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~~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~~ February 1, 2021,was ~~13,948,590.~~13,503,352.

Table of Contents

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~~2020, and March 31, ~~2017~~2020	5

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

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

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

	Unaudited ~~Condensed~~ Consolidated Statements of Stockholders’ Equity for the Nine Months Ended December 31, ~~2017~~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	2628

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4145

Item 4.	Controls and Procedures	4246

Part II. Other Information:

Item 1.	Legal Proceedings	4346

Item 1A.	Risk Factors	4347

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4447

Item 3.	Defaults Upon Senior Securities	4548

Item 4.	Mine Safety Disclosures	4548

Item 5.	Other Information	4548

Item 6.	Exhibits	4549

Signatures & Certifications		4650

Table of Contents

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

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

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

the duration and impact of the novel coronavirus (“COVID-19”) pandemic, 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;~~

the efficacy of the manufacture and distribution of vaccines for the COVID-19 virus:

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

national and international political instability fostering uncertainty and volatility in the global economy including an economic downturn, an increase in tariffs or adverse changes to trade agreements, exposure to fluctuation in foreign currency rates, interest rates, and downward pressure on prices;

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

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

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

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

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:

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

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

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

~~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;~~

~~Table of Contents~~

~~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;

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

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”);

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

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

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

future growth rates in our core 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.

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;

Table of Contents

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

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

Table of Contents

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

	December 31, 2020			March 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	86,463		$	86,231
Accounts receivable—trade, net		460,385			374,998
Accounts receivable—other, net		34,355			36,570
Inventories		81,304			50,268
Financing receivables—net, current		126,692			70,169
Deferred costs		28,939			22,306
Other current assets		8,514			9,256
Total current assets		826,652			649,798

Financing receivables and operating leases—net		87,342			74,158
Property, equipment and other assets		43,387			32,596
Goodwill		126,945			118,097
Other intangible assets—net		41,628			34,464
TOTAL ASSETS	$	1,125,954		$	909,113

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES

Current liabilities:
Accounts payable	$	159,175		$	82,919
Accounts payable—floor plan		177,084			127,416
Salaries and commissions payable		33,197			30,952
Deferred revenue		68,466			55,480
Recourse notes payable—current		0			37,256
Non-recourse notes payable—current		62,021			29,630
Other current liabilities		31,095			22,986
Total current liabilities		531,038			386,639

Non-recourse notes payable—long term		6,312			5,872
Deferred tax liability—net		3,763			2,730
Other liabilities		39,832			27,727
TOTAL LIABILITIES		580,945			422,968

COMMITMENTS AND CONTINGENCIES (Note 10)		0			0

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; 13,503 outstanding at December 31, 2020 and 13,500 outstanding at March 31, 2020		145			144
Additional paid-in capital		150,624			145,197
Treasury stock, at cost, 993 shares at December 31, 2020 and 896 shares at March 31, 2020		(75,372	)		(68,424	)
Retained earnings		469,063			410,219
Accumulated other comprehensive income—foreign currency translation adjustment		549			(991	)
Total Stockholders' Equity		545,009			486,145
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	1,125,954		$	909,113

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

Table of Contents

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 December 31,				Nine Months Ended December 31,
	2020		2019		2020		2019

Net sales
Product	$	375,512	$	378,569	$	1,066,408	$	1,077,667
Services		52,092		50,422		149,308		144,261
Total		427,604		428,991		1,215,716		1,221,928
Cost of sales
Product		297,514		293,209		827,111		832,135
Services		31,939		32,086		92,935		90,427
Total		329,453		325,295		920,046		922,562
Gross profit		98,151		103,696		295,670		299,366

Selling, general, and administrative		65,390		73,090		201,746		209,400
Depreciation and amortization		3,143		3,647		10,000		10,667
Interest and financing costs		355		694		1,179		1,898
Operating expenses		68,888		77,431		212,925		221,965

Operating income		29,263		26,265		82,745		77,401

Other income (expense)		813		997		1,095		912

Earnings before tax		30,076		27,262		83,840		78,313

Provision for income taxes		8,438		7,712		24,996		22,477

Net earnings	$	21,638	$	19,550	$	58,844	$	55,836

Net earnings per common share—basic	$	1.62	$	1.47	$	4.41	$	4.19
Net earnings per common share—diluted	$	1.62	$	1.46	$	4.39	$	4.16

Weighted average common shares outstanding—basic		13,332		13,320		13,342		13,329
Weighted average common shares outstanding—diluted		13,378		13,378		13,402		13,410

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

Table of Contents

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 December 31,				Nine Months Ended December 31,
	2020		2019		2020		2019

NET EARNINGS	$	21,638	$	19,550	$	58,844	$	55,836

OTHER COMPREHENSIVE INCOME, NET OF TAX:

Foreign currency translation adjustments		983		682		1,540		69

Other comprehensive income (loss)		983		682		1,540		69

TOTAL COMPREHENSIVE INCOME	$	22,621	$	20,232	$	60,384	$	55,905

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

Table of Contents

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 )

	Nine Months Ended December 31,
	2020			2019
Cash flows from operating activities:
Net earnings	$	58,844		$	55,836

Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:
Depreciation and amortization		13,762			15,217
Reserve for credit losses		1,920			504
Share-based compensation expense		5,427			6,019
Deferred taxes		1,033			(3	)
Payments from lessees directly to lenders—operating leases		(25	)		(44	)
Gain on disposal of property, equipment, and operaing lease equipment		(408	)		(614	)
Changes in:
Accounts receivable		(67,989	)		(102,093	)
Inventories-net		(28,340	)		(10,429	)
Financing receivables—net		(67,112	)		(87,633	)
Deferred costs and other assets		(15,865	)		(18,424	)
Accounts payable-trade		70,726			33,574
Salaries and commissions payable, deferred revenue, and other liabilities		33,271			33,362
Net cash provided by (used in) operating activities		5,244			(74,728	)

Cash flows from investing activities:
Proceeds from sale of property, equipment, and operating lease equipment		670			1,404
Purchases of property, equipment and operating lease equipment		(4,227	)		(7,209	)
Cash used in acquisitions, net of cash acquired		(27,102	)		(14,239	)
Net cash used in investing activities		(30,659	)		(20,044	)

Cash flows from financing activities:
Borrowings of non-recourse and recourse notes payable		31,698			75,557
Repayments of non-recourse and recourse notes payable		(41,870	)		(9,854	)
Repurchase of common stock		(6,948	)		(13,692	)
Repayments of financing of acquisitions		(556	)		(5,763	)
Net borrowings on floor plan facility		44,058			28,400
Net cash provided by financing activities		26,382			74,648

Effect of exchange rate changes on cash		(735	)		(137	)

Net increase (decrease) in cash and cash equivalents		232			(20,261	)

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

Cash and cash equivalents, end of period	$	86,463		$	59,555

Table of Contents

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 ) $ -

	Nine Months Ended December 31,
	2020			2019
Supplemental disclosures of cash flow information:
Cash paid for interest	$	929		$	1,721
Cash paid for income taxes	$	21,257		$	19,519
Cash paid for amounts included in the measurement of lease liabilities	$	4,460		$	4,113

Schedule of non-cash investing and financing activities:
Purchases of property, equipment, and operating lease equipment	$	(221	)	$	(425	)
Consideration for acquisitions	$	0		$	(1,037	)
Borrowing of non-recourse and recourse notes payable	$	77,289		$	111,234
Repayments of non-recourse and recourse notes payable	$	(25	)	$	(44	)
Vesting of share-based compensation	$	7,926		$	8,990
New operating lease assets obtained in exchange for lease obligations	$	1,097		$	6,035

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

Table of Contents

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

	Nine Months Ended December 31, 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
Issuance of restricted stock awards		1			0		0		0			0		0			0
Share-based compensation		0			0		1,779		0			0		0			1,779
Repurchase of common stock		(35	)		0		0		(2,461	)		0		0			(2,461	)
Net earnings		-			0		0		0			21,638		0			21,638
Foreign currency translation adjustment		-			0		0		0			0		983			983

Balance, December 31, 2020		13,503		$	145	$	150,624	$	(75,372	)	$	469,063	$	549		$	545,009

	Nine Months Ended December 31, 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
Issuance of restricted stock awards		0			0		0		0			0		0			0
Share-based compensation		0			0		1,965		0			0		0			1,965
Repurchase of common stock		0			0		0		0			0		0			0
Net earnings		-			0		0		0			19,550		0			19,550
Foreign currency translation adjustment		-			0		0		0			0		682			682

Balance, December 31, 2019		13,513		$	144	$	143,262	$	(67,691	)	$	396,973	$	(202	)	$	472,486

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

Table of Contents

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 months ended December 31, ~~2017~~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 months ended December 31, ~~2017~~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 32% and ~~HP, Inc. (collectively “Hewlett Packard companies”), and NetApp products, which represented approximately 39%, 5% and 7%, and 45%, 7%, and 5%, respectively,~~41% of our technology segment’s net sales for the three months ended December 31, 2020, and 2019, respectively, and 37% and 41% of our technology segment’s net sales for the nine months ended December 31, ~~2017. Sales of Cisco Systems, Hewlett Packard companies,~~2020, and ~~NetApp represented approximately 45%, 6% and 6%, and 49%, 6% and 5%, respectively,~~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 Consolidated Financial Statements for the ~~three and nine months~~year ended ~~December~~ March 31, ~~2016. Any~~2020, except for changes ~~in our vendors’ ability to provide products or incentive programs could have a material adverse effect on our business, results~~from the adoption of ~~operations and financial condition.~~

~~Table of Contents~~

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~~ Financial Accounting Standards Board (“FASB”) Accounting Standards Update ("ASU") 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 revenue for the transfer 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 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.

Table of Contents

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 $24.4 million and $33.1 million of receivables from contracts with customers included within financing receivables as of December 31,2020, and March 31,2020, respectively. The following table provides the balance of contract liabilities from contracts with customers (in thousands):

	December 31, 2020		March 31, 2020
Current (included in deferred revenue)	$	67,845	$	54,486
Non-current (included in other liabilities)	$	28,441	$	16,395

Revenue recognized from the beginning contract liability balance was $9.6 million and $36.5 million for the three and nine months ended December 31, 2020, respectively, and $15.9 million and $45.3 million for the three and nine months ended December 31, 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	$	13,381
Year Ending March 31, 2022		30,971
Year Ending March 31, 2023		15,062
Year Ending March 31, 2024		6,821
Year Ending March 31, 2025		700
Year Ending March 31, 2026 and thereafter		184
Total remaining performance obligations	$	67,119

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 nine months ended December 31, 2020, and 2019 (in thousands):

	Three months ended December 31,				Nine months ended December 31,
	2020		2019		2020		2019
Net sales	$	4,182	$	5,710	$	22,000	$	13,697
Cost of sales		3,362		4,807		14,091		11,459
Gross profit	$	820	$	903	$	7,909	$	2,238

Table of Contents

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~~nine months ended December 31, 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 December 31,				Nine months ended December 31,
	2020		2019		2020		2019
Interest income on sales-type leases	$	1,956	$	1,272	$	6,059	$	4,862
Lease income on operating leases	$	3,623	$	4,489	$	11,361	$	14,908

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
December 31, 2020										Notes Receivable			Lease Receivables			Financing Receivables

Gross receivables										$	111,321		$	89,629		$	200,950
Unguaranteed residual value (1)											0			20,388			20,388
Initial direct costs, net of amortization											464			0			464
Unearned income		-			(6,034	)		(6,034	)		0			(12,133	)		(12,133	)
Reserve for credit losses (3)		(451	)		(621	)		(1,072	)
Reserve for credit losses (2)											(1,280	)		(1,088	)		(2,368	)
Total, net	$	59,362		$	80,046		$	139,408		$	110,505		$	96,796		$	207,301
Reported as:
Current	$	33,109		$	41,489		$	74,598		$	74,585		$	52,107		$	126,692
Long-term		26,253			38,557			64,810			35,920			44,689			80,609
Total, net	$	59,362		$	80,046		$	139,408		$	110,505		$	96,796		$	207,301

(1)

Includes ~~estimated~~ unguaranteed residual values of ~~$7,753~~$12,314 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~~.”

Table of Contents

The following table provides the future scheduled minimum lease payments for investments in sales-type leases as of December 31,2020 (in thousands):

Remainder of the Year ending March 31, 2021	$	40,211
Year Ending March 31, 2022		24,111
Year Ending March 31, 2023		16,337
Year Ending March 31, 2024		5,992
Year Ending March 31, 2025 and thereafter		2,978
Total	$	89,629

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):

							December 31, 2020			March 31, 2020
	December 31, 2017			March 31, 2017
Cost of equipment under operating leases	$	16,804		$	16,725		$	18,182		$	21,276
Accumulated depreciation		(9,039	)		(8,449	)		(11,449	)		(11,159	)
Investment in operating lease equipment—net (1)	$	7,765		$	8,276		$	6,733		$	10,117

(1)

~~These totals~~Amounts include estimated unguaranteed residual values of ~~$2,077 thousand~~$2.6 million and ~~$1,117 thousand~~$3.1 million as of December 31, ~~2017~~2020, and March 31, ~~2017,~~2020, respectively.

The following table provides the future scheduled minimum lease rental payments for operating leases as of December 31,2020 (in thousands):

Remainder of the Year ending March 31, 2021	$	625
Year Ending March 31, 2022		2,007
Year Ending March 31, 2023		1,456
Year Ending March 31, 2024		479
Year Ending March 31, 2025 and thereafter		37
Total	$	4,604

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~~2020, and March 31, ~~2017,~~2020, we had financing receivables of ~~$37.2~~$69.4 million and ~~$33.1~~$34.6 million, respectively, and operating leases of ~~$5.9~~$4.4 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~~2020, and ~~2016,~~2019, we recognized net gains of ~~$1.2~~$3.0 million and ~~$0.9~~$9.5 million, respectively, and total proceeds from these sales were ~~$32.8~~$67.5 million and ~~$55.8~~$246.0 million, respectively. ~~During~~For the ~~nine months~~year to date periods ended December 31, ~~2017~~2020, and ~~2016,~~2019, we recognized net gains of ~~$4.6~~$10.1 million and ~~$4.1~~$17.0 million, respectively, and total proceeds from these sales were ~~$166.9~~$259.2 million and ~~$185.4~~$414.6 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~~2020, and March 31, ~~2017,~~2020, we had deferred revenue of ~~$0.5~~$0.4 million for ~~servicing.~~ servicing obligations.

Table of Contents

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,~~2020, our ~~maximum~~total potential ~~future payments related to such guarantees~~liability that could result from these indemnities is ~~$0.6 million.~~immaterial. We believe the ~~possibility~~likelihood of making any such payments to be remote.

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 and $1.6 million for the three months ending December 31, 2020, and December 31, 2019, respectively, and $4.6 million and $4.7 million for the nine months ending December 31, 2020, and December 31, 2019, respectively, as part of selling, general, and administrative expenses.

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

Lease term and Discount Rate	December 31, 2020			March 31, 2020
Weighted average remaining lease term (months)		33			38
Weighted average discount rate		3.8	%		3.9	%

The following table provides our future lease payments under our operating leases as of December 31, 2020 (in thousands):

	December 31, 2020
Remainder of the year ending March 31, 2021	$	967
Year ending March 31, 2022		4,390
Year ending March 31, 2023		3,166
Year ending March 31, 2024		1,323
Year ending March 31, 2025 and thereafter		917
Total lease payments	$	10,763
Less: interest		(530	)
Present value of lease liabilities	$	10,233

6.	GOODWILL AND OTHER INTANGIBLE ASSETS

GOODWILL

The following table summarizes the changes in the carrying amount of goodwill for the nine months ended December 31, ~~2017~~2020 (in thousands):

	Nine months ended December 31, 2020
	Goodwill		Accumulated Impairment Loss			Net Carrying Amount

Beginning balance	$	126,770	$	(8,673	)	$	118,097
Acquisitions		8,643		-			8,643
Foreign currency translations		205		-			205
Ending balance	$	135,618	$	(8,673	)	$	126,945

Goodwill represents the premium paid over the fair value of the net tangible 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~~intangible assets that are individually identified and separately recognized in business combinations. Our entire balance as of December 31, ~~2017~~2020, and March 31, ~~2017 was assigned~~2020, relates to our technology reportable segment, which iswe also ~~a single~~determined to be 1 reporting unit. ~~See~~ The carrying value of goodwill was $126.9 and $118.1 million as of December 31, 2020, and March 31, 2020, respectively. The increase in the balance during the nine months ended December 31, 2020, is due to our acquisition of certain assets and liabilities of Systems Management and Planning, Inc. (“SMP”), and changes in foreign currency translation of $0.2 million. Refer to Note ~~15, "Business Combinations~~16", “Business Combinations” for ~~additional information regarding our acquisitions.~~details.

Table of Contents

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~~2020, 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.

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.

OTHER INTANGIBLE ASSETS

~~Our~~

Our other intangible assets consist of the following aton December 31, ~~2017~~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

	December 31, 2020							March 31, 2020
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount

Customer relationships & other intangibles	$	77,307	$	(39,371	)	$	37,936	$	63,006	$	(33,000	)	$	30,006
Capitalized software development		10,537		(6,845	)		3,692		10,385		(5,927	)		4,458
Total	$	87,844	$	(46,216	)	$	41,628	$	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~~$2.3 million ~~and $1.1 million~~ for the three months ended December 31, 2020 and ~~$4.2~~$2.6 million for the three months ended December 31, 2019, and ~~$3.4~~$7.3 million and $7.5 million for the nine months ended December 31, ~~2017~~2020, and ~~2016,~~2019, respectively. The change in the gross carrying amount of other intangible asset is due to the addition of a customer relationship intangible asset of $14.3 million from our acquisition of SMP. Refer to Note 16, “Business Combinations” for details.

~~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 months ended December 31, ~~2017~~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			866			570			484			1,920
Write-offs and other		-		(3,020	)		(164	)		(3,184	)		(46	)		(88	)		(6	)		(140	)
Balance December 31, 2017	$	1,444	$	451		$	621		$	2,516
Balance December 31, 2020												$	2,601		$	1,280		$	1,088		$	4,969

	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			107			283		114			504
Write-offs and other		(32	)		(12	)		-		(44	)		(304	)		0		(2	)		(306	)
Balance December 31, 2016	$	1,324		$	3,508		$	778	$	5,610
Balance December 31, 2019												$	1,382		$	788	$	642		$	2,812

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~~evaluate our ~~investment in direct financing and sales-type leases that are past due disaggregated based on our~~customers using an internally assigned credit quality rating (“CQR”) ~~were as follows~~:

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

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

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

The following table provides the amortized cost basis of our financing receivables by CQR and by credit origination year as of December 31, ~~2017 and March 31, 2017~~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		Amortized cost basis by origination year ending March 31,
																							2021		2020		2019		2018		2017		Total		Transfers (2)			Net credit exposure
December 31, 2017

Notes receivable:

High CQR	$	188	$	90	$	907	$	1,185	$	18,238	$	30,496	$	49,919	$	(3,027	)	$	(14,420	)	$	32,472	$	82,424	$	6,952	$	1,259	$	856	$	27	$	91,518	$	(60,295	)	$	31,223
Average CQR		30		36		216		282		124		22,697		23,103		(1,385	)		(11,413	)		10,305		14,922		3,945		576		36		0		19,479		(6,999	)		12,480
Low CQR		-		-		-		-		-		-		-		-			-			-		0		0		324		0		0		324		0			324
Total	$	218	$	126	$	1,123	$	1,467	$	18,362	$	53,193	$	73,022	$	(4,412	)	$	(25,833	)	$	42,777	$	97,346	$	10,897	$	2,159	$	892	$	27	$	111,321	$	(67,294	)	$	44,027

March 31, 2017
Lease receivables:

High CQR	$	379	$	224	$	230	$	833	$	406	$	32,532	$	33,771	$	(2,362	)	$	(12,924	)	$	18,485	$	39,177	$	8,137	$	2,273	$	713	$	299	$	50,599	$	(18,555	)	$	32,044
Average CQR		113		20		113		246		91		23,622		23,959		(1,556	)		(13,353	)		9,050		25,059		7,709		1,751		403		49		34,971		(4,792	)		30,179
Low CQR		-		-		142		142		-		-		142		(19	)		-			123		0		0		0		0		0		0		0			0
Total	$	492	$	244	$	485	$	1,221	$	497	$	56,154	$	57,872	$	(3,937	)	$	(26,277	)	$	27,658	$	64,236	$	15,846	$	4,024	$	1,116	$	348	$	85,570	$	(23,347	)	$	62,223
Total amortized cost (1)																							$	161,582	$	26,743	$	6,183	$	2,008	$	375	$	196,891	$	(90,641	)	$	106,250

(1)	Unguaranteed residual values of $12,314 thousand that we retained after selling the related lease receivable and initial direct costs of notes receivable of $464 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.

Table of Contents

The ~~age~~following table provides an aging analysis of ~~the recorded~~our financing receivables as of December 31, 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	$	406	$	2,264	$	967	$	3,637	$	8,839	$	12,476	$	98,845	$	111,321
Lease receivables		4,272		1,832		1,295		7,399		3,584		10,983		74,587		85,570
Total	$	4,678	$	4,096	$	2,262	$	11,036	$	12,423	$	23,459	$	173,432	$	196,891

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

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~~of December 31, ~~2017~~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~~

Table 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.Contents

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

Other current assets:

Deposits & funds held in escrow $ 14,819 $ 39,161
Prepaid assets 10,429 3,388
Other 722 815
Total other current assets $ 25,970 $ 43,364

Property, equipment and other assets

Property and equipment, net $ 8,013 $ 6,690
Deferred costs 7,326 3,536
Other 2,293 1,730
Total other assets - long term $ 17,632 $ 11,956

	December 31, 2017		March 31, 2017		December 31, 2020		March 31, 2020
Other current liabilities:
Other current assets:
Deposits & funds held in escrow					$	376	$	926
Prepaid assets						7,626		7,946
Other						512		384
Total					$	8,514	$	9,256

Property, equipment and other assets
Property and equipment, net					$	7,921	$	7,153
Deferred costs - non-current						20,650		10,957
Right-of-use assets						9,986		13,066
Other						4,830		1,420
Total					$	43,387	$	32,596

Other current liabilities:
Accrued expenses	$	7,907	$	7,450	$	13,054	$	10,024
Accrued income taxes payable		170		1,761		2,249		406
Contingent consideration		5,360		554
Contingent consideration - current						0		220
Short-term lease liability						4,292		4,815
Other		12,679		9,414		11,500		7,521
Total other current liabilities	$	26,116	$	19,179
Total					$	31,095	$	22,986

Other liabilities:
Other liabilities:
Deferred revenue	$	10,064	$	4,704	$	28,708	$	16,693
Contingent consideration long-term		7,765		1,500
Long-term lease liability						5,941		8,326
Other		689		876		5,183		2,708
Total other liabilities - long term	$	18,518	$	7,080
Total					$	39,832	$	27,727

~~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 on the contingent consideration liability, refer to Note 15, “~~Business Combinations~~.”

As of December 31, 2017 and March 31, 2017 we had customer 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 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

~~Non-recourse and recourse obligations consist 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

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 forWithin our ~~non-recourse notes payable was 3.73%, as of both December 31, 2017 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.

~~Our~~ technology segment, ~~through our subsidiary~~ ePlus Technology, inc.~~, finances~~ 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 ~~two~~2 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~~$177.1 million and ~~$132.6~~$127.4 million as of December 31, ~~2017~~2020, and March 31, ~~2017, respectively. Under~~2020, respectively, and are presented as accounts payable – floorplan. The fair value of the ~~accounts receivable component, we had no~~ outstanding ~~balances~~balance under the credit facility was equal to its carrying value as of December 31, ~~2017~~2020, and March 31, ~~2017.~~2020.

On ~~July 27, 2017,~~May 15, 2020, we executed an amendment to the WFCDF credit facility ~~which temporarily increases~~that increased the aggregate limit of the ~~two~~2 components, ~~from $250.0 million~~except during a temporary uplift, to ~~$325.0 million from the date of the agreement through October 31, 2017, and provides us~~$275 million. Additionally, we have an election ~~beginning July 1 in each subsequent year~~ to ~~similarly~~ temporarily increase the aggregate limit to $350 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 million, changed the interest rate to two ~~components~~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 ~~$325.0 million ending the earlier~~pay dividends to ePlus inc.

Table of ~~90 days following the date of election or October 31 of that same year.~~Contents

As of December 31, ~~2017,~~2020, the ~~facility agreement had an aggregate~~ limit of the ~~two~~2 components of ~~$250~~the credit facility was $275 million, and the accounts receivable component had a sub-limit of ~~$30 million, which bears interest assessed at a rate~~$100 million. Our borrowing availability under the credit facility varies based upon the value of the ~~One Month LIBOR plus two~~receivables and ~~one half percent.~~inventory of ePlus Technology, inc., and certain of its subsidiaries. Under the accounts receivable component, we had 0 outstanding balance as of December 31, 2020 and $35 million outstanding as of March 31, 2020. The accounts receivable component is presented as recourse notes payable – current.

~~Table of Contents~~

The WFCDF credit facility ~~has full recourse to~~ is secured by the assets of ePlus Technology, inc. and ~~is secured~~certain of its subsidiaries. Additionally, the credit facility requires a guaranty of $10.5 million 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 ePlus ~~Technology,~~ inc. ~~We were in compliance with these covenants as of December 31, 2017. In addition, the~~

The credit facility restricts the ability of ePlus Technology, inc. and certain of its subsidiaries to ~~transfer funds to its affiliates in the form of dividends, loans or advances with certain exceptions for~~pay dividends to ePlus inc. unless their available borrowing meets certain thresholds. As of December 31, 2020, their available borrowing met the threshold such that there were no restricted net assets of ePlus Technology, inc.

The credit facility ~~also~~ 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 ~~also includes~~requires 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~~ e~~Plus 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~~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 March 31, 2020, we had $2.3 million of recourse borrowings that were collateralized by investments in notes receivable and leases. We had 0 recourse borrowings as of December 31, 2020. 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 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 the assets serving as collateral, but not against us. As of December 31, ~~2017~~2020, and March 31, ~~2017,~~2020, we had $68.3 million and $35.5 million, respectively, of non-recourse borrowings that were collateralized by investments in notes and leases. Principal and interest payments are generally due monthly in amounts that are approximately equal to the ~~fair value of~~total payments due from the customer under the leases or notes receivable that collateralize the notes payable. The weighted average interest rate for our ~~long-term recourse and~~ non-recourse notes payable ~~approximated their carrying value.~~was 3.57% and 3.84%, as of December 31, 2020, and March 31, 2020, respectively.

8.10.

COMMITMENTS AND CONTINGENCIES

Legal Proceedings

From time to time, we 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 ~~business.~~ our business and that have not been fully resolved. The ultimate amount of liability, if any, for any claims of any type (either alone or in the aggregate) may materially and adversely affect our financial condition, results of operations and liquidity. In addition, the ~~opinion~~ultimate outcome of any litigation is inherently uncertain. Any outcome, whether favorable or unfavorable, may materially and adversely affect us due to legal costs and expenses, diversion of management ~~there was not at least a reasonable possibility~~attention and other factors. We expense legal costs in the period incurred. We 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~~in the future, and these matters could relate to ~~significant uncertainty. Therefore, although management considers the likelihood~~prior, current or future transactions or events.

Table 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.Contents

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 months ended December 31, ~~2017~~2020, and ~~2016~~2019, respectively (in thousands, except per share data).

	Three Months Ended December 31,				Nine Months Ended December 31,				Three Months Ended December 31,				Nine Months Ended December 31,
	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	$	21,638	$	19,550	$	58,844	$	55,836

Basic and diluted common shares outstanding:
Weighted average common shares outstanding — basic		13,851		13,791		13,845		13,891		13,332		13,320		13,342		13,329
Effect of dilutive shares		139		129		177		135		46		58		60		81
Weighted average shares common outstanding — diluted		13,990		13,920		14,022		14,026		13,378		13,378		13,402		13,410

Earnings per common share - basic	$	1.12	$	0.92	$	3.34	$	2.88	$	1.62	$	1.47	$	4.41	$	4.19

Earnings per common share - diluted	$	1.11	$	0.91	$	3.30	$	2.86	$	1.62	$	1.46	$	4.39	$	4.16

~~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 May 28, 2019, and ending on ~~August 19, 2017 through August 18, 2018.~~ 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 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 months ended December 31, ~~2017,~~2020, we purchased ~~125,605~~59,101 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~~$4.2 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 months ended December 31, ~~2016,~~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.

~~11.~~13.

SHARE-BASED COMPENSATION

Share-Based Plans

As of December 31, ~~2017,~~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 months ended December 31, ~~2017,~~2020, we granted ~~535 restricted shares under the 2008 Director LTIP, 5,310~~9,871 restricted shares under the 2017 Director LTIP, and ~~66,530~~89,873 restricted shares under the 2012 Employee LTIP. For the nine months ended December 31, ~~2016,~~2019, we granted ~~11,384~~8,646 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		99,744		$	71.82
Vested		(156,240	)	$	38.52		(110,292	)	$	70.01
Forfeited		(4,108	)	$	39.37		0		$	0
Nonvested December 31, 2017		283,716		$	51.68
Nonvested December 31, 2020							183,032		$	74.94

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 months ended December 31, ~~2017, the Company had acquired 57,725~~2020, we 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~~2020, and ~~2016,~~2019, we recognized ~~$1.7~~$1.8 million and ~~$1.5~~$2.0 million ~~respectively,~~ of total share-based compensation ~~expense.~~expense, respectively. During the nine months ended December 31, ~~2017~~2020, and ~~2016,~~2019, we recognized ~~$4.9~~$5.4 million and ~~$4.5~~$6.0 million ~~respectively,~~ of total share-based compensation ~~expense.~~expense, respectively. Unrecognized compensation expense related to non-vested restricted stock was ~~$11.1~~$9.9 million as of December 31, ~~2017,~~2020, which will be fully recognized over the next ~~thirty (30)~~30 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~~2020 and ~~2016, our~~2019, our estimated contribution expense for the plan was ~~$0.5~~$0.9 million and ~~$0.5~~$0.8 million, respectively. For the nine months ended December 31, ~~2017~~2020 and ~~2016,~~2019, our estimated contribution expense for the plan was ~~$1.6~~$2.2 million and ~~$1.2~~$2.2 million, ~~respectively.~~respectively.

~~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,~~2020, and December 31, ~~2016.~~2019. We had no0 additions or reductions to our gross unrecognized tax benefits during the ~~three and~~ nine months ended December 31, ~~2017.~~2020. We recognize accrued interest and penalties related to unrecognized tax benefits in income tax expense.

Table of Contents

~~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~~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
December 31, 2020
Assets:
Money market funds									$	5,134	$	5,134	$	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 nine months ended December 31, ~~2017,~~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 nine months ended December 31, 2019, we recorded adjustments to operating expenses that increased the fair value of our liability for contingent consideration by ~~$0.7 million, and $12.6 million due~~$1.5 million. There were 0 adjustments to ~~business acquisitions. For~~operating expenses for the ~~nine~~three months ended December 31, ~~2017,~~2019. In September 2019, we ~~made $0.6~~reached a settlement in full of one of our contingent consideration arrangements in the amount of $9.6 million, which was paid in ~~payments~~October 2019. Additionally, in September 2019, we paid $0.5 million 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

Systems Management Planning (SMP)

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

~~Table of Contents~~

~~15.~~

~~BUSINESS COMBINATIONS~~

~~Integrated Data Storage, LLC acquisition~~

On ~~September 15, 2017,~~December 31, 2020, our subsidiary, ePlus Technology, inc., acquired certain assets and ~~assumed certain~~ liabilities of ~~Integrated Data Storage, LLC (“IDS”) though~~SMP, an ~~asset purchase agreement. Headquartered~~established provider of technology solutions and services in ~~Oak Brook, IL~~upstate New York and with offices in downtown Chicago and Indianapolis, IDS is an advanced data center solutions provider focused on cloud enablement and managed services, including its proprietary IDS Cloud, which features enterprise-class technology infrastructure coupled with consulting services to support private, hybrid, and public cloud deployments.the Northeast. The acquisition ~~expands~~ enhances ePlus’ footprint across the region, broadens its technology solution offerings especially in the ~~Midwest~~areas of collaboration and ~~enhances its sales~~supporting virtual employees, and ~~engineering capabilities in cloud services, disaster recovery~~adds to ePlus’ set of commercial, enterprise and ~~backup as a service, storage, data center,~~state, local, and ~~professional services.~~education customers.

Our preliminary sum of ~~total~~ consideration transferred ~~is $38.4~~was $27.1 million consisting of ~~$29.8~~$29.3 million paid in cash at closing less ~~$1.4~~$2.2 million ~~in receivables~~that is due back to us asrelated to 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	$	14,329
Other assets		3,290
Identified intangible assets		14,270
Accounts payable and other current liabilities		(11,250	)
Performance obligations		(2,180	)

Total identifiable net assets		18,459
Goodwill		8,643

Total purchase consideration	$	27,102

The identified intangible assets of ~~$13.7~~$14.3 million ~~consist~~consists of customer relationships with an estimated useful life of 8seven years. The fair value of acquired receivables equals the gross contractual amounts receivable. We expect to collect all acquired receivables.

Table of Contents

We recognized goodwill related to this transaction of ~~$21.1~~$8.6 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,~~2020, is not material.

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

ABS Technology

On ~~May 17, 2017,~~August 23, 2019, our subsidiary, ePlus Technology, inc., acquired ~~100%~~certain assets and liabilities of ~~the stock of OneCloud Consulting, Inc. (“OneCloud”). Based~~ABS Technology, a Virginia Beach, Virginia- headquartered solutions provider with deep expertise in ~~Milpitas, CA, OneCloud is a versatile team of highly trained technology consultants, architects, developers~~managed services, networking, collaboration, and ~~instructors. OneCloud enables its customers’ cloud~~security solutions. ABS Technology enhances ePlus’ existing solutions portfolio and ~~application strategy via professional services, technical education~~market position in Richmond 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.southern Virginia.

Our sum of ~~total~~ consideration we transferred was ~~$10.0~~$15.3 million consisting of ~~$7.9~~$13.8 million paid in cash at closing ~~net~~plus $1.7 million that was paid primarily during the year ended March 31, 2020, upon the collection of ~~cash acquired,~~certain accounts receivable, and ~~$2.1~~less $0.2 million ~~equal~~that was repaid 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.~~

~~Table of Contents~~

us in December 2019 due to a working capital adjustment. Our allocation of the purchase consideration to the assets acquired and liabilities assumed is presented below (in thousands):

	Acquisition Date Amount			Acquisition Date Amount

Accounts receivable and other assets	$	488
Accounts receivable				$	9,208
Other assets					743
Identified intangible assets		4,130			5,720
Accounts payable and other current liabilities		(1,822	)		(6,715	)
Performance obligation					(1,140	)

Total identifiable net assets		2,796			7,816
Goodwill		7,189			7,461

Total purchase consideration	$	9,985		$	15,277

The identified intangible assets of ~~$4.1~~$5.7 million consist of customer relationships ~~of $1.7 million~~ with an estimated useful life of ~~8 years, and internally developed processes~~seven (7) years. The fair value of ~~$2.4 million with an estimated useful life of 5 years.~~acquired receivables equals the gross contractual amounts receivable. We expect to collect all acquired receivables.

We recognized goodwill related to this transaction of ~~$7.2~~$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.

~~Consolidated~~

17.	SEGMENT REPORTING

Our operations are conducted through 2 operating segments that are also both reportable segments. Our technology segment includes sales of IT ~~Services acquisition~~

~~On December 6, 2016,~~products, third-party software, third-party maintenance, advanced professional and managed services, and our ~~subsidiary~~ e~~Plus Technology, inc., acquired certain assets~~proprietary software to commercial enterprises, state and ~~assumed certain liabilities of Consolidated IT Services. Consolidated IT Services’ business provides data center, unified communications, networking,~~local governments, 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 partgovernment contractors. Our financing segment consists of the ~~final working capital adjustment. Our allocation~~financing of IT equipment, software, and related services to commercial enterprises, state and local governments, and government contractors. We measure the performance of the ~~purchase consideration to the assets acquired and liabilities is presented below (in thousands):~~segments based on operating income.

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.

Table of Contents

Our reportable segment information for the three- and nine-month periods ended December 31, 2020, and 2019 are summarized in the following tables (in thousands):

	Three Months Ended
	December 31, 2020						December 31, 2019
	Technology		Financing		Total		Technology		Financing		Total

Sales
Product	$	363,478	$	12,034	$	375,512	$	360,206	$	18,363	$	378,569
Service		52,092		0		52,092		50,422		0		50,422
Net sales		415,570		12,034		427,604		410,628		18,363		428,991

Cost of Sales
Product		295,310		2,204		297,514		290,980		2,229		293,209
Service		31,939		0		31,939		32,086		0		32,086
Total cost of sales		327,249		2,204		329,453		323,066		2,229		325,295
Gross Profit		88,321		9,830		98,151		87,562		16,134		103,696

Selling, general, and administrative		62,377		3,013		65,390		67,759		5,331		73,090
Depreciation and amortization		3,115		28		3,143		3,619		28		3,647
Interest and financing costs		0		355		355		0		694		694
Operating expenses		65,492		3,396		68,888		71,378		6,053		77,431

Operating income		22,829		6,434		29,263		16,184		10,081		26,265

Other income						813						997

Earnings before tax					$	30,076					$	27,262

Net Sales
Contracts with customers	$	411,175	$	1,904	$	413,079	$	404,918	$	1,689	$	406,607
Financing and other		4,395		10,130		14,525		5,710		16,674		22,384
Net Sales	$	415,570	$	12,034	$	427,604	$	410,628	$	18,363	$	428,991

Selected Financial Data - Statement of Cash Flow

Depreciation and amortization	$	3,311	$	991	$	4,302	$	3,691	$	1,449	$	5,140
Purchases of property, equipment and operating lease equipment	$	959	$	1	$	960	$	786	$	1,535	$	2,321

Selected Financial Data - Balance Sheet

Total assets	$	887,684	$	238,270	$	1,125,954	$	733,174	$	219,434	$	952,608

Table of Contents

	Nine Months Ended
	December 31, 2020						December 31, 2019
	Technology		Financing		Total		Technology		Financing		Total

Sales
Product	$	1,026,845	$	39,563	$	1,066,408	$	1,032,620	$	45,047	$	1,077,667
Service		149,308		0		149,308		144,261		0		144,261
Net sales		1,176,153		39,563		1,215,716		1,176,881		45,047		1,221,928

Cost of Sales
Product		820,859		6,252		827,111		825,509		6,626		832,135
Service		92,935		0		92,935		90,427		0		90,427
Total cost of sales		913,794		6,252		920,046		915,936		6,626		922,562
Gross Profit		262,359		33,311		295,670		260,945		38,421		299,366

Selling, general, and administrative		190,519		11,227		201,746		197,615		11,785		209,400
Depreciation and amortization		9,916		84		10,000		10,555		112		10,667
Interest and financing costs		266		913		1,179		0		1,898		1,898
Operating expenses		200,701		12,224		212,925		208,170		13,795		221,965

Operating income		61,658		21,087		82,745		52,775		24,626		77,401

Other income						1,095						912

Earnings before tax					$	83,840					$	78,313

Net Sales
Contracts with customers	$	1,157,519	$	3,892	$	1,161,411	$	1,163,184	$	3,889	$	1,167,073
Financing and other		18,634		35,671		54,305		13,697		41,158		54,855
Net Sales	$	1,176,153	$	39,563	$	1,215,716	$	1,176,881	$	45,047	$	1,221,928

Selected Financial Data - Statement of Cash Flow

Depreciation and amortization	$	10,444	$	3,318	$	13,762	$	10,974	$	4,243	$	15,217
Purchases of property, equipment and operating lease equipment	$	4,060	$	167	$	4,227	$	3,461	$	3,748	$	7,209

Selected Financial Data - Balance Sheet

Total assets	$	887,684	$	238,270	$	1,125,954	$	733,174	$	219,434	$	952,608

Table of Contents

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 nine month periods ended December 31, 2020, and 2019 in the tables below (in thousands):

	Three Months Ended December 31,						Nine Months Ended December 31,
	2020			2019			2020			2019
Customer end market:
Technology	$	57,346		$	77,841		$	203,634		$	251,523
Telecom, Media & Entertainment		123,441			84,707			277,020			218,217
Financial Services		60,610			56,395			154,763			149,241
State and local government and educational institutions		50,703			55,908			197,758			198,964
Healthcare		44,706			60,275			150,494			176,202
All others		78,764			75,502			192,484			182,734
Net sales		415,570			410,628			1,176,153			1,176,881

Less: Revenue from financing and other		(4,395	)		(5,710	)		(18,634	)		(13,697	)

Revenue from contracts with customers	$	411,175		$	404,918		$	1,157,519		$	1,163,184

	Three Months Ended December 31,						Nine Months Ended December 31,
	2020			2019			2020			2019
Vendor
Cisco Systems	$	132,290		$	169,265		$	433,388		$	488,051
NetApp		13,861			15,799			39,196			38,997
HP Inc. & HPE		14,100			15,853			47,533			57,952
Dell EMC		34,027			12,025			80,457			38,300
Arista Networks		22,157			12,862			42,420			60,578
Juniper Networks		29,781			27,419			68,076			58,843	��
All others		169,354			157,405			465,083			434,160
Net sales		415,570			410,628			1,176,153			1,176,881

Less: Revenue from financing and other		(4,395	)		(5,710	)		(18,634	)		(13,697	)

Revenue from contracts with customers	$	411,175		$	404,918		$	1,157,519		$	1,163,184

Financing Segment Disaggregation of Revenue

We analyze our revenues within our financing segment based on the nature of the arrangement. Our revenues from contracts with customers within our financing segment consist entirely of proceeds from the sale of off-lease equipment.

Table of Contents

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, and ~~periodic consultative reviews. In addition~~then design, deploy and 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,~~2020, the percentage of revenue by customer end market within our technology segment includes telecom, media and entertainment 23%, technology industry ~~25%~~18%, state and local government and educational institutions ~~17%~~(“SLED”) 16%, ~~telecommunications, media and entertainment~~healthcare 14%, and 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%~~78% of our operating income, while our financing segment ~~accounted~~accounts for 3% of our net sales, and ~~30%~~22% of our operating income, for the nine months ended December 31, ~~2017.~~2020.

Table of Contents

Impact of COVID-19 on Our Business Operations

The novel coronavirus (“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, safety-related modifications to workplaces, 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 including the impact of various mutations; governmental, business, and individuals’ actions in response to the pandemic; the vaccine effectiveness, duration of the vaccination process, and demand by citizens to be inoculated; 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.

Table of Contents

Our key business metrics for the three- and ~~results from those metrics~~ nine-month periods ended December 31, 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 December 31,						Nine Months Ended December 31,
Consolidated													2020			2019			2020			2019
Net sales													$	427,604		$	428,991		$	1,215,716		$	1,221,928
	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													$	98,151		$	103,696		$	295,670		$	299,366
Gross margin		22.4	%		22.6	%		22.4	%		22.4	%		23.0	%		24.2	%		24.3	%		24.5	%
Gross margin, product and services		20.1	%		20.7	%		20.2	%		20.5	%
Operating income margin		4.8	%		6.5	%		6.1	%		6.7	%		6.8	%		6.1	%		6.8	%		6.3	%

Net earnings	$	15,581		$	12,620		$	46,225		$	40,066		$	21,638		$	19,550		$	58,844		$	55,836
Net earnings margin		4.5	%		3.9	%		4.3	%		4.0	%		5.1	%		4.6	%		4.8	%		4.6	%
Net earnings per common share - diluted	$	1.11		$	0.91		$	3.30		$	2.86		$	1.62		$	1.46		$	4.39		$	4.16

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)													$	23,929		$	21,941		$	66,606		$	65,628
Non-GAAP: Net earnings per common share - diluted (1)													$	1.79		$	1.64		$	4.97		$	4.89

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)													$	34,395		$	31,856		$	98,670		$	95,828
Adjusted EBITDA margin														8.0	%		7.4	%		8.1	%		7.8	%

Purchases of property and equipment used internally	$	2,018		$	849		$	4,064		$	2,413		$	959		$	786		$	4,060		$	3,461
Purchases of equipment under operating leases		844			3,282			2,234			4,887			1			1,535			167			3,748
Total capital expenditures	$	2,862		$	4,131		$	3,436		$	7,300		$	960		$	2,321		$	4,227		$	7,209

Technology Segment
Net sales													$	415,570		$	410,628		$	1,176,153		$	1,176,881
Adjusted gross billings (3)													$	587,825		$	586,308		$	1,735,283		$	1,713,755

Gross profit													$	88,321		$	87,562		$	262,359		$	260,945
Gross margin														21.3	%		21.3	%		22.3	%		22.2	%

Operating income													$	22,829		$	16,184		$	61,658		$	52,775
Adjusted EBITDA (2)													$	27,876		$	21,687		$	77,312		$	70,895

Financing Segment
Net sales													$	12,034		$	18,363		$	39,563		$	45,047

Gross profit													$	9,830		$	16,134		$	33,311		$	38,421

Operating Income													$	6,434		$	10,081		$	21,087		$	24,626
Adjusted EBITDA (2)													$	6,519		$	10,169		$	21,358		$	24,933

(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.

Table of Contents

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 December 31,						Nine Months Ended December 31,
	2020			2019			2020			2019
GAAP: Earnings before tax	$	30,076		$	27,262		$	83,840		$	78,313
Share based compensation		1,756			1,944			5,427			6,021
Acquisition and integration expense		233			-			232			1,739
Acquisition related amortization expense		1,986			2,421			6,386			6,953
Other (income) expense		(813	)		(997	)		(1,095	)		(912	)
Non-GAAP: Earnings before provision for income taxes		33,238			30,630			94,790			92,114

GAAP: Provision for income taxes		8,438			7,712			24,996			22,477
Share based compensation		493			553			1,621			1,736
Acquisition and integration expense		65			-			65			506
Acquisition related amortization expense		541			668			1,856			1,938
Other (income) expense		(228	)		(283	)		(314	)		(258	)
Tax (expense) benefit on restricted stock		-			39			(40	)		87
Non-GAAP: Provision for income taxes		9,309			8,689			28,184			26,486

Non-GAAP: Net earnings	$	23,929		$	21,941		$	66,606		$	65,628

GAAP: Net earnings per common share - diluted	$	1.62		$	1.46		$	4.39		$	4.16

Non-GAAP: Net earnings per common share - diluted	$	1.79		$	1.64		$	4.97		$	4.89

	Three Months Ended December 31,						Nine Months Ended December 31,
	2020			2019			2020			2019
GAAP: Net earnings per common share - diluted	$	1.62		$	1.46		$	4.39		$	4.16

Share based compensation		0.10			0.10			0.29			0.32
Acquisition and integration expense		0.01			-			0.01			0.09
Acquisition related amortization expense		0.10			0.14			0.33			0.38
Other (income) expense		(0.04	)		(0.05	)		(0.05	)		(0.05	)
Tax benefit on restricted stock		-			(0.01	)		-			(0.01	)
Total non-GAAP adjustments - net of tax		0.17			0.18			0.58			0.73

Non-GAAP: Net earnings per common share - diluted	$	1.79		$	1.64		$	4.97		$	4.89

(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

Table of Contents

	Three Months Ended December 31,						Nine Months Ended December 31,
Consolidated	2020			2019			2020			2019
Net earnings	$	21,638		$	19,550		$	58,844		$	55,836
Provision for income taxes		8,438			7,712			24,996			22,477
Share based compensation		1,756			1,944			5,427			6,021
Interest and financing costs		-			-			266			-
Acquisition and integration expense		233			-			232			1,739
Depreciation and amortization		3,143			3,647			10,000			10,667
Other (income) expense		(813	)		(997	)		(1,095	)		(912	)
Adjusted EBITDA	$	34,395		$	31,856		$	98,670		$	95,828

Technology Segment
Operating income	$	22,829		$	16,184		$	61,658		$	52,775
Depreciation and amortization		3,115			3,619			9,916			10,555
Share based compensation		1,699			1,884			5,240			5,826
Interest and financing costs		-			-			266			-
Acquisition and integration expense		233			-			232			1,739
Adjusted EBITDA	$	27,876		$	21,687		$	77,312		$	70,895

Financing Segment
Operating income	$	6,434		$	10,081		$	21,087		$	24,626
Depreciation and amortization		28			28			84			112
Share based compensation		57			60			187			195
Adjusted EBITDA	$	6,519		$	10,169		$	21,358		$	24,933

(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 December 31,				Nine Months Ended December 31,
	2020		2019		2020		2019
Technology segment net sales	$	415,570	$	410,628	$	1,176,153	$	1,176,881
Costs incurred related to sales of third party maintenance, software assurance and subscription/Saas licenses, and services		172,255		175,680		559,130	$	536,874
Adjusted gross billings	$	587,825	$	586,308	$	1,735,283	$	1,713,755

Consolidated Results of Operations

During the three months ended December 31, ~~2017,~~2020, net sales ~~increased 4.9%~~decreased 0.3%, or ~~$15.9~~$1.4 million, to ~~$342.6~~$427.6 million, as compared to $429.0 million for the same period in the prior fiscal year. Product sales for the three months ended December 31, 2020, decreased 0.8% to $375.5 million, a decrease of $3.1 million from $378.6 million in the same period in the prior year. Services sales during the three months ended December 31, 2020, increased 3.3% to $52.1 million, an increase of $1.7 million over prior year services sales of $50.4 million due to an increase in professional services. The decrease in net sales is due to a relative decrease in our financing segment net sales of $6.3 million for the three months ended December 31, 2020 as several large transactions were completed during the same period in the prior year. In the technology segment, we saw increases in net sales from customers in the telecom, media and entertainment, financial services, and smaller other categories of customers, which was partially offset by decreases in net sales from our technology, healthcare, and SLED customers, during the three months ended December 31, 2020, compared to the prior year period.

Table of Contents

For the nine months ended December 31, 2020, net sales decreased 0.5%, or $6.2 million, to $1.216 billion, compared to $1.222 billion in the same period in the prior fiscal year. Product sales for the nine months ended December 31, 2020, decreased 1.0%, or $11.3 million, to $1.066 billion compared to $1.078 billion in the same period in the prior year. Services sales during the nine months ended December 31, 2020, increased 3.5%, or $5.0 million, to $149.3 million compared to ~~$326.7~~prior year services sales of $144.3 million. The decrease in net sales was due to several large financing segment transactions that were completed during the same period in the prior year, and due to reductions in demand from our customers in the technology and healthcare markets, which were almost entirely offset by increases in demand from our customers in the telecom, media and entertainment, financial services, and smaller other categories of customers, during the nine months ended December 31, 2020, compared to the prior year period.

Adjusted gross billings increased 0.3%, or $1.5 million, to $587.8 million for the three months ended December 31, 2020, from $586.3 million for the same period in the prior fiscal year. For the nine months ended December 31, ~~2017, net sales~~2020, adjusted gross billings increased ~~8.4%~~1.3%, or ~~$83.9~~$21.5 million, to ~~$1,080.6~~$1.735 billion, from $1.714 billion for the same period in the prior fiscal year. The increase in adjusted gross billings for both the three and the nine-month period were from our customers in the telecom, media and entertainment, SLED, and smaller other categories of customers which was partially offset by decreases in demand from the technology, healthcare, and financial services.

Consolidated gross profit for the three months ended December 31, 2020, decreased $5.5 million, or 5.3%, to $98.2 million, compared with $103.7 million in the same period in the prior year. Consolidated gross margins were 23.0% for the three months ended December 31, 2020, which is a decrease of 120 basis points compared to ~~$996.6~~24.2% for the same period in the prior fiscal year. The decrease in margins was due to a reduction in financing segment gross profit caused by several large transactions in the three-month period of the prior year. There also was 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.

For the nine months ended December 31, 2020, consolidated gross profit decreased $3.7 million, or 1.2%, to $295.7 million, compared with $299.4 million for the same period in the prior fiscal year.

~~Adjusted~~ Consolidated gross ~~billings of product and services increased 7.3%, or $31.7 million to $464.1 million,~~margins were 24.3% for the ~~three~~nine months ended December 31, ~~2017 from $432.4 million~~2020, a decrease of 20 basis points compared to 24.5% for the same period in the prior fiscal year. The decrease in gross margin for the nine-month period was due to a reduction in financing segment gross profit caused by several large transactions in the prior year.

Our operating expenses for the three months ended December 31, 2020, decreased $8.5 million, or 11.0%, to $68.9 million, as compared to $77.4 million for the prior year period. The majority of this decrease reflects reductions in selling, general, and administrative expense of $7.7 million, or 10.5%, to $65.4 million as compared to $73.1 million in the same period in the prior year, due in part to reductions in employee salaries and benefits, travel and entertainment, advertising and marketing, and general office related expenses. As of December 31, 2020, we had 1,586 employees, including 102 employees joining ePlus from our December 31, 2020 acquisition of Systems Management and Planning, Inc. (“SMP”), a decrease of 16 from 1,602 as of December 31, 2019.

For the nine months ended December 31, ~~2017, adjusted gross billings of product and services increased 10.0%~~2020, operating expenses decreased $9.0 million, or 4.1%, ~~or $132.2~~to $212.9 million, as compared to ~~$1,449.4~~$222.0 million ~~from $1,317.2 million for~~in 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% for the three months ended December 31, 2017 a decrease of 20 basis points compared to 22.6% for the same period in the prior fiscal year, due lower product margins, including aThe decrease in ~~vendor incentives earned, which was offset by an increase in service revenues.~~

~~Consolidated gross profit rose 8.3% to $241.9 million, compared with $223.4 million~~operating expenses for the nine months ended December 31, ~~2016. Consolidated gross margins were 22.4%~~2020, was due to reductions in selling, general and administrative expenses, interest and financing costs, and depreciation and amortization expense. Selling, general, and administrative expense for ~~both~~ the nine months ended December 31, ~~2017~~2020, decreased $7.7 million, or 3.7%, to $201.7 million, due to decreases in travel and ~~2016. Consolidated gross margins were impacted by lower product margins, including a decrease in vendor incentives earned, which was~~entertainment, advertising and marketing, employee fringe benefits, and general office related expenses, partially offset by ~~higher service~~an increase in salary expense, variable compensation, and ~~financing revenues.~~reserve for credit losses expense. Our prior year results benefited from having only incurred a partial year of salaries and benefits expense from the addition of employees from the August 23, 2019, acquisition of ABS Technology.

~~Table of Contents~~

~~Our operating expenses increased 14.9% to $60.3~~Depreciation and amortization expense decreased $0.5 million, ~~or 78.6% of gross profits~~and $0.7 million for the three ~~months ended December 31, 2017 as compared to $52.5 million, representing 71.1% of gross profits in the same period prior year. For the~~and nine months ended December 31, ~~2017, our operating expenses increased 12.6%~~2020, respectively. Interest and financing costs decreased $0.3 million and $0.7 million, for the three and nine months ended December 31, 2020, respectively, due to ~~$176.6 million, or 72.5%~~a decrease in the average balance of ~~gross profits~~non-recourse notes payable outstanding and lower interest rates during the three and nine months ended December 31, 2020, as compared to ~~$156.4 million, representing 70.0% of gross profits~~the same periods in the ~~same~~ prior ~~year period. The majority of this increase reflects increased salary expense due to an increase in headcount, as well as variable compensation as~~year.

As a result, ~~of the increase in gross profit, 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 compared to the prior year include 105 sales and engineering positions,~~ ~~with the~~ ~~remaining additions being administrative, IT, and finance positions.~~

~~Operating~~operating income for the three months ended December 31, ~~2017 decreased 23.1%~~2020, increased $3.0 million, or 11.4%, to ~~$16.4~~$29.3 million as compared to $21.3 million for the same period in the prior year. For the three months ended December 31, 2017, the operating income margin decreased 170 basis points 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, as compared to $67.0$26.3 million for the same period in the prior year. For the nine months ended December 31, ~~2017, the~~2020, operating income ~~margin decreased 60 basis points~~increased $5.3 million, or 6.9%, to ~~6.1% from 6.7%~~$82.7 million, as compared to $77.4 million for the same period in the prior year.

Table of Contents

Our effective tax rate for the three and nine months ended December 31, 2020, was 28.1% and 29.8%, respectively, compared with 28.3% and 28.7%, respectively, for the same periods in the prior year. The change in our effective tax rate was due to an adjustment to the federal benefit from state taxes.

Consolidated net earnings for the three months ended December 31, ~~2017~~2020, were ~~$15.6~~$21.6 million, an increase of ~~23.5%~~10.7%, or $2.1 million, over the prior year’s results, due to a reduction in operating expense, partially offset by a decrease in gross profit. For the nine months ended December 31, 2020, the consolidated net earnings were $58.8 million, an increase of 5.4%, or $3.0 million, compared to the prior year’s results, due to a reduction in operating expense, partially offset by a decrease in gross profit and an increase in the provision for income taxes rate.

Adjusted EBITDA increased $2.5 million, or 8.0%, to $34.4 million and adjusted EBITDA margin increased 60 basis points to 8.0% for the three months ended December 31, 2020, as compared to the prior year period of ~~$12.6 million.~~ 7.4%. For the nine months ended December 31, ~~2017, consolidated net earnings were $46.2 million, an increase of 15.4%, or $6.2 million, compared to the prior year’s results of $40.1 million.~~

~~Adjusted~~2020, adjusted EBITDA ~~decreased $3.9~~increased $2.8 million, or ~~16.9%~~3.0%, to ~~$19.3~~$98.7 million and ~~Adjusted~~the adjusted EBITDA margin ~~decreased 150~~increased 30 basis points to ~~5.6% for the three months ended December 31, 2017,~~8.1% as compared to the prior year period of ~~7.1%. For the nine months ended December 31, 2017, Adjusted EBITDA increased $0.4 million, or 0.6% to $72.8 million and Adjusted EBITDA margin decreased 60 basis points to 6.7%~~7.8% for the nine months ended December 31, ~~2017, as~~2020, compared to the prior ~~period of 7.3%.~~year period.

Diluted earnings per share increased ~~22.0%~~11.0%, or ~~$0.20~~$0.16, to ~~$1.11~~$1.62 per share for the three months ended December 31, ~~2017,~~2020, as compared to ~~$0.91~~$1.46 per share for the three months ended December 31, ~~2016. Our effective tax rate~~2019. Non-GAAP diluted earnings per share increased 9.1%, or $0.15, to $1.79 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~~2020, as compared to ~~the change in the U.S. statutory rate. Non-GAAP diluted earnings per share decreased 13.4% to $0.97~~$1.64 for the three months ended December 31, ~~2017, as compared to $1.12 for the three months ended December 31, 2016.~~

2019. For the nine months ended December 31, ~~2017,~~2020, diluted earnings per share increased ~~15.4%~~5.5%, or ~~$0.44~~$0.23, to ~~$3.30~~$4.39 per share, as compared to ~~$2.86~~$4.16 per share compared to the prior year period. Non-GAAP diluted earnings per share increased 1.6%, or $0.08, to $4.97 for the nine months ended December 31, ~~2016. Our effective tax rate~~2020, as compared to $4.89 for the nine months ended December 31, ~~2017 was 29.7%, which includes a tax benefit~~2019.

Cash and cash equivalents increased slightly by 0.3% to $86.5 million at December 31, 2020, as compared to $86.2 million as of ~~$1.6 million related to the vesting~~March 31, 2020. Major uses 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. Non-GAAP diluted earnings per share increased 0.6% to $3.14 forcash during the nine months ended December 31, ~~2017, as compared to $3.12 for~~2020, were the ~~nine months ended December 31, 2016.~~

~~Cash~~acquisition of SMP of $27.1 million and the repurchase of $6.9 million in outstanding shares of our common stock. Our cash ~~equivalents decreased $33.7~~position benefited from the payroll tax deferral under the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act that deferred $4.8 million ~~or 30.7% to $76.1 million at December 31, 2017 compared with $109.8 million as of March 31, 2017.~~ ~~The decrease is primarily the result of investments~~ in ~~our financing portfolio, working capital required for the growth 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.

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.

~~Table of Contents~~

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.

Table of Contents

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~~ in the ~~United Kingdom,~~US, 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.

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.

~~Table of Contents~~

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.

Table of Contents

SEGMENT RESULTS OF OPERATIONS

The three and nine months ended December 31, ~~2017~~2020, compared to the three and nine months ended December 31, ~~2016~~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 December 31,				Nine Months Ended December 31,
	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																			$	363,478	$	360,206	$	1,026,845	$	1,032,620
Services																				52,092		50,422		149,308		144,261
Total																				415,570		410,628		1,176,153		1,176,881

Cost of sales
Product																				295,310		290,980		820,859		825,509
Services																				31,939		32,086		92,935		90,427
Total																				327,249		323,066		913,794		915,936

Gross profit		68,144		66,577		1,567		2.4	%		214,626		202,698		11,928		5.9	%		88,321		87,562		262,359		260,945

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																				62,377		67,759		190,519		197,615
Depreciation and amortization		2,893		1,908		985		51.6	%		7,084		5,400		1,684		31.2	%		3,115		3,619		9,916		10,555
Interest and financing costs																				-		-		266		-
Operating expenses		56,729		49,688		7,041		14.2	%		165,922		146,695		19,227		13.1	%		65,492		71,378		200,701		208,170

Operating income	$	11,415	$	16,889	$	(5,474	)	(32.4	%)	$	48,704	$	56,003	$	(7,299	)	(13.0	%)	$	22,829	$	16,184	$	61,658	$	52,775

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																			$	587,825	$	586,308	$	1,735,283	$	1,713,755
Adjusted EBITDA	$	14,308	$	18,797	$	(4,489	)	(23.9	%)	$	55,788	$	61,403	$	(5,615	)	(9.1	%)	$	27,876	$	21,687	$	77,312	$	70,895

Net sales: Net sales for the three months ended December 31, ~~2017~~2020, were ~~$332.6~~$415.6 million compared to ~~$318.3~~$410.6 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%~~1.2% or $4.9 million, due to increases in net sales from customers in the telecom, media and entertainment, financial services, and smaller other categories of customers, which was partially offset by decreases in net sales from our technology, healthcare, and SLED customers. Product sales increased 0.9%, or ~~$77.0 million.~~$3.3 million, to $363.5 million due to a shift in mix to sales of hardware and third-party licenses, partially offset by reductions in third-party maintenance, software assurance, subscriptions/SaaS licenses, and services where we recognize revenue on a net basis. Services revenues increased 3.3%, or $1.7 million to $52.1 million to due to an increase in managed services for the three months ended December 31, 2020.

For the nine months ended December 31, 2020, net sales decreased 0.1%, or $0.7 million to $1.176 billion compared to $1.177 billion during the same period in the prior year. Product sales for the nine months ended December 31, 2020, decreased 0.6%, or $5.8 million to $1.027 billion due to a higher proportion of sales from third party services that are recognized on a net basis. Services revenues increased 3.5%, or $5.0 million to $149.3 million to due to an increase in managed services for the nine months ended December 31, 2020.

Adjusted gross billings increased 0.3%, or $1.5 million, to $587.8 million for the three months ended December 31, 2020, from $586.3 million for the same period in the prior fiscal year. For the nine months ended December 31, 2020, adjusted gross billings increased 1.3%, or $21.5 million, to $1.735 billion, from $1.714 billion for the same period in the prior fiscal year. For both the three and nine month periods ended December 31, 2020, increases in adjusted gross billings were from our customers in the telecom, media and entertainment, SLED, and smaller other categories of customers which was partially offset by decreases in demand from the technology, health care, and financial services.

Table of Contents

Adjusted gross billings of product and services for the three months ended December 31, 2017 were $464.1 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~~ ~~million during the same period in the prior year, an increase of 4.3%, or $13.6 million.~~

The increase in 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, partially offset by reductions in sales 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 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~~ million during the same period in the prior year, an increase of 7.9%, or $77.0 million. The increase in net sales of product and services during the nine month period was due to an increase in demand for products and services from customers in the financial services industries, technology, and health care industries, which include sales relating to several large projects for large customers.

~~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,~~2020, we had open orders of ~~$170.0~~$413.9 million and deferred revenue of ~~$59.6~~$96.3 million. As of December 31, ~~2016,~~2019, we had open orders of ~~$238.5~~$253.8 million and deferred revenues of $~~66.3~~$71.4 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 December 31, 2020, and 2019 are summarized below:

	Twelve Months Ended December 31,									Twelve Months Ended December 31,
	2017			2016			Change			2020			2019			Change
Revenue by customer end market:
Technology		25	%		22	%		3	%		18	%		22	%		(4	%)
Telecom, Media & Entertainment											23	%		17	%		6	%
SLED		17	%		21	%		(4	%)		16	%		17	%		(1	%)
Telecom, Media & Entertainment		14	%		16	%		(2	%)
Healthcare											14	%		15	%		(1	%)
Financial Services		16	%		12	%		4	%		13	%		14	%		(1	%)
Healthcare		13	%		11	%		2	%
Other		15	%		18	%		(3	%)
All others											16	%		15	%		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 December 31,
	2020			2019			Change
Revenue by vendor:
Cisco Systems		36	%		42	%		(6	%)
NetApp		4	%		3	%		1	%
HP Inc. & HPE		4	%		5	%		(1	%)
Dell/EMC		8	%		3	%		5	%
Juniper Networks		5	%		5	%		0	%
Arista Networks		4	%		5	%		(1	%)
All others		39	%		37	%		2	%
Total		100	%		100	%

Our revenues by customer end market have remained consistent over the year with over 80% of our revenues generated from customers within the five end markets identified above. During the trailing ~~twelve months~~twelve-month period ended December 31, ~~2017~~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.~~healthcare, 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%~~fairly constant percentage of over 60% of total revenues for the ~~twelve months~~twelve-month periods ended December 31, 2017 from approximately 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 the percentage of revenues from the top three vendors is due in part to substantial competition2020, 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 of sales, product and services increased 5.1% for~~sales: For the three months ended December 31, ~~2017 as compared to the prior year period,~~2020, cost of sales increased 1.3%, or $4.2 million, due to ~~the 4.3%~~a proportional increase in net sales. Our gross margin was 21.3% for both the three months ended December 31, 2020, and 2019. Cost of sales ~~of product and services.~~ for the nine months ended December 31, 2020, decreased 0.2% or $2.1 million which is in-line with the decrease in net sales. 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~~2020, gross margin ~~on the sales of product and services decreased 60~~increased by 10 basis points to 22.3%, as compared to 22.2% for the prior year period. Product gross margin was stable at 20.1% for both the ~~three~~nine months ended December 31, ~~2017, from 20.7%~~2020, and 2019; service gross margin increased by 50 basis points to 37.8%, compared to 37.3% in the same period in the prior ~~year.~~

~~For the nine months ended December 31, 2017, our gross margin on the sales of product and services decreased 30 basis points to 20.2%, from 20.5%,~~year due to ~~lower product margins from a large competitively bid project which partially shipped during the nine month period as well as reduction~~an increase in ~~vendor incentives earned as a percentage of sales of product services.~~ both professional services and managed services margins. Vendor incentives earned as a percentage of sales ~~of product services~~decreased 30 basis points and 20 basis points for the three ~~months~~ and ~~the~~ nine months ended December 31, ~~2017 decreased 50 and 30 basis points~~2020, respectively, resulting in an unfavorable impact on gross margin, as compared to same periods in the prior year.

Table of Contents

Selling, general, and ~~administrative expenses:~~administrative: Selling, general, and administrative expenses ~~were $53.8~~of $62.4 million for the three months ended December 31, ~~2017, an increase of $6.0~~2020, decreased by $5.4 million, or ~~12.7%~~7.9% from $67.8 million in the same period in the prior year. Salaries and benefits decreased $3.1 million, or 5.4% to $53.7 million, compared to ~~$47.8~~$56.8 million ~~for~~during the same period in the prior year ~~period.~~due to a decrease in employees. Our technology segment had 1,551 employees as of December 31, 2020, which includes 102 employees from our December 31, 2020 acquisition of SMP, a decrease of 16 from 1,567 as of December 31, 2019, or a reduction of 118 employees when the SMP employees are excluded. For the nine months ended December 31, 2020, selling, general, and administrative expenses decreased by $7.1 million, or 3.6%, to $190.5 million compared to $197.6 million in the same period in the prior year. Salaries and benefits increased ~~$4.3~~$1.7 million, or ~~10.8%~~1.0% to ~~$44.5~~$164.6 million, compared to ~~$40.2~~$162.9 million during the same period in the prior year. ~~Most~~Our prior year results benefited from having only incurred partial year-to-date salaries from employees added in the August 23, 2019, acquisition of ABS Technology. The increase in salary and variable compensation expense was partially offset by reductions in employee benefits, and other fringe benefits and employee stock compensation, for the ~~increase was~~nine months ended December 31, 2020, as compared to the prior year period.

General and administrative expenses decreased $3.1 million, or 27.6%, to $8.1 million during the three months ended December 31, 2020, compared to $11.2 million in the same period in the prior year, due to ~~higher salaries~~a decrease in advertising and ~~benefits~~marketing, travel and entertainment expenses, and other general office related expenses resulting in part from restrictions on travel due to the ~~increase~~COVID-19 pandemic. Acquisition related expenses were $0.2 million higher and the reserve for credit losses expense was $0.5 million higher for the three months ended December 31, 2020, than in the ~~number of employees from both acquisitions and internal growth.~~

~~Selling,~~same period in the prior year. For the nine months ended December 31, 2020, general and administrative expenses decreased $8.1 million, or 24.7%, to $24.8 million. The decrease in selling, general and administrative expenses was primarily due to decreases in travel and entertainment expenses and advertising and marketing costs resulting from travel restrictions due in part to the COVID-19 pandemic as well as decreases in professional fees and other general office related expenses. Acquisition related expenses were ~~$158.8~~$1.5 million lower and the reserve for credit losses expense was $0.9 million higher for the nine months ended December 31, 2020 than in the same period in the prior year.

Depreciation and amortization: Depreciation and amortization decreased $0.5 million, or 13.9%, to $3.1 million during the three months ended December 31, 2020, and decreased $0.6 million, or 6.1%, to $9.9 million for the nine months ended December 31, ~~2017, an increase of $17.5 million, or 12.4%~~2020, compared to ~~$141.3~~the prior year periods.

Interest and financing costs: Interest and financing costs were $0.3 million for the ~~prior year period. Salaries and benefits increased $12.8 million, or 10.8% to $130.6 million,~~nine months ended December 31, 2020, compared to ~~$117.8 million during~~none in the same period in 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,~~no interest and ~~professional services personnel.~~

~~General and administrative expenses increased $1.5 million, or 23.9% to $7.9 million during~~financing costs for the three months ended December 31, ~~2017 compared to $6.4~~2020, and 2019. The $0.3 million ~~the prior year,~~in interest and financing costs is due to $35.0 million in borrowings under the accounts receivable component of our Technology segment credit facility during the first quarter of the fiscal year.

Segment operating income: As a result of the foregoing, operating income was $22.8 million, an ~~adjustment~~increase of $0.7 million to the fair value of contingent consideration for acquisitions, higher advertising and marketing expense, and travel expenses, including travel expense related to acquisitions. For the nine months ended December 31, 2017, general and administrative expenses increased $3.9$6.6 million, or ~~20.3% 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~~40.7%, for acquisitions, 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 primarily due to legal fees related to the IDS and OneCloud acquisitions.

~~Depreciation and amortization expense~~ ~~increased $1.0 million, or 51.6% to $2.9 million during~~ the three months ended December 31, ~~2017~~2020, as compared to ~~$1.9~~$16.2 million in the same period in the prior year. For the nine months ended December 31, ~~2017, depreciation and amortization expense increased $1.7~~2020, operating income was $61.7 million, an increase of $8.9 million, or ~~31.2% to $7.1 million~~16.8%, compared to ~~$5.4~~$52.8 million for the same period in the prior 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 million, a decrease of $5.5 million, or 32.4% for the three months ended December 31, 2017 compared to $16.9 million in the prior year period.~~ For the three months ended December 31, ~~2017,~~2020, adjusted EBITDA was $27.9 million, an increase of $6.2 million, or 28.5%, compared to $21.7 million in the same period in the prior year. Adjusted EBITDA was ~~$14.3~~$77.3 million, ~~a decrease~~an increase of ~~$4.5~~$6.4 million, or 23.9% compared to $18.8 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 in the prior year period. Adjusted EBITDA9.1%, for the nine months ended December 31, ~~2017, was $55.8 million, a decrease of $5.6 million, or 9.1%~~2020, compared to ~~$61.4~~$70.9 million for the same period in the prior ~~year period.~~year.

Table of Contents

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 December 31,				Nine Months Ended December 31,
	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	%	$	12,034	$	18,363	$	39,563	$	45,047
Direct lease costs		1,394		1,142		252		22.1	%		3,846		3,459		387		11.2	%

Cost of sales																				2,204		2,229		6,252		6,626

Gross profit		8,544		7,209		1,335		18.5	%		27,226		20,685		6,541		31.6	%		9,830		16,134		33,311		38,421

Selling, general, and administrative expenses		3,298		2,380		918		38.6	%		9,300		8,526		774		9.1	%
Selling, general, and administrative																				3,013		5,331		11,227		11,785
Depreciation and amortization		1		2		(1	)	(50.0	%)		2		8		(6	)	(75.0	%)		28		28		84		112
Interest and financing costs		270		409		(139	)	(34.0	%)		903		1,158		(255	)	(22.0	%)		355		694		913		1,898
Operating expenses		3,569		2,791		778		27.9	%		10,205		9,692		513		5.3	%		3,396		6,053		12,224		13,795

Operating income	$	4,975	$	4,418	$	557		12.6	%	$	17,021	$	10,993	$	6,028		54.8	%	$	6,434	$	10,081	$	21,087	$	24,626

Key business metrics
Adjusted EBITDA	$	4,976	$	4,420	$	556		12.6	%	$	17,023	$	11,001	$	6,022		54.7	%	$	6,519	$	10,169	$	21,358	$	24,933

Net sales: Net sales ~~increased~~decreased by ~~$1.6~~$6.3 million, or ~~19.0%~~34.5%, to ~~$9.9~~$12.0 million for the three months ended December 31, ~~2017,~~2020, as compared to ~~$8.4 million~~ prior year results due to gains on several significant transactions in the prior year, which were partially offset by higher ~~post-contract earnings and other financing revenues.~~portfolio earnings. During the ~~quarters~~three months ended December 31, ~~2017~~2020, and ~~2016,~~2019, we recognized net gains on sales of financial assets of ~~$1.2~~$3.0 million and ~~$0.9~~$9.5 million, respectively, and the fair value of assets received from these sales were ~~$32.8~~$67.5 million and ~~$55.8~~$246.0 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,~~2020, net sales ~~increased by $6.9~~decreased $5.5 million, or ~~28.7%~~12.2%, to ~~$31.1~~$39.6 million as compared to ~~$24.1 million~~the same period in the prior year ~~results~~of $45.0 million due to ~~higher transactional~~ gains on several significant transactions in the prior year, and a reduction in post-contract earnings, partially offset by an increase in other financing ~~revenues.~~revenues and portfolio earnings. During the nine months ended December 31, ~~2017~~2020, and ~~2016,~~2019, we recognized net gains on sales of financial assets of ~~$4.6~~$10.1 million and ~~$4.1~~$17.0 million, respectively, and the fair value of assets received from these sales were ~~$166.9~~$259.2 million and ~~$185.4~~$414.6 million, respectively. Post contract earnings increased $4.9 million due to the gain on sale of equipment associated with early lease terminations, and other financing revenues increased $1.0 million mainly due to earnings on consumption based financing arrangements.

At December 31, ~~2017,~~2020, we had ~~$147.2~~$214.0 million in financing receivables and operating leases, compared to ~~$140.4~~$162.7 million as of December 31, ~~2016,~~2019, an increase of ~~$6.8~~$51.3 million, or ~~4.8%~~31.5%.

~~Gross Profit:~~ ~~Gross profit increased by $1.3 million, or 18.5% to $8.5~~Cost of sales: Cost of sales, which consists of depreciation expense from operating leases, remained constant at $2.2 million for the three months ended December 31, ~~2017,~~2020, and decreased $0.4 million, to $6.3 million for the nine months ended December 31, 2020, as compared to the ~~same period~~prior year periods. Gross profit decreased $6.3 million, or 39.1%, to $9.8 million, for the three months ended December 31, 2020, and decreased $5.1 million, or 13.3% to $33.3 million, for the nine months ended December 31, 2020, as compared to the prior year periods, due to several large transactions in the quarter ended December 31, 2019.

Selling, general and administrative:Selling, general, and administrative expenses decreased by $2.3 million or 43.5%, which was primarily due to a decrease in variable compensation as a result of lower gross profit, a reduction in credit loss reserve expense, and lower general and administrative expense for the three months ended December 31, 2020, as compared to the prior ~~year.~~ year period.For the nine months ended December 31, ~~2017, gross profit increased $6.5~~2020, selling, general, and administrative expenses decreased by $0.6 million or ~~31.6%~~4.7%, which was primarily due to ~~$27.2~~a decrease in variable compensation of $0.6 million, and general and administrative expenses of $0.6 million, partially offset by an increase in allowance for credit losses of $0.5 million, as compared to the same ~~period of~~periods in the prior year.

Interest and financing costs: Interest and financing costs decreased by 48.8% to $0.4 million for the three months ended December 31, 2020, and decreased by 51.9% to $0.9 million for the nine months ended December 31, 2020, compared to the same periods in the prior year, due to a decrease in the average balance and average interest rate on total notes payable outstanding. Total notes payable for the financing segment was $68.3 million as of December 31, 2020, as compared to $68.4 million as of December 31, 2019. Our weighted average interest rate for non-recourse notes payable was 3.57% and 3.69%, as of December 31, 2020, and 2019, respectively.

Table of Contents

Segment operating income: As a result of ~~higher revenues.~~ ~~Direct lease costs increased $0.3~~the foregoing, operating income and adjusted EBITDA decreased $3.6 million and ~~$0.4~~$3.7 million, respectively, or 36.2% and 35.9%, to $6.4 million and $6.5 million, respectively, for the three months ended December 31, 2020, over the prior year period. For the nine months ended December 31, 2020, operating income and adjusted EBITDA decreased $3.5 million and $3.6 million, respectively, or 14.4% and 14.3%, to $21.1 million and $21.4 million, respectively.

Consolidated

Other income: Other income of $0.8 million, decreased $0.2 million, or 18.5%, due to a distribution from a claim for $0.8 million we recognized in the prior year, which was mostly offset by favorable foreign exchange rate during the three months ended December 31, 2020, as compared to the prior year period. Other income for the nine months ended December 31, 2020, was $1.1 million, compared to $0.9 million for the nine months ended December 31, 2019, due to a favorable foreign exchange rate in the current year period, mostly offset by the distribution from a claim of $0.8 million we recognized in the prior year.

Income taxes: Our provision for income tax expense was $8.4 million and $25.0 million for the three and nine 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 selling, general, and administrative expenses increased by $0.9 million or 38.6%, which was due primarily to an increase in our salaries and benefits expense of $0.7 million resulting from an increase in variable compensation related to the increase in gross profit. Selling, general, and administrative expenses 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 gross profit, partially offset by lower professional fees and credit loss expenses for the nine months ended December 31, 2017. Our financing segment had 48 employees as of December 31, 2017, compared to 51 employees as of December 31, 2016.

Interest and financing costs decreased $0.1 million to $0.3 million for the three months ended December 31, 2017, compared to the prior year, due to a decrease in the average 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%. Total notes payable were $31.5 million as of December 31, 2017, a decrease of $22.5 million or 41.7% compared to $54.0 million as of December 31, 2016. Our weighted average interest rate for non-recourse notes payable was 3.73% and 3.38%, as of December 31, 2017 and December 31, 2016, respectively.

~~Table of Contents~~

~~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~~

~~Other income:~~ Other income and expense during the three months ended December 31, 2017 was a net expense of $0.1 million, which consists of interest income on cash and cash equivalents, more than offset by foreign currency transaction losses.

~~Income taxes:~~ ~~Our provision for income tax expense was $0.7 million and $19.5 million for the three and nine months ended December 31, 2017,~~2020, as compared to ~~$8.7~~$7.7 million and ~~$27.3~~$22.5 million for the same periods in the prior year. Our effective income tax ~~rate~~rates for the three and nine months ended December 31, ~~2017~~2020, was ~~4.2%~~28.1% and ~~29.7%~~29.8%, respectively, as compared to ~~40.8%~~28.3% and ~~40.5%~~28.7% for the three and nine months ended December 31, ~~2016.~~ 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 to the change in the U.S. statutory rate~~rates for the three and nine months ended December 31, ~~2017, and a tax benefit of $1.6 million on~~2020 compared to the ~~vesting of restricted stock~~same period in the ~~nine months ended December 31, 2017, compared~~prior year were primarily due to achanges in our state income tax ~~benefit of $0.5 million in the nine months ended December 31, 2016.~~rates.

Net earnings: The foregoing resulted in net earnings of ~~$15.6 million and $46.2~~$21.6 million for the three ~~and~~months ended December 31, 2020, an increase of $2.1 million, or 10.7%, as compared to $19.6 million of the same period in the prior year. For the nine months ended December 31, ~~2017,~~2020, net earnings were $58.8 million, an increase of ~~23.5% and 15.4%~~$3.0 million, or 5.4%, as compared to ~~$12.6~~$55.8 million ~~and $40.1 million during~~in the ~~three and nine months ended December 31, 2016, respectively.~~same period in the prior year.

Basic and fully diluted earnings per common share ~~were $1.12 and $1.11~~was $1.62 for the three months ended December 31, ~~2017,~~2020, an increase of ~~21.7%~~10.2% and ~~22.0%~~11.0%, respectively, as compared to ~~$0.92~~$1.47 and ~~$0.91, respectively,~~$1.46 for the ~~three months ended December 31, 2016.~~basic and fully diluted earnings per common share for the same periods in the prior year. For the nine months ended December 31, ~~2017,~~2020, basic and fully diluted earnings per common share were ~~$3.34~~$4.41 and ~~$3.30,~~$4.39, an increase of ~~16.0%~~5.3% and ~~15.4%~~5.5%, respectively, as compared to ~~$2.88~~$4.19 and ~~$2.86, respectively,~~$4.16 for the same ~~period~~periods in the prior year.

Non-GAAP diluted earnings per share increased 9.1% to $1.79 for the three months ended December 31, 2020, as compared to $1.64 for the three months ended December 31, 2019. Non-GAAP diluted earnings per share increased 1.6% to $4.97 for the nine months ended December 31, 2020, as compared to $4.89 for the nine months ended December 31, 2019.

Weighted average common shares outstanding used in the calculation of basic ~~and diluted~~ earnings per common share for both the three and nine months ended December 31, ~~2017~~2020 and 2019 was ~~13.9 million and 14.0 million, respectively.~~13.3 million. Weighted average common shares outstanding used in the calculation of ~~the basic and~~ diluted earnings per common share for both 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 the~~ nine months ended December 31, ~~2017~~2020, and 2019 was 13.8 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.

~~Table of Contents~~

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.

Table of Contents

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.

Cash Flows

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

	Nine Months Ended December 31,
	2020			2019
Net cash provided by (used in) operating activities	$	5,244		$	(74,728	)
Net cash used in investing activities		(30,659	)		(20,044	)
Net cash provided by financing activities		26,382			74,648
Effect of exchange rate changes on cash		(735	)		(137	)

Net increase (decrease) in cash and cash equivalents	$	232		$	(20,261	)

Cash flows from ~~$250.0~~operating activities. We had $5.2 million provided by operating activities during the nine months ended December 31, 2020, compared to ~~$325.0~~$74.7 million used in operating activities for the nine months ended December 31, 2019. See below for a breakdown of operating cash flows by segment (in thousands):

	Nine Months Ended December 31,
	2020			2019
Technology segment	$	43,694		$	(18,146	)
Financing segment		(38,450	)		(56,582	)
Net cash provided by (used in) operating activities	$	5,244		$	(74,728	)

Technology Segment: In the nine months ended December 31, 2020, our technology segment provided $43.7 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 $44.1 million which was partially offset by repayment of $35.0 million in borrowings under the accounts receivable component of our Technology segment credit facility. 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 nine months ended December 31, 2019, operating cash flows used by our technology segment was $18.1 million as cash generated from earnings were exceeded by changes in working capital. In addition, cash provided by the accounts payable – floor plan facility was $28.4 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”).

Table of Contents

The following table presents the components of the ~~agreement~~cash conversion cycle for our Technology segment:

	As of December 31,
	2020			2019

(DSO) Days sales outstanding (1)		62			57
(DIO) Days inventory outstanding (2)		13			10
(DPO) Days payable outstanding (3)		(51	)		(41	)
Cash conversion cycle		24			26

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

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

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

Our cash conversion cycle decreased to 24 days at December 31, 2020, compared to 26 days at December 31, 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 10 days. Invoices processed through ~~October~~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 5 days due to an increase in sales during the quarter ended December 31, ~~2017,~~2020, to customers with terms greater than or equal to net 60 days. The 3 day increase in DIO was due to an increase in average inventory balances of 21.9%, or $12.7 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 nine months ended December 31, 2020, our financing segment used $38.5 million from operating activities, primarily due to changes in financing receivables- net of $67.1 million, partially offset by earnings of $15.4 million and an increase in accounts payable trade of $12.5 million. In the nine months ended December 30, 2019, our financing segment used $56.6 million from operating activities, primarily due to the issuance of new financing receivables. 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 nine months ended December 31, 2020, we used $30.7 million from investing activities, consisting of $27.1 million for the acquisition of SMP, $4.2 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. In the nine months ended December 31, 2019, we used $20.0 million from investing activities, consisting of $14.2 million for acquisitions and $7.2 million for purchases of property, equipment, and operating lease equipment, and offset by $1.4 million of proceeds from the sale of property, equipment, and operating lease equipment.

Cash flows from financing activities. In the nine months ended December 31, 2020, cash provided by financing activities was $26.4 million consisting of net borrowings on floor plan facility of $44.1 million, net borrowings of non-recourse and recourse notes payable of $24.8 million, which was partially offset by repayment of $35.0 million in borrowings under the accounts receivable component of our Technology segment credit facility, $6.9 million in repurchase of common stock, and $0.6 million paid to the sellers of a prior acquisition.

In the nine months ended December 31, 2019, cash provided by financing activities was $74.6 million, consisting of net borrowings of non-recourse and recourse notes payable of $65.7 million, net borrowings on floor plan facility of $28.4 million, and offset by $13.7 million in repurchase of common stock and $5.8 million in repayments of financing of acquisitions.

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.

Table of Contents

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.

Secured borrowings – Financing segment

We may finance all or most of ~~election~~the cost of the assets that we finance for customers by transferring all or ~~October 31~~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 ~~same year.~~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.

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 December 31, 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. Our borrowing availability under the credit facility varies based upon the value of the receivables and inventory of ePlus Technology, inc. and certain of its subsidiaries.

The WFCDF credit facility is secured by the assets of ePlus Technology, inc. and certain of its subsidiaries. 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 December 31, 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.

Table of Contents

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.

~~Table of Contents~~

~~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.

~~Table of Contents~~

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.

~~Table of Contents~~

~~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
Maximum Credit Limit at December 31, 2020								Maximum Credit Limit at December 31, 2020	Balance as of December 31, 2020		Maximum Credit Limit at March 31, 2020		Balance as of March 31, 2020
$	250,000	$	107,761	$	250,000	$	132,612	275,000	$	177,084	$	300,000	$	127,416

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 atof $35.0 million. As of December 31, ~~2017or~~2020, there was no outstanding balance for the accounts receivable component. As of December 31, 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 from time to time maintain a balance on the accounts receivable component to assist in mitigating risk arising from COVID-19.

~~Table of Contents~~

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,~~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.

Table of Contents

Inflation

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

Potential Fluctuations in Quarterly Operating Results

Our future quarterly operating results and the market price of our common stock may fluctuate. In the event our revenues or earnings for any quarter are less than the level expected by securities analysts or the market in general, such shortfall could have an immediate and significant adverse impact on the market price of our common stock. Any such adverse impact could be greater if any such shortfall occurs near the time of any material decrease in any widely followed stock index or in the market price of the stock of one or more public equipment leasing and financing companies, IT resellers, software competitors, 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,~~2020, the aggregate fair value of our recourse and non-recourse borrowings approximated their carrying value.

~~Table of Contents~~

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,~~UK’s leaving the European Union (“Brexit”) 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~~our 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.

Table of Contents

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.~~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~~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~~we 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~~us in a reporting period for amounts in excess of management’s expectations, ~~the Company’s~~our 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 months ended December 31, ~~2017.~~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	)
October 1, 2020 through October 31, 2020		25,455	$	70.67		25,455		450,227	(9	)
November 1, 2020 through November 30, 2020		9,328	$	70.99		9,328		440,899	(10	)
December 1, 2020 through December 31, 2020		-	$	-		-		440,899	(11	)

~~(1)~~

~~Any shares acquired were in open-market purchases, except for 54,546 shares, which were repurchased in June 2017, and 3,179 shares which were repurchased in July 2017,~~(1) Any shares acquired were in open-market purchases, except for 37,640 shares, out of which 996 were repurchased in May 2020 and 36,644 in June 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~~2020, had purchase limitations on the number of shares of up to 500,000 shares. As of October 31, ~~2017,~~2020, the remaining authorized shares to be purchased were ~~500,000.~~450,227.

(10)

The share purchase authorization in place for the month ended November 30, ~~2017~~2020, had purchase limitations on the number of shares of up to 500,000 shares. As of November 30, ~~2017,~~2020, the remaining authorized shares to be purchased were ~~443,293.~~440,899.

(11)

The share purchase authorization in place for the month ended December 31, ~~2017~~2020, had purchase limitations on the number of shares of up to 500,000 shares. As of December 31, ~~2017,~~2020, the remaining authorized shares to be purchased were ~~374,395.~~440,899.

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.

	ePlus inc.

Date: February ~~7, 2018~~3, 2021	/s/ MARK P. MARRON
	By: Mark P. Marron
	Chief Executive Officer and President
	(Principal Executive Officer)

Date: February ~~7, 2018~~3, 2021	/s/ ELAINE D. MARION
	By: Elaine D. Marion
	Chief Financial Officer
	(Principal Financial Officer)

4650

	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							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

	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	%

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	)