
             
Money market funds $39,509  $39,509  $-  $- 
                 
Liabilities:                
                 
Contingent consideration $1,041  $-  $-  $1,041 
                 
March 31, 2015
                
Assets:                
                 
Money market funds $25,004  $25,004  $-  $- 
                 
Liabilities:                
                 
Contingent consideration $1,830  $-  $-  $1,830 

For the year ended March 31, 2016, we recorded adjustments that increasedtable provides the fair value of our liability for contingent consideration by $369 thousand. We recorded an adjustment to decrease by $150 thousandassets and liabilities measured at fair value as categorized within the fair value hierarchy as of the contingent consideration during the year ended March 31, 2015. These adjustments were presented within general2023, and administrative expenses in our consolidated statement of operations. We estimated the fair value using a Monte Carlo simulation model.

During the year ended March 31, 2016 we paid $1.2 million to satisfy the current obligations2022 (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)
 
March 31, 2023
            
Assets:            
Money market funds $8,880  $8,880  $-  $- 
                 
March 31, 2022
                
Assets:                
Money market funds $18,138  $18,138  $-  $- 

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14.
16. BUSINESS COMBINATIONS


IGX acquisitionNETWORK SOLUTIONS GROUP


On December 4, 2015,April 30, 2023, our subsidiary, ePlusePlus Technology, inc., acquired certain assets and assumed certain liabilities of IGX Acquisition Global, LLC (“IGX Acquisition”)the Network Solutions Group (NSG), formerly a business unit of CCI Systems, Inc., a Michigan-based provider of networking services and IGX Support, LLC, including IGX Acquisition’s wholly-ownedsolutions. This acquisition will help drive additional growth for us in the service provider end-markets with enhanced engineering, sales, and services delivery capabilities specific to the industry. Our preliminary sum for consideration transferred is $59.6 million, equal to cash paid at closing. As of our filing date, our initial accounting for the business combination is incomplete.

FUTURE COM

On July 15, 2022, our subsidiary, IGXGlobal UK Limited (collectively, “IGX”)ePlus Technology, inc., which provide advancedacquired certain assets and liabilities of Future Com, Ltd., a Texas-based provider of cybersecurity solutions, cloud security solutions, secured networking products and related professionalsecurity consulting services throughout the US. Our acquisition provides access to a diverse setenhanced engineering, sales, and services delivery capabilities in the South-Central region of domestic and international customers including commercial, enterprise, and state, local, and education (SLED) organizations. IGX is headquartered near Hartford, CT and has a sales presence in New York and Bostonthe United States, as well as an operating branch in London that serves its United Kingdom (“UK”)bolstering the skills and global customers. IGXGlobal UK Limited is a private limited company, registered in England and Wales.
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The total purchase price, net

Our sum for consideration transferred is $13.3 million consisting of cash acquired, was $16.6$13.0 million paid in cash. Thecash at closing plus an additional $0.3 million that was subsequently paid to the sellers based on adjustments to our determination of the total net assets delivered. Our allocation of the purchase consideration to the assets acquired and liabilities assumed is presented below (in thousands):

  
Acquisition
Date Amount
 
    
Accounts receivable—trade, net $8,457 
Property and equipment  81 
Identified intangible assets  8,710 
Accounts payable and other current liabilities  (8,641)
Deferred tax liability  (89)
     
Total identifiable net assets  8,518 
Goodwill  8,131 
     
Total purchase consideration $16,649 
 
Acquisition Date
Amount
 
Accounts receivable $4,033 
Other assets  129 
Identified intangible assets  8,360 
Accounts payable and other liabilities  (8,714)
Contract liabilities
  (214)
Total identifiable net assets  3,594 
Goodwill  9,694 
Total purchase consideration $13,288 


The identified intangible assets consist of $8.4 million consists of customer relationships with an estimated useful life of seven years. The fair value of acquired receivables equals the following:gross contractual amounts receivable. We expect to collect all acquired receivables.

  
Estimated
Useful Lives
(in years)
  
Acquisition
Date Amount
 
       
Intangible assets—customer relationships  7  $7,680 
Intangible assets—trade names  10   520 
Intangible assets—backlog  1   510 
         
Total identified intangible assets     $8,710 

We assignedrecognized goodwill related to this transaction of $8.1$9.7 million, which was assigned to our technology reporting unit. The goodwill recognized in the acquisition is attributable to the acquired assembled workforce an entry into the UK and European markets and expected synergies, none of which qualify for recognition as a separate intangible asset. The total amount of goodwill that is expected to be deductible for tax purposes is $5.8 million.purposes. The amount of revenues and earnings of the acquiree since the acquisition date are not material. Likewise, the impact to our revenuesthe revenue and net earnings from thisof the combined entity for the current reporting period as though the acquisition date had been April 1, 2022, is not material.

Evolve acquisition

On August 18, 2014, our subsidiary, ePlus Technology, inc., acquired the operating assets and assumed certain liabilities of Granite Business Solutions, Inc. dba Evolve Technology Group (“Evolve”). Located in Sacramento, CA, Evolve provided information security, collaboration, virtualization and data center solutions to an established customer base of state, local and educational institutions, as well as commercial enterprises. Our acquisition expands our presence in the western United States.

The total purchase price was $10.5 million, which consists of cash paid, amounts to be paid to Evolve upon collection of certain accounts receivables, and the fair value of contingent consideration. We estimated the fair value of the contingent consideration to be $2.0 million as of the acquisition date using a Monte Carlo simulation model. The maximum payout for contingent consideration is $2.5 million over 3 years. The purchase price has been allocated to the assets acquired and liabilities assumed based on their estimated fair values on the transaction date, including identifiable intangible assets of $4.0 million related to customer relationships with an estimated useful life of 6 years, and other net assets of $0.6 million. We recognized goodwill related to this transaction of $4.5 million, which was assigned to our technology reporting unit. The goodwill recognized in the acquisition is attributable to the acquired assembled workforce, their presence in the western United States, and expected synergies, none of which qualify for recognition as a separate intangible asset. Goodwill associated with the acquisition is deductible for tax purposes.

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15.
17. SEGMENT REPORTING

The Company’s
Our segment information is presented in accordance with a “management approach,” which designates the internal reporting used by the chief operating decision-maker (“CODM”) for deciding how to allocate resources and for assessing performance. Our CODM is our Chief Executive Officer and President. Our CODM conducts our operations are conducted through two business segments. Inoperating segments- our technology segment and our customers viewfinancing segment. Our technology purchases as integrated solutions, rather than discrete productsegment includes sales of information technology products, third-party software, third-party maintenance, advanced professional and service categoriesmanaged services and the majority of our sales are derived from integrated solutions involving our customers' data center, network,proprietary software to commercial, state, and collaboration infrastructure.local governments, and government contractors. Our financing segment offersconsists of the financing solutions forof IT and medical equipment, software and related software, maintenanceservices to commercial, state, and services.
local governments, and government contractors. Our CODM uses several measures to allocate resources and assess performance. Our reported measure is earnings before taxes.

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Our reportable segment information was as follows (in thousands):


  Year Ended March 31, 
  2016  2015  2014 
Statement of Operations
 Technology  Financing  Total  Technology  Financing  Total  Technology  Financing  Total 
                            
Sales of product and services $1,163,337  $-  $1,163,337  $1,100,884  $-  $1,100,884  $1,013,374  $-  $1,013,374 
Financing revenue  -   35,091   35,091   -   34,728   34,728   -   35,896   35,896 
Fee and other income  5,728   43   5,771   7,565   105   7,670   8,037   229   8,266 
Net sales  1,169,065   35,134   1,204,199   1,108,449   34,833   1,143,282   1,021,411   36,125   1,057,536 
                                     
Cost of sales, product and services  931,782   -   931,782   887,673   -   887,673   827,875   -   827,875 
Direct lease costs  -   10,360   10,360   -   11,062   11,062   -   12,748   12,748 
Cost of sales  931,782   10,360   942,142   887,673   11,062   898,735   827,875   12,748   840,623 
                                     
Professional and other fees  5,505   1,041   6,546   5,340   1,168   6,508   7,557   1,484   9,041 
Salaries and benefits  140,086   9,218   149,304   128,945   9,141   138,086   113,481   9,670   123,151 
General and administrative expenses  22,401   729   23,130   21,127   1,404   22,531   18,334   1,549   19,883 
Depreciation and amortization  5,532   16   5,548   4,310   23   4,333   2,769   23   2,792 
Interest and financing costs  70   1,708   1,778   96   2,283   2,379   84   1,864   1,948 
Operating expenses  173,594   12,712   186,306   159,818   14,019   173,837   142,225   14,590   156,815 
                                     
Operating income $63,689  $12,062  $75,751  $60,958  $9,752  $70,710  $51,311  $8,787  $60,098 
                                     
                                     
Selected Financial Data - Statement of Cash Flow
                             
Depreciation and amortization $5,641  $10,339  $15,980  $4,450  $11,125  $15,575  $2,838  $11,917  $14,755 
Purchases of property, equipment and operating lease equipment $2,442  $12,026  $14,468  $3,610  $8,306  $11,916  $4,238  $5,714  $9,952 
                                     
                                     
Selected Financial Data - Balance Sheet
                                 
Total assets $427,580  $189,100  $616,680  $368,971  $199,304  $568,275  $335,879  $217,966  $553,845 
 Year Ended March 31, 
  2023  2022  2021 
  Technology  Financing  Total  Technology  Financing  Total  Technology  Financing  Total 
                            
Net Sales                           
Product $1,750,802  $52,473  $1,803,275  $1,492,411  $87,983  $1,580,394  $1,305,789  $60,369  $1,366,158 
Service  264,443   -   264,443   240,625   -   240,625   202,165   -   202,165 
Total  2,015,245   52,473   2,067,718   1,733,036   87,983   1,821,019   1,507,954   60,369   1,568,323 
                                     
Cost of Sales                                    
Product  1,370,061   9,439   1,379,500   1,175,789   35,154   1,210,943   1,036,627   13,050   1,049,677 
Service  170,694   -   170,694   149,094   -   149,094   125,092   -   125,092 
Total  1,540,755   9,439   1,550,194   1,324,883   35,154   1,360,037   1,161,719   13,050   1,174,769 
                                     
Gross Profit  474,490   43,034   517,524   408,153   52,829   460,982   346,235   47,319   393,554 
                                     
Selling, general, and administrative  317,885   15,635   333,520   283,690   13,427   297,117   256,210   15,053   271,263 
Depreciation and amortization  13,598   111   13,709   14,535   111   14,646   13,839   112   13,951 
Interest and financing costs  2,897   1,236   4,133   928   975   1,903   521   1,484   2,005 
Operating expenses  334,380   16,982   351,362   299,153   14,513   313,666   270,570   16,649   287,219 
                                     
Operating income  140,110   26,052   166,162   109,000   38,316   147,316   75,665   30,670   106,335 
                                     
Other income (expense), net          (3,188)          (432)          571 
                                     
Earnings before tax         $162,974          $146,884          $106,906 
                                     
Net Sales                                    
Contracts with customers $1,992,568  $9,304  $2,001,872  $1,718,093  $34,842  $1,752,935  $1,484,104  $12,369  $1,496,473 
Financing and other  22,677   43,169   65,846   14,943   53,141   68,084   23,850   48,000   71,850 
Total $2,015,245  $52,473  $2,067,718  $1,733,036  $87,983  $1,821,019  $1,507,954  $60,369  $1,568,323 

Selected Financial Data - Statement of Cash Flow                             
                            
Depreciation and amortization $14,999  $3,590  $18,589  $15,592  $8,713  $24,305  $14,568  $5,423  $19,991 
Purchases of property, equipment and operating lease equipment $7,693  $1,687  $9,380  $4,951  $18,231  $23,182  $4,752  $6,761  $11,513 
                                     
Selected Financial Data - Balance Sheet                                    
                                     
Total assets $1,147,821  $267,005  $1,414,826  $941,743  $224,460  $1,166,203  $828,576  $248,199  $1,076,775 

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TECHNOLOGY SEGMENT DISAGGREGATION OF REVENUE

We analyze net sales for our technology segment by customer end market, by type, and by the timing of the transfer of goods and services and our position as principal or agent, which are summarized below (in thousands):

 Year Ended March 31, 
  2023  2022  2021 
Customer end market:         
Telecom, Media & Entertainment $532,921  $502,408  $371,913 
Technology  393,594   250,485   251,683 
State and local government and educational institutions  290,624   241,769   245,919 
Healthcare  274,936   270,481   200,067 
Financial Services  156,257   155,160   198,761 
All others  366,913   312,733   239,611 
Net sales  2,015,245   1,733,036   1,507,954 
             
Less: Revenue from financing and other  (22,677)  (14,943)  (23,850)
Revenue from contracts with customers $1,992,568  $1,718,093  $1,484,104 
             
Type:            
Data Center / Cloud $587,097  $581,113  $516,930 
Networking  803,678   611,488   510,205 
Security  214,459   158,927   155,186 
Collaboration  57,472   57,244   47,504 
Other  88,096   83,639   75,964 
ePlus services  264,443   240,625   202,165 
Net sales  2,015,245   1,733,036   1,507,954 
             
Less: Revenue from financing and other  (22,677)  (14,943)  (23,850)
Revenue from contracts with customers $1,992,568  $1,718,093  $1,484,104 
             
Timing and position as principal or agent:
            
Transferred at a point in time as principal
 $1,566,760  $1,342,799  $1,174,582 
Transferred at a point in time as agent
  161,365   134,669   107,357 
Transferred over time as principal
  264,443   240,625   202,165 
Revenue from contracts with customers
 $1,992,568  $1,718,093  $1,484,104 

FINANCING SEGMENT DISAGGREGATION OF REVENUE

We analyze our revenues within our financing segment based on the nature of the arrangement, and our revenues from contracts with customers consist of proceeds from the sale of off-lease equipment. All revenues from contracts with customers in our financing segment are recognized at a point in time as principal.
GEOGRAPHIC INFORMATION
The geographic information for the years ended March 31, 2016, 20152023, 2022, and 20142021 was as follows (in thousands):


 Year Ended March 31,  Year Ended March 31, 
 2016  2015  2014  2023  2022  2021 
                  
Net sales:
                  
U.S. $1,186,904  $1,124,371  $1,042,446 
Non U.S.  17,295   18,911   15,090 
US $1,953,465  $1,716,525  $1,476,466 
Non US  114,253   104,494   91,857 
Total $1,204,199  $1,143,282  $1,057,536  $2,067,718  $1,821,019  $1,568,323 


  As of March 31, 
  2016  2015 
Long-lived tangible assets:
      
U.S. $22,632  $22,550 
Non U.S.  1,427   1,608 
Total $24,059  $24,158 

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Our long-lived tangible assets include property and equipment-net, operating leases-net, and equipment that has been returned to us at the termination of the lease.


 March 31, 
  2023  2022 
Long-lived tangible assets:      
US $16,313  $21,837 
Non US  1,140   716 
Total $17,453  $22,553 

No single customer accounted for more than 10%Sales to Verizon Communications Inc. represented 22%, 24% and 19% of net sales for the years ended March 31, 2016, and 2015. For the year ended2023, March 31, 2014, sales to a large telecommunications company were approximately 11% of net sales,2022, and March 31, 2021, respectively, all of which related to our technology segment.

16. QUARTERLY DATA —UNAUDITED

Condensed quarterly financial information is as follows (amounts in thousands, except per share amounts):
  Year Ended March 31, 2016 
  
First
Quarter
  
Second
 Quarter
  
Third
Quarter
  
Fourth
Quarter
  
Annual
Amount
 
                
Net sales $269,866  $336,286  $298,644  $299,403  $1,204,199 
Cost of sales  210,736   264,365   234,584   232,457   942,142 
Gross profit  59,130   71,921   64,060   66,946   262,057 
Operating expenses  44,064   45,260   46,415   50,567   186,306 
Operating income  15,066   26,661   17,645   16,379   75,751 
Earnings before provision for income taxes  15,066   26,661   17,645   16,379   75,751 
Provision for income taxes  6,252   10,982   7,348   6,422   31,004 
Net earnings $8,814  $15,679  $10,297  $9,957  $44,747 
                     
Net earnings per common share—Basic (1) $1.22  $2.16  $1.41  $1.37  $6.17 
                     
Net earnings per common share—Diluted (1) $1.21  $2.15  $1.40  $1.36  $6.09 

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  Year Ended March 31, 2015 
  
First
Quarter
  
Second
Quarter
  
Third
Quarter
  
Fourth
Quarter
  
Annual
Amount
 
                
Net sales $272,304  $297,472  $306,241  $267,265  $1,143,282 
Cost of sales  215,865   233,548   240,803   208,519   898,735 
Gross profit  56,439   63,924   65,438   58,746   244,547 
Operating expenses  41,697   43,598   44,876   43,666   173,837 
Operating income  14,742   20,326   20,562   15,080   70,710 
Other income  1,434   -   6,169   -   7,603 
Earnings before provision for income taxes  16,176   20,326   26,731   15,080   78,313 
Provision for income taxes  6,699   8,374   11,230   6,170   32,473 
Net earnings $9,477  $11,952  $15,501  $8,910  $45,840 
                     
Net earnings per common share—Basic (1) $1.26  $1.63  $2.14  $1.23  $6.26 
                     
Net earnings per common share—Diluted (1) $1.25  $1.63  $2.13  $1.22  $6.19 
(1)Basic and diluted earnings per share are computed independently for each of the quarters presented. Therefore, the sum of quarterly basic and diluted per share information may not equal annual basic and diluted earnings per share.
ePlus inc. AND SUBSIDIARIES
Schedule II - Valuation and Qualifying Accounts
(Dollars in thousands)


  
Balance at
Beginning of
Period
  
Charged to
Costs and
Expenses
  
Deductions/
Write-Offs
  
Balance at End
of Period
 
             
Allowance for Sales Returns: (1)
            
Year Ended March 31, 2014  543   1,079   (1,030)  592 
Year Ended March 31, 2015  592   1,009   (988)  613 
Year Ended March 31, 2016  613   1,500   (1,460)  653 
                 
Reserve for Credit Losses:
                
Year Ended March 31, 2014  5,129   750   (127)  5,752 
Year Ended March 31, 2015  5,752   125   (254)  5,623 
Year Ended March 31, 2016  5,623   (242)  (188)  5,193 
                 
Valuation for Deferred Taxes:
                
Year Ended March 31, 2014  1,505   (218)  -   1,287 
Year Ended March 31, 2015  1,287   (64)  -   1,223 
Year Ended March 31, 2016  1,223   47   -   1,270 
 
Balance at
Beginning of
Period
  
Charged to
Costs and
Expenses
  
Deductions/
Write-Offs
  
Balance at End
of Period
 
             
Allowance for sales returns: (1)            
Year ended March 31, 2021
 $1,038  $
2,909  $
(2,758) $
1,189 
Year ended March 31, 2022
 $
1,189  $
2,158  $
(2,101) $
1,246 
Year ended March 31, 2023
 $
1,246  $
3,991  $
(3,973) $
1,264 
                 
Allowance for credit losses:                
Year ended March 31, 2021
 $
3,189  $
1,436  $
(178) $
4,447 
Year ended March 31, 2022
 $
4,447  $
(102) $
(545) $
3,800 
Year ended March 31, 2023
 $
3,800  $
666  $
(112) $
4,354 
                 
Valuation for deferred taxes:                
Year ended March 31, 2021
 $
1,385  $
0  $
(1,385) $
0 
Year ended March 31, 2022
 $
0  $
250  $
0  $
250 
Year ended March 31, 2023
 $
250  $
(138) $
0  $
112 


(1)These amounts represent the gross profit effect of sales returns during the respective years. Expected merchandise returns after year-end for sales made before year-end were $4.0$7.9 million, $3.8$7.8 million, and $3.6$7.4 million as of March 31, 2016, 2015,2023, 2022, and 2014,2021, respectively.

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