UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, ~~D.C. 20549~~D.C.20549

FORM 10-Q

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

For the quarterly period ended ~~December 31, 2017~~September 30, 2020

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

For the transition period from____ to ____ .

Commission file number:1-34167

e~~Plus~~ePlus inc.

(Exact name of registrant as specified in its charter)

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

13595 Dulles Technology Drive, Herndon, VA20171-3413

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

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

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

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

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

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically ~~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 232.405 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 ☐

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

Large accelerated filer ☐☒	Accelerated filer ☒☐
Non-accelerated filer ~~☐(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 is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

The number of shares of common stock outstanding as of ~~January 31, 2018~~ November 2, 2020,was ~~13,948,590.~~13,507,214.

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TABLE OF CONTENTS

ePlus inc. AND SUBSIDIARIES

Part I. Financial Information:

Item 1.	Financial Statements

	Unaudited ~~Condensed~~ Consolidated Balance Sheets as of ~~December 31, 2017~~September 30, 2020 and March 31, ~~2017~~2020	5

	Unaudited ~~Condensed~~ Consolidated Statements of Operations for the Three and ~~Nine~~Six Months Ended ~~December 31, 2017~~September 30, 2020 and ~~2016~~2019	6

	Unaudited ~~Condensed~~ Consolidated Statements of Comprehensive Income for the Three and ~~Nine~~Six Months Ended ~~December 31, 2017~~September 30, 2020 and ~~2016~~2019	7

	Unaudited ~~Condensed~~ Consolidated Statements of Cash Flows for the ~~Nine~~Three and Six Months Ended ~~December 31, 2017~~September 30, 2020 and ~~2016~~2019	8

	Unaudited ~~Condensed~~ Consolidated Statements of Stockholders’ Equity for the ~~Nine~~Three and Six Months Ended ~~December 31, 2017~~September 30, 2020 and 2019	10

	Notes to Unaudited ~~Condensed~~ Consolidated Financial Statements	11

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

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4143

Item 4.	Controls and Procedures	4244

Part II. Other Information:

Item 1.	Legal Proceedings	4344

Item 1A.	Risk Factors	4345

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4445

Item 3.	Defaults Upon Senior Securities	45

Item 4.	Mine Safety Disclosures	45

Item 5.	Other Information	45

Item 6.	Exhibits	4546

Signatures & Certifications		4647

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CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

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

national and international political instability fostering uncertainty and volatility in the global economy including exposure to fluctuation in foreign currency rates, and downward pressure on prices;

the duration and impact of the novel coronavirus pandemic (“COVID-19”), which could materially adversely affect our financial condition and results of operations and has resulted in governmental authorities imposing numerous unprecedented measures to try to contain the virus that has impacted and may further impact our workforce and operations, the operations of our customers, and those of our respective vendors, suppliers, and partners;

~~significant adverse changes in, reductions in, or loss of our largest volume customer or one or more of our large volume customers, or vendors;~~

national and international political instability fostering uncertainty and volatility in the global economy including exposure to fluctuation in foreign currency rates, interest rates, and downward pressure on prices;

~~exposure to changes in, interpretations of, or enforcement trends in legislation and regulatory matters;~~

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

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

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

~~reduction of vendor incentives provided to us;~~

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

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 encounter the following challenges, risks, difficulties and uncertainties:

uncertainty regarding the phase out of LIBOR may negatively affect our operating results;

~~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, competent, 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;~~

~~performing professional and managed services competently;~~

~~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 to our customers;~~

~~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 we are subject to audit in which we may not pass, and our professional and liability insurance policies coverage may be insufficient to cover a claim;

~~disruptions or a security breach in our IT systems and data and audio communication networks;~~

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~~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;

~~our ability to realize our investment in leased equipment;~~

reliance on third parties to perform some of our service obligations to our customers;

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

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;

reduction of vendor incentives provided to us;

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

the possibility of goodwill impairment charges in the future;

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

adapting to meet changes in markets and competitive developments;

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

our ability to secure our own and our customers’ electronic and other confidential information, and remain secure during a cyber-security attack;

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

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

performing professional and managed services competently;

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

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changes to or loss of members of our senior management team and/or failure to successfully implement succession plans;

exposure to changes in, interpretations of, or enforcement trends in legislation and regulatory matters;

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

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

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

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

disruptions or a security breach in our or our vendors’ IT systems and data and audio communication networks;

our ability to realize our investment in leased equipment;

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

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 or inaccurate costs and completion dates for our services, which could affect our estimates; and

•

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

~~the possibility of goodwill impairment charges in the future;~~

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~~-party patents, and the costs associated with those actions, and, when appropriate, license required ~~technology; and~~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 or inaccurate costs and completion dates for our services which could affect our estimates.

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,~~1A, “Risk Factors” and Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections contained elsewhere in this report, as well as other reports that we file with the Securities and Exchange Commission (“SEC”).

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PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements

ePlus inc. AND SUBSIDIARIES

UNAUDITED ~~CONDENSED~~ CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

As of
December 31, 2017

As of
March 31, 2017

ASSETS (in thousands, except per share data)

Current assets:
Cash and cash equivalents $ 76,105 $ 109,760
Accounts receivable—trade, net 285,820 266,029
Accounts receivable—other, net 30,690 24,987
Inventories 51,295 93,557
Financing receivables—net, current 74,598 51,656
Deferred costs 24,740 7,971
Other current assets 25,970 43,364
Total current assets 569,218 597,324

Financing receivables and operating leases—net 72,575 71,883
Deferred tax assets—net 1,268 -
Property, equipment and other assets 17,632 11,956
Goodwill 76,546 48,397
Other intangible assets—net 27,414 12,160
TOTAL ASSETS $ 764,653 $ 741,720

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES

Current liabilities:
Accounts payable $ 125,850 $ 113,518
Accounts payable—floor plan 107,761 132,612
Salaries and commissions payable 20,568 18,878
Deferred revenue 50,739 65,312
Recourse notes payable—current - 908
Non-recourse notes payable—current 27,649 26,085
Other current liabilities 26,116 19,179
Total current liabilities 358,683 376,492

Non-recourse notes payable—long term 3,840 10,431
Deferred tax liability—net - 1,799
Other liabilities 18,518 7,080
TOTAL LIABILITIES 381,041 395,802

COMMITMENTS AND CONTINGENCIES (Note 8)

STOCKHOLDERS' EQUITY

Preferred stock, $.01 per share par value; 2,000 shares authorized; none outstanding - -
Common stock, $.01 per share par value; 25,000 shares authorized;14,046 outstanding at December 31, 2017 and 14,161 outstanding at March 31, 2017
142 142
Additional paid-in capital 128,392 123,536
Treasury stock, at cost (14,165 ) -
Retained earnings 269,048 222,823
Accumulated other comprehensive income—foreign currency translation adjustment 195 (583 )
Total Stockholders' Equity 383,612 345,918
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 764,653 $ 741,720

	September 30, 2020			March 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	161,081		$	86,231
Accounts receivable—trade, net		369,037			374,998
Accounts receivable—other, net		40,832			36,570
Inventories		73,751			50,268
Financing receivables—net, current		92,766			70,169
Deferred costs		22,329			22,306
Other current assets		8,233			9,256
Total current assets		768,029			649,798

Financing receivables and operating leases—net		87,926			74,158
Property, equipment and other assets		34,314			32,596
Goodwill		118,177			118,097
Other intangible assets—net		30,265			34,464
TOTAL ASSETS	$	1,038,711		$	909,113

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES

Current liabilities:
Accounts payable	$	104,893		$	82,919
Accounts payable—floor plan		218,970			127,416
Salaries and commissions payable		30,284			30,952
Deferred revenue		59,078			55,480
Recourse notes payable—current		2,286			37,256
Non-recourse notes payable—current		35,610			29,630
Other current liabilities		25,372			22,986
Total current liabilities		476,493			386,639

Non-recourse notes payable—long term		2,444			5,872
Deferred tax liability—net		3,762			2,730
Other liabilities		32,942			27,727
TOTAL LIABILITIES		515,641			422,968

COMMITMENTS AND CONTINGENCIES (Note 10)

STOCKHOLDERS' EQUITY

Preferred stock, $0.01 per share par value; 2,000 shares authorized; NaN outstanding		0			0
Common stock, $0.01 per share par value; 25,000 shares authorized; 13,537 outstanding at September 30, 2020 and 13,500 outstanding at March 31, 2020		145			144
Additional paid-in capital		148,845			145,197
Treasury stock, at cost, 958 shares at September 30, 2020 and 896 shares at March 31, 2020		(72,911	)		(68,424	)
Retained earnings		447,425			410,219
Accumulated other comprehensive income—foreign currency translation adjustment		(434	)		(991	)
Total Stockholders' Equity		523,070			486,145
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	1,038,711		$	909,113

See Notes to Unaudited ~~Condensed~~ Consolidated Financial Statements.

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ePlus inc. AND SUBSIDIARIES

UNAUDITED ~~CONDENSED~~ CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

Three Months Ended
December 31,

Nine Months Ended
December 31,

2017 2016 2017 2016

(in thousands, except per share data)

Net sales $ 342,569 $ 326,657 $ 1,080,571 $ 996,622
Cost of sales 265,881 252,871 838,719 773,239
Gross profit 76,688 73,786 241,852 223,383

Selling, general, and administrative expenses 57,134 50,160 168,138 149,821
Depreciation and amortization 2,894 1,910 7,086 5,408
Interest and financing costs 270 409 903 1,158
Operating expenses 60,298 52,479 176,127 156,387

Operating income 16,390 21,307 65,725 66,996

Other income (expense) (131 ) - (1 ) 380

Earnings before tax 16,259 21,307 65,724 67,376

Provision for income taxes 678 8,687 19,499 27,310

Net earnings $ 15,581 $ 12,620 $ 46,225 $ 40,066

Net earnings per common share—basic $ 1.12 $ 0.92 $ 3.34 $ 2.88
Net earnings per common share—diluted $ 1.11 $ 0.91 $ 3.30 $ 2.86

Weighted average common shares outstanding—basic 13,851 13,791 13,845 13,891
Weighted average common shares outstanding—diluted 13,990 13,920 14,022 14,026

	Three Months Ended September 30,					Six Months Ended September 30,
	2020		2019			2020		2019

Net sales
Product	$	383,656	$	363,497		$	690,896	$	699,098
Services		49,425		48,068			97,216		93,839
Total		433,081		411,565			788,112		792,937
Cost of sales
Product		302,963		278,863			529,597		538,926
Services		31,156		29,671			60,996		58,341
Total		334,119		308,534			590,593		597,267

Gross profit		98,962		103,031			197,519		195,670

Selling, general, and administrative		66,889		70,523			136,356		136,310
Depreciation and amortization		3,341		3,557			6,857		7,020
Interest and financing costs		247		576			824		1,204
Operating expenses		70,477		74,656			144,037		144,534

Operating income		28,485		28,375			53,482		51,136

Other income (expense)		184		(40	)		282		(85	)

Earnings before tax		28,669		28,335			53,764		51,051

Provision for income taxes		8,823		8,237			16,558		14,765

Net earnings	$	19,846	$	20,098		$	37,206	$	36,286

Net earnings per common share—basic	$	1.48	$	1.51		$	2.79	$	2.72
Net earnings per common share—diluted	$	1.48	$	1.51		$	2.78	$	2.71

Weighted average common shares outstanding—basic		13,372		13,312			13,347		13,334
Weighted average common shares outstanding—diluted		13,391		13,350			13,394		13,408

See Notes to Unaudited ~~Condensed~~ Consolidated Financial Statements.

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ePlus inc. AND SUBSIDIARIES

UNAUDITED ~~CONDENSED~~ CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

Three Months Ended
December 31,

Nine Months Ended
December 31,

2017 2016 2017 2016
(amounts in thousands)

NET EARNINGS $ 15,581 $ 12,620 $ 46,225 $ 40,066

OTHER COMPREHENSIVE INCOME, NET OF TAX:

Foreign currency translation adjustments 75 (145 ) 778 (240 )

Other comprehensive income (loss) 75 (145 ) 778 (240 )

TOTAL COMPREHENSIVE INCOME $ 15,656 $ 12,475 $ 47,003 $ 39,826

	Three Months Ended September 30,					Six Months Ended September 30,
	2020		2019			2020		2019

NET EARNINGS	$	19,846	$	20,098		$	37,206	$	36,286

OTHER COMPREHENSIVE INCOME, NET OF TAX:

Foreign currency translation adjustments		520		(350	)		557		(613	)

Other comprehensive income (loss)		520		(350	)		557		(613	)

TOTAL COMPREHENSIVE INCOME	$	20,366	$	19,748		$	37,763	$	35,673

See Notes to Unaudited ~~Condensed~~ Consolidated Financial Statements.

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ePlus inc. AND SUBSIDIARIES

UNAUDITED ~~CONDENSED~~ CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

Nine Months Ended December 31,
2017 2016
(in thousands)
Cash Flows From Operating Activities:
Net earnings $ 46,225 $ 40,066

Adjustments to reconcile net earnings to net cash (used in) provided by operating activities:
Depreciation and amortization 11,324 8,758
Reserve for credit losses, inventory obsolescence and sales returns 286 926
Share-based compensation expense 4,856 4,520
Deferred taxes (3,058 ) -
Payments from lessees directly to lenders—operating leases
(1,325 ) (1,831 )
Gain on disposal of property, equipment and operating lease equipment (7,555 ) (3,742 )
Gain on sale of financing receivables (4,625 ) (3,968 )
Other 1 316
Changes in:
Accounts receivable—trade (8,295 ) (57,732 )
Accounts receivable—other (1,976 ) (4,232 )
Inventories 43,332 (77,422 )
Financing receivables—net (13,045 ) 17,797
Deferred costs, other intangible assets and other assets (26,188 ) 1,838
Accounts payable 18,406 53,208
Salaries and commissions payable, deferred revenue and other liabilities (9,539 ) 51,200
Net cash provided by operating activities $ 48,824 $ 29,702

Cash Flows From Investing Activities:
Proceeds from sale of property, equipment and operating lease equipment 9,967 6,380
Purchases of property, equipment, software, and operating lease equipment (6,298 ) (7,300 )
Purchases of assets to be leased or financed (5,716 ) (5,897 )
Issuance of financing receivables (138,160 ) (114,671 )
Repayments of financing receivables 59,029 44,091
Proceeds from sale of financing receivables 64,103 39,857
Cash used in acquisitions, net of cash acquired (37,718 ) (9,500 )
Net cash used in investing activities $ (54,793 ) $ (47,040 )

	Six Months Ended September 30,
	2020			2019

Cash flows from operating activities:
Net earnings	$	37,206		$	36,286

Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:
Depreciation and amortization		9,460			10,077
Reserve for credit losses		1,766			631
Share-based compensation expense		3,648			4,054
Deferred taxes		1,032			(3	)
Payments from lessees directly to lenders—operating leases		(13	)		(34	)
Gain on disposal of property, equipment, and operaing lease equipment		(278	)		(436	)
Changes in:
Accounts receivable		1,755			(46,100	)
Inventories-net		(23,381	)		(5,301	)
Financing receivables—net		(54,386	)		(76,423	)
Deferred costs and other assets		(1,052	)		(18,826	)
Accounts payable-trade		21,717			15,585
Salaries and commissions payable, deferred revenue, and other liabilities		10,934			26,086
Net cash provided by (used in) operating activities		8,408			(54,404	)

Cash flows from investing activities:
Proceeds from sale of property, equipment, and operating lease equipment		456			653
Purchases of property, equipment and operating lease equipment		(3,267	)		(4,888	)
Cash used in acquisitions, net of cash acquired		0			(13,815	)
Net cash used in investing activities		(2,811	)		(18,050	)

Cash flows from financing activities:
Borrowings of non-recourse and recourse notes payable		23,613			54,877
Repayments of non-recourse and recourse notes payable		(40,529	)		(5,629	)
Repurchase of common stock		(4,487	)		(13,692	)
Repayments of financing of acquisitions		(421	)		(785	)
Net borrowings on floor plan facility		91,554			13,585
Net cash provided by financing activities		69,730			48,356

Effect of exchange rate changes on cash		(477	)		114

Net increase (decrease) in cash and cash equivalents		74,850			(23,984	)

Cash and cash equivalents, beginning of period		86,231			79,816

Cash and cash equivalents, end of period	$	161,081		$	55,832

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UNAUDITED ~~CONDENSED~~ CONSOLIDATED STATEMENTS OF CASH FLOWS - continued

(in thousands)

Nine Months Ended December 31,
2017 2016
(in thousands)
Cash Flows From Financing Activities:
Borrowings of non-recourse and recourse notes payable $ 39,365 $ 34,020
Repayments of non-recourse and recourse notes payable (27,269 ) (5,412 )
Repurchase of common stock (13,399 ) (30,493 )
Payment of contingent consideration - (718 )
Repayments of financing of acquisitions (1,604 ) -
Net borrowings (repayments) on floor plan facility (24,851 ) (5,602 )
Net cash used in financing activities (27,758 ) (8,205 )

Effect of exchange rate changes on cash 72 454

Net Decrease in Cash and Cash Equivalents (33,655 ) (25,089 )

Cash and Cash Equivalents, Beginning of Period 109,760 94,766

Cash and Cash Equivalents, End of Period $ 76,105 $ 69,677

Supplemental Disclosures of Cash Flow Information:
Cash paid for interest $ 421 $ 38
Cash paid for income taxes $ 29,987 $ 23,381

Schedule of Non-Cash Investing and Financing Activities:
Proceeds from sale of property, equipment, and operating lease equipment $ 3,463 $ 429
Purchases of property, equipment, software, and operating lease equipment $ (751 ) $ (2,442 )
Purchase of assets to be leased or financed $ (7,225 ) $ (12,700 )
Issuance of financing receivables $ (74,907 ) $ (110,120 )
Repayment of financing receivables $ 9,572 $ 16,454
Proceeds from sale of financing receivables $ 83,954 $ 104,430
Financing of acquisitions $ (12,050 ) $ -
Borrowing of non-recourse and recourse notes payable $ 8,904 $ 33,651
Repayments of non-recourse and recourse notes payable $ (14,465 ) $ (20,438 )
Vesting of share-based compensation $ 12,010 $ 7,982
Repurchase of common stock included in accounts payable $ (766 ) $ -

	Six Months Ended September 30,
	2020			2019
Supplemental disclosures of cash flow information:
Cash paid for interest	$	739		$	1,115
Cash paid for income taxes	$	12,348		$	12,471
Cash paid for amounts included in the measurement of lease liabilities	$	2,975		$	2,566

Schedule of non-cash investing and financing activities:
Purchases of property, equipment, and operating lease equipment	$	(393	)	$	(396	)
Financing of acquisitions	$	0		$	(1,464	)
Borrowing of non-recourse and recourse notes payable	$	35,780		$	82,462
Repayments of non-recourse and recourse notes payable	$	(13	)	$	(34	)
Vesting of share-based compensation	$	7,916		$	8,972
New operating lease assets obtained in exchange for lease obligations	$	774		$	5,225

See Notes to Unaudited ~~Condensed~~ Consolidated Financial Statements.

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ePlus inc. AND SUBSIDIARIES

UNAUDITED ~~CONDENSED~~ CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)

Common Stock
Additional
Paid-In
Treasury Retained
Accumulated
Other
Comprehensive

Shares Par Value Capital Stock Earnings Income Total

Balance, April 1, 2017 14,161 $ 142 $ 123,536 $ - $ 222,823 $ (583 ) $ 345,918
Issuance of restricted stock awards 68 - - - - - -
Share-based compensation - - 4,856 - - - 4,856
Repurchase of common stock (183 ) - - (14,165 ) - - (14,165 )
Net earnings - - - - 46,225 - 46,225
Foreign currency translation adjustment - - - - - 778 778

Balance, December 31, 2017 14,046 $ 142 $ 128,392 $ (14,165 ) $ 269,048 $ 195 $ 383,612

	Six Months Ended September 30, 2020
	Common Stock					Additional Paid-In		Treasury			Retained		Accumulated Other Comprehensive
	Shares			Par Value		Capital		Stock			Earnings		Income			Total
Balance, March 31, 2020		13,500		$	144	$	145,197	$	(68,424	)	$	410,219	$	(991	)	$	486,145
Issuance of restricted stock awards		91			1		0		0			0		0			1
Share-based compensation		0			0		1,885		0			0		0			1,885
Repurchase of common stock		(38	)		0		0		(2,703	)		0		0			(2,703	)
Net earnings		-			0		0		0			17,360		0			17,360
Foreign currency translation adjustment		-			0		0		0			0		37			37

Balance, June 30, 2020		13,553		$	145	$	147,082	$	(71,127	)	$	427,579	$	(954	)	$	502,725
Issuance of restricted stock awards		8			0		0		0			0		0			0
Share-based compensation		0			0		1,763		0			0		0			1,763
Repurchase of common stock		(24	)		0		0		(1,784	)		0		0			(1,784	)
Net earnings		-			0		0		0			19,846		0			19,846
Foreign currency translation adjustment		-			0		0		0			0		520			520

Balance, September 30, 2020		13,537		$	145	$	148,845	$	(72,911	)	$	447,425	$	(434	)	$	523,070

	Six Months Ended September 30, 2019
	Common Stock					Additional Paid-In		Treasury			Retained		Accumulated Other Comprehensive
	Common Stock					Additional Paid-In		Treasury			Retained		Accumulated Other Comprehensive
	Shares			Par Value		Capital		Stock			Earnings		Income			Total
Balance, March 31, 2019		13,611		$	143	$	137,243	$	(53,999	)	$	341,137	$	(271	)	$	424,253
Issuance of restricted stock awards		86			1		0		0			0		0			1
Share-based compensation		0			0		1,919		0			0		0			1,919
Repurchase of common stock		(188	)		0		0		(13,455	)		0		0			(13,455	)
Net earnings		-			0		0		0			16,188		0			16,188
Foreign currency translation adjustment		-			0		0		0			0		(263	)		(263	)

Balance, June 30, 2019		13,509		$	144	$	139,162	$	(67,454	)	$	357,325	$	(534	)	$	428,643
Issuance of restricted stock awards		7			0		0		0			0		0			0
Share-based compensation		(3	)		0		2,135		0			0		0			2,135
Repurchase of common stock		0			0		0		(237	)		0		0			(237	)
Net earnings		-			0		0		0			20,098		0			20,098
Foreign currency translation adjustment		-			0		0		0			0		(350	)		(350	)

Balance, September 30, 2019		13,513		$	144	$	141,297	$	(67,691	)	$	377,423	$	(884	)	$	450,289

See Notes to Unaudited ~~Condensed~~ Consolidated Financial Statements.

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ePlus inc. AND SUBSIDIARIES

NOTES TO UNAUDITED ~~CONDENSED~~ CONSOLIDATED FINANCIAL STATEMENTS

1.	ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS — Our company was founded in 1990 and is a Delaware corporation. ePlus inc. is sometimes referred to in this Quarterly Report on Form 10-Q as ~~"we," "our," "us," "ourselves,"~~“we,” “our,” “us,” “ourselves,” or "“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 market~~selling to medium and large enterprises in North America, ~~and~~ the United ~~Kingdom.~~Kingdom (“UK”), and other European countries.

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

INTERIM FINANCIAL STATEMENTS — The unaudited ~~condensed~~ consolidated financial statements for the ~~three and nine~~six months ended ~~December 31, 2017~~September 30, 2020, and ~~2016~~2019, were prepared by us ~~without audit,~~ and include all normal and recurring adjustments that, in the opinion of management, are necessary for a fair presentation of our financial position, results of operations, changes in comprehensive income, and cash flows for such periods. Operating results for the ~~three and nine~~six months ended ~~December 31, 2017~~September 30, 2020, and ~~2016~~2019 are not necessarily indicative of results that may be expected for any other interim period or for the full fiscal year ending March 31, ~~2018~~2021, or any other future period. These unaudited ~~condensed~~ consolidated financial statements do not include all disclosures required by the accounting principles generally accepted in the United States (“~~U.S.~~US GAAP”) for annual financial statements. Our audited consolidated financial statements are contained in our annual report on Form 10-K for the year ended March 31, ~~2017~~2020 (“~~2017~~2020 Annual Report”), which should be read in conjunction with these interim ~~condensed~~ consolidated financial statements.

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

The notes to the consolidated financial statements contained in the 2017 Annual Report include additional discussion of the significant accounting policies and estimates used in the preparation of our consolidated financial statements. There have been no material changes to our significant accounting policies and estimates during the nine months ended December 31, 2017.

STOCK SPLIT — On March 31, 2017, we completed a two-for-one stock split in the form of a stock dividend. References made to outstanding shares or per share amounts in the accompanying financial statements and disclosures have been retroactively adjusted for this stock split. The number of authorized shares reflected on the consolidated balance sheets was not affected by the stock split.

CONCENTRATIONS OF RISK — A substantial portion of our sales ~~of product and services~~ are products from ~~sales of~~ Cisco Systems, ~~Hewlett Packard Enterprise (“HPE”)~~which were 41% and ~~HP, Inc. (collectively “Hewlett Packard companies”), and NetApp products, which represented approximately 39%, 5% and 7%, and 45%, 7%, and 5%, respectively,~~43% of our technology segment’s net sales for the three ~~and nine~~ months ended ~~December 31, 2017. Sales~~September 30, 2020, and 2019, respectively, and 40% and 42% of ~~Cisco Systems, Hewlett Packard companies, and NetApp represented approximately 45%, 6% and 6%, and 49%, 6% and 5%, respectively,~~our technology segment’s net sales for the ~~three and nine~~six months ended ~~December 31, 2016. Any changes~~September 30, 2020, and 2019, respectively.

SIGNIFICANT ACCOUNTING POLICIES — The significant accounting policies used in preparing these Consolidated Financial Statements were applied on a basis consistent with those reflected in our ~~vendors’ ability to provide products or incentive programs could have a material adverse effect on our business, results of operations and financial condition.~~

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2.	~~RECENT ACCOUNTING PRONOUNCEMENTS~~

~~RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED — In May 2014, the FASB issued ASU 2014-09,~~ ~~Revenue from Contracts with Customers (Topic 606)~~, which, along with amendments issued in 2015 and 2016, will replace most existing revenue recognition guidance under GAAP and eliminate industry specific guidance. The core principle of the new guidance is that an entity should recognize revenueConsolidated Financial Statements for the ~~transfer~~year ended March 31,2020, except for changes from the adoption of ~~goods and services equal to an amount it expects to be entitled to receive for those goods and 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 become effective for us in our quarter ending June 30, 2018. The new guidance permits two methods of adoption: retrospectively to each prior reporting period presented (full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (modified retrospective method).

We have established a cross-functional implementation team and utilized a bottom-up approach to analyze the impact of the standard on our arrangements by reviewing the current accounting policies and practices to identify potential differences that would result from applying the requirements of the new standard to our revenue contracts. Based on our analysis to date, we have reached the following tentative conclusions regarding the new standard and how we expect it to affect our consolidated financial statements and related disclosures:

We will adopt the guidance in our quarter ending June 30, 2018. We currently prefer to adopt the standard using the full retrospective method; however, our ability to do so is dependent on many factors, including the completion of our analysis of information necessary to recast prior period financial statements. Based on these and other factors, we may decide to use the modified retrospective method.

·	Substantially all of our revenue within our technology segment is contractual and is within the scope of ASU No. 2014-09, as amended. The majority of our revenues within our financing segment are scoped out of this update.

·	The majority of our revenues within our technology segment are derived from sales of third-party products, third-party software, third-party services, such as maintenance and software assurance, and sales of e~~Plus professional and managed services.~~

We recognize revenue on sales of third party product and third-party software on a gross basis upon delivery and we are still assessing whether we are acting as a principal or an agent in these transactions under the update.

~~We recognize sales of third party maintenance and software assurance on a net basis at the date of sale and sales of~~ e~~Plus professional and managed services on a gross basis as the services are performed. We do not anticipate a material impact to our revenue recognition for these transactions under the update.~~

·	~~We expect that our disclosures in our notes to our consolidated financial statements related to revenue recognition will be significantly expanded under the new standard.~~

Our analysis and evaluation of the new standard will continue through its effective date in our quarter ending June 30, 2018. A substantial amount of work remains to be completed due to the complexity of the new standard, the application of judgment and the requirement for the use of estimates in applying the new standard, as well as the volume of our customer portfolio and the related terms and conditions of our contracts that must be reviewed.

~~In November~~ Financial Accounting Standards Board (“FASB”) Accounting Standards Update ("ASU") 2016 ~~the FASB issued ASU 2016-02,~~ ~~Leases~~, which will supersede the current U.S. GAAP on this topic. The core principle of this update is that a lessee should recognize the assets and liabilities that arise from leases. This update 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.

~~In June 2016, the FASB issued ASU 2016-13,~~ -13,Financial Instruments- Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, as amended (“ASU 2016-13”). The updates to our accounting policies from adopting ASU 2016-13 are provided below.

ALLOWANCE FOR CREDIT LOSSES — We maintain an allowance for credit losses related to our accounts receivable and financing 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 assign 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 charge off uncollectable financing receivables when we stop pursuing collection.

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2.	RECENT ACCOUNTING PRONOUNCEMENTS

CREDIT LOSSES — We adopted ASU 2016-13 on April 1, 2020. The amendments in this update replace the incurred loss impairment methodology in current US GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. ~~This update requires~~Our adoption under a modified retrospective approach and becomes effective for us in our quarter ending June 30, 2020. Early adoption is permitted beginning in our quarter ending June 30, 2019. We are currently evaluating the impact of this update, onincluding the cumulative-effect adjustment to retained earnings, is not significant to our financial statements. Refer to Note 7, “Allowance for Credit Losses” for additional information.

REVENUES

Contract balances

Accounts receivable – trade consists entirely of amounts due from contracts with customers. In addition, we had $41.3 million and $33.1 million of receivables from contracts with customers included within financing receivables as of September 30,2020, and March 31,2020, respectively. The following table provides the balance of contract liabilities from contracts with customers (in thousands):

Contract liabilities	September 30, 2020		March 31, 2020
Current (included in deferred revenue)	$	58,267	$	54,486
Non-current (included in other liabilities)	$	18,794	$	16,395

Revenue recognized from the beginning contract liability balance was $11.3 million and $26.9 million for the three and six months ended September 30, 2020, respectively, and $13.6 million and $29.4 million for the three and six months ended September 30, 2019, respectively.

Performance obligations

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

Remainder of Year ending March 31, 2021	$	20,527
Year Ending March 31, 2022		18,889
Year Ending March 31, 2023		8,385
Year Ending March 31, 2024		2,026
Year Ending March 31, 2025		516
Year Ending March 31, 2026 and thereafter		111
Total remaining performance obligations	$	50,454

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 three and six months ended September 30, 2020, and 2019 (in thousands):


	Three months ended September 30, 2020		Three months ended September 30, 2019		Six months ended September 30, 2020		Six months ended September 30, 2019
Net sales	$	7,655	$	3,133	$	17,818	$	7,987
Cost of sales		5,402		2,702		10,729		6,652
Gross profit	$	2,253	$	431	$	7,089	$	1,335

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3.	~~FINANCING RECEIVABLES AND OPERATING LEASES~~

~~Our financing receivables~~The following table provides interest income in aggregate on our sales-type leases and lease income on our operating leases ~~consist of assets that we finance~~ for our customers, which we manage as a portfolio of investments. Equipment financed for our customers is accounted for as investments in direct financing, sales-type or operating leases in accordance with Accounting Standards Codification (“ASC”) Topic 840, ~~Leases. We also finance third-party software, maintenance,~~the three and ~~services for our customers, which are classified as notes receivables. Our notes receivables are interest bearing~~six months ended September 30, 2020, and ~~are often due over a period of time that corresponds with the terms of the leased products.~~2019 (in thousands):

	Three months ended September 30 2020		Three months ended September 30, 2019		Six months ended September 30, 2020		Six months ended September 30, 2019
Interest income on sales-type leases	$	1,884	$	1,495	$	4,103	$	3,590
Lease income on operating leases	$	3,900	$	5,059	$	7,738	$	10,418

FINANCING RECEIVABLES—NET

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

December 31, 2017	Notes Receivables			Lease-Related Receivables			Total Financing Receivables
Minimum payments	$	59,444		$	73,022		$	132,466
Estimated unguaranteed residual value (1)		-			13,358			13,358
Initial direct costs, net of amortization (2)		369			321			690
September 30, 2020										Notes Receivable			Lease Receivables			Financing Receivables

Gross receivables										$	90,002		$	76,700		$	166,702
Unguaranteed residual value (1)											0			20,213			20,213
Initial direct costs, net of amortization											364			0			364
Unearned income		-			(6,034	)		(6,034	)		0			(11,329	)		(11,329	)
Reserve for credit losses (3)		(451	)		(621	)		(1,072	)
Reserve for credit losses (2)											(1,337	)		(1,227	)		(2,564	)
Total, net	$	59,362		$	80,046		$	139,408		$	89,029		$	84,357		$	173,386
Reported as:
Current	$	33,109		$	41,489		$	74,598		$	52,397		$	40,369		$	92,766
Long-term		26,253			38,557			64,810			36,632			43,988			80,620
Total, net	$	59,362		$	80,046		$	139,408		$	89,029		$	84,357		$	173,386

(1)

Includes ~~estimated~~ unguaranteed residual values of ~~$7,753~~$12,644 thousand that we retained after selling the related lease receivable.

(2)

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

March 31, 2020	Notes Receivable			Lease Receivables			Financing Receivables

Minimum payments	$	55,417		$	69,492		$	124,909
Estimated unguaranteed residual value (1)		0			21,862			21,862
Initial direct costs, net of amortization		212			247			459
Unearned income		0			(11,612	)		(11,612	)
Reserve for credit losses (2)		(798	)		(610	)		(1,408	)
Total, net	$	54,831		$	79,379		$	134,210
Reported as:
Current	$	31,181		$	38,988		$	70,169
Long-term		23,650			40,391			64,041
Total, net	$	54,831		$	79,379		$	134,210

(1)

Includes unguaranteed residual values of $14,972 thousand for sales type leases, which have been sold and accounted for as sales.

(2)

~~Initial direct costs are shown net of amortization of $334 thousand.~~

~~(3)~~

~~For details on reserve for credit losses, refer~~Refer to Note ~~5, “Reserves~~7, “Allowance for Credit ~~Losses~~.”Losses” for details.

March 31, 2017

Notes
Receivables

Lease-Related
Receivables

Total Financing
Receivables

Minimum payments $ 48,524 $ 57,872 $ 106,396
Estimated unguaranteed residual value (1) - 18,273 18,273
Initial direct costs, net of amortization (2) 279 341 620
Unearned income - (5,913 ) (5,913 )
Reserve for credit losses (3) (3,434 ) (679 ) (4,113 )
Total, net $ 45,369 $ 69,894 $ 115,263
Reported as:
Current $ 23,780 $ 27,876 $ 51,656
Long-term 21,589 42,018 63,607
Total, net $ 45,369 $ 69,894 $ 115,263

~~(1)~~

~~Includes estimated unguaranteed residual values of $12,677 thousand for direct financing leases which have been sold and accounted for as sales.~~

~~(2)~~

~~Initial direct costs are shown net of amortization of $510 thousand.~~

~~(3)~~

~~For details on reserve for credit losses, refer to Note 5, “Reserves for Credit Losses~~.”

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The following table provides the future scheduled minimum lease payments for investments in sales-type leases as of September 30,2020 (in thousands):

Remainder of the Year ending March 31, 2021	$	46,006
Year Ending March 31, 2022		19,376
Year Ending March 31, 2023		8,196
Year Ending March 31, 2024		2,205
Year Ending March 31, 2025 and thereafter		917
Total	$	76,700

OPERATING LEASES—NET

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

							September 30, 2020			March 31, 2020
	December 31, 2017			March 31, 2017
Cost of equipment under operating leases	$	16,804		$	16,725		$	19,578		$	21,276
Accumulated depreciation		(9,039	)		(8,449	)		(12,272	)		(11,159	)
Investment in operating lease equipment—net (1)	$	7,765		$	8,276		$	7,306		$	10,117

(1)

~~These totals~~Amounts include estimated unguaranteed residual values of ~~$2,077 thousand~~$2.5 million and ~~$1,117 thousand~~$3.1 million as of ~~December 31, 2017~~September 30, 2020, and March 31, ~~2017,~~2020, respectively.

The following table provides the future scheduled minimum lease rental payments for operating leases as of September 30,2020 (in thousands):

Remainder of the Year ending March 31, 2021	$	1,534
Year Ending March 31, 2022		1,927
Year Ending March 31, 2023		1,436
Year Ending March 31, 2024		477
Year Ending March 31, 2025 and thereafter		35
Total	$	5,409

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 ASC Topic 860,~~ ~~Transfers and Servicing~~. borrowings.

For transfers accounted for as a secured borrowing, the corresponding investments serve as collateral for non-recourse notes payable. As of ~~December 31, 2017~~September 30, 2020, and March 31, ~~2017,~~2020, we had financing receivables of ~~$37.2~~$33.7 million and ~~$33.1~~$34.6 million, respectively, and operating leases of ~~$5.9~~$4.9 million and ~~$6.6~~$6.7 million, respectively, which were collateral for non-recourse notes payable. See Note ~~7, "Notes~~9, “Notes Payable and Credit ~~Facility~~."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. During the three months ended ~~December 31, 2017~~September 30, 2020, and ~~2016,~~2019, we recognized net gains of $1.2 million and $0.9 million, respectively, and total proceeds from these sales were $32.8 million and $55.8 million, respectively. During the nine months ended December 31, 2017 and 2016, we recognized net gains of $4.6$4.5 million and $4.1 million, respectively, and total proceeds from these sales were ~~$166.9~~$118.5 million and ~~$185.4~~$95.1 million, respectively. For the year to date periods ended September 30, 2020, and 2019, we recognized net gains of $7.0 million and $7.5 million, respectively, and total proceeds from these sales were $191.7 million and $172.0 million, respectively.

~~For certain assignments of financial assets,~~When we retain a servicing ~~obligation. For assignments~~obligations 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 ~~December 31, 2017~~September 30, 2020, and March 31, ~~2017,~~2020, we had deferred revenue of ~~$0.5~~$0.4 million for ~~servicing.~~ servicing obligations.

In a limited number of ~~such~~transfers accounted for as sales, we indemnified the assignee in the event that the lessee elected to early terminate the lease. As of ~~December 31, 2017,~~September 30, 2020, our maximum potential future payments related to such guarantees is ~~$0.6 million.~~immaterial. We believe the ~~possibility~~likelihood of making any such payments to be remote.

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4.5.	LESSEE ACCOUNTING

We lease office space for periods up to 6 years. We recognize our right-of-use assets as part of property, equipment and other assets. We recognize the current and long-term portions of our lease liability as part of other current liabilities and other liabilities, respectively. We recognized rent expense of $1.5 million as part of selling, general, and administrative expenses for both the three months ended September 30, 2020, and September 30, 2019, and $3.1 million for both the six months ending September 30, 2020, and September 30, 2019.

The following table provides supplemental information about the remaining lease terms and discount rates applied as of September 30,2020, and March 31,2020:

Lease term and Discount Rate	September 30, 2020			March 31, 2020
Weighted average remaining lease term (months)		34			38
Weighted average discount rate		3.8	%		3.9	%

The following table provides our future lease payments under our operating leases as of September 30, 2020 (in thousands):

	September 30, 2020
Remainder of the year ending March 31, 2021	$	2,432
Year ending March 31, 2022		4,319
Year ending March 31, 2023		3,093
Year ending March 31, 2024		1,249
Year ending March 31, 2025 and thereafter		813
Total lease payments	$	11,906
Less: interest		(617	)
Present value of lease liabilities	$	11,289

6.	GOODWILL AND OTHER INTANGIBLE ASSETS

GOODWILL

The ~~following table summarizes the changes in the~~ carrying ~~amount~~value of goodwill ~~for the nine months ended December 31, 2017~~was $118.2 and ~~2016, (in thousands):~~

Nine Months Ended December 31, 2017 Nine Months Ended December 31, 2016
Goodwill
Accumulated
Amortization
/ Impairment
Loss

Net
Carrying
Amount
Goodwill
Accumulated
Amortization
/ Impairment
Loss

Net
Carrying
Amount

Balance as of March 31 $ 57,070 $ (8,673 ) $ 48,397 $ 50,824 $ (8,673 ) $ 42,151
Acquisitions 27,996 - 27,996 7,636 - 7,636
Foreign currency translations 153 - 153 (315 ) - (315 )
Balance as of December 31 $ 85,219 $ (8,673 ) $ 76,546 $ 58,145 $ (8,673 ) $ 49,472

~~All of our goodwill~~$118.1 million as of ~~December 31, 2017~~September 30, 2020, and March 31, ~~2017~~2020, respectively. There was ~~assigned~~no significant activity in the balance during the six months ended September 30, 2020, other than change in foreign currency translation of $0.1 million.

Goodwill represents the premium paid over the fair value of the net tangible and intangible assets that are individually identified and separately recognized in business combinations. Our entire balance as of September 30, 2020, and March 31, 2020, relates to our technology reportable segment, which iswe also ~~a single~~determined to be 1 reporting unit. ~~See Note 15, "Business Combinations" for additional information regarding our acquisitions.~~

We ~~performed~~test goodwill for impairment on an annual basis, as of the first day of our third fiscal quarter, and between annual tests if an event occurs, or circumstances change, that would more likely than not reduce the fair value of a reporting unit below its carrying value.

In our annual test ~~for goodwill impairment for fiscal year 2018~~ as of October 1, ~~2017. We~~2019, we performed a qualitative assessment of goodwill and concluded that, more likely than not, the fair value of our technology reporting unit ~~more likely than not, exceeded~~continued to substantially exceed its ~~respective~~ carrying ~~value as~~value.

During the fourth quarter of ~~October 1, 2017.~~

~~We performed our annual test for~~fiscal year 2020, we determined that the uncertainty associated with the economic environment stemming from the COVID-19 pandemic was a triggering event and we elected to perform a quantitative goodwill impairment ~~for fiscal year 2017 as of October 1, 2016.~~test. We ~~elected to bypass~~concluded that the ~~qualitative assessment of goodwill and estimate the fair value of our reporting units. The~~ fair value of our technology reporting unit substantially exceeded its carrying value as of ~~October 1, 2016.~~March 31, 2020. Our conclusions would not be impacted by a ~~ten percent~~10percent change in our estimate of the fair value of the reporting unit.

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OTHER INTANGIBLE ASSETS

Our other intangible assets consist of the following ~~at December 31, 2017~~on September 30, 2020, and March 31, ~~2017~~2020 (in thousands):

December 31, 2017 March 31, 2017

Gross
Carrying
Amount

Accumulated
Amortization

Net
Carrying
Amount

Gross
Carrying
Amount

Accumulated
Amortization

Net
Carrying
Amount

Customer relationships & other intangibles $ 41,777 $ (16,792 ) $ 24,985 $ 23,373 $ (12,553 ) $ 10,820
Capitalized software development 4,908 (2,479 ) 2,429 3,649 (2,310 ) 1,339
Total $ 46,685 $ (19,271 ) $ 27,414 $ 27,022 $ (14,863 ) $ 12,159

	September 30, 2020							March 31, 2020
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount

Customer relationships & other intangibles	$	63,093	$	(37,467	)	$	25,626	$	63,006	$	(33,000	)	$	30,006
Capitalized software development		11,176		(6,537	)		4,639		10,385		(5,927	)		4,458
Total	$	74,269	$	(44,004	)	$	30,265	$	73,391	$	(38,927	)	$	34,464

~~Customer relationships and capitalized software development costs are amortized over an estimated useful life, which is generally between 3 to 8 years.~~ ~~Trade names and trademarks are amortized over an estimated useful life of 10 years.~~

Customer relationships and other intangibles ~~increased for the nine months ended December 31, 2017 due~~are generally amortized between 5 to business acquisitions by $18.4 million, of which $2.4 million is internally developed processes, $15.7 million is customer relationships, $0.2 million is due to foreign exchange translation, and $0.1 million in capitalized 10 years.Capitalizedsoftware development ~~costs.~~ is generally amortized over 5 years.

Total amortization expense for other intangible assets was ~~$1.9~~$2.5 million for both the three months ended September 30, 2020, and 2019, respectively, and $5.0 million and ~~$1.1~~$4.9 million for the ~~three months and $4.2 million and $3.4 million for the nine~~six months ended ~~December 31, 2017~~September 30, 2020, and ~~2016,~~2019, respectively.

~~See Note 15, “Business Combinations” for additional information regarding acquired intangibles.~~

5.7.	~~RESERVES~~ALLOWANCE FOR CREDIT LOSSES

~~Activity~~The following table provides the activity in our ~~reserves~~allowance for credit losses for the ~~nine~~six months ended ~~December 31, 2017~~September 30, 2020, and ~~2016 were as follows~~2019 (in thousands):

	Accounts Receivable		Notes Receivable			Lease-Related Receivables			Total			Accounts Receivable			Notes Receivable			Lease Receivables			Total
Balance April 1, 2017	$	1,279	$	3,434		$	679		$	5,392
Balance April 1, 2020												$	1,781		$	798		$	610		$	3,189
Provision for credit losses		165		37			106			308			576			566			624			1,766
Write-offs and other		-		(3,020	)		(164	)		(3,184	)		(27	)		(27	)		(7	)		(61	)
Balance December 31, 2017	$	1,444	$	451		$	621		$	2,516
Balance September 30, 2020												$	2,330		$	1,337		$	1,227		$	4,894

	Accounts Receivable			Notes Receivable			Lease-Related Receivables		Total			Accounts Receivable			Notes Receivable		Lease Receivables			Total
Balance April 1, 2016	$	1,127		$	3,381		$	685	$	5,193
Balance April 1, 2019												$	1,579		$	505	$	530		$	2,614
Provision for credit losses		229			139			93		461			311			15		(27	)		299
Write-offs and other		(32	)		(12	)		-		(44	)		(42	)		0		(3	)		(45	)
Balance December 31, 2016	$	1,324		$	3,508		$	778	$	5,610
Balance September 30, 2019												$	1,848		$	520	$	500		$	2,868

~~Table of Contents~~

~~Our reserves~~The following table provides our allowance for credit losses and minimum payments associated with our notes receivables and lease-related receivables disaggregated based on ~~the basis of~~ our impairment method ~~were~~ as ~~follows~~of March 31, 2020 (in thousands):

	December 31, 2017				March 31, 2017				March 31, 2020
	Notes Receivable		Lease- Related Receivables		Notes Receivable		Lease- Related Receivables		Notes Receivable		Lease Receivables
Reserves for credit losses:
Allowance for credit losses:
Ending balance: collectively evaluated for impairment	$	389	$	621	$	348	$	556	$	736	$	610
Ending balance: individually evaluated for impairment		62		-		3,086		123		62		0
Ending balance	$	451	$	621	$	3,434	$	679	$	798	$	610

Minimum payments:
Ending balance: collectively evaluated for impairment	$	59,382	$	73,022	$	45,438	$	57,730	$	55,005	$	69,492
Ending balance: individually evaluated for impairment		62		-		3,086		142		412		0
Ending balance	$	59,444	$	73,022	$	48,524	$	57,872	$	55,417	$	69,492

We place receivables on non-accrual status when events, such as a customer’s declaring bankruptcy, occur that indicate a receivable will not be collectable. We charge off uncollectable financing receivables when we stop pursuing collection. As of March 31, 2017 we had a balance outstanding as of $3.2 million for a customer in bankruptcy which was fully reserved and on a non-accrual status. We wrote off this balance against the reserve for credit losses during the nine months ended December 31, 2017, after the bankruptcy case was substantially complete.

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 our internally assigned credit quality rating (“CQR”) were as follows as of December 31, 2017 and March 31, 2017 (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

December 31, 2017

High CQR $ 188 $ 90 $ 907 $ 1,185 $ 18,238 $ 30,496 $ 49,919 $ (3,027 ) $ (14,420 ) $ 32,472
Average CQR 30 36 216 282 124 22,697 23,103 (1,385 ) (11,413 ) 10,305
Low CQR - - - - - - - - - -
Total $ 218 $ 126 $ 1,123 $ 1,467 $ 18,362 $ 53,193 $ 73,022 $ (4,412 ) $ (25,833 ) $ 42,777

March 31, 2017

High CQR $ 379 $ 224 $ 230 $ 833 $ 406 $ 32,532 $ 33,771 $ (2,362 ) $ (12,924 ) $ 18,485
Average CQR 113 20 113 246 91 23,622 23,959 (1,556 ) (13,353 ) 9,050
Low CQR - - 142 142 - - 142 (19 ) - 123
Total $ 492 $ 244 $ 485 $ 1,221 $ 497 $ 56,154 $ 57,872 $ (3,937 ) $ (26,277 ) $ 27,658

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We evaluate our customers using an internally assigned credit quality rating (“CQR”):

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

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

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

The ~~age~~following table provides the amortized cost basis of ~~the recorded~~our financing receivables by CQR and by credit origination year as of September 30, 2020 (in thousands):

	Amortized cost basis by origination year ending March 31,
	2021		2020		2019		2018		2017		2016 and prior		Total		Transfers (2)			Net credit exposure

Notes receivable:

High CQR	$	64,678	$	9,744	$	2,434	$	947	$	38	$	0	$	77,841	$	(35,867	)	$	41,974
Average CQR		6,189		4,697		837		52		0		0		11,775		(3,651	)		8,124
Low CQR		0		0		324		0		0		62		386		0			386
Total	$	70,867	$	14,441	$	3,595	$	999	$	38	$	62	$	90,002	$	(39,518	)	$	50,484

Lease receivables:

High CQR	$	21,650	$	11,826	$	3,609	$	998	$	314	$	8	$	38,405	$	(9,518	)	$	28,887
Average CQR		22,447		9,415		1,921		646		106		0		34,535		(11,409	)		23,126
Low CQR		0		0		0		0		0		0		0		0			0
Total	$	44,097	$	21,241	$	5,530	$	1,644	$	420	$	8	$	72,940	$	(20,927	)	$	52,013
Total amortized cost (1)	$	114,964	$	35,682	$	9,125	$	2,643	$	458	$	70	$	162,942	$	(60,445	)	$	102,497

(1)	Unguaranteed residual values of $12,644 thousand that we retained after selling the related lease receivable and initial direct costs of notes receivable of $364 thousand are excluded from amortized cost.

(2)	Transfers consist of receivables that have been transferred to third-party financial institutions on a non-recourse basis and receivables that are in the process of being transferred to third-party financial institutions.

The following table provides an aging analysis of our financing receivables as of September 30, 2020 (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	$	925	$	270	$	823	$	2,018	$	10,105	$	12,123	$	77,879	$	90,002
Lease receivables		660		2,049		1,771		4,480		1,754		6,234		66,706		72,940
Total	$	1,585	$	2,319	$	2,594	$	6,498	$	11,859	$	18,357	$	144,585	$	162,942

The following table provides an aging analysis of our lease receivables by CQR as of March 31, 2020 (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

High CQR	$	951	$	105	$	922	$	1,978	$	1,181	$	33,581	$	36,740	$	(4,766	)	$	(19,823	)	$	12,151
Average CQR		46		107		112		265		1,106		31,381		32,752		(3,646	)		(18,693	)		10,413
Low CQR		0		0		0		0		0		0		0		0			0			0
Total	$	997	$	212	$	1,034	$	2,243	$	2,287	$	64,962	$	69,492	$	(8,412	)	$	(38,516	)	$	22,564

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The following table provides an aging analysis of our notes receivable ~~balance disaggregated based~~by CQR as of March 31, 2020 (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

High CQR	$	1,332	$	2	$	280	$	1,614	$	2,878	$	29,057	$	33,549	$	(18,341	)	$	15,208
Average CQR		140		44		142		326		1,135		19,995		21,456		(16,636	)		4,820
Low CQR		63		0		152		215		0		197		412		0			412
Total	$	1,535	$	46	$	574	$	2,155	$	4,013	$	49,249	$	55,417	$	(34,977	)	$	20,440

Our financial assets on ~~our internally assigned CQR~~nonaccrual status were not significant as ~~follows as December 31, 2017~~of September 30, 2020, and March 31, ~~2017 (in thousands):~~2020.

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

December 31, 2017

High CQR $ 4 $ - $ 833 $ 837 $ 2,071 $ 35,001 $ 37,909 $ (21,971 ) $ 15,938
Average CQR 1,086 4 599 1,689 8 19,776 21,473 (15,555 ) 5,918
Low CQR - - 62 62 - - 62 - 62
Total $ 1,090 $ 4 $ 1,494 $ 2,588 $ 2,079 $ 54,777 $ 59,444 $ (37,526 ) $ 21,918

March 31, 2017

High CQR $ 183 $ 663 $ 755 $ 1,601 $ 1,165 $ 23,359 $ 26,125 $ (12,003 ) $ 14,122
Average CQR 28 5 - 33 555 18,725 19,313 (13,732 ) 5,581
Low CQR - - 3,086 3,086 - - 3,086 - 3,086
Total $ 211 $ 668 $ 3,841 $ 4,720 $ 1,720 $ 42,084 $ 48,524 $ (25,735 ) $ 22,789

We estimate losses on our net credit exposure to be between 0% - 5% for customers with highest CQR, 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, and between 15% - 100% for customers with low CQR, which includes customers in bankruptcy.

6.8.	PROPERTY, EQUIPMENT, OTHER ASSETS AND LIABILITIES

Our property, equipment, other assets and liabilities consist of the following (in thousands):

	December 31, 2017		March 31, 2017		September 30, 2020		March 31, 2020
Other current assets:
Deposits & funds held in escrow	$	14,819	$	39,161	$	339	$	926
Prepaid assets		10,429		3,388		7,640		7,946
Other		722		815		254		384
Total other current assets	$	25,970	$	43,364
Total					$	8,233	$	9,256

Property, equipment and other assets
Property and equipment, net	$	8,013	$	6,690	$	7,258	$	7,153
Deferred costs		7,326		3,536
Deferred costs - non-current						12,568		10,957
Right-of-use assets						11,069		13,066
Other		2,293		1,730		3,419		1,420
Total other assets - long term	$	17,632	$	11,956
Total					$	34,314	$	32,596


Other current liabilities:
Accrued expenses					$	10,639	$	10,024
Accrued income taxes payable						3,021		406
Contingent consideration - current						0		220
Short-term lease liability						4,698		4,815
Other						7,014		7,521
Total					$	25,372	$	22,986

Other liabilities:
Deferred revenue					$	19,074	$	16,693
Long-term lease liability						6,590		8,326
Other						7,278		2,708
Total					$	32,942	$	27,727

December 31,
2017

March 31,
2017

Other current liabilities:

Accrued expenses $ 7,907 $ 7,450
Accrued income taxes payable 170 1,761
Contingent consideration 5,360 554
Other 12,679 9,414
Total other current liabilities $ 26,116 $ 19,179

Other liabilities:

Deferred revenue $ 10,064 $ 4,704
Contingent consideration long-term 7,765 1,500
Other 689 876
Total other liabilities - long term $ 18,518 $ 7,080

~~Table of Contents~~

As of December 31, 2017 we had current and long-term contingent consideration liability balance of $5.4 and $7.8 million, respectively, of which $10.0 million relates to a recent acquisition. For details onIn the ~~contingent consideration liability, refer to Note 15, “Business Combinations~~.”

~~As of December 31, 2017 and March 31, 2017 we had customer~~above table, deposits and funds held in escrow ~~of $14.8 million and $39.2 million, respectively. These balances~~ relate to financial assets that were sold to third-party banks. In conjunction with those sales, a portion of the proceeds ~~were~~was placed in escrow and will be released to us upon payment of outstanding invoices related to the underlying financing arrangements that were sold.

7.9.	CREDIT FACILITY AND NOTES PAYABLE ~~AND CREDIT FACILITY~~

Credit Facility

Within our technology segment, ePlus Technology, inc. and certain of its subsidiaries finance their operations with funds generated from operations, and with a credit facility with Wells Fargo Commercial Distribution Finance, LLC (“WFCDF”). This facility provides short-term capital for our technology segment. There are 2 components of the WFCDF credit facility: (1) a floor plan component and (2) an accounts receivable component.

Table of Contents

Under the floor plan component, we had outstanding balances of $219.0 million and $127.4 million as of September 30, 2020, and March 31, 2020, respectively, and are presented as accounts payable – floorplan. The fair value of the outstanding balance under the credit facility was equal to its carrying value as of September 30, 2020, and March 31, 2020.

On May 15, 2020, we executed an amendment to the WFCDF credit facility that increased the aggregate limit of the two components, except during a temporary uplift, to $275.0 million. Additionally, we have an election to temporarily increase the aggregate limit to $350.0 million for a period of not less than 30 days, provided that all such periods shall not exceed 150 days in the aggregate in any calendar year. Further, the amendment increased the limit on the accounts receivable component of the WFCDF credit facility to $100.0 million, changed the interest rate to two percent (2.00%) plus the greater of one month LIBOR or seventy-five hundredths of one percent (0.75%), and modified certain restrictions on ePlus Technology, inc.’s ability to pay dividends to ePlus inc.

As of September 30, 2020, the limit of the 2 components of the credit facility was $275 million, and the accounts receivable component had a sub-limit of $100 million. Under the accounts receivable component, we had 0 outstanding balance as of September 30, 2020 and $35 million outstanding as of March 31, 2020. The accounts receivable component is presented as recourse notes payable – current.

The WFCDF credit facility is secured by the assets of ePlus Technology, inc. and certain of its subsidiaries, and varies available borrowing based upon the value of their receivables and inventory. Additionally, the credit facility requires a guaranty of $10.5 million by ePlus inc.

The credit facility restricts the ability of ePlus Technology, inc. and certain of its subsidiaries to pay dividends to ePlus inc. unless their available borrowing meets certain thresholds. As of September 30, 2020, their available borrowing met the threshold such that there were no restricted net assets of ePlus Technology, inc.

The credit facility requires that financial statements of ePlus Technology, inc. and certain of its subsidiaries be provided within 45 days of each quarter and 90 days of each fiscal year end, and requires that other operational reports be provided on a regular basis. Either party may terminate with 90 days’ advance notice.

The loss of the WFCDF credit facility, including during circumstances related to COVID-19, 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.

On October 1, 2020, we elected to exercise the temporary increase in the aggregate limit of the WFCDF credit facility to $350.0 million for a period of 30 days.

Recourse Notes Payable

Recourse notes payable consist of borrowings that, in the event of default, the lender has recourse against us in addition to the assets serving as collateral.

As of September 30, 2020, and March 31, 2020, we had $2.3 million of recourse borrowings that were collateralized by investments in notes receivable and leases. Our principal and interest payments are generally due monthly in amounts that 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 these borrowings was 2.55% as of both September 30, 2020, and March 31, 2020.

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 ~~recourse obligations consist~~the assets serving as collateral, but not against us. As of ~~the following (in thousands):~~

December 31,
2017

March 31,
2017

Recourse notes payable with interest rates ranging from 3.20% to 4.13% as of March 31, 2017.
Current $ - $ 908

Non-recourse notes payable secured by financing receivables and investment in operating leases with interest rates ranging from 2.00% to 8.45% December 31, 2017, and ranging from 2.00% to 7.75% as of March 31, 2017.
Current $ 27,649 $ 26,085
Long-term 3,840 10,431
Total non-recourse notes payable $ 31,489 $ 36,516

September 30, 2020, and March 31, 2020, we had $38.1 million and $35.5 million, respectively, of non-recourse borrowings that were collateralized by investments in notes and leases. Principal and interest payments ~~on 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 ~~3.73%~~3.15% and 3.84%, as of ~~both December 31, 2017~~September 30, 2020, and March 31, ~~2017. The weighted average interest rate for our recourse notes payable was~~ 3.45%, as of March 31, 2017. Under recourse financing, in the event of a default by a customer, the lender has recourse to 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.2020, respectively.

~~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 (“WFCDF”). This facility provides short-term capital for our technology segment. There are two components of the WFCDF credit facility: (1) a floor plan component, and (2) an accounts receivable component. Under the floor plan component, we had outstanding balances of $107.8 million and $132.6 million as of December 31, 2017 and March 31, 2017, respectively. Under the accounts receivable component, we had no outstanding balances as of December 31, 2017 and March 31, 2017.

On July 27, 2017, we executed an amendment to the WFCDF credit facility which temporarily increases the aggregate limit of the two components from $250.0 million to $325.0 million from the date of the agreement through October 31, 2017, and provides us an election beginning July 1 in each subsequent year to similarly temporarily increase the aggregate limit of the two components to $325.0 million ending the earlier of 90 days following the date of election or October 31 of that same year.

As of December 31, 2017, 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.

Table of Contents

~~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. 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 (“EBITDA”) of e~~Plus Technology, inc. We were in compliance with these covenants as of December 31, 2017. In addition, the facility restricts the ability of~~ e~~Plus Technology, inc. to transfer funds to its affiliates in the form of dividends, loans or advances with certain exceptions for dividends to~~ e~~Plus 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, e~~Plus Technology, inc. This credit facility is secured by the assets of only~~ e~~Plus Technology, inc. and the guaranty as described below.~~

~~The facility provided by WFCDF requires a guaranty of $10.5 million by~~ e~~Plus inc. The guaranty requires~~ ePlus inc. to deliver its annual audited financial statements by certain dates. We have delivered the annual audited financial statements for the year ended March 31, 2017, 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.

~~Fair Value~~

~~As of December 31, 2017 and March 31, 2017, the fair value of our long-term recourse and non-recourse notes payable approximated their carrying value.~~

8.10.

COMMITMENTS AND CONTINGENCIES

Legal Proceedings

From time to time, wethe Company may be ~~subject to~~involved in routine legal proceedings, as well as demands, claims and threatened litigation that arise in the ~~ordinary~~normal course of our business. The ultimate amount of liability, if any, for any claims of any type (either alone or in the aggregate) may materially and adversely affect the Company’s financial condition, results of operations and liquidity. In addition, the ~~opinion~~ultimate outcome of any litigation is uncertain. Any outcome, whether favorable or unfavorable, may materially and adversely affect the Company due to legal costs and expenses, diversion of management ~~there was not at least a reasonable possibility~~attention and other factors. The Company expenses legal costs in the period incurred. The Company cannot assure that ~~the Company may have incurred a material loss, or a material loss in excess~~additional contingencies of a ~~recorded accrual, with respect to loss~~legal nature or contingencies ~~for~~having legal aspects will not be asserted ~~legal and other claims.~~ However, the outcome of legal proceedings and claims brought against us is subject to significant uncertainty. Therefore, although management considers the likelihood of such an outcome to be remote, if one or more of these legal matters were resolved against the Company in ~~a reporting period for amounts in excess of management’s expectations,~~ the ~~Company’s consolidated financial statements for that reporting period~~future, and these matters could ~~be materially adversely affected.~~relate to prior, current or future transactions or events.

9.11.

EARNINGS PER SHARE

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

~~Table of Contents~~

The following table provides a reconciliation of the numerators and denominators used to calculate basic and diluted net income per common share as disclosed on our unaudited consolidated statements of operations for the three and ~~nine~~six months ended ~~December 31, 2017~~September 30, 2020, and ~~2016~~2019, respectively (in thousands, except per share data).

	Three Months Ended December 31,				Nine Months Ended December 31,				Three Months Ended September 30,				Six Months Ended September 30,
	2017		2016		2017		2016		2020		2019		2020		2019

Net earnings attributable to common shareholders - basic and diluted	$	15,581	$	12,620	$	46,225	$	40,066	$	19,846	$	20,098	$	37,206	$	36,286

Basic and diluted common shares outstanding:
Weighted average common shares outstanding — basic		13,851		13,791		13,845		13,891		13,372		13,312		13,347		13,334
Effect of dilutive shares		139		129		177		135		19		38		47		74
Weighted average shares common outstanding — diluted		13,990		13,920		14,022		14,026		13,391		13,350		13,394		13,408

Earnings per common share - basic	$	1.12	$	0.92	$	3.34	$	2.88	$	1.48	$	1.51	$	2.79	$	2.72

Earnings per common share - diluted	$	1.11	$	0.91	$	3.30	$	2.86	$	1.48	$	1.51	$	2.78	$	2.71

~~10.~~12.

STOCKHOLDERS’ EQUITY

Share Repurchase Plan

On ~~August 15, 2017,~~ May 24, 2019, our board of directors authorized the repurchase of up to 500,000 shares of our outstanding common stock over a 12-month period beginning on ~~August 19, 2017 through August 18, 2018.~~ May 28, 2019, and ending on May 27, 2020. The plan 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.

On May 20, 2020, our board of directors authorized the repurchase of up to 500,000 shares of our outstanding common stock over a 12-month period beginning on May 28, 2020, and ending on May 27, 2021. The ~~former repurchase~~ plan ~~expired on August 18, 2017.~~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.

During the ~~nine~~six months ended ~~December 31, 2017,~~September 30, 2020, we purchased ~~125,605~~24,318 shares of our outstanding common stock at ~~an average cost~~a value of ~~$77.88 per share for a total purchase price of $9.8~~$1.8 million under the share repurchase ~~plan. We~~plan; we also ~~acquired 57,725~~purchased 37,640 shares of common stock at a value of ~~$4.4~~$2.7 million to satisfy tax withholding obligations relating to the vesting of employees’ restricted stock.

During the ~~nine~~six months ended ~~December 31, 2016,~~September 30, 2019, we purchased ~~656,962~~149,044 shares of our outstanding common stock at ~~an average cost~~a value of ~~$40.81 per share for a total purchase price of $26.8~~$10.7 million under the share repurchase ~~plan. We~~plan; we also purchased ~~59,472~~41,817 shares of common stock at a value of ~~$2.6~~$3.0 million to satisfy tax withholding obligations relating to the vesting of employees’ restricted stock.

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~~11.~~13.

SHARE-BASED COMPENSATION

Share-Based Plans

As of ~~December 31, 2017,~~September 30, 2020, we had share-based awards outstanding under the followingplans: (1) ~~the 2008 Non-Employee Director Long-Term Incentive Plan (“2008 Director LTIP”), (2)~~ the 2017 Non-Employee Director Long-Term Incentive Plan (“2017 Director LTIP”), and ~~(3)~~(2) the 2012 Employee Long-Term Incentive Plan ("2012 Employee LTIP"). ~~The~~These share-based plans define fair market value as the previous trading day's closing price when the grant date falls on a date the stock was not traded.

~~Table of Contents~~

Restricted Stock Activity

For the ~~nine~~six months ended ~~December 31, 2017,~~September 30, 2020, we granted ~~535 restricted shares under the 2008 Director LTIP, 5,310~~9,309 restricted shares under the 2017 Director LTIP, and ~~66,530~~89,873 restricted shares under the 2012 Employee LTIP. For the ~~nine~~six months ended ~~December 31, 2016,~~September 30, 2019, we granted ~~11,384~~8,132 restricted shares under the ~~2008~~2017 Director LTIP, and ~~134,538~~85,132 restricted shares under the 2012 Employee LTIP. A summary of the restricted shares is as follows:

	Number of Shares			Weighted Average Grant-date Fair Value		Number of Shares			Weighted Average Grant- date Fair Value

Nonvested April 1, 2017		371,689		$	40.45
Nonvested April 1, 2020							193,580		$	73.74
Granted		72,375		$	80.25		99,182		$	71.81
Vested		(156,240	)	$	38.52		(110,155	)	$	70.00
Forfeited		(4,108	)	$	39.37		0		$	0
Nonvested December 31, 2017		283,716		$	51.68
Nonvested September 30, 2020							182,607		$	74.95

Upon each vesting period of the restricted stock awards, employees are subject to minimum tax withholding obligations. Under the 2012 Employee LTIP, we may purchase a sufficient number of shares due to the participant to satisfy their minimum tax withholding on employee stock awards. For the ~~nine~~six months ended ~~December 31, 2017,~~September 30, 2020, the Company ~~had acquired 57,725~~withheld 37,640 shares of common stock at a value of ~~$4.4~~$2.7 million, ~~to satisfy tax withholding obligations relating to the vesting of employees’ restricted stock,~~ which was included in treasury stock.

Compensation Expense

We recognize compensation cost for awards of restricted stock with graded vesting on a ~~straight line~~straight-line basis over the requisite service period. There are no additional conditions for vesting other than service conditions. During the three months ended ~~December 31, 2017~~September 30, 2020, and ~~2016,~~2019, we recognized ~~$1.7~~$1.8 million and ~~$1.5~~$2.1 million ~~respectively,~~ of total share-based compensation ~~expense.~~expense, respectively. During the ~~nine~~six months ended ~~December 31, 2017~~September 30, 2020, and ~~2016,~~2019, we recognized ~~$4.9~~$3.6 million and ~~$4.5~~$4.1 million ~~respectively,~~ of total share-based compensation ~~expense.~~expense, respectively. Unrecognized compensation expense related to non-vested restricted stock was ~~$11.1~~$11.6 million as of ~~December 31, 2017,~~September 30, 2020, which will be fully recognized over the next ~~thirty (30)~~33 months.

We also provide our employees with a contributory 401(k) profit sharing ~~plan. We~~plan, to which we may ~~make contributions~~contribute from time to ~~the plan. These contributions are not required and whether or not we choose to make them is entirely within~~time at our sole discretion. ~~Our employer~~Employer contributions to the plan are fully vested at all times. ~~For the three months ended December 31, 2017 and 2016, our~~Our estimated contribution expense for the plan for both the three months ended September 30, 2020, and 2019, was ~~$0.5~~$0.7 million, and ~~$0.5~~$1.4 million ~~respectively. For~~for both the ~~nine~~six months ended ~~December 31, 2017~~September 30, 2020, and ~~2016, our estimated contribution expense for the plan was $1.6 million and $1.2 million, respectively.~~2019.

~~12.~~14.

INCOME TAXES

~~Income Taxes – Provision~~

Our provision for income tax expense was $0.7 million and $19.5 million for the three and nine months ended December 31, 2017, as compared to $8.7 million and $27.3 million for the same periods in the prior year. Our effective income tax rate for the three and nine months ended December 31, 2017, was 4.2% and 29.7%, respectively, compared to 40.8% and 40.5% for the three and nine months ended December 31, 2016, respectively. In the third quarter, the Company revised its estimated annual effective tax rate to reflect a change in the federal statutory rate from 35% to 21%, resulting from legislation that was enacted on December 22, 2017. The rate change is administratively effective at the beginning of our current fiscal year, using a blended rate for the annual period. As a result, the blended statutory tax rate for our current year is 31.5%. In addition, we recognized an estimated tax benefit in our tax provision for the period related to adjusting our deferred tax balance to reflect the new corporate tax rate. As a result, income tax expense reported for the first nine months was adjusted to reflect the effects of the change in the tax law and resulted in a decrease in income tax expense of $2.6 million during the third quarter. In addition we estimated the tax effect of originating items occurring in the fourth quarter that are expected to reverse at a rate of 21%. This resulted in an additional tax benefit of $0.8 million.

The accounting for the effects of the rate change on deferred tax balances is provisional and we will finalize these estimates during our fourth quarter of fiscal year 2018. We re-measured certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 21%. However, we are still analyzing certain aspects of the new tax law and refining our calculations, which could potentially affect the measurement of these balances or potentially give rise to new deferred tax amounts.

~~Table of Contents~~

~~Income Taxes – Uncertain Tax Positions~~

We account for our tax positions in accordance with ~~ASC~~Codification Topic 740, Income Taxes. 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.

Our total gross unrecognized tax benefits recorded for uncertain income tax, and interest and penalties thereon, were negligible as of ~~December 31, 2017,~~September 30, 2020, and ~~December 31, 2016.~~September 30, 2019. We had no0 additions or reductions to our gross unrecognized tax benefits during the ~~three and nine~~six months ended ~~December 31, 2017.~~September 30, 2020. We recognize accrued interest and penalties related to unrecognized tax benefits in income tax expense.

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~~13.~~15.

FAIR VALUE OF FINANCIAL INSTRUMENTS

We account for the fair values of our assets and liabilities in accordance with ~~ASC~~Codification Topic 820, Fair Value Measurement and Disclosure.The following table summarizes the fair value hierarchy of our financial instruments as of ~~December 31, 2017~~September 30, 2020 and March 31, ~~2017~~2020 (in thousands):

			Fair Value Measurement Using								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)		Recorded Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)

December 31, 2017
September 30, 2020
Assets:
Money market funds									$	45,132	$	45,132	$	0	$	0

March 31, 2020
Assets:
Money market funds	$	21,596	$	21,596	$	-	$	-	$	128	$	128	$	0	$	0

Liabilities:
Contingent consideration	$	13,125	$	-	$	-	$	13,125	$	220	$	0	$	0	$	220

March 31, 2017
Assets:
Money market funds	$	50,866	$	50,866	$	-	$	-

Liabilities:
Contingent consideration	$	554	$	-	$	-	$	554

For the three and six months ended September 30, 2020, we did 0t record significant adjustments to our liability for contingent consideration arising from a past business combination. In August 2020, we paid $219 thousand to fully satisfy the obligations of our contingent consideration arrangement.

For the three and ~~nine~~six months ended ~~December 31, 2017,~~September 30, 2019, we recorded adjustments to operating expenses of $1.1 million and $1.5 million, respectively, that increased ~~the fair value of~~ our liability for contingent consideration ~~by $0.7~~arising from our past business combinations. In September 2019, we reached a settlement in full of one of our contingent consideration arrangements in the amount of $9.6 million, ~~and $12.6~~that was paid in October 2019. Additionally, in September 2019, we paid $0.5 million ~~due to business acquisitions. For the nine months ended December 31, 2017, we made $0.6 million in payments~~ to satisfy ~~the~~certain current obligations in another of ~~the contingent consideration arrangement from our earlier acquisition of Consolidated IT Services.~~these arrangements.

~~14.~~16.

~~SEGMENT REPORTING~~BUSINESS COMBINATIONS

ABS Technology

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

~~Table of Contents~~

~~Our reportable segment information was as follows (in thousands):~~

Three Months Ended
December 31, 2017 December 31, 2016
Technology Financing Total Technology Financing Total

Sales of product and services $ 330,953 $ - $ 330,953 $ 317,391 $ - $ 317,391
Financing revenue - 9,592 9,592 - 8,190 8,190
Fee and other income 1,678 346 2,024 915 161 1,076
Net sales 332,631 9,938 342,569 318,306 8,351 326,657

Cost of sales, product and services 264,487 - 264,487 251,729 - 251,729
Direct lease costs - 1,394 1,394 - 1,142 1,142
Cost of sales 264,487 1,394 265,881 251,729 1,142 252,871

Selling, general, and administrative expenses 53,836 3,298 57,134 47,780 2,380 50,160
Depreciation and amortization 2,893 1 2,894 1,908 2 1,910
Interest and financing costs - 270 270 - 409 409
Operating expenses 56,729 3,569 60,298 49,688 2,791 52,479

Operating income $ 11,415 $ 4,975 $ 16,390 $ 16,889 $ 4,418 $ 21,307

Selected Financial Data - Statement of Cash Flow

Depreciation and amortization $ 3,157 $ 1,422 $ 4,579 $ 1,941 $ 985 $ 2,926
Purchases of property, equipment and operating lease equipment $ 2,018 $ 844 $ 2,862 $ 849 $ 3,282 $ 4,131

Selected Financial Data - Balance Sheet

Total assets $ 595,584 $ 169,069 $ 764,653 $ 546,728 $ 189,950 $ 736,678

Nine Months Ended
December 31, 2017 December 31, 2016
Technology Financing Total Technology Financing Total

Sales of product and services $ 1,045,792 $ - $ 1,045,792 $ 968,799 $ - $ 968,799
Financing revenue - 30,698 30,698 - 23,899 23,899
Fee and other income 3,707 374 4,081 3,679 245 3,924
Net sales 1,049,499 31,072 1,080,571 972,478 24,144 996,622

Cost of sales, product and services 834,873 - 834,873 769,780 - 769,780
Direct lease costs - 3,846 3,846 - 3,459 3,459
Cost of sales 834,873 3,846 838,719 769,780 3,459 773,239

Selling, general, and administrative expenses 158,838 9,300 168,138 141,295 8,526 149,821
Depreciation and amortization 7,084 2 7,086 5,400 8 5,408
Interest and financing costs - 903 903 - 1,158 1,158
Operating expenses 165,922 10,205 176,127 146,695 9,692 156,387

Operating income $ 48,704 $ 17,021 $ 65,725 $ 56,003 $ 10,993 $ 66,996

Selected Financial Data - Statement of Cash Flow

Depreciation and amortization $ 7,413 $ 3,911 $ 11,324 $ 5,494 $ 3,264 $ 8,758
Purchases of property, equipment and operating lease equipment $ 4,064 $ 2,234 $ 6,298 $ 2,413 $ 4,887 $ 7,300

Selected Financial Data - Balance Sheet

Total assets $ 595,584 $ 169,069 $ 764,653 $ 546,728 $ 189,950 $ 736,678

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~~15.~~

~~BUSINESS COMBINATIONS~~

~~Integrated Data Storage, LLC acquisition~~

On ~~September 15, 2017,~~August 23, 2019, our subsidiary, ePlus Technology, inc., acquired certain assets and ~~assumed certain~~ liabilities of ~~Integrated Data Storage, LLC (“IDS”) though an asset purchase agreement. Headquartered in Oak Brook, IL and with offices in downtown Chicago and Indianapolis, IDS is an advanced data center~~ABS Technology, a Virginia Beach, Virginia- headquartered solutions provider ~~focused on cloud enablement and~~with deep expertise in managed services, ~~including its proprietary IDS Cloud, which features enterprise-class technology infrastructure coupled with consulting services to support private, hybrid,~~networking, collaboration, and ~~public cloud deployments. The acquisition expands~~ security solutions. ABS Technology enhances ePlus’ ~~footprint~~existing solutions portfolio and market position in ~~the Midwest~~Richmond and ~~enhances its sales and engineering capabilities in cloud services, disaster recovery and backup as a service, storage, data center, and professional services.~~southern Virginia.

Our ~~preliminary~~ sum of ~~total~~ consideration transferred ~~is $38.4~~was $15.3 million consisting of ~~$29.8~~$13.8 million paid in cash at closing plus $1.7 million that was paid primarily during the year ended March 31, 2020, upon the collection of certain accounts receivable and less ~~$1.4~~$0.2 million that was repaid to us in ~~receivables~~December 2019 due to ~~us as~~ a working capital adjustment, plus an additional $10.0 million equal to the preliminary fair value of consideration, contingent on the acquiree’s business operations future gross profit. The contingent consideration was calculated using the Monte Carlo simulation model based on our projections of future gross profits. The maximum payout of the contingent consideration is $15.0 million paid over 3 years. adjustment. Our ~~preliminary~~ allocation of the purchase consideration to the assets acquired and liabilities assumed is presented below (in thousands):

Acquisition
Date Amount

Accounts receivable and other assets $ 14,353
Property and equipment 1,620
Identified intangible assets 13,650
Accounts payable and other current liabilities (12,313 )
Total identifiable net assets 17,310
Goodwill 21,088
Total purchase consideration $ 38,398

Our sum for consideration transferred and our allocation of the purchase consideration is preliminary and subject to revision as additional information related to the fair value of assets and liabilities becomes available.

	Acquisition Date Amount
Accounts receivable		9,208
Other assets		743
Identified intangible assets		5,720
Accounts payable and other current liabilities		(6,715	)
Performance obligation		(1,140	)

Total identifiable net assets		7,816
Goodwill		7,461

Total purchase consideration	$	15,277

The identified intangible assets of ~~$13.7~~$5.7 million consist of customer relationships with an estimated useful life of 8seven (7) years. The fair value of acquired receivables equals the gross contractual amounts receivable. We expect to collect all acquired receivables.

We recognized goodwill related to this transaction of ~~$21.1~~$7.5 million, which was assigned to our technology reporting unit. The goodwill recognized in the acquisition is attributable to the acquired assembled workforce and expected synergies, none of which qualify for recognition as a separate intangible asset. The total amount of goodwill is expected to be deductible for tax purposes. The amount of revenues and earnings of the acquiree since the acquisition date are not material. Likewise, the impact to the revenue and earnings of the combined entity for the current reporting period ~~through~~as though the acquisition date had ~~the acquisition date~~ been April 1, ~~2017,~~2019, is not material.

~~OneCloud Consulting Inc. acquisition~~

~~On May 17, 2017, our subsidiary~~ ePlus Technology, inc., acquired 100% of the stock of OneCloud Consulting, Inc. (“OneCloud”). Based in Milpitas, CA, OneCloud is a versatile team of highly trained technology consultants, architects, developers and instructors. OneCloud enables its customers’ cloud and application strategy via professional services, technical education and software development. The acquisition provides us with additional ability to address customers’ needs in cloud-based solutions and infrastructure, including DevOps, OpenStack, and other emerging technologies, to our broad customer base.

Our sum of total consideration we transferred was $10.0 million consisting of $7.9 million paid in cash at closing, net of cash acquired, and $2.1 million equal to the fair value of contingent consideration, calculated using the Monte Carlo simulation model. The maximum payout of the contingent consideration is $4.5 million paid over 3 years.

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17.	SEGMENT REPORTING

Our ~~allocation~~operations are conducted through 2 operating segments that are also both reportable segments. Our technology segment includes sales of IT products, third-party software, third-party maintenance, advanced professional and managed services, and our proprietary software to commercial enterprises, state and local governments, and government contractors. Our financing segment consists of the ~~purchase consideration~~financing of IT equipment, software, and related services to commercial enterprises, state and local governments, and government contractors. We measure the ~~assets acquired~~performance of the segments based on operating income.

Our reportable segment information for the three- and ~~liabilities assumed is presented below~~six-month periods ended September 30, 2020, and 2019 are summarized in the following tables (in thousands):

Acquisition
Date Amount

Accounts receivable and other assets $ 488
Identified intangible assets 4,130
Accounts payable and other current liabilities (1,822 )
Total identifiable net assets 2,796
Goodwill 7,189
Total purchase consideration $ 9,985

	Three Months Ended
	September 30, 2020						September 30, 2019
	Technology		Financing		Total		Technology		Financing		Total

Sales
Product	$	369,934	$	13,722	$	383,656	$	349,650	$	13,847	$	363,497
Service		49,425		0		49,425		48,068		0		48,068
Net sales		419,359		13,722		433,081		397,718		13,847		411,565

Cost of Sales
Product		301,006		1,957		302,963		276,475		2,388		278,863
Service		31,156		0		31,156		29,671		0		29,671
Total cost of sales		332,162		1,957		334,119		306,146		2,388		308,534
Gross Profit		87,197		11,765		98,962		91,572		11,459		103,031

Selling, general, and administrative		62,586		4,303		66,889		67,189		3,334		70,523
Depreciation and amortization		3,313		28		3,341		3,529		28		3,557
Interest and financing costs		1		246		247		0		576		576
Operating expenses		65,900		4,577		70,477		70,718		3,938		74,656

Operating income		21,297		7,188		28,485		20,854		7,521		28,375

Other income						184						(40	)

Earnings before tax					$	28,669					$	28,335

Net Sales
Contracts with customers	$	412,357	$	1,028	$	413,385	$	394,585	$	1,411	$	395,996
Financing and other		7,002		12,694		19,696		3,133		12,436		15,569
Net Sales	$	419,359	$	13,722	$	433,081	$	397,718	$	13,847	$	411,565

Selected Financial Data - Statement of Cash Flow

Depreciation and amortization	$	3,499	$	1,182	$	4,681	$	3,658	$	1,455	$	5,113
Purchases of property, equipment and operating lease equipment	$	990	$	0	$	990	$	1,426	$	1,944	$	3,370

Selected Financial Data - Balance Sheet

Total assets	$	812,633	$	226,078	$	1,038,711	$	690,648	$	223,618	$	914,266

The identified intangible assets of $4.1 million consist of customer relationships of $1.7 million with an estimated useful life of 8 years, and internally developed processes of $2.4 million with an estimated useful life of 5 years.

We recognized goodwill related to this transaction of $7.2 million, which was assigned to our technology reporting unit. The goodwill recognized in the acquisition is attributable to the acquired assembled workforce and expected synergies, none of which qualify for recognition as a separate intangible asset. The total amount of goodwill is expected to be deductible for tax purposes. The amount of revenues and earnings of the acquiree since the acquisition date are not material. Likewise, the impact to the revenue and earnings of the combined entity for the current reporting period through the acquisition date had the acquisition date been April 1, 2017, is not material.

~~Consolidated IT Services acquisition~~

~~On December 6, 2016, our subsidiary~~ ePlus Technology, inc., acquired certain assets and assumed certain liabilities of Consolidated IT Services. Consolidated IT Services’ business provides data center, unified communications, networking, and security solutions to a diverse set of domestic and international customers including commercial, enterprise, and state, local, and education (SLED) organizations in the upper Midwest. Acquiring Consolidated IT Services expanded our reach to the upper Midwest, a new geography for e~~Plus, and enables us to market our advanced technology solutions to their long-standing customer base.~~

The total purchase price is $13.1 million including $9.5 million paid in cash at closing and $4.0 million that will be paid in cash in equal quarterly installments over 2 years, less $0.4 million paid back to us as part of the final working capital adjustment. Our allocation of the purchase consideration to the assets acquired and liabilities is presented below (in thousands):

Acquisition
Date Amount

Accounts receivable and other current assets $ 7,491
Property and equipment 1,045
Identified intangible assets 4,090
Accounts payable and other current liabilities (5,786 )
Total identifiable net assets 6,840
Goodwill 6,227
Total purchase consideration $ 13,067

~~In the nine months ended December 31, 2017,~~ ~~we increased identified intangible assets and decreased goodwill by $280 thousand from the provisional amounts recorded as of March 31, 2017.~~

~~The identified intangible assets of $4.1 million consist entirely of customer relationships with an estimated useful life of 7 years.~~

We recognized goodwill related to this transaction of $6.2 million, which was assigned to our technology reporting unit. The goodwill recognized in the acquisition is attributable to the acquired assembled workforce and expected synergies, none of which qualify for recognition as a separate intangible asset. The total amount of goodwill is expected to be deductible for tax purposes. The amount of revenues and earnings of the acquiree since the acquisition date are not material. Likewise, the impact to the revenue and earnings of the combined entity for the prior reporting period through the acquisition date had the acquisition date been April 1, 2016 is not material.

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	Six Months Ended
	September 30, 2020						September 30, 2019
	Technology		Financing		Total		Technology		Financing		Total

Sales
Product	$	663,367	$	27,529	$	690,896	$	672,414	$	26,684	$	699,098
Service		97,216		0		97,216		93,839		0		93,839
Net sales		760,583		27,529		788,112		766,253		26,684		792,937

Cost of Sales
Product		525,549		4,048		529,597		534,529		4,397		538,926
Service		60,996		0		60,996		58,341		0		58,341
Total cost of sales		586,545		4,048		590,593		592,870		4,397		597,267
Gross Profit		174,038		23,481		197,519		173,383		22,287		195,670

Selling, general, and administrative		128,142		8,214		136,356		129,856		6,454		136,310
Depreciation and amortization		6,801		56		6,857		6,936		84		7,020
Interest and financing costs		266		558		824		0		1,204		1,204
Operating expenses		135,209		8,828		144,037		136,792		7,742		144,534

Operating income		38,829		14,653		53,482		36,591		14,545		51,136

Other income						282						(85	)

Earnings before tax					$	53,764					$	51,051

Net Sales
Contracts with customers	$	746,344	$	1,988	$	748,332	$	758,266	$	2,200	$	760,466
Financing and other		14,239		25,541		39,780		7,987		24,484		32,471
Net Sales	$	760,583	$	27,529	$	788,112	$	766,253	$	26,684	$	792,937

Selected Financial Data - Statement of Cash Flow

Depreciation and amortization	$	7,133	$	2,327	$	9,460	$	7,283	$	2,794	$	10,077
Purchases of property, equipment and operating lease equipment	$	3,101	$	166	$	3,267	$	2,675	$	2,213	$	4,888

Selected Financial Data - Balance Sheet

Total assets	$	812,633	$	226,078	$	1,038,711	$	690,648	$	223,618	$	914,266

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Technology Segment Disaggregation of Revenue

We analyze net sales for our technology segment by customer end market and by vendor, as opposed to discrete product and service categories, which are summarized for the three and six month periods ended September 30, 2020, and 2019 in the tables below (in thousands):

	Three Months Ended September 30,						Six Months Ended September 30,
	2020			2019			2020			2019
Customer end market:
Technology	$	76,321		$	97,502		$	146,288		$	173,682
Telecom, Media & Entertainment		96,927			71,044			153,579			133,510
Financial Services		46,732			44,605			94,153			92,847
State and local government and educational institutions		76,492			71,866			147,055			143,057
Healthcare		59,252			59,818			105,788			115,926
All others		63,635			52,883			113,720			107,231
Net sales		419,359			397,718			760,583			766,253

Less: Revenue from financing and other		(7,002	)		(3,133	)		(14,239	)		(7,987	)

Revenue from contracts with customers	$	412,357		$	394,585		$	746,344		$	758,266

	Three Months Ended September 30,						Six Months Ended September 30,
	2020			2019			2020			2019
Vendor
Cisco Systems	$	173,166		$	172,605		$	301,098		$	318,786
NetApp		9,914			9,771			25,335			23,198
HP Inc. & HPE		16,395			18,986			33,433			42,099
Dell EMC		15,349			12,494			46,430			26,275
Arista Networks		13,443			26,766			20,263			47,716
Juniper Networks		24,716			24,370			38,295			31,424
All others		166,376			132,726			295,729			276,755
Net sales		419,359			397,718			760,583			766,253

Less: Revenue from financing and other		(7,002	)		(3,133	)		(14,239	)		(7,987	)

Revenue from contracts with customers	$	412,357		$	394,585		$	746,344		$	758,266

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.

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Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

This discussion is intended to further the reader’s understanding of our consolidated financial condition and results of operations. It should be read in conjunction with the financial statements included in this quarterly report on Form 10-Q and our ~~annual report on Form 10-K for the fiscal year ended March 31, 2017 (“2017~~2020 Annual ~~Report”).~~Report. These historical financial statements may not be indicative of our future performance. This Management’s Discussion and Analysis of Financial Condition and Results of Operations may contain forward-looking statements, all of which are based on our current expectations and could be affected by the uncertainties and risks described in Part I, Item 1A, “Risk Factors,” in our ~~2017~~2020 Annual Report., and in Part II, Item 1A. “Risk Factors” in this Report.

EXECUTIVE OVERVIEW

Business Description

We are a leading solutions provider that delivers actionable outcomes for organizations by ~~utilizing information technology (IT)~~using IT and consulting solutions to drive business agility and innovation. Leveraging ~~world-class~~our engineering talent, we assess, plan, deliver, and secure solutions comprised of leading technologies and consumption models aligned with our customers’ needs. Our expertise and experience ~~enables~~ enable ePlus to craft optimized solutions that take advantage of the cost, scale and efficiency of private, public and hybrid cloud in an evolving market. We also provide consulting, staffing, professional, managed, IT staff augmentation, and complete lifecycle management services including flexible financing ~~solutions.~~and solutions in the areas of security, cloud, networking, data center, collaboration and emerging technologies. We have been in the business of selling, leasing, financing, and managing ~~information technology~~IT and other assets for more than 2730 years.

Our primary focus is to deliver integrated ~~technology~~ solutions that address our customers’ ~~Cloud, Security and Digital Infrastructure~~business needs, ~~for~~leveraging the appropriate technologies, both on-premise and in the cloud. Our ~~Hybrid IT framework~~approach is ~~a lifecycle approach that includes~~to lead with advisory consulting ~~assessment, architecture, testing, implementation, managed services, maintenance~~to understand our customers’ needs, design, deploy and ~~periodic consultative reviews. In addition~~manage solutions aligned to ~~cloud, our portfolio~~their objectives. Underpinning the broader areas of ~~expertise includes software defined, security, IoT,~~Cloud, Security, Networking, Data Center and Collaboration are specific skills in orchestration and automation, application modernization, DevOps, data ~~and~~management, data visualization, analytics, ~~mobility, hyper-converged infrastructure,~~network modernization, edge compute and other advanced and emerging technologies. ~~We design, implement and manage an array~~These solutions are comprised of ~~IT solutions~~class leading technologies from ~~multiple leading IT vendors. We are an authorized reseller from over 1,000 vendors, but primarily from approximately 100 vendors, including Artista~~partners such as Amazon Web Services, Arista Networks, Blue Coat, Check Point, Cisco Systems, Citrix, Commvault, Dell EMC, Extreme Networks, F5 Networks, Fortinet, Gigamon, ~~HP Inc.,~~ HPE, Juniper Networks, Lenovo, Microsoft, NetApp, ~~Nimble Storage,~~Nutanix, NVIDIA, Oracle, Palo Alto Networks, Proofpoint, Pure Storage, ~~Quantum,~~Qumulo, Rubrik, Splunk, Symantec and VMware, among many others. We possess top-level engineering certifications with a broad range of leading IT vendors that enable us to offer multi-vendor IT solutions that are optimized for each of our customers’ specific requirements. Our hosted, proprietary software solutions are focused on giving our customers more control over their IT supply chain, by automating and optimizing the procurement and management of their owned, leased, and consumption-based assets.

Our scale and financial resources have enabled us to continue investing in engineering and technology resources ~~and~~to stay current with emerging technology trends. ~~By delivering leading edge Hybrid IT solutions,~~ Our expertise in core and emerging technologies, buttressed by our robust portfolio of consulting, professional, and managed services has enabled ePlus ~~has become~~to remain a trusted advisor tofor our customers. ~~Our integrated technology solutions incorporate hardware, software, security and both managed and professional services.~~ In addition, we offer a wide range of consumption options including leasing and financing for technology and other capital assets. We believe our lifecycle approach offering of integrated solutions, services, financing, and our proprietary supply chain software, isare unique in the industry. This broad portfolio enables us to deliver a unique customer experience that spans the continuum from fast delivery of competitively priced products, services, subsequent management and upkeep, through to end-of-life disposal services. This approach ~~also~~ permits usePlus to ~~accommodate~~deploy ever-more-sophisticated solutions enabling our customers’ business ~~requirements and deliver ever-more-sophisticated hybrid IT solutions, thus solidifying our relationships and value.~~outcomes.

Our go-to-market strategy focuses primarily on diverse end-markets for middle market to large enterprises. For the ~~twelve months~~trailing twelve-month period ended ~~December 31, 2017,~~September 30, 2020, the percentage of revenue by customer end market within our technology segment includes technology industry ~~25%~~19%, telecommunications, media and entertainment 20%, state and local government and educational institutions ~~17%~~(“SLED”) 16%, ~~telecommunications, media~~healthcare 15%, and ~~entertainment 14%,~~ financial services ~~16%, and healthcare~~ 13%. The majority of our sales were generated within the United ~~States;~~States (“US”); however, we have the ability to support our customers nationally and internationally, including ~~a presence~~physical locations in the United Kingdom (“~~U.K.”~~UK”)~~, India~~ and ~~Singapore.~~India. Our technology segment ~~accounted~~accounts for 97% of our net sales, and ~~70%~~73% of our operating income, while our financing segment ~~accounted~~accounts for 3% of our net sales, and ~~30%~~27% of our operating income, for the ~~nine~~six months ended ~~December 31, 2017.~~September 30, 2020.

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Impact of COVID-19 on Our Business Operations

The COVID-19 pandemic continues to have widespread, rapidly evolving, and unpredictable impacts on global society, economies, financial markets, and business practices. Federal, state and local governments and public health authorities have required and may in the future require measures to contain the virus, including social distancing, travel restrictions, border closures, limitations on public gatherings, work from home, supply chain logistical changes, and closure of non-essential businesses.

As COVID-19 impacts continue to expand across the country and globe, we have been adjusting our business activities for the safety of our employees and to best serve our customers in this rapidly evolving environment. We have implemented a flexible work from home strategy applicable to all offices and operational continuity plans to provide sufficient resources to continue supporting our customers. For employees who wish to return to the office, we have reopened our headquarters with limited capacity and required health and safety protocols in place. We plan to reopen our other offices using a phased approach but currently have not set a schedule to do so. Our configuration centers have remained open with our employees working in them following required health and safety protocols. In addition, we also have a procedure to review and approve employees’ business-related travel. Our managed service teams are distributed across the US with the ability to leverage technology to provide coverage while working from home. While we and many of our customers and vendor partners have restricted travel, we are leveraging video and other collaborative tools to continue to be responsive.

Our account relationship teams are actively engaging with our customers, to ensure they have the support needed in adjusting to changes in the business environment and government directives. In addition, we granted a limited number of customers temporary payment term extensions. Also, we are working closely with our vendor partners to address varying impacts on their supply chain to satisfy infrastructure needs. Certain of our vendor partners extended payment terms to us and our competitors.

We continue to execute against and adjust our business continuity plans to maximize our ability to support our employees and customers in concert with our partners. We have an internal resource page to support specific customer inquiries from security to collaboration to financing options. We remain committed to driving positive business outcomes.

The extent to which the COVID-19 pandemic impacts our business going forward will depend on numerous evolving factors we cannot reliably predict, including the duration and scope of the pandemic; governmental, business, and individuals' actions in response to the pandemic; and the impact on economic activity including the possibility of recession or financial market instability. These factors may adversely impact business, and government spending on technology as well as our customers' ability to pay for our products and services on an ongoing basis. This uncertainty also affects management’s accounting estimates and assumptions, which could result in greater variability in a variety of areas that depend on these estimates and assumptions. Refer to Part I, Item 1A, “Risk Factors,” in our 2020 Annual Report.

Key Business Metrics

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 net sales, gross margin, ~~gross margin on product and services,~~ operating income margin, net earnings, net earnings per common share, ~~Adjusted~~adjusted EBITDA, ~~Adjusted~~adjusted EBITDA margin, ~~Adjusted~~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 ~~U.S.~~US GAAP and presented in our unaudited condensed consolidated financial statements as well as non-GAAP performance measurement tools. Generally, a non-GAAP financial measure is a numerical measure of a company’s performance or financial position that either excludes or includes amounts that are not normally included in the most directly comparable measure calculated and presented in accordance with ~~U.S~~US GAAP. Non-GAAP measures used by management may differ from similar measures used by other companies, even when similar terms are used to identify such measures.

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Our key business metrics for the three- and ~~results from those metrics~~ six-month periods ended September 30, 2020, and 2019 are ~~as follows,~~summarized in the following tables (dollars in thousands):

	Three Months Ended December 31,						Nine Months Ended December 31,						Three Months Ended September 30,						Six Months Ended September 30,
Consolidated													2020			2019			2020			2019
Net sales													$	433,081		$	411,565		$	788,112		$	792,937
	2017			2016			2017			2016

Sales of products and services	$	330,953		$	317,391		$	1,045,792		$	968,799

Adjusted gross billings of product and services (1)	$	464,105		$	432,407		$	1,449,371		$	1,317,188

Gross profit													$	98,962		$	103,031		$	197,519		$	195,670
Gross margin		22.4	%		22.6	%		22.4	%		22.4	%		22.9	%		25.0	%		25.1	%		24.7	%
Gross margin, product and services		20.1	%		20.7	%		20.2	%		20.5	%
Operating income margin		4.8	%		6.5	%		6.1	%		6.7	%		6.6	%		6.9	%		6.8	%		6.4	%

Net earnings	$	15,581		$	12,620		$	46,225		$	40,066		$	19,846		$	20,098		$	37,206		$	36,286
Net earnings margin		4.5	%		3.9	%		4.3	%		4.0	%		4.6	%		4.9	%		4.7	%		4.6	%
Net earnings per common share - diluted	$	1.11		$	0.91		$	3.30		$	2.86		$	1.48		$	1.51		$	2.78		$	2.71

Non-GAAP: Net earnings (2)	$	13,574		$	15,621		$	44,013		$	43,710
Non-GAAP: Net earnings per common share - diluted (2)	$	0.97		$	1.12		$	3.14		$	3.12
Non-GAAP: Net earnings (1)													$	22,470		$	24,228		$	42,677		$	43,687
Non-GAAP: Net earnings per common share - diluted (1)													$	1.68		$	1.81		$	3.19		$	3.26

Adjusted EBITDA (3)	$	19,284		$	23,217		$	72,811		$	72,404
Adjusted EBITDA margin (3)		5.6	%		7.1	%		6.7	%		7.3	%
Adjusted EBITDA (2)													$	33,561		$	35,405		$	64,275		$	63,972
Adjusted EBITDA margin														7.7	%		8.6	%		8.2	%		8.1	%

Purchases of property and equipment used internally	$	2,018		$	849		$	4,064		$	2,413		$	990		$	1,426		$	3,101		$	2,675
Purchases of equipment under operating leases		844			3,282			2,234			4,887			-			1,944			166			2,213
Total capital expenditures	$	2,862		$	4,131		$	3,436		$	7,300		$	990		$	3,370		$	3,267		$	4,888

Technology Segment
Net sales													$	419,359		$	397,718		$	760,583		$	766,253
Adjusted gross billings (3)													$	601,064		$	579,084		$	1,147,458		$	1,127,447

Gross profit													$	87,197		$	91,572		$	174,038		$	173,383
Gross margin														20.8	%		23.0	%		22.9	%		22.6	%

Operating income													$	21,297		$	20,854		$	38,829		$	36,591
Adjusted EBITDA (2)													$	26,275		$	27,789		$	49,436		$	49,208

Financing Segment
Net sales													$	13,722		$	13,847		$	27,529		$	26,684

Gross profit													$	11,765		$	11,459		$	23,481		$	22,287

Operating Income													$	7,188		$	7,521		$	14,653		$	14,545
Adjusted EBITDA (2)													$	7,286		$	7,616		$	14,839		$	14,764

(1)

~~We define Adjusted gross billings of product~~Non-GAAP net earnings and ~~services as our sales of product and services~~non-GAAP net earnings per common share – diluted is based on net earnings calculated in accordance with ~~U.S.~~ GAAP, adjusted to exclude other income (expense), share based compensation, and acquisition and integration expenses, and 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 financial measure to this non-GAAP financial measure.tax effects.

We use ~~Adjusted gross billings of product and services~~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 ~~volume~~exclusion of other income (expense), share-based compensation, and acquisition-related amortization expense in calculating non-GAAP net earnings per common share provides management and investors a useful measure for period-to-period comparisons of our business ~~generated~~and operating results by excluding items that management believes are not reflective of our ~~technology segment,~~underlying operating performance. Accordingly, we believe that non-GAAP net earnings per common share provide useful information to investors and others to ~~analyze the changes to~~understand and evaluate our ~~accounts receivable and accounts payable. Our~~operating results. However, our use of ~~Adjusted gross billings of product and services~~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 ~~U.S.~~ GAAP. In addition, other companies, including companies in our industry, might calculate ~~Adjusted gross billings of product~~similar non-GAAP net earnings and ~~services~~non-GAAP net earnings per common share or similarly titled measures differently, which may reduce their usefulness as comparative measures.

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Three Months Ended
December 31,

Nine Months Ended
December 31,

2017 2016 2017 2016
Sales of products and services $ 330,953 $ 317,391 $ 1,045,792 $ 968,799
Costs incurred related to sales of third party software assurance, maintenance and services 133,152 115,016 403,579 348,389

Adjusted gross billings of product and services $ 464,105 $ 432,407 $ 1,449,371 $ 1,317,188

	Three Months Ended September 30,					Six Months Ended September 30,
	2020			2019		2020			2019
GAAP: Earnings before tax	$	28,669		$	28,335	$	53,764		$	51,051
Share based compensation		1,764			2,135		3,671			4,077
Acquisition and integration expense		(30	)		1,338		(1	)		1,739
Acquisition related amortization expense		2,172			2,345		4,400			4,532
Other (income) expense		(184	)		40		(282	)		85
Non-GAAP: Earnings before provision for income taxes		32,391			34,193		61,552			61,484

GAAP: Provision for income taxes		8,823			8,237		16,558			14,765
Share based compensation		541			624		1,128			1,183
Acquisition and integration expense		(9	)		391		-			506
Acquisition related amortization expense		648			663		1,315			1,270
Other (income) expense		(56	)		12		(86	)		25
Tax (expense) benefit on restricted stock		(26	)		38		(40	)		48
Non-GAAP: Provision for income taxes		9,921			9,965		18,875			17,797

Non-GAAP: Net earnings	$	22,470		$	24,228	$	42,677		$	43,687

GAAP: Net earnings per common share - diluted	$	1.48		$	1.51	$	2.78		$	2.71

Non-GAAP: Net earnings per common share - diluted	$	1.68		$	1.81	$	3.19		$	3.26

	Three Months Ended September 30,				Six Months Ended September 30,
	2020		2019		2020			2019
GAAP: Net earnings per common share - diluted	$	1.48	$	1.51	$	2.78		$	2.71

Share based compensation		0.09		0.11		0.19			0.22
Acquisition and integration expense		-		0.07		-			0.09
Acquisition related amortization expense		0.11		0.12		0.23			0.24
Other (income) expense		-		-		(0.01	)		-
Tax benefit on restricted stock		-		-		-			-
Total non-GAAP adjustments - net of tax		0.20		0.30		0.41			0.55

Non-GAAP: Net earnings per common share - diluted	$	1.68	$	1.81	$	3.19		$	3.26

(2)

Non-GAAP net earnings per common share are based on net earnings calculated in accordance with U.S. GAAP, adjusted to exclude other income and acquisition related amortization expense, and related effects on income tax, the tax (benefit) expense recognized due to the vesting of shared based compensation, the tax benefit associated with the re-measurement of deferred tax assets and liabilities at the new tax rates, as well as an adjustment to our tax expense in the prior year assuming a 31.5% effective annual income tax rate for U.S. operations due to changes in U.S. tax rates. 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 these items in calculating Non-GAAP net earnings per common share provides management and investors a useful measure for period-to-period comparisons of our business and operating results by excluding items that management believes are not reflective of our underlying operating performance. Accordingly, we believe that non-GAAP net earnings per common share provide useful information to investors and others in understanding and evaluating our operating results. However, our use of Non-GAAP 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 U.S. 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.

Three Months Ended
December 31,

Nine Months Ended
December 31,

2017 2016 2017 2016
GAAP: Earnings before tax $ 16,259 $ 21,307 $ 65,724 $ 67,376
Acquisition related amortization expense 1,871 1,035 4,178 3,098
Other (income) expense 131 - 1 (380 )
Non-GAAP: Earnings before provision for income taxes 18,261 22,342 69,903 70,094

GAAP: Provision for income taxes 678 8,687 19,499 27,310
Acquisition related amortization expense 547 267 1,421 956
Other (income) expense 55 13 - (144 )
Remeasurement of deferred taxes 3,407 - 3,407 -
Adjustment to FY17 US Federal tax rate to 31.5% - (2,252 ) - (2,252 )
Tax benefit on restricted stock - 6 1,563 514
Non-GAAP: Provision for income taxes 4,687 6,721 25,890 26,384

Non-GAAP: Net earnings $ 13,574 $ 15,621 $ 44,013 $ 43,710

GAAP: Net earnings per common share - diluted $ 1.11 $ 0.91 $ 3.30 $ 2.86
Non-GAAP: Net earnings per common share - diluted $ 0.97 $ 1.12 $ 3.14 $ 3.12

~~(3)~~

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

~~Table of Contents~~

We use ~~Adjusted~~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~~adjusted EBITDA and ~~Adjusted~~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~~adjusted EBITDA and ~~Adjusted~~adjusted EBITDA margin provide useful information to investors and others ~~in understanding~~to understand and ~~evaluating~~evaluate our operating results. However, our use of ~~Adjusted~~adjusted EBITDA and ~~Adjusted~~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 ~~U.S.~~ GAAP. In addition, other companies, including companies in our industry, might calculate ~~Adjusted~~adjusted EBITDA and ~~Adjusted~~adjusted EBITDA margin or similarly titled measures differently, which may reduce their usefulness as a comparative ~~measures.~~measure.

Three Months Ended
December 31,

Nine Months Ended
December 31,

Consolidated
2017 2016 2017 2016
Net earnings $ 15,581 $ 12,620 $ 46,225 $ 40,066
Provision for income taxes 678 8,687 19,499 27,310
Depreciation and amortization 2,894 1,910 7,086 5,408
Other (income) expense 131 - 1 (380 )
Adjusted EBITDA $ 19,284 $ 23,217 $ 72,811 $ 72,404

Technology Segment

Operating income $ 11,415 $ 16,889 $ 48,704 $ 56,003
Depreciation and amortization 2,893 1,908 7,084 5,400
Adjusted EBITDA $ 14,308 $ 18,797 $ 55,788 $ 61,403

Financing Segment

Operating income $ 4,975 $ 4,418 $ 17,021 $ 10,993
Depreciation and amortization 1 2 2 8
Adjusted EBITDA $ 4,976 $ 4,420 $ 17,023 $ 11,001

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	Three Months Ended September 30,					Six Months Ended September 30,
Consolidated	2020			2019		2020			2019
Net earnings	$	19,846		$	20,098	$	37,206		$	36,286
Provision for income taxes		8,823			8,237		16,558			14,765
Share based compensation		1,764			2,135		3,671			4,077
Interest and financing costs		1			-		266			-
Acquisition and integration expense		(30	)		1,338		(1	)		1,739
Depreciation and amortization		3,341			3,557		6,857			7,020
Other (income) expense		(184	)		40		(282	)		85
Adjusted EBITDA	$	33,561		$	35,405	$	64,275		$	63,972

Technology Segment
Operating income	$	21,297		$	20,854	$	38,829		$	36,591
Depreciation and amortization		3,313			3,529		6,801			6,936
Share based compensation		1,694			2,068		3,541			3,942
Interest and financing costs		1			-		266			-
Acquisition and integration expense		(30	)		1,338		(1	)		1,739
Adjusted EBITDA	$	26,275		$	27,789	$	49,436		$	49,208

Financing Segment
Operating income	$	7,188		$	7,521	$	14,653		$	14,545
Depreciation and amortization		28			28		56			84
Share based compensation		70			67		130			135
Adjusted EBITDA	$	7,286		$	7,616	$	14,839		$	14,764

(3)

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

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

	Three Months Ended September 30,				Six Months Ended September 30,
	2020		2019		2020		2019
Technology segment net sales	$	419,359	$	397,718	$	760,583	$	766,253
Costs incurred related to sales of third party maintenance, software assurance and subscription/Saas licenses, and services		181,705		181,366		386,875	$	361,194
Adjusted gross billings	$	601,064	$	579,084	$	1,147,458	$	1,127,447

Consolidated Results of Operations

During the three months ended ~~December 31, 2017,~~September 30, 2020, net sales increased ~~4.9%~~5.2%, or ~~$15.9~~$21.5 million, to ~~$342.6~~$433.1 million, as compared to ~~$326.7~~$411.6 million for the same period in the prior fiscal year. Product sales for the three months ended September 30, 2020, increased 5.5% to $383.7 million, or an increase of $20.2 million from $363.5 million in the same period in the prior year. Services sales during the three months ended September 30, 2020, increased 2.8% to $49.4 million, or an increase of $1.4 million over prior year services sales of $48.1 million primarily due to an increase in managed services. The increase in products sales was due to a shift in mix of higher hardware and third-party software licenses sales which we recognize on a gross basis, and a lower proportion of sales of maintenance, software assurance, subscriptions/SaaS licenses, and services where we recognize revenue on a net basis. We saw increases in net sales from telecom, media and entertainment, SLED, financial services, and all the other categories of customers, which was partially offset by decreases in net sales from our technology customers, and a small decrease from health care customers, during the three months ended September 30, 2020, compared to the prior year.

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For the ~~nine~~six months ended ~~December 31, 2017,~~September 30, 2020, net sales ~~increased 8.4%~~decreased 0.6%, or ~~$83.9~~$4.8 million, to ~~$1,080.6~~$788.1 million, compared to ~~$996.6~~$792.9 million in the same period in the prior fiscal year. Product sales for the six months ended September 30, 2020, decreased 1.2%, or $8.2 million, to $690.9 million compared to $699.1 million in the same period in the prior year. Services sales during the six months ended September 30, 2020, increased 3.6%, or $3.4 million, to $97.2 million compared to prior year services sales of $93.8 million. The decrease in net sales was due to reductions in demand from the our customers in the technology and health care markets, which were mostly offset by increases in demand from our customers in the telecom, media and entertainment, SLED, financial services, and all other category of customers, during the six months ended September 30, 2020, compared to the prior year.

Adjusted gross billings increased 3.8%, or $22.0 million, to $601.1 million for the three months ended September 30, 2020, from $579.1 million for the same period in the prior fiscal year.

~~Adjusted~~ There was an increase in adjusted gross billings from our customers in the telecom, media and entertainment, SLED, and health care customers which was partially offset by decreases in demand from the technology, financial services, and all the other categories of ~~product and services~~customers. For the six months ended September 30, 2020, adjusted gross billings increased ~~7.3%~~1.8%, or ~~$31.7~~$20.1 million, to ~~$464.1~~$1,147.5 million, ~~for the three months ended December 31, 2017~~ from ~~$432.4~~$1,127.4 million for the same period in the prior fiscal year. ~~For the nine months ended December 31, 2017,~~The increase in adjusted gross billings is due to higher demand from the same customer end markets that were previously identified for the increase in net sales with the exception of health care customers which declined for the six-month period.

Consolidated gross profit for the three months ended September 30, 2020, decreased $4.1 million, or 3.9%, to $99.0 million, compared with $103.0 million in the same period in the prior year. Consolidated gross margins were 22.9% for the three months ended September 30, 2020, which is a decrease of 210 basis points compared to 25.0% for the same period in the prior fiscal year. The decrease in margins for the three-month period was due to a shift in product mix, as we sold a higher proportion hardware and third-party licenses which are recognized on a gross basis and therefore have lower product margins, and a lower proportion of our product mix was from third-party maintenance, software assurance and subscription/SaaS licenses, and services, which are recorded on a net basis, and were partially offset by slightly higher gross profit from of our financing segment. For the six months ended September 30, 2020, consolidated gross profit increased ~~10.0%~~$1.8 million, or 0.9%, ~~or $132.2~~to $197.5 million, ~~to $1,449.4 million, from $1,317.2~~compared with $195.7 million for the same period in the prior fiscal year. Both the three month and nine month increase in demand was from commercial customers primarily in the technology, financial services and health care industries, partially offset by SLED and other industries.

~~Consolidated gross profit rose 3.9% to $76.7 million, compared with $73.8 million for the three months ended December 31, 2016.~~ Consolidated gross margins were ~~22.4%~~25.1% for the ~~three~~six months ended ~~December 31, 2017 a decrease~~September 30, 2020, an increase of 2040 basis points compared to ~~22.6%~~24.7% for the same period in the prior fiscal ~~year, due lower product margins, including a decrease in vendor incentives earned, which was offset by an~~year. The increase in ~~service revenues.~~

~~Consolidated~~ gross ~~profit rose 8.3% to $241.9 million, compared with $223.4 million~~margin for the ~~nine months ended December 31, 2016. Consolidated~~six-month period was due to a shift in product mix, as we sold a higher proportion of third-party maintenance, software assurance and subscription/SaaS licenses, and services. Also contributing to the gross ~~margins were 22.4% for both the nine months ended December 31, 2017 and 2016. Consolidated gross margins were impacted by lower product margins, including a decrease in vendor incentives earned, which~~margin improvement was ~~offset by~~ higher service revenues, and higher post-contract revenue from of our financing ~~revenues.~~segment.

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Our operating expenses ~~increased 14.9% to $60.3 million, or 78.6% of gross profits~~ for the three months ended ~~December 31, 2017~~September 30, 2020, decreased 5.6% to $70.5 million, as compared to ~~$52.5~~$74.7 million ~~representing 71.1% of gross profits in~~for the same period prior year. For the nine months ended December 31, 2017, our operating expenses increased 12.6% to $176.6 million, or 72.5% of gross profits as compared to $156.4 million, representing 70.0% of gross profits in the same prior year period. The majority of this ~~increase~~decrease reflects ~~increased salary~~reductions in selling, general, and administrative expense of 5.2% or $3.6 million, to $66.9 million as compared to $70.5 million in the same period in the prior year, due in part to reductions in travel and entertainment, general office related expenses, employee salaries and benefits, which were partially offset by an increase in ~~headcount,~~allowance for credit losses. Our prior year results benefit from having only incurred a partial quarter of salaries and benefits from employees acquired from ABS Technology. As of September 30, 2020, we had 1,497 employees, a decrease of 132 from 1,629 last year.

For the six months ended September 30, 2020, operating expenses decreased $0.5 million, or 0.3%, to $144.0 million, as ~~well as~~compared to $144.5 million in the same period in the prior year. The decrease in operating expenses for the six months ended September 30, 2020, is due to the reductions in interest and financing costs, and depreciation and amortization expense. Selling, general, and administrative expense for the six months ended September 30, 2020, increased slightly to $136.4 million, with increases in salaries and benefits, variable compensation, asand reserve for credit losses, offset almost entirely by reductions in general and administrative expense and acquisition related expenses.

Depreciation and amortization expense decreased $0.2 million for both the three and six months ended September 30, 2020. Interest and financing costs decreased $0.3 million and $0.4 million, for the three and six months ended September 30, 2020, respectively, due to a ~~result~~decrease in the average balance of non-recourse notes payable outstanding during the ~~increase in gross profit,~~three and ~~an increase in employee healthcare costs. Our headcount increased by 120 employees or 10.3% to 1,284 from 1,164 a year ago, 98 of which~~ ~~were from the acquisitions of IDS and OneCloud~~. ~~The net additions in personnel~~six months ended September 30, 2020, as compared to the prior ~~year include 105 sales and engineering positions,~~ ~~with the~~ ~~remaining additions being administrative, IT, and finance positions.~~year.

~~Operating~~As a result, operating income for the three months ended ~~December 31, 2017 decreased 23.1%~~September 30, 2020, increased $0.1 million, or 0.4%, to ~~$16.4~~$28.5 million as compared to ~~$21.3~~$28.4 million for the same period in the prior year. For the ~~three~~six months ended ~~December 31, 2017, the~~September 30, 2020, operating income ~~margin decreased 170 basis points~~increased $2.3 million, or 4.6%, to ~~4.8% from 6.5% for the same period in the prior year. Operating income for the nine months ended December 31, 2017 decreased 1.9% to $65.7million,~~$53.5 million, as compared to ~~$67.0~~$51.1 million for the same period in the prior year. ~~For~~

Our effective tax rate for the ~~nine~~three and six months ended ~~December 31, 2017, the operating income margin decreased 60 basis points to 6.1% from 6.7%~~September 30, 2020, was 30.8%, compared with 29.1% and 28.9%, respectively, for the same ~~period~~periods in the prior year. The change in our effective tax rate was due to an adjustment to the federal benefit from state taxes.

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Consolidated net earnings for the three months ended ~~December 31, 2017~~September 30, 2020, were ~~$15.6~~$19.8 million, a decrease of 1.3%, or $0.3 million, over the prior year’s results, due to the decrease in gross profit, partially offset by a reduction in operating expenses. For the six months ended September 30, 2020, the consolidated net earnings were $37.2 million, an increase of ~~23.5%~~2.5%, or ~~$3.0~~$0.9 million, compared to the prior year’s results, ~~of $12.6 million. For~~due to the ~~nine months ended December 31, 2017, consolidated net earnings were $46.2 million,~~increase in revenues and gross profit, and other income mostly offset by an increase ~~of 15.4%, or $6.2 million, compared to~~ the ~~prior year’s results of $40.1 million.~~provision for income taxes.

Adjusted EBITDA decreased ~~$3.9~~$1.8 million, or ~~16.9%~~5.2%, to ~~$19.3~~$33.6 million and ~~Adjusted~~adjusted EBITDA margin decreased ~~150~~90 basis points to ~~5.6%~~7.7% for the three months ended ~~December 31, 2017,~~September 30, 2020, as compared to the prior year period of ~~7.1%~~8.6%. For the ~~nine~~six months ended ~~December 31, 2017, Adjusted~~September 30, 2020, adjusted EBITDA increased ~~$0.4~~$0.3 million, or ~~0.6%~~0.5%, to ~~$72.8~~$64.3 million and ~~Adjusted~~the adjusted EBITDA margin ~~decreased 60~~increased 10 basis points to ~~6.7% for the nine months ended December 31, 2017,~~8.2% as compared to the prior year period of ~~7.3%.~~8.1% for the six months ended September 30, 2020, compared to the prior year period.

Diluted earnings per share ~~increased 22.0%~~decreased 2.0%, or ~~$0.20~~$0.03, to ~~$1.11~~$1.48 per share for the three months ended ~~December 31, 2017,~~September 30, 2020, as compared to ~~$0.91~~$1.51 per share for the three months ended December 31, 2016. Our effective tax rate for the three months ended December 31, 2017 was 4.2%, which includes a tax benefit $3.4 million from the re-measurement of deferred tax assets and liabilities due to the change in the U.S. statutory rate.September 30, 2019. Non-GAAP diluted earnings per share decreased ~~13.4%~~7.2%, or $0.13, to ~~$0.97~~$1.68 for the three months ended ~~December 31, 2017,~~September 30, 2020, as compared to ~~$1.12~~$1.81 for the three months ended ~~December 31, 2016.~~

September 30, 2019. For the ~~nine~~six months ended ~~December 31, 2017,~~September 30, 2020, diluted earnings per share increased ~~15.4%~~2.6%, or ~~$0.44~~$0.07, to ~~$3.30~~$2.78 per share, as compared to ~~$2.86~~$2.71 per share ~~for the nine months ended December 31, 2016. Our effective tax rate for the nine months ended December 31, 2017 was 29.7%, which includes a tax benefit of $1.6 million related~~compared to the ~~vesting of share based compensation and a tax benefit $3.4 million from the re-measurement of deferred tax assets and liabilities due to the change in the U.S. statutory rate.~~prior year period. Non-GAAP diluted earnings per share ~~increased 0.6%~~decreased 2.1%, or $0.07, to ~~$3.14~~$3.19 for the ~~nine~~six months ended ~~December 31, 2017,~~September 30, 2020, as compared to ~~$3.12~~$3.26 for the ~~nine~~six months ended ~~December 31, 2016.~~September 30, 2019.

Cash and cash equivalents ~~decreased $33.7~~increased $74.9 million or ~~30.7%~~86.8% to ~~$76.1~~$161.1 million at ~~December 31, 2017~~September 30, 2020, as compared ~~with $109.8~~to $86.2 million as of March 31, ~~2017.~~ 2020. The ~~decrease~~increase is primarily the result of ~~investments~~the extension of payment terms by 30 days from certain vendor partners that deferred $76.3 million in ~~our financing portfolio, working capital required for~~payments and a payroll tax deferral under the ~~growth~~Coronavirus Aid, Relief, and Economic Security (“CARES”) Act that deferred $4.8 million in ~~our technology segment~~, ~~$29.8 million~~payments that will be paid in ~~cash at closing of our acquisition of IDS~~ December 2021 and ~~$7.9 million paid in cash at closing for our acquisition of OneCloud.~~December 2022. Our cash on hand, funds generated from operations, amounts available under our credit facility, and the possible monetization of our investment portfolio ~~provide~~have provided sufficient liquidity for our business.

The extent of the impact of COVID-19 is uncertain and may impact our liquidity position over the longer term. As credit markets have tightened as a result of COVID-19, we may have difficulty funding our financing transactions with lenders, which may result in the use of our cash or a decrease in financing originations.

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Segment Overview

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

Technology Segment

The technology segment sells IT equipment and software and related services 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-based business-to-business supply chain management solutions for ~~information technology~~IT products.

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Our technology segment derives revenue from the sales of new equipment and service engagements. Included in ~~the~~net sales ~~of product and services~~ are revenues derived from performing advanced IT professional and managed services that may be sold together with and integral to third-party products and software. 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.

Customers who purchase IT equipment and services from us may have customer master agreements, or CMAs, with our company, which stipulate 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~~responses.

We endeavor to minimize our cost of sales through incentive programs provided by vendors and distributors. The programs for which 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, 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,~~change; therefore, there is no guarantee of future reductions of costs provided by these vendor consideration programs.

Financing Segment

Our financing segment offers financing solutions to corporations, governmental entities, and educational institutions nationwide, ~~and also~~as well as internationally in the ~~United Kingdom,~~UK, Canada, Iceland, and ~~Iceland.~~Spain. The financing segment derives revenue from leasing IT and medical 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 revenue generally falls into the following three categories:

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

Transactional gains: Net gains or losses on the sale of financial assets; 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.

Our financing segment sells the equipment underlying a lease to the lessee or a third-party other than the lessee. These sales occur at the end of the lease term and revenues from the sales of such equipment are recognized at the date of sale. We also recognize revenue from events that occur after the initial sale of a financial asset and remarketing fees from certain residual value investments.

Fluctuations in ~~Revenues~~Operating Results

Our results of operations are susceptible to fluctuations for a number of reasons, including, without limitation, customer demand for our products and services, supplier costs, changes in vendor incentive programs, interest rate fluctuations, decision to sell financial assets, general economic conditions, and differences between estimated residual values and actual amounts realized related to the equipment we lease. Operating results could also fluctuate as a result of a sale prior to the expiration of the lease term to the lessee or to a third-party or from other post-term events.

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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~~areas over the longer term, which may reduce our results from ~~operations in~~operations. COVID-19 may negatively affect market demand, which will likely lower our financial results, and may adversely impact our ability to expand. We are uncertain as to the ~~short term.~~extent and duration of the impact to the IT market demand for our products and services.

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CRITICAL ACCOUNTING ESTIMATES

~~The preparation of financial statements~~As disclosed in conformity with U.S. GAAP requires management to use judgment in the application of 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, resulting inNote 2, “Recent Accounting Pronouncements,” we adopted a ~~change in financial results. On~~new credit loss standard on April 1, 2020. Under this new standard, we estimate an ~~ongoing basis, we reevaluate our estimates, including those related to revenue recognition, residual values, vendor incentives, lease classification, goodwill and intangibles, reserves~~allowance for credit losses related to accounts receivable for future expected credit losses by using relevant information such as historical information, current conditions, and ~~income taxes specifically relating to uncertain tax positions. We base estimates~~reasonable and supportable forecasts. The allowance is measured on a collective basis when similar risk characteristics exist, and a loss-rate for each group with similar risk characteristics is determined using historical credit loss experience ~~and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form~~as the basis for ~~making judgments about~~ the ~~carrying values~~estimation of ~~assets and liabilities that~~expected credit losses. Adjustments to historical loss information are ~~not readily apparent from other sources. For all such estimates, we caution that future events rarely develop exactly~~made for differences in current conditions, as well as changes in forecasted ~~and therefore, these estimates may require adjustment.~~macroeconomic conditions. Our allowance reflects the forecasted credit deterioration due to the COVID-19 pandemic.

Our other critical accounting estimates have not changed from those reported in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our ~~2017 annual~~2020 Annual Report.

SEGMENT RESULTS OF OPERATIONS

The three and ~~nine~~six months ended ~~December 31, 2017~~September 30, 2020, compared to the three and ~~nine~~six months ended ~~December 31, 2016~~September 30, 2019

Technology Segment

The results of operations for our technology segment ~~for the three and nine months ended December 31, 2017 and 2016~~ were as follows (dollars in thousands):

	Three Months Ended December 31,									Nine Months Ended December 31,									Three Months Ended September 30,				Six Months Ended September 30,
	2017		2016		Change					2017		2016		Change					2020		2019		2020		2019
Sales of product and services	$	330,953	$	317,391	$	13,562		4.3	%	$	1,045,792	$	968,799	$	76,993		7.9	%
Fee and other income		1,678		915		763		83.4	%		3,707		3,679		28		0.8	%
Net sales		332,631		318,306		14,325		4.5	%		1,049,499		972,478		77,021		7.9	%
Cost of sales, product and services		264,487		251,729		12,758		5.1	%		834,873		769,780		65,093		8.5	%
Product																			$	369,934	$	349,650	$	663,367	$	672,414
Services																				49,425		48,068		97,216		93,839
Total																				419,359		397,718		760,583		766,253

Cost of sales
Product																				301,006		276,475		525,549		534,529
Services																				31,156		29,671		60,996		58,341
Total																				332,162		306,146		586,545		592,870

Gross profit		68,144		66,577		1,567		2.4	%		214,626		202,698		11,928		5.9	%		87,197		91,572		174,038		173,383

Selling, general, and administrative expenses		53,836		47,780		6,056		12.7	%		158,838		141,295		17,543		12.4	%
Selling, general, and administrative																				62,586		67,189		128,142		129,856
Depreciation and amortization		2,893		1,908		985		51.6	%		7,084		5,400		1,684		31.2	%		3,313		3,529		6,801		6,936
Interest and financing costs																				1		-		266		-
Operating expenses		56,729		49,688		7,041		14.2	%		165,922		146,695		19,227		13.1	%		65,900		70,718		135,209		136,792

Operating income	$	11,415	$	16,889	$	(5,474	)	(32.4	%)	$	48,704	$	56,003	$	(7,299	)	(13.0	%)	$	21,297	$	20,854	$	38,829	$	36,591

Key business metrics
Adjusted gross billings of product and services	$	464,105	$	432,407	$	31,698		7.3	%	$	1,449,371	$	1,317,188	$	132,183		10.0	%

Adjusted gross billings																			$	601,064	$	579,084	$	1,147,458	$	1,127,447
Adjusted EBITDA	$	14,308	$	18,797	$	(4,489	)	(23.9	%)	$	55,788	$	61,403	$	(5,615	)	(9.1	%)	$	26,275	$	27,789	$	49,436	$	49,208

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Net sales: Net sales for the three months ended ~~December 31, 2017~~September 30, 2020, were ~~$332.6~~$419.4 million compared to ~~$318.3~~$397.7 million ~~during the three months ended December 31, 2016, an increase of 4.5%, or $14.3 million. For the nine months ended December 31, 2017, net sales were $1,049.5 million compared to $972.5 million during~~in the same period in the prior year, an increase of ~~7.9%~~5.4% or $21.6 million, due to increases in net sales to customers in the telecom, media and entertainment, SLED, financial services, and all the other customer categories, which was partially offset by a decrease in technology, and healthcare customer categories. Product sales increased 5.8%, or ~~$77.0 million.~~

~~Table~~$20.3 million, to $369.9 million due to a shift in mix to sales of ~~Contents~~

~~Adjusted gross billings of product~~hardware and third-party licenses, partially offset by reductions in third-party maintenance, software assurance, subscriptions/SaaS licenses, and services ~~for~~where we recognize revenue on a net basis. Services revenues increased 2.8%, or $1.4 million to $49.4 million to due to an increase in managed services.

For the ~~three~~six months ended ~~December 31, 2017 were $464.1~~September 30, 2020, net sales decreased 0.7%, or $5.7 million to $760.6 million compared to ~~$432.4 million during the three months ended December 31, 2016, an increase of 7.3%, or $31.7 million.~~ ~~Sales of product and services for the three months ended December 31, 2017 were $331.0 million compared to $317.4~~$766.3 million during the same period in the prior ~~year, an increase of 4.3%~~year. Product sales for the six months ended September 30, 2020, decreased 1.3%, or ~~$13.6 million.~~

~~The increase in~~$9.0 million to $663.4 million due to a higher proportion of sales from third party services that are recognized on a net sales of product and services during the three months ended December 31, 2017 was also due, in part, to an increase in demand for products and services from customers in the technology, financial services and healthcare industries,basis, partially offset by ~~reductions~~the increase in ~~sales~~services revenues by 3.6%, or $3.4 million, to ~~state and local government and educational customers (“SLED”), technology, and telecom, media and entertainment customers, and other industries.~~

~~For the nine months ended December 31, 2017, adjusted gross billings of product and services were $1,449.4~~$97.2 million compared to $1,317.2 million during the nine months ended December 31, 2016, an increase of 10.0%, or $132.2 million. For the nine months ended December 31, 2017, sales of product and services were $1,045.8 million compared to $~~968.8~~$93.8 million during the same period in the prior ~~year,~~year.

Adjusted gross billings increased 3.8%, or $22.0 million, to $601.1 million for the three months ended September 30, 2020, from $579.1 million for the same period in the prior fiscal year. There was an increase in adjusted gross billings from our customers in the telecom, media and entertainment, SLED, and health care customers which was partially offset by decreases in demand from the technology, financial services, and all the other categories of ~~7.9%~~customers. For the six months ended September 30, 2020, adjusted gross billings increased 1.8%, or ~~$77.0 million.~~$20.1 million, to $1,147.5 million, from $1,127.4 million for the same period in the prior fiscal year. The increase in adjusted gross billings is due to higher demand from the same customer end markets that were previously identified for the increase in net sales ~~of product and services during~~with the ~~nine month period was due to an increase in demand for products and services from customers in the financial services industries, technology, and~~exception of health care ~~industries,~~customers which ~~include sales relating to several large projects~~declined for ~~large customers.~~the six-month period.

~~Summarized below are the sequential and year-over-year changes in net sales of product and services:~~

Quarter Ended Sequential Year over Year
December 31, 2017 (7.5 %) 4.3 %
September 30, 2017 0.2 % (1.0 %)
June 30, 2017 11.1 % 23.1 %
March 31, 2017 1.3 % 10.3 %
December 31, 2016 (12.1 %) 10.3 %

We rely on our vendors to fulfill a large majority of shipments to our customers. As of ~~December 31, 2017,~~September 30, 2020, we had open orders of ~~$170.0~~$389.7 million and deferred revenue of ~~$59.6~~$77.1 million. As of ~~December 31, 2016,~~September 30, 2019, we had open orders of ~~$238.5~~$210.7 million and deferred revenues of $~~66.3~~$66.5 million.

We analyze net sales ~~of products and services~~ by customer end market and by ~~manufacturer,~~vendor, as opposed to discrete product and service categories. The percentage of net sales ~~of product and services~~ by industry and vendor for the twelve-month periods ended September 30, 2020, and 2019 are summarized below:

	Twelve Months Ended December 31,									Twelve Months Ended September 30,
	2017			2016			Change			2020			2019			Change
Revenue by customer end market:
Technology		25	%		22	%		3	%		19	%		22	%		(3	%)
Telecom, Media & Entertainment											20	%		16	%		4	%
SLED		17	%		21	%		(4	%)		16	%		17	%		(1	%)
Telecom, Media & Entertainment		14	%		16	%		(2	%)
Healthcare											15	%		15	%		0	%
Financial Services		16	%		12	%		4	%		13	%		14	%		(1	%)
Healthcare		13	%		11	%		2	%
Other		15	%		18	%		(3	%)
All others											17	%		16	%		1	%
Total		100	%		100	%					100	%		100	%

Revenue by vendor:
Cisco Systems		44	%		49	%		(5	%)
HP Inc. & HPE		7	%		6	%		1	%
NetApp		4	%		5	%		(1	%)
Sub-total		55	%		60	%		(5	%)
Other		45	%		40	%		5	%
Total		100	%		100	%

	Twelve Months Ended September 30,
	2020			2019			Change
Revenue by vendor:
Cisco Systems		39	%		41	%		(2	%)
NetApp		4	%		3	%		1	%
HP Inc. & HPE		4	%		6	%		(2	%)
Dell/EMC		7	%		4	%		3	%
Juniper Networks		5	%		4	%		1	%
Arista Networks		3	%		5	%		(2	%)
All others		38	%		37	%		1	%
Total		100	%		100	%

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Our revenues by customer end market have remained consistent over the year with over 80% of our revenues generated from customers within the five end markets identified above. During the trailing ~~twelve months~~twelve-month period ended ~~December 31, 2017~~September 30, 2020, we had an increase in the percentage total revenues from customers in the ~~technology, financial services,~~telecom, media and ~~health care industries, which were partially offset by~~entertainment industry, and all other customer category, and decreases in the percentage of total revenues ~~from~~in the technology, SLED, ~~compared to the prior year period.~~and financial services markets. These changes were driven by changes caused by the COVID-19 pandemic, changes in customer buying cycles, and the timing of specific IT related initiatives, rather than the acquisition or loss of a customer or set of customers.

~~Table of Contents~~

The majority of our revenues by vendor are derived from ~~Cisco Systems,~~our top six suppliers, which, when combined, is a ~~combined HP Inc. and HPE, and NetApp, which, collectively, declined to 55% for the twelve months ended December 31, 2017 from approximately~~fairly constant percentage of over 60% ~~in the prior year trailing twelve month period, with the greatest decline in the proportional percentage~~ of total revenues ~~in Cisco product sales. The decrease in~~for the ~~percentage of revenues from the top three vendors is due in part to substantial competition~~twelve-month periods ended September 30, 2020, and ~~rapid developments in the IT industry.~~2019. None of the vendors included within the “other” category exceeded 4%5% of total revenues.

Cost of ~~sales, product and services:~~ ~~Cost~~sales: For the three months ended September 30, 2020, cost of sales increased 8.5%, or $26.0 million, due to a shift in product mix, as we sold a higher proportion of hardware and ~~services increased 5.1%~~third-party software licenses which we recognize on a gross basis. Due to this shift in product mix, our gross margin decreased 220 basis points to 20.8% for the three months ended ~~December 31, 2017 as~~September 30, 2020, compared to the prior year period, due to the 4.3% increase in sales of product and services. For the nine months ended December 31, 2017, cost of sales, product and services increased 8.5% due to the increase in sales of product and services. Our gross margin on the sales of product and services decreased 60 basis points to 20.1% for the three months ended December 31, 2017, from 20.7%23.0% in the same period in the prior year.

Cost of sales for the six months ended September 30, 2020, decreased 1.1% or $6.3 million which is in-line with the decrease in net sales. For the ~~nine~~six months ended ~~December 31, 2017, our~~September 30, 2020, gross margin ~~on the sales of product and services decreased~~increased by 30 basis points to ~~20.2%~~22.9%, ~~from~~as compared to 22.6% for the prior year period; product margin also increased by 30 basis points to 20.8%, compared to 20.5%~~, due to lower product margins from a large competitively bid project which partially shipped during~~ in the ~~nine month~~same period ~~as well as reduction~~ in ~~vendor incentives earned as a percentage of sales of product services.~~ the prior year. Vendor incentives earned as a percentage of sales ~~of product services~~decreased 70 basis points and 20 basis points for the three ~~months~~ and ~~the nine~~six months ended ~~December 31, 2017 decreased 50 and~~September 30, ~~basis points~~2020, respectively, resulting in an unfavorable impact on gross margin, as compared to same periods in the prior year.

Selling, general, and ~~administrative expenses:~~administrative: Selling, general, and administrative expenses ~~were $53.8~~of $62.6 million for the three months ended ~~December 31, 2017, an increase of $6.0~~September 30, 2020, decreased by $4.6 million, or ~~12.7%~~6.9% from $67.2 million in the same period in the prior year. Salaries and benefits decreased $0.8 million, or 1.5% to $53.8 million, compared to ~~$47.8~~$54.6 million ~~for~~during the same period in the prior year ~~period.~~due to a decrease variable compensation and fringe benefits, more than offsetting an increase in salaries. Our prior year results benefit from having only incurred a partial quarter of salaries and benefits from employees acquired from ABS Technology. Our technology segment had 1,460 employees as of September 30, 2020, a decrease of 135 from 1,595 at September 30, 2019. For the six months ended September 30, 2020, selling, general, and administrative expenses decreased by $1.7 million, or 1.3%, to $128.1 million compared to $129.9 million in the same period in the prior year. Salaries and benefits increased ~~$4.3~~$4.7 million, or ~~10.8%~~4.5% to ~~$44.5~~$110.8 million, compared to ~~$40.2~~$106.1 million during the ~~prior year. Most of the increase was due to higher salaries and benefits expenses related to the increase~~same period in the ~~number of employees from both acquisitions and internal growth.~~

Selling, general, and administrative expenses were $158.8 million for the nine months ended December 31, 2017, an increase of $17.5 million, or 12.4% compared to $141.3 million for the prior year period. Salaries and benefits increased $12.8 million, or 10.8% to $130.6 million, compared to $117.8 million during the prior year. Approximately 20.8% of this increase was due to higher variable compensation due to the increase in gross profit, 18.6% of the increase was due to higher employee benefits, and the remaining increase was primarily due salary expense related to an increase in the number of employees. Our technology segment had 1,236 employees as of December 31, 2017, an increase of 123, or 11.1%, from 1,113 at December 31, 2016. The acquisitions of ~~OneCloud and IDS accounted for 98 of the added positions.~~ ~~There were 107 positions added in the past year related to sales, marketing, and professional services personnel.~~

General and administrative expenses ~~increased $1.5~~decreased $4.0 million, or ~~23.9%~~31.7%, to ~~$7.9~~$8.7 million during the three months ended ~~December 31, 2017~~September 30, 2020, compared to ~~$6.4~~$12.7 million in the same period in the prior year, due to ~~an adjustment of $0.7 million to the fair value of contingent consideration for acquisitions, higher~~a decrease in travel and entertainment expenses, advertising and marketing, ~~expense,~~professional fees, and other general office related expenses resulting in part from restrictions on travel due to the COVID-19 pandemic, and $1.1 million in lower acquisition related expenses ~~including travel expense related to acquisitions.~~ than the prior year. For the ~~nine~~six months ended ~~December 31, 2017,~~September 30, 2020, general and administrative expenses ~~increased $3.9~~decreased $6.8 million, or ~~20.3%~~28.9%, to ~~$23.3 million compared to $19.3 million the prior year, due to the incremental adjustment of $0.8 million to the fair value of contingent consideration for acquisitions,~~$16.8 million. The decrease in selling, general and ~~higher travel expense, including travel expense related to acquisitions. Professional and other fees increased $0.9 million, or 20.7% to $5.0 million~~administrative expenses was primarily due to ~~legal~~decrease in travel and entertainment expenses, advertising and marketing, professional fees, and other general office related expenses resulting from travel restrictions due in part to the ~~IDS~~COVID-19 pandemic, and ~~OneCloud acquisitions.~~$1.5 million in lower acquisition related expenses than the prior year.

Depreciation and amortization:Depreciation and amortization ~~expense~~ ~~increased $1.0~~decreased $0.2 million, or ~~51.6%~~6.1%, to ~~$2.9~~$3.3 million during the three months ended ~~December 31, 2017~~September 30, 2020, and decreased $0.1 million, or 1.9%, to $6.8 million for the six months ended September 30, 2020, compared to ~~$1.9~~the prior year periods.

Interest and financing costs: Interest and financing costs were insignificant in the three months ended September 30, 2020, and $0.3 million for the six months ended September 30, 2020, compared to none in the same period in the prior year. ~~For the nine months ended December 31, 2017, depreciation and amortization expense increased $1.7 million, or 31.2%~~This is due to ~~$7.1 million compared to $5.4~~$35.0 million in borrowings under the ~~prior~~accounts receivable component of our Technology segment credit facility during the first quarter of the fiscal year. ~~The increase in depreciation and amortization expense is related to the acquisitions of Consolidated IT Services in December 2016, OneCloud in May 2017, and IDS in September 2017.~~

Segment operating income: As a result of the foregoing, operating income was ~~$11.4~~$21.3 million, ~~a decrease~~an increase of ~~$5.5~~$0.4 million, or ~~32.4%~~2.1%, for the three months ended ~~December 31, 2017~~September 30, 2020, as compared to ~~$16.9~~$20.9 million in the same period in the prior year. For the six months ended September 30, 2020, operating income was $38.8 million, compared to $36.6 million for the same period in the prior year, ~~period.~~ an increase of $2.2 million, or 6.1%.

For the three months ended ~~December 31, 2017, Adjusted~~September 30, 2020, adjusted EBITDA was ~~$14.3~~$26.3 million, a decrease of ~~$4.5~~$1.5 million, or ~~23.9%~~5.4%, compared to ~~$18.8~~$27.8 million in the ~~prior year period. For the nine months ended December 31, 2017, operating income was $48.7 million, a decrease of $7.3 million, or 13.0% compared to $56.0 million~~same period in the prior ~~year period.~~year. Adjusted EBITDA was $49.4 million, an increase of $0.2 million, or 0.5%, for the ~~nine~~six months ended ~~December 31, 2017, was $55.8 million, a decrease of $5.6 million, or 9.1%~~September 30, 2020, compared to ~~$61.4~~$49.2 million for the same period in the prior ~~year period.~~year.

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Financing Segment

The results of operations for our financing segment ~~for the three and nine months ended December 31, 2017 and 2016~~ were as follows (dollars in thousands):

	Three Months Ended December 31,									Nine Months Ended December 31,									Three Months Ended September 30,				Six Months Ended September 30,
	2017		2016		Change					2017		2016		Change					2020		2019		2020		2019
Financing revenue	$	9,592	$	8,190	$	1,402		17.1	%	$	30,698	$	23,899	$	6,799		28.4	%
Fee and other income		346		161		185		114.9	%		374		245		129		52.7	%
Net sales		9,938		8,351		1,587		19.0	%		31,072		24,144		6,928		28.7	%	$	13,722	$	13,847	$	27,529	$	26,684
Direct lease costs		1,394		1,142		252		22.1	%		3,846		3,459		387		11.2	%

Cost of sales																				1,957		2,388		4,048		4,397

Gross profit		8,544		7,209		1,335		18.5	%		27,226		20,685		6,541		31.6	%		11,765		11,459		23,481		22,287

Selling, general, and administrative expenses		3,298		2,380		918		38.6	%		9,300		8,526		774		9.1	%
Selling, general, and administrative																				4,303		3,334		8,214		6,454
Depreciation and amortization		1		2		(1	)	(50.0	%)		2		8		(6	)	(75.0	%)		28		28		56		84
Interest and financing costs		270		409		(139	)	(34.0	%)		903		1,158		(255	)	(22.0	%)		246		576		558		1,204
Operating expenses		3,569		2,791		778		27.9	%		10,205		9,692		513		5.3	%		4,577		3,938		8,828		7,742

Operating income	$	4,975	$	4,418	$	557		12.6	%	$	17,021	$	10,993	$	6,028		54.8	%	$	7,188	$	7,521	$	14,653	$	14,545

Key business metrics
Adjusted EBITDA	$	4,976	$	4,420	$	556		12.6	%	$	17,023	$	11,001	$	6,022		54.7	%	$	7,286	$	7,616	$	14,839	$	14,764

Net sales: Net sales ~~increased~~decreased by ~~$1.6~~$0.1 million, or ~~19.0%~~0.9%, to ~~$9.9~~$13.7 million for the three months ended ~~December 31, 2017,~~September 30, 2020, as compared to ~~$8.4 million~~ prior year results due to ~~higher post-contract~~a reduction in post contract earnings and portfolio earnings, which were mostly offset by higher other financing ~~revenues.~~revenues and transactional gains. During the ~~quarters~~three months ended ~~December 31, 2017~~September 30, 2020, and ~~2016,~~2019, we recognized net gains on sales of financial assets of $1.2 million and $0.9 million, respectively, and the fair value of assets received from these sales were $32.8 million and $55.8 million, respectively. Post contract earnings increased $1.4 million due to the gain on sale of equipmentn associated with early lease terminations, and other financing revenues decreased $0.3 million mainly due to earnings on consumption based financing arrangements.

For the nine months ended December 31, 2017, net sales increased by $6.9 million, or 28.7% to $31.1 million as compared to $24.1 million prior year results due to higher transactional gains and other financing revenues. During the nine months ended December 31, 2017 and 2016, we recognized net gains on sales of financial assets of $4.6$4.5 million and $4.1 million, respectively, and the fair value of assets received from these sales were ~~$166.9~~$118.5 million and ~~$185.4~~$95.1 million, respectively. ~~Post contract earnings~~

For the six months ended September 30, 2020, net sales increased ~~$4.9~~to $27.5 million, an increase of $0.8 million, or 3.2% as compared to the same period in the prior year of $26.7 million due to ~~the gain on sale of equipment associated with early lease terminations, and~~higher other financing revenues ~~increased $1.0~~and portfolio earnings, which were partially offset by lower post-contract earnings and transactional gains. During the six months ended September 30, 2020, and 2019, we recognized net gains on sales of financial assets of $7.0 million ~~mainly due to earnings on consumption based financing arrangements.~~

and $7.5 million, respectively, and the fair value of assets received from these sales were $191.7 million and $172.0 million, respectively. At ~~December 31, 2017,~~September 30, 2020, we had ~~$147.2~~$180.7 million in financing receivables and operating leases, compared to ~~$140.4~~$188.2 million as of ~~December 31, 2016, an increase~~September 30, 2019, a decrease of ~~$6.8~~$7.5 million, or ~~4.8%~~4.0%.

~~Gross Profit:~~Cost of sales: Cost of sales decreased $0.4 million and $0.3 million for the three and six months ended September 30, 2020, respectively, which consists of depreciation expense from operating leases. Gross profit increased by ~~$1.3 million, or 18.5%~~2.7% to ~~$8.5~~$11.8 million, for the three months ended ~~December 31, 2017,~~September 30, 2020, and increased by 5.4% to $23.5 million, for the six months ended September 30, 2020, as compared to the ~~same period in the prior year.~~ ~~For the nine months ended December 31, 2017, gross profit increased $6.5 million, or 31.6% to $27.2 million compared to the same period of the~~ prior year ~~as a result of higher revenues.~~ ~~Direct lease costs increased $0.3 million~~periods.

Selling, general and ~~$0.4 million for~~administrative:For the three and ~~nine~~six months ended ~~December 31, 2017, respectively, which primarily consists of depreciation expense from operating leases.~~

~~Selling, general, and administrative expenses:~~ ~~For the three months ended December 31, 2017~~September 30, 2020, selling, general, and administrative expenses increased by ~~$0.9~~$1.0 million or ~~38.6%~~29.1%, and $1.8 million, or 27.3%, respectively, which was due primarily to an increase in ~~our salaries~~allowance for credit losses of $0.8 million and ~~benefits expense of $0.7~~$1.1 million ~~resulting from an increase in variable compensation related~~for the three and six months ended September 30, 2020, as compared to the ~~increase~~same periods in ~~gross profit. Selling, general, and administrative expenses~~the prior year. Variable compensation also increased ~~by $0.8 million or 9.1%,~~ due to ~~an increase in our salaries and benefits expense of $1.1 million resulting from an increase in variable compensation related to the increase in~~higher gross profit ~~partially offset by lower professional fees~~for both the three and ~~credit loss expenses for the nine~~six months ended ~~December 31, 2017. Our~~September 30, 2020.

Interest and financing ~~segment had 48 employees as of December 31, 2017, compared to 51 employees as of December 31, 2016.~~

costs: Interest and financing costs decreased ~~$0.1 million~~by 57.3% to ~~$0.3~~$0.2 million for the three months ended ~~December 31, 2017,~~September 30, 2020, and decreased by 53.7% to $0.6 million for the six months ended September 30, 2020, compared to the same periods in the prior year, due to a decrease in the average balance and interest rate on total notes payable ~~outstanding compared to the three months ended December 31, 2017. For the nine months ended December 31, 2017, interest and financing costs decreased by $0.3 million to $0.9 million, or 22.0%.~~outstanding. Total notes payable ~~were $31.5~~for the financing segment was $40.3 million as of ~~December 31, 2017,~~September 30, 2020, a decrease of ~~$22.5~~$45.7 million, or ~~41.7%~~53.1%, as compared to ~~$54.0~~$86.0 million as of ~~December 31, 2016.~~September 30, 2019. Our weighted average interest rate for non-recourse notes payable was ~~3.73%~~3.15% and ~~3.38%~~3.98%, as of ~~December 31, 2017~~September 30, 2020, and ~~December 31, 2016,~~2019, respectively.

Segment operating income: As a result of the foregoing, operating income and adjusted EBITDA both decreased $0.3 million or 4.4% and 4.3%, to $7.2 million and $7.3 million, respectively, for the three months ended September 30, 2020, over the prior year period. For the six months ended September 30, 2020, operating income and adjusted EBITDA both increased $0.1 million, respectively, or 0.7% and 0.5%, to $14.7 million and $14.8 million, respectively.

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~~Segment operating income~~: As a result of the foregoing, both operating income and Adjusted EBITDA increased $0.6 million or 12.6% to $5.0 million for both the three months ended December 31, 2017 and 2016. For the nine months ended December 31, 2017, operating income and Adjusted EBITDA each increased $6.0 million or 54.8% and 54.7% to $17.0 million, respectively.Consolidated

~~Consolidated~~

Other income: Other income increased to $0.2 million and ~~expense~~$0.3 million due to the favorable foreign exchange rate during the three and six months ended ~~December 31, 2017 was a net~~September 30, 2020, respectively, compared to an expense of ~~$0.1 million, which consists of interest income on cash~~$40 thousand and ~~cash equivalents, more than offset by~~$85 thousand due to the unfavorable foreign ~~currency transaction losses.~~exchange rate in the three and six month periods in the prior year, respectively.

Income taxes: Our provision for income tax expense was ~~$0.7~~$8.8 million and ~~$19.5~~$16.6 million for the three and ~~nine~~six months ended ~~December 31, 2017,~~September 30, 2020, as compared to ~~$8.7~~$8.2 million and ~~$27.3~~$14.8 million for the same periods in the prior year. Our effective income tax ~~rate~~rates for both the three and six months ended September 30, 2020, was 30.8%, compared to 29.1% and 28.9% for the three and ~~nine~~six months ended ~~December 31, 2017 was 4.2% and 29.7%, compared to 40.8% and 40.5% for the three and nine months ended December 31, 2016.~~September 30, 2019. The ~~favorable~~ change in our effective ~~income~~ tax rate was due ~~primarily~~ to ~~a tax benefit of $3.4 million from the re-measurement of deferred tax assets and liabilities due~~an adjustment to the ~~change in the U.S. statutory rate for the three and nine months ended December 31, 2017, and a tax~~federal benefit ~~of $1.6 million on the vesting of restricted stock in the nine months ended December 31, 2017, compared to a tax benefit of $0.5 million in the nine months ended December 31, 2016.~~from state taxes.

Net earnings: The foregoing resulted in net earnings of ~~$15.6 million and $46.2~~$19.8 million for the three ~~and nine~~ months ended ~~December 31, 2017, an increase~~September 30, 2020, a decrease of ~~23.5% and 15.4%~~$0.3 million, or 1.3%, as compared to ~~$12.6~~$20.1 million ~~and $40.1 million during~~of the ~~three and nine~~same period in the prior year. For the six months ended ~~December 31, 2016, respectively.~~September 30, 2020, net earnings were $37.2 million, an increase of $0.9 million, or 2.5%, as compared to $36.3 million in the same period in the prior year.

Basic and fully diluted earnings per common share ~~were $1.12 and $1.11~~was $1.48 for the three months ended ~~December 31, 2017, an increase~~September 30, 2020, a decrease of ~~21.7% and 22.0%~~2.0% as compared to ~~$0.92~~$1.51 for both the basic and ~~$0.91, respectively,~~fully diluted earnings per common share for the ~~three~~same period in the prior year. For the six months ended ~~December 31, 2016. For the nine months ended December 31, 2017,~~September 30, 2020, basic and fully diluted earnings per common share were ~~$3.34~~$2.79 and ~~$3.30,~~$2.78, an increase for both of ~~16.0% and 15.4%~~0.3%, as compared to ~~$2.88~~$2.72 and ~~$2.86,~~$2.71, respectively, for the same period in the prior year.

Non-GAAP diluted earnings per share decreased 7.2% to $1.68 for the three months ended September 30, 2020, as compared to $1.81 for the three months ended September 30, 2019. Non-GAAP diluted earnings per share decreased 2.1% to $3.19 for the six months ended September 30, 2020, as compared to $3.26 for the six months ended September 30, 2019.

Weighted average common shares outstanding used in the calculation of basic and diluted earnings per common share for the three months ~~ended December 31, 2017~~ending September 30, 2020 was ~~13.9~~$13.4 million and ~~14.0~~for the six months ended September 30, 2020 was $13.3 million and $13.4 million respectively. Weighted average common shares outstanding used in the calculation of the basic and diluted earnings per common share for the three months ended December 31, 2016 was 13.8 million and 13.9 million, respectively.

Weighted average common shares outstanding used in the calculation of basic and diluted earnings per common share for both the ~~nine~~three and six months ended ~~December 31, 2017~~September 30, 2019, was ~~13.8~~13.3 million and 14.0 million, respectively. Weighted average common shares outstanding used in the calculation of the basic and diluted earnings per common share for the nine months ended December 31, 2016 was 13.9 million and 14.0 million, respectively.13.4 million.

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LIQUIDITY AND CAPITAL RESOURCES

Liquidity Overview

Our primary ~~sources~~source of ~~liquidity have historically been~~funding is cash ~~and cash equivalents, internally generated funds~~ from operations and borrowings ~~both~~which are accounted for as non-recourse and ~~recourse.~~recourse notes payable. We ~~have used~~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 subsidiary~~ ePlus Technology, inc., and certain of its subsidiaries, which are part of our technology segment, ~~finances its~~finance their operations with funds generated from operations, and with a credit facility with Wells Fargo Commercial Distribution Finance, LLC (“WFCDF”). e~~Plus Technology, inc.’s agreement with WFCDF has an aggregate credit limit~~This facility provides short-term capital for our technology segment. There are two components of ~~$250 million as of December 31, 2017.~~

~~On July 27, 2017, we executed an amendment to~~ the WFCDF credit facility: (1) a floor plan component, and (2) an accounts receivable component.

We believe that cash on hand and funds generated from operations, together with available credit under our credit facility, ~~which temporarily increases~~will be enough to finance our working capital, capital expenditures, and other requirements for at least the ~~aggregate limit~~next year.

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

The extent of the ~~two components~~impact of COVID-19 is uncertain and may impact our liquidity position over the longer term. As credit markets have tightened as a result of COVID-19, we may have difficulty funding our financing transactions with lenders, which may result in the use of our cash or a decrease in financing originations.

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Cash Flows

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

	Six Months Ended September 30,
	2020			2019
Net cash provided by (used in) operating activities	$	8,408		$	(54,404	)
Net cash used in investing activities		(2,811	)		(18,050	)
Net cash provided by financing activities		69,730			48,356
Effect of exchange rate changes on cash		(477	)		114
Net increase (decrease) in cash and cash equivalents	$	74,850		$	(23,984	)

Cash flows from ~~$250.0~~operating activities. We had $8.4 million provided by operating activities during the six months ended September 30, 2020, compared to ~~$325.0~~$54.4 million used in operating activities for the six months ended September 30, 2019. See below for a breakdown of operating cash flows by segment (in thousands):

	Six Months Ended September 30,
	2020			2019
Technology segment	$	44,367		$	3,833
Financing segment		(35,959	)		(58,237	)
Net cash provided by (used in) operating activities	$	8,408		$	(54,404	)

Technology Segment: In the six months ended September 30, 2020, our technology segment provided $44.4 million from operating activities primarily due to cash generated from earnings. Additionally, we had net borrowing on the ~~date~~floor plan component of our credit facility of $91.6 million which was partially offset by repayment of $35.0 million in borrowings under the accounts receivable component of our Technology segment credit facility. The net borrowing is primarily the result of extended payment terms from certain vendor partners that deferred $76.3 million in payments for an additional 30 days. The majority of these programs relate to COVID-19 and ended in October 2020. We use this facility to manage working capital needs. We present changes in this balance as financing activity in our consolidated statement of cash flows.

In the six months ended September 30, 2019, operating cash flows provided by our technology segment was $3.8 million as cash generated from earnings exceeding changes in working capital. In addition, cash provided by the accounts payable – floor plan facility was $13.6 million. Accounts payable – floor plan is a facility used to manage working capital needs and we are required to present changes in this balance as financing activity in our consolidated statement of cash flows.

To manage our working capital, we monitor our cash conversion cycle for our technology segment, which is defined as days sales outstanding (“DSO”) in accounts receivable plus days of supply in inventory (“DIO”) minus days of purchases outstanding in accounts payable (“DPO”). The following table presents the components of the ~~agreement~~cash conversion cycle for our Technology segment:

	As of September 30,
	2020			2019
(DSO) Days sales outstanding (1)		61			59
(DIO) Days inventory outstanding (2)		14			10
(DPO) Days payable outstanding (3)		(54	)		(46	)
Cash conversion cycle		21			23

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

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

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

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Our cash conversion cycle decreased to 21 days at September 30, 2020, compared to 23 days at September 30, 2019. Our standard payment term for customers is between 30-60 days; however, certain customer orders may be approved for extended payment terms. Our DPO increased 8 days. Invoices processed through ~~October 31, 2017,~~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; however, certain of our suppliers temporarily increased our terms to 90 days. Our DSO increased 2 days due to an increase in sales during the quarter ended September 30, 2020, to customers with terms greater than or equal to net 60 days. The 4 day increase in DIO was due to an increase in average inventory balances of 45.1%, or $24.0 million, due to pending projects for our customers and ~~provides~~some delays in receiving by our customers whose offices were temporarily closed due to COVID-19.

Financing Segment: In the six months ended September 30, 2020, our financing segment used $36.0 million from operating activities, primarily due to changes in financing receivables- net of $54.4 million, partially offset by earnings of $10.4 million and an increase in accounts payable trade of $13.0 million. In the six months ended September 30, 2019, our financing segment used $58.2 million from operating activities, primarily due to changes in financing receivables- net of $76.4 million. We recognize the change in financing receivables, including the issuance of financing receivables offset by repayments of financing receivables and the proceeds from the transfer of financing receivables, when we account for the transfer as a sale, as part of operating activities.

Cash flows related to investing activities. In the six months ended September 30, 2020, we used $2.8 million from investing activities, consisting of $3.3 million for purchases of property, equipment and operating lease equipment offset by $0.5 million of proceeds from the sale of property, equipment, and operating lease equipment. In the six months ended September 30, 2019, we used $18.1 million from investing activities, consisting of $13.8 million for acquisitions, $4.9 million for purchases of property, equipment and operating lease equipment offset by $0.7 million of proceeds from the sale of property, equipment, and operating lease equipment.

Cash flows from financing activities. In the six months ended September 30, 2020, cash provided by financing activities was $69.7 million consisting of net borrowings on floor plan facility of $91.6 million, net borrowings of non-recourse and recourse notes payable of $18.1 million, which was partially offset by repayment of $35.0 million in borrowings under the accounts receivable component of our Technology segment credit facility and $4.5 million in repurchase of common stock.

In the six months ended September 30, 2019, cash provided by financing activities was $48.4 million, consisting of net borrowings of non-recourse and recourse notes payable of $49.2 million, net borrowings on floor plan facility of $13.6 million, and offset by $13.7 million in repurchase of common stock and $0.8 million paid to sellers of SLAIT as part of a working capital adjustment.

Our borrowing of non-recourse and recourse notes payable primarily arises from our financing segment when we transfer contractual payments due to us ~~an election beginning July 1~~under lease and financing agreements to third-party financial institutions. When the transfers do not meet the requirements for a sale, the proceeds paid to us represent borrowings of non-recourse or recourse notes payable.

Non-Cash Activities. We transfer contractual payments due to us under lease and financing agreements to third-party financial institutions. As a condition of these agreements, certain financial institutions may request that the customer remit their contractual payments to a trust, rather than to us, and the trust pays the financial institution. Alternatively, the customer will make payments to us, and we will remit the payment to the financial institution. The economic impact to us under either structure is similar, in ~~each subsequent year~~that the assigned contractual payments are paid by the customer and remitted to ~~similarly temporarily increase~~ the ~~aggregate limit~~lender. However, when our customer makes payments through a trust, such payments represent non-cash transactions. Also, in certain assignment agreements, we may direct the third-party financial institution to pay some of the ~~two components~~proceeds from the assignment directly to ~~$325.0 million ending~~ the ~~earlier~~vendor or vendors that have supplied the assets being leased and or financed. In these situations, the portion of ~~90 days following~~ the ~~date~~proceeds paid directly to our vendors are non-cash transactions.

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Secured borrowings – Financing segment

We may finance all or ~~October 31~~most of the cost of the assets that ~~same year.~~we finance for customers by transferring all or part of the contractual payments due to us to third-party financing institutions. When we account for the transfer as a secured borrowing, we recognize the proceeds as either recourse or non-recourse notes payable. Our customers are responsible for repaying the debt from a secured borrowing. The lender typically secures a lien on the financed assets at the time the financial assets are transferred and releases it upon collecting all the transferred payments. We are not liable for the repayment of non-recourse loans unless we breach our representations and warranties in the loan agreements. The lender assumes the credit risk and their only recourse, upon default by the customer, is against the customer and the specific equipment under lease. While we expect that the credit quality of our financing arrangements and our residual return history will continue to allow us to obtain such financing, such financing may not be available on acceptable terms, or at all. As a result of COVID-19, credit markets have tightened. Our lenders are more discerning and are taking longer to approve transactions. In addition, certain lenders have narrowed their demand to certain types of transactions and/or credit quality and excluding others. For example, some lenders have declined transactions that have longer terms or transactions with certain market segments. Therefore, we may no longer be able to transfer certain receivables to financial institutions which may result in investing our capital or declining the transaction.

Credit facility — Technology segment

Our subsidiary, ePlus Technology, inc., and certain of its subsidiaries have a financing facility from WFCDF to finance their 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.

As of September 30, 2020, the limit of the two components of the credit facility was $275 million, and the accounts receivable component had a sub-limit of $100 million.

The credit facility requires that financial statements of ePlus Technology, inc. and certain of its subsidiaries be provided within 45 days of each quarter and 90 days of each fiscal year end and requires that other operational reports be provided on a regular basis. Either party may terminate with 90 days’ advance notice.

Floor Plan Component. After a customer places a purchase order with us and after we have completed our credit ~~check,~~review of the customer, 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~~In addition, certain suppliers have temporarily extended their repayment terms to us 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 December 31, 2017or March 31, 2017, 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.

to COVID-19. Most customer payments in our technology segment are remitted to our lockboxes. Once payments are cleared, the monies in the lockbox accounts are automatically and daily transferred to our operating ~~account on a daily basis.~~account. On the due dates of the floor plan component, we make cash payments to WFCDF. ~~These payments from the accounts receivable component to~~Our borrowings and repayments under the floor plan component ~~and repayments from our cash~~ are ~~reflected as~~included in “net borrowings (repayments) on floor plan facility” ~~in the~~within cash flows from the financing activities ~~section of~~in 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.

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~~Cash Flows~~

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

Nine Months Ended December 31,
2017 2016
Net cash provided by operating activities $ 48,824 $ 29,702
Net cash used in investing activities (54,793 ) (47,040 )
Net cash used in financing activities (27,758 ) (8,205 )
Effect of exchange rate changes on cash 72 454

Net decrease in cash and cash equivalents $ (33,655 ) $ (25,089 )

~~Cash flows from operating activities. Cash provided by operating activities totaled~~ ~~$48.8~~ million during the nine months ended December 31, 2017. Net earnings adjusted for the impact of non-cash items was $46.1million. Net changes in assets and liabilities resulted in a increase of cash and cash equivalents of $2.7 million, primarily due to net reductions in inventories of $43.3 million and increased in accounts payable of $18.4 million, mostly offset by additions to deferred costs, other intangible assets and other assets of $26.2 financing receivables of $13.0, accounts receivables of $10.3 million, and salaries and commissions payable and deferred revenues and other liabilities of $9.5 million.

~~Cash provided by operating activities totaled~~ ~~$29.7~~ million during the nine months ended December 31, 2016. Net earnings adjusted for the impact of non-cash items was $45.0 million. Net changes in assets and liabilities resulted in a decrease of cash and cash equivalents of $15.3 million, primarily due to net additions to accounts receivables of $62.0 million, inventories of $77.4 million, partially offset by increased in accounts payable of $53.2 million, and salaries and commissions payable, deferred revenues and other liabilities of $51.2 million.

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 December 31,
2017 2016

(DSO) Days sales outstanding (1) 52 52
(DIO) Days inventory outstanding (2) 12 23
(DPO) Days payable outstanding (3) (40 ) (48 )
Cash conversion cycle 24 27

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

Our cash conversion cycle decreased to 24 days at December 31, 2017, compared to 27 days at December 31, 2016, primarily driven by a decrease in DPO of 8 days due to DPO timing of payments. The higher cash conversion cycle for December 31, 2016 was due mainly to a significant increase in our inventories due to large projects for several of our major customers in the prior year’s quarter.

~~Cash flows related to investing activities~~. Cash used in investing activities was $54.8 million during the nine months ended December 31, 2017. Cash used in investing activities during the nine months ended December 31, 2017 was primarily driven by acquisitions of $37.7 million, net issuance and repayment of financing receivables of $79.1 million, purchases of assets to be leased or financed of $5.7 million, and purchases of property, equipment, software, and operating lease equipment of $6.3 million, which was partially offset by the sale of financing receivables of $64.1 million, and proceeds from sale of property, equipment and operating leases of $10.0 million.

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Cash used in investing activities was $47.0 million during the nine months ended December 31, 2016. Cash used in investing activities during the nine months ended December 31, 2016 was primarily driven by issuance of financing receivables of $114.7 million, cash used in acquisitions of $9.5 million, purchases of property, equipment and operating lease equipment of $7.3 million, and purchases of assets to be leased or financed of $5.9 million, which was partially offset by cash proceeds from the repayment financing receivable of $44.1 million, the sale of financing receivables of $39.9 million, and proceeds from the sale of property, equipment and operating lease equipment of $6.4 million.

~~Cash flows from financing activities~~. Cash used in financing activities was $27.8 million during the nine months ended December 31, 2017, which was primarily due to net repayment on floor plan facility of $24.9 million, cash used for the repurchase of common stock of $13.4 million, and ~~repayment of financing of acquisitions of $1.6 million, partially offset by~~ ~~net borrowings of non-recourse and recourse notes payable of $12.1 million~~. ~~Cash used in financing activities was $8.2 million during the nine months ended December 31, 2016, which was primarily due to $30.5 million in cash used for the repurchase of common stock, and~~ ~~net repayment on the floor plan facility of $5.6 million, partially offset by~~ ~~to net borrowings of non-recourse and recourse notes payable of $28.6 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. We are able to obtain financing through our traditional lending sources which is primarily non-recourse borrowings from third party banks and finance companies. 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 payments at a fixed rate of interest, and the lender secures a lien on the financed assets. When the lender is fully repaid, the lien is released and all further 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, and the lender’s only recourse, upon default, is against the customer and the specific equipment.

At December 31, 2017, our non-recourse notes payable decreased 13.8% to $31.5 million, as compared to $36.5 million at March 31, 2017. Recourse notes payable was zero as of December 31, 2017 compared to $0.9 million as of March 31, 2017.

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.

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~~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 December 31, 2017, the facility had an aggregate limit of the two components of $250.0 million with an accounts receivable sub-limit of $30.0 million.

On July 27, 2017, we executed an amendment to the WFCDF credit facility which temporarily increased the aggregate limit of the two components from $250.0 million to $325.0 million from the date of the agreement through October 31, 2017, and provides us an election beginning July 1 in each subsequent year to similarly temporarily increase the aggregate limit of the two components to $325.0 million ending the earlier of 90 days following the date of election and October 31 of that same year.

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 December 31, 2017. 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 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, e~~Plus Technology, inc. This credit facility is secured by the assets of only~~ e~~Plus Technology, inc. and the guaranty as described below.~~

~~The facility provided by WFCDF requires a guaranty of $10.5 million by~~ e~~Plus 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, 2017, 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~~

~~Purchases by~~ ePlus Technology, inc. including computer technology products, software, maintenance and services, are in part financed through a floor plan component in which interest expense for the first thirty to ninety 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 ninety-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 ninety-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 December 31, 2017

Balance as of
December 31, 2017

Maximum Credit Limit
at March 31, 2017

Balance as of
March 31, 2017

$ 250,000 $ 107,761 $ 250,000 $ 132,612

Maximum Credit Limit at September 30, 2020		Balance as of September 30, 2020		Maximum Credit Limit at March 31, 2020		Balance as of March 31, 2020
$275,000		$218,970		$300,000		$127,416

On October 1, 2020, we elected to exercise the temporary increase in the aggregate limit of the WFCDF credit facility to $350.0 million for a period of not less than 30 days.

Accounts Receivable Component

~~Included within the credit facility,~~ . ePlus Technology, inc. ~~has~~and certain of its subsidiaries have an accounts receivable component ~~from~~included within the WFCDF credit facility, 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~~Our borrowings and repayments under the accounts receivable component 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, 2020, there was noan outstanding balance ~~outstanding~~ for the accounts receivable component ~~at December 31, 2017or~~of $35.0 million. As of September 30, 2020, there was no outstanding balance for the accounts receivable component. As of September 30, 2020, and March 31, ~~2017, while~~2020, the maximum credit limit was ~~$30.0~~$100.0 million ~~for both periods.~~and $50.0 million, respectively. We may maintain a balance on the accounts receivable component to assist in mitigating risk arising from COVID-19.

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

Off-Balance Sheet Arrangements

As part of our ongoing business, we do not participate in transactions that generate relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K, or other contractually narrow or limited purposes. As of ~~December 31, 2017,~~September 30, 2020, 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 ~~start~~open 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. We may continue to use our internally generated funds to finance investments in leased assets or investments in notes receivables due from our customers. These actions may result in increased working capital needs as the business expands. As a result, we may require additional financing to fund our strategy, implementation, potential future acquisitions, and working capital needs, which may include additional debt and equity financing. The impacts of COVID-19 may limit or eliminate our access to capital. While the future is uncertain, we do not believe our credit facility will be terminated by the lender or us. Our lending partners in our financing segment have tightened credit availability and are more discerning in their approval process. However, currently we have funding resources available for our transactions.

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.

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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, or our major customers or ~~vendors of ours.~~vendors.

Our quarterly results of operations are susceptible to fluctuations for a number of reasons, including, but not limited to the worldwide impacts from COVID-19, currency fluctuations, reduction in IT spending, any reduction of expected residual values related to the equipment under our leases, the timing and mix of specific transactions, the reduction of manufacturer incentive programs, and other factors. Quarterly operating results could also fluctuate as a result of our sale of equipment in our lease portfolio to a lessee or third-party at the expiration of a lease term or prior to such expiration, ~~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 ~~2017~~2020 Annual Report.

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

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

~~There have been no material changes~~Our cash flow may be adversely affected by the risks related to the COVID-19 pandemic, which may result in ~~our quantitative and qualitative disclosures about market risk during~~delays in the ~~nine months ended December 31, 2017 from our 2017 Annual Report. For a discussion of the Company's exposure to market risk, reference is made to disclosures set forth in Part II, Item 7A~~collections of our ~~above-mentioned 2017 Annual Report.~~accounts receivables or non-payment.

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~~that are subject to fluctuations in short-term interest rates. ~~These~~Our non-recourse instruments, which are denominated in ~~U.S.~~US dollars, were entered ~~into~~ for other than trading purposes and ~~with the exception of amounts drawn under the WFCDF 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. Financing transactions 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 facility bear interest at a market-based variable rate. As of ~~December 31, 2017,~~September 30, 2020, the aggregate fair value of our recourse and non-recourse borrowings approximated their carrying value.

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We have transactions in foreign currencies, primarily in British Pounds, Euros, and ~~in Euros.~~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 ~~the~~our subsidiary’s functional currency. To date, our foreign 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.

The UK referendum (“Brexit”) to leave the European Union could impact revenue items, cost items, tax, goodwill impairments and liquidity, among others. The most obvious immediate impact is the effect of foreign exchange fluctuations on revenue and cost items. We have determined that our foreign currency exposure for our ~~United Kingdom~~UK operations is insignificant in relation to total consolidated operations, and we believe those potential fluctuations in currency exchange rates and other ~~Brexit related~~Brexit-related economic and operational risks will not have a material effect on our results of operations and financial position.

We evaluate Brexit-related developments on a regular basis to determine if such developments are anticipated to have a material impact on the Company’s results on operations and financial position.

We ~~have~~lease assets in foreign countries, including Canada, the UK and ~~Iceland.~~several other European countries. As 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 and~~smaller compared to our domestic operations, we believe that potential fluctuations in currency exchange rates will not have a material effect on our financial position.

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Item 4.

Controls and Procedures

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer (“CEO”) and our Chief Financial Officer (“CFO”), of the effectiveness of the design and operation of our disclosure controls and procedures, or “disclosure controls,” as defined in the Exchange Act Rule 13a-15(e). Disclosure controls are controls and procedures designed to reasonably ensure that information required to be disclosed in our reports filed under the Exchange Act, such as this quarterly report, is recorded, processed, summarized and reported within the ~~time~~ periods specified in the SEC’s rules and forms. Disclosure controls include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to our management, including our CEO and CFO, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Our disclosure controls include some, but not all, components of our internal control over financial reporting. Based upon that evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective as of ~~December 31, 2017.~~September 30, 2020.

Changes in Internal ~~Controls~~Control Over Financial Reporting.

There have not been any changes in our internal control over financial reporting during the quarter ended ~~December 31, 2017, which~~September 30, 2020, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

~~Table of Contents~~

Limitations on the Effectiveness of Controls

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

PART II. OTHER INFORMATION

Item 1.

Legal Proceedings

~~From~~We are not currently involved in any litigation that we believe could have a materially adverse effect on our financial condition or results of operation. However, from time to time, we may be subject to legal proceedings that arise in the ordinary course of business. Legal proceedings which may arise in the ordinary course of business include, but are not limited to, preference payment claims asserted in customer bankruptcy ~~proceedings,~~proceedings; tax ~~audits,~~audits; claims of alleged infringement of patents, trademarks, copyrights, and other intellectual property ~~rights,~~rights; claims of alleged non-compliance with contract ~~provisions,~~provisions; employment-related ~~claims,~~claims; claims by competitors, vendors, or ~~customers,~~customers; claims related to alleged violations of laws and ~~regulations, and~~regulations; claims relating to alleged security or privacy ~~breaches.~~breaches, and claims stemming from actions or events relating to COVID-19. We attempt to ameliorate the effect of potential litigation through insurance coverage and contractual protections such as rights to indemnifications and limitations of liability. Additionally, we proactively seek to recover funds to which we may be entitled. From time to time, we are successful in obtaining recoveries by filing a claim in class action suits, however, we have limited insight into the timing or amount of those recoveries.

We provide for costs relating to contingencies when a loss is probable, and the amount is reasonably determinable. In the opinion of management, there was not at least a reasonable possibility that the Company may have incurred a material loss, or a material loss in excess of a recorded accrual, with respect to loss contingencies for asserted legal and other claims. However, the outcome of legal proceedings and claims brought against us is subject to significant uncertainty. Therefore, although management considers the likelihood of such an outcome to be remote, if one or more of these legal matters were resolved against the Company in a reporting period for amounts in excess of management’s expectations, the Company’s consolidated financial statements for that reporting period could be materially adversely affected.

Table of Contents

Item 1A.

Risk Factors

There has not been any material change in the risk factors previously disclosed in Part I, Item 1A of our ~~2017~~2020 Annual Report.

~~Table of Contents~~

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

The following table provides information regarding our purchases of ePlus inc. common stock during the ~~nine~~six months ended ~~December 31, 2017.~~September 30, 2020.

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, 2017 through April 30, 2017 - $ - - 1,000,000 (2 )
May 1, 2017 through May 31, 2017 - $ - - 1,000,000 (3 )
June 1, 2017 through June 30, 2017 54,546 $ 75.72 - 1,000,000 (4 )
July 1, 2017 through July 31, 2017 3,179 $ 79.50 - 1,000,000 (5 )
August 1, 2017 through August 18, 2017 - $ - - 1,000,000 (6 )
August 19, 2017 through August 31, 2017 - $ - - 500,000 (7 )
September 1, 2017 through September 30, 2017 - $ - - 500,000 (8 )
October 1, 2017 through October 31, 2017 - $ - - 500,000 (9 )
November 1, 2017 through November 30, 2017 56,707 $ 78.21 - 443,293 (10 )
December 1, 2017 through December 31, 2017 68,898 $ 77.61 - 374,395 (11 )

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, 2020 through April 30, 2020		-	$	-		-		339,324	(2)
May 1, 2020 through May 27, 2020		996	$	66.75		-		339,324	(3)
May 28, 2020 through May 31, 2020		-				-		500,000	(4)
June 1, 2020 through June 30, 2020		36,644	$	71.94		-		500,000	(5)
July 1, 2020 through July 31, 2020		-				-		500,000	(6)
August 1, 2020 through August 31, 2020		-	$	-		-		500,000	(7)
September 1, 2020 through September 30, 2020		24,318	$	73.37		24,318		475,682	(8)

(1)

Any shares acquired were in open-market purchases, except for ~~54,546~~37,640 shares, out of which 996 were repurchased in May 2020 and 36,644 in June ~~2017, and 3,179 shares which were repurchased in July 2017,~~2020 to satisfy tax withholding obligations that arose due to the vesting of shares of restricted stock.

(2)

The share purchase authorization in place for the month ended April 30, ~~2017~~2020, had purchase limitations on the number of shares of up to ~~1,000,000~~500,000 shares. As of April 30, ~~2017,~~2020, the remaining authorized shares to be purchased were ~~1,000,000.~~339,324.

(3)

~~The share purchase authorization in place for the month ended May 31, 2017 had purchase limitations on the number of shares of up to 1,000,000 shares.~~ As of May ~~31, 2017, the remaining authorized shares to be purchased were 1,000,000.~~

~~(4)~~

The share purchase authorization in place for the month ended June 30, 2017 had purchase limitations on the number of shares of up to 1,000,000 shares. As of June 30, 2017, the remaining authorized shares to be purchased were 1,000,000.

~~(5)~~

The share purchase authorization in place for the month ended July 31, 2017 had purchase limitations on the number of shares of up to 1,000,000 shares. As of July 31, 2017, the remaining authorized shares to be purchased were 1,000,000.

~~(6)~~

~~As of August 18, 2017~~27, 2019, the authorization under the then existing share ~~purchase~~repurchase plan expired.

~~(7)~~(4)

On ~~August 15, 2017,~~May 20, 2020, the board of directors authorized the company to repurchase up to 500,000 shares of our outstanding common stock commencing on ~~August 19, 2017 through August 18, 2018.~~May 28, 2020, and continuing to May 27, 2021. As of ~~August~~May 31, ~~2017,~~2020, the remaining authorized shares to be purchased were 500,000.

(5)

The share purchase authorization in place for the month ended June 30, 2020, had purchase limitations on the number of shares of up to 500,000 shares. As of June 30, 2020, the remaining authorized shares to be purchased were 500,000.

(6)

The share purchase authorization in place for the month ended July 31, 2020, had purchase limitations on the number of shares of up to 500,000 shares. As of July 31, 2020, the remaining authorized shares to be purchased were 500,000.

(7)

The share purchase authorization in place for the month ended August 31, 2020, had purchase limitations on the number of shares of up to 500,000 shares. As of August 31, 2020, the remaining authorized shares to be purchased were 500,000.

(8)

The share purchase authorization in place for the month ended September 30, ~~2017~~2020, had purchase limitations on the number of shares of up to 500,000 shares. As of September 30, ~~2017,~~2020, the remaining authorized shares to be purchased were ~~500,000.~~475,682.

~~(9)~~

The share purchase authorization in place for the month ended October 31, 2017 had purchase limitations on the number of shares of up to 500,000 shares. As of October 31, 2017, the remaining authorized shares to be purchased were 500,000.

~~(10)~~

The share purchase authorization in place for the month ended November 30, 2017 had purchase limitations on the number of shares of up to 500,000 shares. As of November 30, 2017, the remaining authorized shares to be purchased were 443,293.

~~(11)~~

The share purchase authorization in place for the month ended December 31, 2017 had purchase limitations on the number of shares of up to 500,000 shares. As of December 31, 2017, the remaining authorized shares to be purchased were 374,395.

The timing and expiration date of the current stock repurchase authorizations are included in Note ~~10, “Stockholders’ Equity~~12”, “Stockholders’ Equity” to our unaudited condensed consolidated financial statements included elsewhere in this report.

~~Table of Contents~~

Item 3.

Defaults Upon Senior Securities

Not Applicable.

Item 4.

Mine Safety Disclosures

Not Applicable.

Item 5.

Other Information

None.

Table of Contents

Item 6.

Exhibits

~~10.1~~Exhibit Number	~~Amended and Restated Employment Agreement effective September 6, 2017, by and between ePlus inc. and Mark P. Marron.~~	Exhibit Description

~~10.2~~3.1		ePlus inc. Amended and Restated ~~Employment Agreement effective December 12, 2017,~~Certificate of Incorporation as amended September 15, 2008 (Incorporated herein by ~~and between ePlus inc. and Phillip G. Norton.~~reference as Exhibit 3.1 to our Current Report on Form 8-K filed on September 19, 2008).

~~10.3~~3.2		Amended and Restated ~~Employment Agreement effective September 6, 2017,~~Bylaws of ePlus inc., as amended February 15, 2018 (Incorporated herein by ~~and between ePlus inc. and Elaine D. Marion.~~reference to Exhibit 3.1 to our Current Report on Form 8-K filed on February 20, 2018).

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

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

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

101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema Document

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		XBRL Taxonomy Extension Label Linkbase Document

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

104		Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).

Table of Contents

SIGNATURES

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

	e~~Plus~~ePlus inc.

Date: ~~February 7, 2018~~November 4, 2020	/s/ MARK P. MARRON
	By: Mark P. Marron,
	Chief Executive Officer and President
	(Principal Executive Officer)

Date: ~~February 7, 2018~~November 4, 2020	/s/ ELAINE D. MARION
	By: Elaine D. Marion
	Chief Financial Officer
	(Principal Financial Officer)

4647

	As of December 31, 2017			As of March 31, 2017
ASSETS	(in thousands, except per share data)

Current assets:
Cash and cash equivalents	$	76,105		$	109,760
Accounts receivable—trade, net		285,820			266,029
Accounts receivable—other, net		30,690			24,987
Inventories		51,295			93,557
Financing receivables—net, current		74,598			51,656
Deferred costs		24,740			7,971
Other current assets		25,970			43,364
Total current assets		569,218			597,324

Financing receivables and operating leases—net		72,575			71,883
Deferred tax assets—net		1,268			-
Property, equipment and other assets		17,632			11,956
Goodwill		76,546			48,397
Other intangible assets—net		27,414			12,160
TOTAL ASSETS	$	764,653		$	741,720

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES

Current liabilities:
Accounts payable	$	125,850		$	113,518
Accounts payable—floor plan		107,761			132,612
Salaries and commissions payable		20,568			18,878
Deferred revenue		50,739			65,312
Recourse notes payable—current		-			908
Non-recourse notes payable—current		27,649			26,085
Other current liabilities		26,116			19,179
Total current liabilities		358,683			376,492

Non-recourse notes payable—long term		3,840			10,431
Deferred tax liability—net		-			1,799
Other liabilities		18,518			7,080
TOTAL LIABILITIES		381,041			395,802

COMMITMENTS AND CONTINGENCIES (Note 8)

STOCKHOLDERS' EQUITY

Preferred stock, $.01 per share par value; 2,000 shares authorized; none outstanding		-			-
Common stock, $.01 per share par value; 25,000 shares authorized;14,046 outstanding at December 31, 2017 and 14,161 outstanding at March 31, 2017		142			142
Additional paid-in capital		128,392			123,536
Treasury stock, at cost		(14,165	)		-
Retained earnings		269,048			222,823
Accumulated other comprehensive income—foreign currency translation adjustment		195			(583	)
Total Stockholders' Equity		383,612			345,918
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	764,653		$	741,720

	Nine Months Ended December 31,
	2017			2016
	(in thousands)
Cash Flows From Operating Activities:
Net earnings	$	46,225		$	40,066

Adjustments to reconcile net earnings to net cash (used in) provided by operating activities:
Depreciation and amortization		11,324			8,758
Reserve for credit losses, inventory obsolescence and sales returns		286			926
Share-based compensation expense		4,856			4,520
Deferred taxes		(3,058	)		-
Payments from lessees directly to lenders—operating leases		(1,325	)		(1,831	)
Gain on disposal of property, equipment and operating lease equipment		(7,555	)		(3,742	)
Gain on sale of financing receivables		(4,625	)		(3,968	)
Other		1			316
Changes in:
Accounts receivable—trade		(8,295	)		(57,732	)
Accounts receivable—other		(1,976	)		(4,232	)
Inventories		43,332			(77,422	)
Financing receivables—net		(13,045	)		17,797
Deferred costs, other intangible assets and other assets		(26,188	)		1,838
Accounts payable		18,406			53,208
Salaries and commissions payable, deferred revenue and other liabilities		(9,539	)		51,200
Net cash provided by operating activities	$	48,824		$	29,702

Cash Flows From Investing Activities:
Proceeds from sale of property, equipment and operating lease equipment		9,967			6,380
Purchases of property, equipment, software, and operating lease equipment		(6,298	)		(7,300	)
Purchases of assets to be leased or financed		(5,716	)		(5,897	)
Issuance of financing receivables		(138,160	)		(114,671	)
Repayments of financing receivables		59,029			44,091
Proceeds from sale of financing receivables		64,103			39,857
Cash used in acquisitions, net of cash acquired		(37,718	)		(9,500	)
Net cash used in investing activities	$	(54,793	)	$	(47,040	)

	Nine Months Ended December 31, 2017							Nine Months Ended December 31, 2016
	Goodwill		Accumulated Amortization / Impairment Loss			Net Carrying Amount		Goodwill			Accumulated Amortization / Impairment Loss			Net Carrying Amount

Balance as of March 31	$	57,070	$	(8,673	)	$	48,397	$	50,824		$	(8,673	)	$	42,151
Acquisitions		27,996		-			27,996		7,636			-			7,636
Foreign currency translations		153		-			153		(315	)		-			(315	)
Balance as of December 31	$	85,219	$	(8,673	)	$	76,546	$	58,145		$	(8,673	)	$	49,472

	December 31, 2017		March 31, 2017
Recourse notes payable with interest rates ranging from 3.20% to 4.13% as of March 31, 2017.
Current	$	-	$	908

Non-recourse notes payable secured by financing receivables and investment in operating leases with interest rates ranging from 2.00% to 8.45% December 31, 2017, and ranging from 2.00% to 7.75% as of March 31, 2017.
Current	$	27,649	$	26,085
Long-term		3,840		10,431
Total non-recourse notes payable	$	31,489	$	36,516

	Three Months Ended
	December 31, 2017						December 31, 2016
	Technology		Financing		Total		Technology		Financing		Total

Sales of product and services	$	330,953	$	-	$	330,953	$	317,391	$	-	$	317,391
Financing revenue		-		9,592		9,592		-		8,190		8,190
Fee and other income		1,678		346		2,024		915		161		1,076
Net sales		332,631		9,938		342,569		318,306		8,351		326,657

Cost of sales, product and services		264,487		-		264,487		251,729		-		251,729
Direct lease costs		-		1,394		1,394		-		1,142		1,142
Cost of sales		264,487		1,394		265,881		251,729		1,142		252,871

Selling, general, and administrative expenses		53,836		3,298		57,134		47,780		2,380		50,160
Depreciation and amortization		2,893		1		2,894		1,908		2		1,910
Interest and financing costs		-		270		270		-		409		409
Operating expenses		56,729		3,569		60,298		49,688		2,791		52,479

Operating income	$	11,415	$	4,975	$	16,390	$	16,889	$	4,418	$	21,307

Selected Financial Data - Statement of Cash Flow
Depreciation and amortization	$	3,157	$	1,422	$	4,579	$	1,941	$	985	$	2,926
Purchases of property, equipment and operating lease equipment	$	2,018	$	844	$	2,862	$	849	$	3,282	$	4,131

Selected Financial Data - Balance Sheet
Total assets	$	595,584	$	169,069	$	764,653	$	546,728	$	189,950	$	736,678

	Nine Months Ended
	December 31, 2017						December 31, 2016
	Technology		Financing		Total		Technology		Financing		Total

Sales of product and services	$	1,045,792	$	-	$	1,045,792	$	968,799	$	-	$	968,799
Financing revenue		-		30,698		30,698		-		23,899		23,899
Fee and other income		3,707		374		4,081		3,679		245		3,924
Net sales		1,049,499		31,072		1,080,571		972,478		24,144		996,622

Cost of sales, product and services		834,873		-		834,873		769,780		-		769,780
Direct lease costs		-		3,846		3,846		-		3,459		3,459
Cost of sales		834,873		3,846		838,719		769,780		3,459		773,239

Selling, general, and administrative expenses		158,838		9,300		168,138		141,295		8,526		149,821
Depreciation and amortization		7,084		2		7,086		5,400		8		5,408
Interest and financing costs		-		903		903		-		1,158		1,158
Operating expenses		165,922		10,205		176,127		146,695		9,692		156,387

Operating income	$	48,704	$	17,021	$	65,725	$	56,003	$	10,993	$	66,996

Selected Financial Data - Statement of Cash Flow
Depreciation and amortization	$	7,413	$	3,911	$	11,324	$	5,494	$	3,264	$	8,758
Purchases of property, equipment and operating lease equipment	$	4,064	$	2,234	$	6,298	$	2,413	$	4,887	$	7,300

Selected Financial Data - Balance Sheet
Total assets	$	595,584	$	169,069	$	764,653	$	546,728	$	189,950	$	736,678

	Acquisition Date Amount
Accounts receivable and other assets	$	14,353
Property and equipment		1,620
Identified intangible assets		13,650
Accounts payable and other current liabilities		(12,313	)
Total identifiable net assets		17,310
Goodwill		21,088
Total purchase consideration	$	38,398

	Acquisition Date Amount
Accounts receivable and other current assets	$	7,491
Property and equipment		1,045
Identified intangible assets		4,090
Accounts payable and other current liabilities		(5,786	)
Total identifiable net assets		6,840
Goodwill		6,227
Total purchase consideration	$	13,067

Quarter Ended	Sequential			Year over Year
December 31, 2017		(7.5	%)		4.3	%
September 30, 2017		0.2	%		(1.0	%)
June 30, 2017		11.1	%		23.1	%
March 31, 2017		1.3	%		10.3	%
December 31, 2016		(12.1	%)		10.3	%

	As of December 31,
	2017			2016

(DSO) Days sales outstanding (1)		52			52
(DIO) Days inventory outstanding (2)		12			23
(DPO) Days payable outstanding (3)		(40	)		(48	)
Cash conversion cycle		24			27

Maximum Credit Limit at December 31, 2017				Balance as of December 31, 2017				Maximum Credit Limit at March 31, 2017				Balance as of March 31, 2017
$	250,000			$	107,761			$	250,000			$	132,612

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, 2017 through April 30, 2017		-	$	-		-		1,000,000	(2	)
May 1, 2017 through May 31, 2017		-	$	-		-		1,000,000	(3	)
June 1, 2017 through June 30, 2017		54,546	$	75.72		-		1,000,000	(4	)
July 1, 2017 through July 31, 2017		3,179	$	79.50		-		1,000,000	(5	)
August 1, 2017 through August 18, 2017		-	$	-		-		1,000,000	(6	)
August 19, 2017 through August 31, 2017		-	$	-		-		500,000	(7	)
September 1, 2017 through September 30, 2017		-	$	-		-		500,000	(8	)
October 1, 2017 through October 31, 2017		-	$	-		-		500,000	(9	)
November 1, 2017 through November 30, 2017		56,707	$	78.21		-		443,293	(10	)
December 1, 2017 through December 31, 2017		68,898	$	77.61		-		374,395	(11	)