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.~~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,~~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”).

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements

ePlus inc. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

	December 31, 2019			March 31, 2019			September 30, 2020			March 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	59,555		$	79,816		$	161,081		$	86,231
Accounts receivable—trade, net		413,741			299,899			369,037			374,998
Accounts receivable—other, net		37,187			41,328			40,832			36,570
Inventories		61,065			50,493			73,751			50,268
Financing receivables—net, current		89,229			63,767			92,766			70,169
Deferred costs		20,421			17,301			22,329			22,306
Other current assets		8,809			7,499			8,233			9,256
Total current assets		690,007			560,103			768,029			649,798

Financing receivables and operating leases—net		73,506			59,032			87,926			74,158
Property, equipment and other assets		34,000			17,328			34,314			32,596
Goodwill		118,225			110,807			118,177			118,097
Other intangible assets—net		36,870			38,928			30,265			34,464
TOTAL ASSETS	$	952,608		$	786,198		$	1,038,711		$	909,113

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES

Current liabilities:
Accounts payable	$	126,154		$	86,801		$	104,893		$	82,919
Accounts payable—floor plan		144,483			116,083			218,970			127,416
Salaries and commissions payable		27,476			21,286			30,284			30,952
Deferred revenue		55,128			47,251			59,078			55,480
Recourse notes payable—current		2,239			28			2,286			37,256
Non-recourse notes payable—current		59,015			38,117			35,610			29,630
Other current liabilities		24,995			19,285			25,372			22,986
Total current liabilities		439,490			328,851			476,493			386,639

Non-recourse notes payable—long term		7,120			10,502			2,444			5,872
Deferred tax liability—net		4,924			4,915			3,762			2,730
Other liabilities		28,588			17,677			32,942			27,727
TOTAL LIABILITIES		480,122			361,945			515,641			422,968

COMMITMENTS AND CONTINGENCIES (Note 10)
COMMITMENTS AND CONTINGENCIES (Note 10)

STOCKHOLDERS' EQUITY

Preferred stock, $0.01 per share par value; 2,000 shares authorized; NaN outstanding		-			-			0			0
Common stock, $0.01 per share par value; 25,000 shares authorized; 13,513 outstanding at December 31, 2019 and 13,611 outstanding at March 31, 2019		144			143
Common stock, $0.01 per share par value; 25,000 shares authorized; 13,537 outstanding at September 30, 2020 and 13,500 outstanding at March 31, 2020								145			144
Additional paid-in capital		143,262			137,243			148,845			145,197
Treasury stock, at cost, 884 shares at December 31, 2019 and 693 shares at March 31, 2019		(67,691	)		(53,999	)
Treasury stock, at cost, 958 shares at September 30, 2020 and 896 shares at March 31, 2020								(72,911	)		(68,424	)
Retained earnings		396,973			341,137			447,425			410,219
Accumulated other comprehensive income—foreign currency translation adjustment		(202	)		(271	)		(434	)		(991	)
Total Stockholders' Equity		472,486			424,253			523,070			486,145
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	952,608		$	786,198		$	1,038,711		$	909,113

See Notes to Unaudited Consolidated Financial Statements.

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ePlus inc. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

	Three Months Ended December 31,				Nine Months Ended December 31,				Three Months Ended September 30,					Six Months Ended September 30,
	2019		2018		2019		2018		2020		2019			2020		2019

Net sales
Product	$	378,569	$	310,443	$	1,077,667	$	942,735	$	383,656	$	363,497		$	690,896	$	699,098
Services		50,422		35,221		144,261		104,504		49,425		48,068			97,216		93,839
Total		428,991		345,664		1,221,928		1,047,239		433,081		411,565			788,112		792,937
Cost of sales
Product		293,209		241,856		832,135		735,802		302,963		278,863			529,597		538,926
Services		32,086		20,895		90,427		62,321		31,156		29,671			60,996		58,341
Total		325,295		262,751		922,562		798,123		334,119		308,534			590,593		597,267

Gross profit		103,696		82,913		299,366		249,116		98,962		103,031			197,519		195,670

Selling, general, and administrative		73,090		59,728		209,400		174,399		66,889		70,523			136,356		136,310
Depreciation and amortization		3,647		2,719		10,667		8,250		3,341		3,557			6,857		7,020
Interest and financing costs		694		443		1,898		1,403		247		576			824		1,204
Operating expenses		77,431		62,890		221,965		184,052		70,477		74,656			144,037		144,534

Operating income		26,265		20,023		77,401		65,064		28,485		28,375			53,482		51,136

Other income		997		721		912		1,140
Other income (expense)										184		(40	)		282		(85	)

Earnings before tax		27,262		20,744		78,313		66,204		28,669		28,335			53,764		51,051

Provision for income taxes		7,712		5,880		22,477		18,064		8,823		8,237			16,558		14,765

Net earnings	$	19,550	$	14,864	$	55,836	$	48,140	$	19,846	$	20,098		$	37,206	$	36,286

Net earnings per common share—basic	$	1.47	$	1.10	$	4.19	$	3.57	$	1.48	$	1.51		$	2.79	$	2.72
Net earnings per common share—diluted	$	1.46	$	1.10	$	4.16	$	3.54	$	1.48	$	1.51		$	2.78	$	2.71

Weighted average common shares outstanding—basic		13,320		13,471		13,329		13,467		13,372		13,312			13,347		13,334
Weighted average common shares outstanding—diluted		13,378		13,544		13,410		13,592		13,391		13,350			13,394		13,408

See Notes to Unaudited Consolidated Financial Statements.

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ePlus inc. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

	Three Months Ended December 31,					Nine Months Ended December 31,					Three Months Ended September 30,					Six Months Ended September 30,
	2019		2018			2019		2018			2020		2019			2020		2019

NET EARNINGS	$	19,550	$	14,864		$	55,836	$	48,140		$	19,846	$	20,098		$	37,206	$	36,286

OTHER COMPREHENSIVE INCOME, NET OF TAX:

Foreign currency translation adjustments		682		(302	)		69		(1,102	)		520		(350	)		557		(613	)

Other comprehensive income (loss)		682		(302	)		69		(1,102	)		520		(350	)		557		(613	)

TOTAL COMPREHENSIVE INCOME	$	20,232	$	14,562		$	55,905	$	47,038		$	20,366	$	19,748		$	37,763	$	35,673

See Notes to Unaudited Consolidated Financial Statements.

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ePlus inc. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS ~~(in~~

(in thousands)

	Nine Months Ended December 31,						Six Months Ended September 30,
	2019			2018			2020			2019

Cash Flows From Operating Activities:
Cash flows from operating activities:
Net earnings	$	55,836		$	48,140		$	37,206		$	36,286

Adjustments to reconcile net earnings to net cash used in operating activities:
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:
Depreciation and amortization		15,217			13,341			9,460			10,077
Reserve for credit losses		504			269			1,766			631
Share-based compensation expense		6,019			5,418			3,648			4,054
Deferred taxes		(3	)		(215	)		1,032			(3	)
Payments from lessees directly to lenders—operating leases		(44	)		(118	)		(13	)		(34	)
Gain on disposal of property, equipment, and leased equipment		(614	)		(1,307	)
Gain on sale of financing receivables		-			(5,030	)
Gain on disposal of property, equipment, and operaing lease equipment								(278	)		(436	)
Changes in:
Accounts receivable		(102,093	)		(56,769	)		1,755			(46,100	)
Inventories-net		(10,429	)		(11,674	)		(23,381	)		(5,301	)
Financing receivables—net		(87,633	)		(1,070	)		(54,386	)		(76,423	)
Deferred costs and other assets		(18,424	)		3,971			(1,052	)		(18,826	)
Accounts payable-trade		33,574			16,062			21,717			15,585
Salaries and commissions payable, deferred revenue, and other liabilities		33,362			(8,846	)		10,934			26,086
Net cash used in / provided by operating activities	$	(74,728	)	$	2,172
Net cash provided by (used in) operating activities								8,408			(54,404	)

Cash Flows From Investing Activities:
Proceeds from sale of property, equipment, and leased equipment		1,404			2,550
Purchases of property, equipment, and operating lease equipment		(7,209	)		(8,492	)
Purchases of assets to be leased or financed		-			(13,941	)
Issuance of financing receivables		-			(140,307	)
Repayments of financing receivables		-			55,198
Proceeds from sale of financing receivables		-			56,983
Cash flows from investing activities:
Proceeds from sale of property, equipment, and operating lease equipment								456			653
Purchases of property, equipment and operating lease equipment								(3,267	)		(4,888	)
Cash used in acquisitions, net of cash acquired		(14,239	)		-			0			(13,815	)
Net cash used in investing activities	$	(20,044	)	$	(48,009	)		(2,811	)		(18,050	)

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

Effect of exchange rate changes on cash								(477	)		114

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

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

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

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UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS - continued

(in thousands)

Nine Months Ended December 31,
2019 2018

Cash Flows From Financing Activities:
Borrowings of non-recourse and recourse notes payable $ 75,557 $ 40,693
Repayments of non-recourse and recourse notes payable (9,854 ) (17,447 )
Repurchase of common stock (13,692 ) (16,261 )
Repayments of financing of acquisitions (5,763 ) (7,634 )
Net borrowings (repayments) on floor plan facility 28,400 12,450
Net cash provided by financing activities 74,648 11,801

Effect of exchange rate changes on cash (137 ) 172

Net Decrease in Cash and Cash Equivalents (20,261 ) (33,864 )

Cash and Cash Equivalents, Beginning of Period 79,816 118,198

Cash and Cash Equivalents, End of Period $ 59,555 $ 84,334

Supplemental Disclosures of Cash Flow Information:
Cash paid for interest $ 1,721 $ 1,364
Cash paid for income taxes $ 19,519 $ 18,269
Cash paid for amounts included in the measurement of lease liabilities $ 4,113 $ -

Schedule of Non-Cash Investing and Financing Activities:
Proceeds from sale of property, equipment, and leased equipment $ - $ 483
Purchases of property, equipment, and operating lease equipment $ (425 ) $ (2,704 )
Purchases of assets to be leased or financed $ - $ 2,437
Issuance of financing receivables $ - $ (96,406 )
Proceeds from sale of financing receivables $ - $ 88,119
Consideration for acquisitions $ (1,037 ) $ -
Borrowing of non-recourse and recourse notes payable $ 111,234 $ 65,042
Repayments of non-recourse and recourse notes payable $ (44 ) $ (118 )
Vesting of share-based compensation $ 8,990 $ 12,795
Repurchase of common stock $ - $ (393 )
New operating lease assets obtained in exchange for lease obligations $ 6,035 $ -

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

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

See Notes to Unaudited Consolidated Financial Statements.

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ePlus inc. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)

	Nine Months Ended December 31, 2019																		Six Months Ended September 30, 2020
	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			Shares			Par Value		Capital		Stock			Earnings		Income			Total
Balance, March 31, 2019		13,611		$	143	$	137,243	$	(53,999	)	$	341,137	$	(271	)	$	424,253
Balance, March 31, 2020																				13,500		$	144	$	145,197	$	(68,424	)	$	410,219	$	(991	)	$	486,145
Issuance of restricted stock awards		86			1		-		-			-		-			1			91			1		0		0			0		0			1
Share-based compensation		-			-		1,919		-			-		-			1,919			0			0		1,885		0			0		0			1,885
Repurchase of common stock		(188	)		-		-		(13,455	)		-		-			(13,455	)		(38	)		0		0		(2,703	)		0		0			(2,703	)
Net earnings		-			-		-		-			16,188		-			16,188			-			0		0		0			17,360		0			17,360
Foreign currency translation adjustment		-			-		-		-			-		(263	)		(263	)		-			0		0		0			0		37			37

Balance, June 30, 2019		13,509		$	144	$	139,162	$	(67,454	)	$	357,325	$	(534	)	$	428,643
Balance, June 30, 2020																				13,553		$	145	$	147,082	$	(71,127	)	$	427,579	$	(954	)	$	502,725
Issuance of restricted stock awards		7			-		-		-			-		-			-			8			0		0		0			0		0			0
Share-based compensation		-			-		2,135		-			-		-			2,135			0			0		1,763		0			0		0			1,763
Repurchase of common stock		(3	)		-		-		(237	)		-		-			(237	)		(24	)		0		0		(1,784	)		0		0			(1,784	)
Net earnings		-			-		-		-			20,098		-			20,098			-			0		0		0			19,846		0			19,846
Foreign currency translation adjustment		-			-		-		-			-		(350	)		(350	)		-			0		0		0			0		520			520

Balance, September 30, 2019		13,513		$	144	$	141,297	$	(67,691	)	$	377,423	$	(884	)	$	450,289
Issuance of restricted stock awards		-			-		-		-			-		-			-
Share-based compensation		-			-		1,965		-			-		-			1,965
Repurchase of common stock		-			-		-		-			-		-			-
Net earnings		-			-		-		-			19,550		-			19,550
Foreign currency translation adjustment		-			-		-		-			-		682			682

Balance, December 31, 2019		13,513		$	144	$	143,262	$	(67,691	)	$	396,973	$	(202	)	$	472,486
Balance, September 30, 2020																				13,537		$	145	$	148,845	$	(72,911	)	$	447,425	$	(434	)	$	523,070

	Nine Months Ended December 31, 2018																		Six Months Ended September 30, 2019
	Common Stock					Additional Paid-In		Treasury			Retained		Accumulated Other Comprehensive						Common Stock					Additional Paid-In		Treasury			Retained		Accumulated Other Comprehensive
	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			Shares			Par Value		Capital		Stock			Earnings		Income			Total
Balance, March 31, 2018		13,761		$	142	$	130,000	$	(36,016	)	$	277,945	$	532		$	372,603
Balance, March 31, 2019																				13,611		$	143	$	137,243	$	(53,999	)	$	341,137	$	(271	)	$	424,253
Issuance of restricted stock awards		70			1		-		-			-		-			1			86			1		0		0			0		0			1
Share-based compensation		-			-		1,693		-			-		-			1,693			0			0		1,919		0			0		0			1,919
Repurchase of common stock		(108	)		-		-		(9,059	)		-		-			(9,059	)		(188	)		0		0		(13,455	)		0		0			(13,455	)
Net earnings		-			-		-		-			15,273		-			15,273			-			0		0		0			16,188		0			16,188
Foreign currency translation adjustment		-			-		-		-			-		(657	)		(657	)		-			0		0		0			0		(263	)		(263	)

Balance, June 30, 2018		13,723		$	143	$	131,693	$	(45,075	)	$	293,218	$	(125	)	$	379,854
Balance, June 30, 2019																				13,509		$	144	$	139,162	$	(67,454	)	$	357,325	$	(534	)	$	428,643
Issuance of restricted stock awards		7			-		-		-			-		-			-			7			0		0		0			0		0			0
Share-based compensation		-			-		1,868		-			-		-			1,868			(3	)		0		2,135		0			0		0			2,135
Repurchase of common stock		(3	)		-		-		(305	)		-		-			(305	)		0			0		0		(237	)		0		0			(237	)
Net earnings		-			-		-		-			18,003		-			18,003			-			0		0		0			20,098		0			20,098
Foreign currency translation adjustment		-			-		-		-			-		(143	)		(143	)		-			0		0		0			0		(350	)		(350	)

Balance, September 30, 2018		13,727		$	143	$	133,561	$	(45,380	)	$	311,221	$	(268	)	$	399,277
Issuance of restricted stock awards		(2	)		-		-		-			-		-			-
Share-based compensation		-			-		1,857		-			-		-			1,857
Repurchase of common stock		(85	)		-		-		(6,519	)		-		-			(6,519	)
Net earnings		-			-		-		-			14,864		-			14,864
Foreign currency translation adjustment		-			-		-		-			-		(302	)		(302	)

Balance, December 31, 2018		13,640		$	143	$	135,418	$	(51,899	)	$	326,085	$	(570	)	$	409,177
Balance, September 30, 2019																				13,513		$	144	$	141,297	$	(67,691	)	$	377,423	$	(884	)	$	450,289

See Notes to Unaudited Consolidated Financial Statements.

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ePlus inc. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1.	ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

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

INTERIM FINANCIAL STATEMENTS — The unaudited consolidated financial statements for the ~~three and nine~~six months ended ~~December 31,~~September 30, 2020, and 2019, ~~and 2018,~~ were prepared by us and include all normal and recurring adjustments that, in the opinion of management, are necessary for a fair presentation of our financial position, results of operations, changes in comprehensive income, and cash flows for such periods. Operating results for the ~~nine~~six months ended ~~December 31,~~September 30, 2020, and 2019 ~~and 2018~~ are not necessarily indicative of results that may be expected for any other interim period or for the full fiscal year ending March 31, ~~2020~~2021, or any other future period. These unaudited consolidated financial statements do not include all disclosures required by the accounting principles generally accepted in the United States (“US GAAP”) for annual financial statements. Our audited consolidated financial statements are contained in our annual report on Form 10-K for the year ended March 31, ~~2019~~2020 (“~~2019~~2020 Annual Report”), which should be read in conjunction with these interim consolidated financial statements.

USE OF ESTIMATES — The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Estimates are used when accounting for items and matters including, but not limited to, revenue recognition, residual values, vendor consideration, lease classification, goodwill and intangible assets, ~~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.

CONCENTRATIONS OF RISK — A substantial portion of our sales are products from Cisco Systems, which were 41% and 43% of our technology segment’s net sales for the three months ended ~~December 31,~~September 30, 2020, and 2019, respectively, and 40% ~~for the three months ended December 31, 2018, and 41%~~ and 42% of our technology segment’s net sales for the ~~nine~~six months ended ~~December 31,~~September 30, 2020, and 2019, ~~and 2018,~~ 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 year ended March 31, ~~2019,~~2020, except for changes from the adoption of ~~Accounting Standards Update ("ASU") 2016-02,~~ ~~Leases~~ ~~(Topic 842), as amended (“ASU 2016-02”). This update establishes Codification Topic 842,~~ ~~Leases~~ ~~(“Codification Topic 842”) within the~~ Financial Accounting Standards Board (“FASB”) Accounting Standards ~~Codification (“Codification”~~Update ("ASU")~~. The updates to our accounting policies from adopting ASU 2016-02 are provided below.~~

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

We classify our leases as either sales-type leases or operating leases. We classify leases as sales-type leases if any one of five criteria are met, each of which indicate that the lease transfers control of the underlying asset to the lessee. We classify our other leases as operating leases.

For sales-type leases, upon lease commencement, we recognize the present value of the lease payments and the residual asset discounted using the rate implicit in the lease. When we are financing equipment provided by another dealer, we typically do not have any selling profit or loss arising from the lease. When we are the dealer of the equipment being leased, we typically recognize revenue in the amount of the lease receivable and cost of sales in the amount of the carrying value of the underlying asset minus the unguaranteed residual asset. After the commencement date, we recognize interest income as part of net sales using the effective interest method.

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

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

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

2016~~We account for transfers of our financial assets, including our lease receivables and notes receivable, under Codification Topic 860~~ -~~Transfers and Servicing~~13, ~~(“Codification Topic 860”). When a transfer meets all the requirements for sale accounting, we derecognize the financial asset and record a net gain or loss that is included in net sales.~~

LESSEE ACCOUNTING — We lease office space over initial terms typically between 3 and 6 years. At the lease commencement date, we recognize operating lease liabilities based on the present value of the future minimum lease payments. In determining the present value of future minimum lease payments, we use our incremental borrowing rate based on the information available at the commencement date. When the future minimum payments encompass non-lease components, we account for the lease and non-lease components as a single lease component. We elected not to recognize right-of-use assets and lease liabilities for leases with an initial term of 12 months or less. We recognize lease expense on a straight-line basis over the lease term beginning on the commencement date.

2.	~~RECENT ACCOUNTING PRONOUNCEMENTS~~

~~RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS — We adopted~~ ASU 2016-02 in our quarter ended June 30, 2019 using a transition option that allows entities to initially apply the new standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. Under this transition option, we do not update the financial information and disclosures for comparative periods.

Additionally, we elected a package of practical expedients to not reassess whether any expired or existing contracts are or contain leases, not reassess the lease classification for any expired or existing leases, and not reassess initial direct costs for any existing leases. As a result of our adoption, we recorded an initial impact to our consolidated balance sheets of establishing right-of-use assets of $~~12.7~~ ~~million and lease liabilities of $12.3~~ ~~million and a reduction in prepaid assets of $0.4~~ ~~million at the beginning of our quarter ending June 30, 2019.~~

~~RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED — In June 2016, the FASB issued ASU 2016-13,~~ Financial Instruments- Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, as amended (“ASU 2016-13”). The updates to our accounting policies from adopting ASU 2016-13 are provided below.

ALLOWANCE FOR CREDIT LOSSES — We maintain an allowance for credit losses related to our accounts receivable and financing receivables. We record an expense in the amount necessary to adjust the allowance for credit losses to our current estimate of expected credit losses on financial assets. We estimate expected credit losses based on our internal rating of the customer’s credit quality, our historical credit losses, current economic conditions, and other relevant factors. Prior to providing credit, we assign an internal rating for each customer’s credit quality based on the customer’s financial status, rating agency reports and other financial information. We review our internal ratings for each customer at least annually or when there is an indicator of a change in credit quality, such as a delinquency or bankruptcy. We charge off uncollectable financing receivables when we stop pursuing collection.

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2.	RECENT ACCOUNTING PRONOUNCEMENTS

CREDIT LOSSES — We adopted ASU 2016-13 on April 1, 2020. The amendments in this update replace the incurred loss impairment methodology in current US GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. ~~This update requires~~Our adoption ~~under a modified retrospective approach and will become effective for us in the quarter ending June 30, 2020. 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.

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REVENUES

Contract balances

Accounts receivable – trade ~~represents~~consists entirely of amounts due from contracts with customers. In addition, we had ~~$18.5~~$41.3 million and ~~$16.2~~$33.1 million of receivables from contracts with customers included within financing receivables as of ~~December 31, 2019,~~September 30,2020, and March 31, ~~2019,~~2020, respectively. The following table provides the balance of contract liabilities from contracts with customers (in ~~thousands)~~ thousands):

Contract liabilities	December 31, 2019		March 31, 2019		September 30, 2020		March 31, 2020
Current (included in deferred revenue)	$	54,482	$	46,356	$	58,267	$	54,486
Non-current (included in other liabilities)	$	16,874	$	13,593	$	18,794	$	16,395

Revenue recognized from the beginning contract liability balance was ~~$15.9~~$11.3 million and ~~$45.3~~$26.9 million for the three and ~~nine~~six months ended ~~December 31, 2019,~~September 30, 2020, respectively, and ~~$7.3~~$13.6 million and ~~$28.2~~$29.4 million for the three and ~~nine~~six months ended ~~December 31, 2018,~~September 30, 2019, respectively.

Performance obligations

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

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

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

Remainder of Year ending March 31, 2020 $ 9,439
Year ending March 31, 2021 20,100
Year ending March 31, 2022 9,589
Year ending March 31, 2023 2,935
Year ending March 31, 2024 467
Year ending March 31, 2025 and thereafter 443
Total remaining performance obligations $ 42,973

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~~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. ~~We classify leases as either sales-type or operating lease in accordance with Codification Topic 842.~~

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~~six months ended ~~December 31,~~September 30, 2020, and 2019 (in thousands):


	Three months ended December 31, 2019		Nine months ended December 31, 2019		Three months ended September 30, 2020		Three months ended September 30, 2019		Six months ended September 30, 2020		Six months ended September 30, 2019
Net sales	$	5,710	$	13,697	$	7,655	$	3,133	$	17,818	$	7,987
Cost of sales		4,807		11,459		5,402		2,702		10,729		6,652
Gross Profit	$	903	$	2,238
Gross profit					$	2,253	$	431	$	7,089	$	1,335

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The following table provides interest income in aggregate on our sales-type leases and lease income on our operating leases for the three and ~~nine~~six months ended ~~December 31,~~September 30, 2020, and 2019 (in thousands):

	Three months ended December 31, 2019		Nine months ended December 31, 2019		Three months ended September 30 2020		Three months ended September 30, 2019		Six months ended September 30, 2020		Six months ended September 30, 2019
Interest Income on sales-type leases	$	1,272	$	4,862
Interest income on sales-type leases					$	1,884	$	1,495	$	4,103	$	3,590
Lease income on operating leases	$	4,489	$	14,908	$	3,900	$	5,059	$	7,738	$	10,418

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FINANCING RECEIVABLES—NET

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

December 31, 2019	Notes Receivables			Lease-Related Receivables			Total Financing Receivables
September 30, 2020										Notes Receivable			Lease Receivables			Financing Receivables

Minimum payments	$	60,234		$	81,450		$	141,684
Estimated unguaranteed residual value (1)		-			21,073			21,073
Gross receivables										$	90,002		$	76,700		$	166,702
Unguaranteed residual value (1)											0			20,213			20,213
Initial direct costs, net of amortization ~~(2)~~		297			319			616			364			0			364
Unearned income		-			(11,937	)		(11,937	)		0			(11,329	)		(11,329	)
Reserve for credit losses ~~(3)~~(2)		(788	)		(642	)		(1,430	)		(1,337	)		(1,227	)		(2,564	)
Total, net	$	59,743		$	90,263		$	150,006		$	89,029		$	84,357		$	173,386
Reported as:
Current	$	41,350		$	47,879		$	89,229		$	52,397		$	40,369		$	92,766
Long-term		18,393			42,384			60,777			36,632			43,988			80,620
Total, net	$	59,743		$	90,263		$	150,006		$	89,029		$	84,357		$	173,386

(1)

Includes ~~estimated~~ unguaranteed residual values of ~~$15,883~~$12,644 thousand that we retained after selling the related lease receivable.

(2)

Refer to Note 7, “Allowance for 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 $299 thousand.~~

~~(3)~~

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

March 31, 2019

Notes
Receivables

Lease-Related
Receivables

Total Financing
Receivables

Minimum payments $ 40,563 $ 64,201 $ 104,764
Estimated unguaranteed residual value (1) - 14,639 14,639
Initial direct costs, net of amortization (2) 377 332 709
Unearned income - (7,671 ) (7,671 )
Reserve for credit losses (3) (505 ) (530 ) (1,035 )
Total, net $ 40,435 $ 70,971 $ 111,406
Reported as:
Current $ 30,852 $ 32,914 $ 63,766
Long-term 9,583 38,057 47,640
Total, net $ 40,435 $ 70,971 $ 111,406

~~(1)~~

~~Includes $8,996 thousand for the estimated residual values of sales type leases and direct financing leases for which we sold the financing assets.~~

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~~(2)~~

~~Initial direct costs are shown net of amortization of $275 thousand.~~

~~(3)~~

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

~~Future~~The following table provides the future scheduled minimum lease payments for investments in sales-type leases as of ~~December 31, 2019 are as follows~~September 30,2020 (in ~~thousands)~~ thousands):

Remainder of year ending March 31, 2020 $ 36,224
Year ending March 31, 2021 23,059
Year ending March 31, 2022 13,728
Year ending March 31, 2023 5,946
Year ending March 31, 2024 and thereafter 2,492
Total $ 81,449

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

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OPERATING LEASES—NET

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

	December 31, 2019			March 31, 2019			September 30, 2020			March 31, 2020

Cost of equipment under operating leases	$	24,692		$	21,532		$	19,578		$	21,276
Accumulated depreciation		(11,963	)		(10,139	)		(12,272	)		(11,159	)
Investment in operating lease equipment—net (1)	$	12,729		$	11,393		$	7,306		$	10,117

(1)

~~These totals~~Amounts include estimated unguaranteed residual values of ~~$3.2~~$2.5 million and ~~$2.9~~$3.1 million as of ~~December 31, 2019~~September 30, 2020, and March 31, ~~2019,~~2020, respectively.

~~Future~~The following table provides the future scheduled minimum lease rental payments for operating leases as of ~~December 31, 2019 are as follows~~September 30,2020 (in ~~thousands)~~ thousands):

Remainder of year ending March 31, 2020 $ 1,476
Year ending March 31, 2021 4,380
Year ending March 31, 2022 2,961
Year ending March 31, 2023 1,626
Year ending March 31, 2024 and thereafter 443
Total $ 10,886

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

TRANSFERS OF FINANCIAL ASSETS

We enter into arrangements to transfer the contractual payments due under financing receivables and operating lease agreements, which are accounted for as sales or secured ~~borrowings in accordance with Codification Topic 860.~~borrowings.

For transfers accounted for as a secured borrowing, the corresponding investments serve as collateral for non-recourse notes payable. As of ~~December 31, 2019,~~September 30, 2020, and March 31, ~~2019,~~2020, we had financing receivables of $~~62.5~~33.7 million and $~~50.2~~34.6 million, respectively, and operating leases of $~~8.5~~4.9 million and $~~7.8~~6.7 million, respectively, which were collateral for non-recourse notes payable. See Note 9 ~~"Notes~~, “Notes Payable and Credit Facility."”

For transfers accounted for as sales, we derecognize the carrying value of the asset transferred plus any liability and recognize a net gain or loss on the sale, which are presented within net sales in the consolidated statement of operations. During the three months ended ~~December 31,~~September 30, 2020, and 2019, ~~and 2018,~~ we recognized net gains of ~~$9.5~~$4.5 million and ~~$2.4~~$4.1 million, respectively, and total proceeds from these sales were ~~$246.0~~$118.5 million and ~~$95.2~~$95.1 million, respectively. For the year to date periods ended ~~December 31,~~September 30, 2020, and 2019, ~~and 2018,~~ we recognized net gains of ~~$17.0~~$7.0 million and ~~$5.0~~$7.5 million, respectively, and total proceeds from these sales were ~~$414.6~~$191.7 million and ~~$189.2~~$172.0 million, respectively.

When we retain servicing 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, 2019~~September 30, 2020, and March 31, ~~2019,~~2020, we had deferred revenue of $0.4 million for servicing obligations.

In a limited number of 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, 2019,~~September 30, 2020, our maximum potential future payments related to such guarantees is $~~0.3~~ ~~million.~~immaterial. We believe the likelihood of making any such payments to be remote.

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5.	LESSEE ACCOUNTING

We lease office space for periods up to ~~six years~~.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 $~~1.6millionand $4.7~~ $1.5 million as part of selling, general, and administrative expenses ~~during~~for both the three ~~and nine~~ months ended ~~December 31,~~September 30, 2020, and September 30, 2019, and $3.1 million for both the six months ending September 30, 2020, and September 30, 2019.

~~Supplemental~~The following table provides supplemental information about the remaining lease terms and discount rates applied as of ~~December~~ September 30,2020, and March 31, ~~2019:~~2020:

~~Lease term and Discount Rate~~	~~December 31, 2019~~
~~Weighted average remaining lease term (months)~~		40
~~Weighted average discount rate~~		~~4.0~~	%

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

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~~Future~~The following table provides our future lease payments under our operating leases as of ~~December 31, 2019~~September 30, 2020 (in ~~thousands)~~ thousands):

December 31, 2019
Remainder of year ending March 31, 2020 $ 1,084
Year ending March 31, 2021 5,460
Year ending March 31, 2022 4,020
Year ending March 31, 2023 3,049
Year ending March 31, 2024 1,206
Thereafter 762
Total lease payments $ 15,581
Less: Interest (965 )
Present value of lease liabilities $ 14,616

~~As of December 31, 2019, we were committed to~~ 1 ~~office lease that had not yet commenced with a total commitment of $200~~ ~~thousand.~~

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

6.	GOODWILL AND OTHER INTANGIBLE ASSETS

GOODWILL

The ~~following table summarizes the changes~~carrying value of goodwill was $118.2 and $118.1 million as of September 30, 2020, and March 31, 2020, respectively. There was no significant activity in the ~~carrying amount of goodwillfor~~balance during the ~~nine~~six months ended ~~December 31, 2019 (in thousands):~~September 30, 2020, other than change in foreign currency translation of $0.1 million.

Goodwill
Accumulated
Impairment
Loss

Net
Carrying
Amount

Beginning balance March 31, 2019 $ 119,480 $ (8,673 ) $ 110,807
Acquisitions 7,410 - 7,410
Foreign currency translations 8 - 8
Ending balance December 31, 2019 $ 126,898 $ (8,673 ) $ 118,225

Goodwill represents the premium paid over the fair value of the net tangible and intangible assets that are individually identified and separately recognized in business combinations. Our entire balance as of ~~December~~September 30, 2020, and March 31, ~~2019~~2020, relates to our technology reportable segment, which we also determined to be 1 reporting unit.The change in our goodwill balance during the nine months ended December 31, 2019 relates to our acquisition of certain assets and liabilities of Innovative Technology Systems & Solutions, Inc. (“ABS Technology”), which is partially offset by adjustments related to our acquisition of SLAIT Consulting, LLC (“SLAIT”) and foreign exchange translations. See ~~Note 16, “Business Combinations”.~~

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

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

During the fourth quarter of ~~October 1, 2018,~~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 ~~bypass the qualitative assessment of goodwill and~~ perform a quantitative goodwill impairment test. We concluded that the fair value of our technology reporting unit substantially exceeded its carrying ~~value.~~value as of 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.

1615

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OTHER INTANGIBLE ASSETS

Our other intangible assets consist of the following ~~at December 31, 2019~~on September 30, 2020, and March 31, ~~2019~~ ~~(in~~2020 (in thousands):

	December 31, 2019							March 31, 2019							September 30, 2020							March 31, 2020
	Gross Carrying Amount		Accumulated Amortization / Impairment Loss			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization / Impairment Loss			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount

Customer relationships & other intangibles	$	63,141	$	(30,836	)	$	32,305	$	57,407	$	(23,865	)	$	33,542	$	63,093	$	(37,467	)	$	25,626	$	63,006	$	(33,000	)	$	30,006
Capitalized software development		10,193		(5,628	)		4,565		10,188		(4,802	)		5,386		11,176		(6,537	)		4,639		10,385		(5,927	)		4,458
Total	$	73,334	$	(36,464	)	$	36,870	$	67,595	$	(28,667	)	$	38,928	$	74,269	$	(44,004	)	$	30,265	$	73,391	$	(38,927	)	$	34,464

Customer relationships and other intangibles are generally amortized between ~~five~~5 to ~~ten~~10 years. Capitalized software development is generally amortized over ~~five~~5 years.

Total amortization expense for other intangible assets was $~~2.6~~$2.5 million for both the three months ended ~~December 31,~~September 30, 2020, and 2019, respectively, and $~~1.7~~$5.0 million and $4.9 million for the ~~three~~six months ended ~~December 31, 2018~~September 30, 2020, and $~~7.5~~ ~~million and $5.3~~ ~~million for the nine months ended December 31,~~ 2019, ~~and 2018,~~ respectively. ~~The change in the gross carrying amount of other intangible assets is due to the addition of a customer relationship intangible asset of $5.7~~ ~~million from our acquisition of ABS Technology.~~

7.	~~RESERVES~~ALLOWANCE FOR CREDIT LOSSES

~~Activity~~The following table provides the activity in our ~~reserves~~allowance for credit losses for the ~~nine~~six months ended ~~December 31,~~September 30, 2020, and 2019 ~~and 2018 were as follows(in~~(in thousands):

	Accounts Receivable			Notes Receivable		Lease- Related Receivables			Total			Accounts Receivable			Notes Receivable			Lease Receivables			Total
Balance April 1, 2019	$	1,579		$	505	$	530		$	2,614
Balance April 1, 2020												$	1,781		$	798		$	610		$	3,189
Provision for credit losses		107			283		114			504			576			566			624			1,766
Write-offs and other		(304	)		-		(2	)		(306	)		(27	)		(27	)		(7	)		(61	)
Balance December 31, 2019	$	1,382		$	788	$	642		$	2,812
Balance September 30, 2020												$	2,330		$	1,337		$	1,227		$	4,894

	Accounts Receivable			Notes Receivable		Lease- Related Receivables			Total			Accounts Receivable			Notes Receivable		Lease Receivables			Total
Balance April 1, 2018	$	1,538		$	486	$	640		$	2,664
Balance April 1, 2019												$	1,579		$	505	$	530		$	2,614
Provision for credit losses		275			50		(131	)		194			311			15		(27	)		299
Write-offs and other		(246	)		-		-			(246	)		(42	)		0		(3	)		(45	)
Balance December 31, 2018	$	1,567		$	536	$	509		$	2,612
Balance September 30, 2019												$	1,848		$	520	$	500		$	2,868

~~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 our impairment method ~~were~~ as ~~follows~~of March 31, 2020 (in thousands):

	December 31, 2019				March 31, 2019				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	$	726	$	642	$	443	$	530	$	736	$	610
Ending balance: individually evaluated for impairment		62		-		62		-		62		0
Ending balance	$	788	$	642	$	505	$	530	$	798	$	610

Minimum payments:
Ending balance: collectively evaluated for impairment	$	60,145	$	81,450	$	40,501	$	64,201	$	55,005	$	69,492
Ending balance: individually evaluated for impairment		89		-		62		-		412		0
Ending balance	$	60,234	$	81,450	$	40,563	$	64,201	$	55,417	$	69,492

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

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

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

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

W~~e place receivables on non-accrual status when events occur that indicate a receivable will not be collectable (such as a customer bankruptcy). We charge off uncollectable~~The following table provides the amortized cost basis of our financing receivables ~~when we stop pursuing collection.~~by CQR and by credit origination year as of September 30, 2020 (in thousands):

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

Notes receivable:

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

Lease receivables:

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

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

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

The following table provides an aging analysis of our financing receivables as of September 30, 2020 (in thousands):

	31-60 Days Past Due		61-90 Days Past Due		> 90 Days Past Due		Total Past Due		Current		Total Billed		Unbilled		Amortized Cost
Notes receivable	$	925	$	270	$	823	$	2,018	$	10,105	$	12,123	$	77,879	$	90,002
Lease receivables		660		2,049		1,771		4,480		1,754		6,234		66,706		72,940
Total	$	1,585	$	2,319	$	2,594	$	6,498	$	11,859	$	18,357	$	144,585	$	162,942

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

	31-60 Days Past Due		61-90 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Current		Unbilled Minimum Lease Payments		Total Minimum Lease Payments		Unearned Income			Non- Recourse Notes Payable			Net Credit Exposure

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

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The ~~age~~following table provides an aging analysis of ~~the recorded minimum lease payments and net credit exposure associated with~~ our ~~investment in direct financing and sales-type leases that are past due disaggregated based on our internally assigned credit quality rating (“CQR”) were as follows~~notes receivable by CQR as of ~~December~~March 31, ~~2019~~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 nonaccrual status were not significant as of September 30, 2020, and March 31, ~~2019 (in thousands):~~

31-60
Days
Past
Due

61-90
Days
Past
Due

Greater
than 90
Days
Past
Due

Total
Past
Due
Current
Unbilled
Minimum
Lease
Payments

Total
Minimum
Lease
Payments

Unearned
Income

Non-
Recourse
Notes
Payable

Net
Credit
Exposure

December 31, 2019

High CQR $ 695 $ 322 $ 252 $ 1,269 $ 390 $ 49,887 $ 51,546 $ (4,890 ) $ (31,698 ) $ 14,958
Average CQR 315 18 74 407 716 28,781 29,904 (2,111 ) (13,472 ) 14,321
Low CQR - - - - - - - - - -
Total $ 1,010 $ 340 $ 326 $ 1,676 $ 1,106 $ 78,668 $ 81,450 $ (7,001 ) $ (45,170 ) $ 29,279

March 31, 2019

High CQR $ 325 $ 41 $ 10 $ 376 $ 543 $ 29,503 $ 30,422 $ (2,799 ) $ (11,044 ) $ 16,579
Average CQR 22 54 15 91 125 33,563 33,779 (2,508 ) (20,848 ) 10,423
Low CQR - - - - - - - - - -
Total $ 347 $ 95 $ 25 $ 467 $ 668 $ 63,066 $ 64,201 $ (5,307 ) $ (31,892 ) $ 27,002

~~The age of the recorded notes receivable balance disaggregated based on our internally assigned CQR were as follows~~ ~~as of December 31, 2019 and March 31, 2019(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

December 31, 2019

High CQR $ 578 $ 49 $ 240 $ 867 $ 1,422 $ 42,648 $ 44,937 $ (20,323 ) $ 24,614
Average CQR 118 29 125 272 246 14,690 15,208 (6,307 ) 8,901
Low CQR 90 - 29 119 352 (382 ) 89 - 89
Total $ 786 $ 78 $ 394 $ 1,258 $ 2,020 $ 56,956 $ 60,234 $ (26,630 ) $ 33,604

March 31, 2019

High CQR $ 990 $ 40 $ 30 $ 1,060 $ 3,813 $ 28,113 $ 32,986 $ (18,245 ) $ 14,741
Average CQR 105 34 7 146 137 7,232 7,515 (1,507 ) 6,008
Low CQR - - 62 62 - - 62 - 62
Total $ 1,095 $ 74 $ 99 $ 1,268 $ 3,950 $ 35,345 $ 40,563 $ (19,752 ) $ 20,811

We estimate losses on our net credit exposure to be between 0% - 5% for customers with the highest CQR, as these customers are investment grade or the equivalent of investment grade. We estimate losses on our net credit exposure to be between 2% - 15% for customers with average CQR, and between 15% - 100% for customers with low CQR, which includes customers in bankruptcy.2020.

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8.	PROPERTY, EQUIPMENT, OTHER ASSETS AND LIABILITIES

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

	December 31, 2019		March 31, 2019		September 30, 2020		March 31, 2020
Other current assets:
Deposits & funds held in escrow	$	2,438	$	438	$	339	$	926
Prepaid assets		6,324		6,425		7,640		7,946
Other		47		636		254		384
Total other current assets	$	8,809	$	7,499
Total					$	8,233	$	9,256

Property, equipment and other assets
Property and equipment, net	$	7,078	$	7,314	$	7,258	$	7,153
Deferred costs - non-current		11,338		8,856		12,568		10,957
Right-of-use assets		14,577		-		11,069		13,066
Other		1,007		1,158		3,419		1,420
Total other assets - long term	$	34,000	$	17,328
Total					$	34,314	$	32,596


Other current liabilities:
Other current liabilities:
Accrued expenses	$	9,639	$	7,813	$	10,639	$	10,024
Accrued income taxes payable		1,424		181		3,021		406
Contingent consideration - current		283		5,162		0		220
Short-term lease liability		5,231		-		4,698		4,815
Other		8,418		6,129		7,014		7,521
Total other current liabilities	$	24,995	$	19,285
Total					$	25,372	$	22,986

Other liabilities:
Other liabilities:
Deferred revenue	$	17,076	$	13,789	$	19,074	$	16,693
Contingent consideration - long-term		-		3,780
Long-term lease liability		9,385		-		6,590		8,326
Other		2,127		108		7,278		2,708
Total other liabilities - long term	$	28,588	$	17,677
Total					$	32,942	$	27,727

In the above table, deposits and funds held in escrow relate to financial assets that were sold to third-party banks. In conjunction with those sales, a portion of the proceeds was placed in escrow and will be released to us upon payment of outstanding invoices related to the underlying financing arrangements that were sold.

In September 2019, we reached a settlement in full for one of our contingent consideration arrangements in the amount of $9.6 million which was paid in October 2019. This settlement is the primary factor behind the decrease in short-term and long-term contingent consideration.

9.	CREDIT FACILITY AND NOTES PAYABLE ~~AND CREDIT FACILITY~~

~~Non-recourse and recourse obligations consist of the following (in thousands):~~

December 31,
2019

March 31,
2019

Recourse notes payable with interest rates at 2.55% as of December 31, 2019 and 4.00% as of March 31, 2019

Current $ 2,239 $ 28

Non-recourse notes payable secured by certain financing receivables and investments in operating leases with interest rates ranging from 2.90% to 8.45% as of December 31, 2019 and 3.23% to 8.45% as of March 31, 2019.
Current $ 59,015 $ 38,117
Long-term 7,120 10,502
Total non-recourse notes payable $ 66,135 $ 48,619

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Principal and interest payments on non-recourse notes payable are generally due monthly in amounts that are approximately equal to the total payments due from the customer under the leases or notes receivable that collateralize the notes payable. The weighted average interest rate for our non-recourse notes payable was 3.69% and 4.68%, as of December 31, 2019 and March 31, 2019, respectively. ~~The weighted average interest rate for our recourse notes payable was~~ ~~2.55%~~ ~~and~~ ~~4.00%~~ ~~as of December 31, 2019 and March 31, 2019.~~ Under recourse financing, if a customer defaults, the lender has recourse to the customer, the assets serving as collateral, and us. Under non-recourse financing, if a customer defaults, the lender generally only has recourse against the customer and the assets serving as collateral, but not us.Credit Facility

~~Our~~Within our technology segment, ~~primarily 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 or (“WFCDF”). This facility provides short-term capital for our technology segment. There are 2 components of the WFCDF credit facility: (1) a floor plan component and (2) an accounts receivable component.

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Under the floor plan component, we had outstanding balances of ~~$144.5~~$219.0 million and $~~116.1~~$127.4 million as of ~~December 31, 2019~~September 30, 2020, and March 31, ~~2019, respectively. Under~~2020, respectively, and are presented as accounts payable – floorplan. The fair value of the outstanding balance under the credit facility was equal to its carrying value as of September 30, 2020, and March 31, 2020.

On May 15, 2020, we executed an amendment to the WFCDF credit facility that increased the aggregate limit of the two components, except during a temporary uplift, to $275.0 million. Additionally, we have an election to temporarily increase the aggregate limit to $350.0 million for a period of not less than 30 days, provided that all such periods shall not exceed 150 days in the aggregate in any calendar year. Further, the amendment increased the limit on the accounts receivable component ~~we had 0 outstanding balances as~~ of ~~December 31, 2019~~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 ~~March 31, 2019.~~modified certain restrictions on ePlus Technology, inc.’s ability to pay dividends to ePlus inc.

As of ~~December 31, 2019,~~September 30, 2020, the ~~facility had an aggregate~~ limit of ~~$250 million for~~ the 2 components of the credit facility was $275 million, and the accounts receivable component had a sub-limit of ~~$50~~$100 million. Under the accounts receivable component, we had 0 outstanding balance as of September 30, 2020 and $35 million ~~which bears interest assessed at a rate~~ outstanding as of ~~the One Month LIBOR plus~~ ~~two and one-half percent~~March 31, 2020.~~We have an election beginning July 1 in each year to temporarily increase the aggregate limit of the two components from $250~~ ~~million to $325~~ ~~million ending the earlier of 90 days following the election or October 31 of that same year. On July 31, 2019, we elected to temporarily increase the aggregate limit to $325~~ ~~million.~~The accounts receivable component is presented as recourse notes payable – current.

The WFCDF credit facility ~~has full recourse to~~is secured by the assets of ePlus Technology, inc. and certain of its subsidiaries, and ~~is secured by a blanket lien against all its assets, such as~~varies available borrowing based upon the value of their receivables and inventory. ~~Availability under~~Additionally, the credit facility ~~may be limited~~requires a guaranty of $10.5 million 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,ePlus inc. ~~and certain subsidiaries. We were in compliance with these covenants as of December 31, 2019. 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 September 30, 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 ~~at the end~~ 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 ~~the credit 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. and certain subsidiaries. This credit facility is secured by the assets of only~~ e~~Plus Technology, inc., and certain subsidiaries, and the guaranty as described below.~~

~~The WFCDF facility 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, 2019, as required.~~ 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.

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

Recourse Notes Payable

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

As of ~~December 31, 2019,~~September 30, 2020, and March 31, ~~2019,~~2020, we had $2.3 million of recourse borrowings that were collateralized by investments in notes receivable and leases. Our principal and interest payments are generally due monthly in amounts that equal to the ~~fair value~~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 ~~our long-term~~both September 30, 2020, and March 31, 2020.

Non-recourse Notes Payable

Non-recourse notes payable consists of borrowings that, in the event of a default by a customer, the lender generally only has recourse against the customer, and the assets serving as collateral, but not against us. As of September 30, 2020, and March 31, 2020, we had $38.1 million and $35.5 million, respectively, of non-recourse borrowings that were collateralized by investments in notes and leases. Principal and interest payments are generally due monthly in amounts that are approximately equal to the total payments due from the customer under the leases or notes receivable that collateralize the notes payable. The weighted average interest rate for our non-recourse notes payable ~~approximated their carrying value.~~was 3.15% and 3.84%, as of September 30, 2020, and March 31, 2020, respectively.

2019

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~~10.COMMITMENTS AND CONTINGENCIES~~

10.	COMMITMENTS AND CONTINGENCIES

Legal Proceedings

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

~~During the three and nine months ended December 31, 2019, we recognized distributions totaling $0.8~~ ~~million and $1.0~~ ~~million, respectively, from various claims, which were recognized within other income in our consolidated statement of operations.~~relate to prior, current or future transactions or events.

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.

The following table provides a reconciliation of the numerators and denominators used to calculate basic and diluted net income per common share as disclosed on our unaudited consolidated statements of operations for the three and ~~nine~~six months ended ~~December 31,~~September 30, 2020, and 2019, ~~and 2018,~~ respectively (in thousands, except per share data).

	Three Months Ended December 31,				Nine Months Ended December 31,				Three Months Ended September 30,				Six Months Ended September 30,
	2019		2018		2019		2018		2020		2019		2020		2019

Net earnings attributable to common shareholders - basic and diluted	$	19,550	$	14,864	$	55,836	$	48,140	$	19,846	$	20,098	$	37,206	$	36,286

Basic and diluted common shares outstanding:
Weighted average common shares outstanding — basic		13,320		13,471		13,329		13,467		13,372		13,312		13,347		13,334
Effect of dilutive shares		58		73		81		125		19		38		47		74
Weighted average shares common outstanding — diluted		13,378		13,544		13,410		13,592		13,391		13,350		13,394		13,408

Earnings per common share - basic	$	1.47	$	1.10	$	4.19	$	3.57	$	1.48	$	1.51	$	2.79	$	2.72

Earnings per common share - diluted	$	1.46	$	1.10	$	4.16	$	3.54	$	1.48	$	1.51	$	2.78	$	2.71

12.	STOCKHOLDERS’ EQUITY

Share Repurchase Plan

On ~~April 26, 2018,~~May 24, 2019, our board of directors authorized the repurchase of up to 500,000 shares of our outstanding common stock over a 12-month period beginning on May 28, ~~2018 through~~2019, and ending on May 27, ~~2019.~~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 ~~24, 2019,~~20, 2020, our board of directors authorized the repurchase of up to 500,000 shares of our outstanding common stock over a 12-month period beginning on May 28, ~~2019 through~~2020, and ending on May 27, ~~2020.~~2021. 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.

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During the ~~nine~~six months ended ~~December 31,~~September 30, 2020, we purchased 24,318 shares of our outstanding common stock at a value of $1.8 million under the share repurchase plan; we also purchased 37,640 shares of common stock at a value of $2.7 million to satisfy tax withholding obligations relating to the vesting of employees’ restricted stock.

During the six months ended September 30, 2019, we purchased 149,044 shares of our outstanding common stock at a value of $10.7 million under the share repurchase plan; we also purchased 41,817 shares of common stock at a value of $3.0 million to satisfy tax withholding obligations relating to the vesting of employees’ restricted stock.

During the nine months ended December 31, 2018, we purchased 156,087 shares of our outstanding common stock at a value of $12.0 million under the share repurchase plan; we also purchased 40,092 shares of common stock at a value of $3.9 million to satisfy tax withholding obligations relating to the vesting of employees’ restricted stock.

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13.	SHARE-BASED COMPENSATION

Share-Based Plans

As of ~~December 31, 2019,~~September 30, 2020, we had share-based awards outstanding under the following plans: (1) the 2017 Non-Employee Director Long-Term Incentive Plan (“2017 Director LTIP”), and (2) the 2012 Employee Long-Term Incentive Plan ("2012 Employee LTIP"). 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.

Restricted Stock Activity

For the ~~nine~~six months ended ~~December 31, 2019,~~September 30, 2020, we granted ~~8,646~~9,309 restricted shares under the 2017 Director LTIP, and ~~85,132~~89,873 restricted shares under the 2012 Employee LTIP. For the ~~nine~~six months ended ~~December 31, 2018,~~September 30, 2019, we granted ~~8,531~~8,132 restricted shares under the 2017 Director LTIP, and ~~69,847~~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, 2019		224,000		$	67.70
Nonvested April 1, 2020							193,580		$	73.74
Granted		93,778		$	72.90		99,182		$	71.81
Vested		(123,250	)	$	62.07		(110,155	)	$	70.00
Forfeited		(1,189	)	$	81.84		0		$	0
Nonvested December 31, 2019		193,339		$	73.73
Nonvested September 30, 2020							182,607		$	74.95

Upon each vesting period of the restricted stock awards, employees are subject to minimum tax withholding obligations. Under the 2012 Employee LTIP, we may purchase a sufficient number of shares due to the participant to satisfy their minimum tax withholding on employee stock awards. For the ~~nine~~six months ended ~~December 31, 2019,~~September 30, 2020, the Company ~~had~~ withheld ~~41,817~~37,640 shares of common stock at a value of ~~$3.0~~$2.7 million, which was included in treasury stock.

Compensation Expense

We recognize compensation cost for awards of restricted stock with graded vesting on a straight-line basis over the requisite service period. There are no additional conditions for vesting other than service conditions. During the three months ended ~~December 31,~~September 30, 2020, and 2019, ~~and 2018,~~ we recognized ~~$2.0~~$1.8 million and ~~$1.9~~$2.1 million ~~respectively,~~ of total share-based compensation ~~expense.~~expense, respectively. During the ~~nine~~six months ended ~~December 31,~~September 30, 2020, and 2019, ~~and 2018,~~ we recognized ~~$6.0~~$3.6 million and ~~$5.4~~$4.1 million of total share-based compensation expense, respectively. Unrecognized compensation expense related to non-vested restricted stock was ~~$10.1~~$11.6 million as of ~~December 31, 2019,~~September 30, 2020, which will be fully recognized over the next 3033 months.

We also provide our employees with a contributory 401(k) profit sharing plan, to which we may contribute from time to time at our sole discretion. Employer contributions to the plan are fully vested at all times. ~~For the three months ended December 31, 2019 and 2018, our~~Our estimated contribution expense for the plan for both the three months ended September 30, 2020, and 2019, was ~~$0.8~~$0.7 million, and ~~$0.7~~$1.4 million ~~respectively. For~~for both the ~~nine~~six months ended ~~December 31, 2019~~September 30, 2020, and ~~2018, our estimated contribution expense for the plan was $2.2 million and $1.8 million, respectively.~~2019.

~~Table of Contents~~

~~14.INCOME TAXES~~

14.	INCOME TAXES

We account for our tax positions in accordance with 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 ~~to be~~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, 2019~~September 30, 2020, and ~~2018.~~September 30, 2019. We had 0 additions or reductions to our gross unrecognized tax benefits during the ~~three and nine~~six months ended ~~December 31, 2019.~~September 30, 2020. We recognize accrued interest and penalties related to unrecognized tax benefits in income tax expense.

Table of Contents

15.	FAIR VALUE OF FINANCIAL INSTRUMENTS

We account for the fair values of our assets and liabilities in accordance with Codification Topic 820, Fair Value Measurement and Disclosure. The following table summarizes the fair value hierarchy of our financial instruments as of ~~December 31, 2019~~September 30, 2020 and March 31, ~~2019~~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, 2019
September 30, 2020
Assets:
Money market funds	$	127	$	127	$	-	$	-	$	45,132	$	45,132	$	0	$	0

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

Liabilities:
Contingent consideration	$	283	$	-	$	-	$	283	$	220	$	0	$	0	$	220

March 31, 2019
Assets:
Money market funds	$	50	$	50	$	-	$	-
Liabilities:
Contingent consideration	$	8,942	$	-	$	-	$	8,942

For the ~~nine~~three and six months ended ~~December 31,~~September 30, 2020, we did 0t record significant adjustments to our liability for contingent consideration arising from a past business combination. In August 2020, we paid $219 thousand to fully satisfy the obligations of our contingent consideration arrangement.

For the three and six months ended September 30, 2019, we recorded adjustments to operating expenses of $1.1 million and $1.5 million, respectively, that increased ~~the fair value of~~ our liability for contingent consideration ~~by $1.5~~ ~~million. There were~~ 0 ~~adjustments to operating expenses for the three months ended December 31, 2019.~~arising from our past business combinations. In September 2019, we reached a settlement in full of one of our contingent consideration arrangements in the amount of $~~9.6~~$9.6 million, ~~which~~that was paid in October 2019. Additionally, in September 2019, we paid $~~0.5~~$0.5 million to satisfy certain current obligations in another of these arrangements.

~~For the three and nine months ended December 31, 2018, we recorded adjustments to operating expenses that increased the fair value of our liability for contingent consideration by $0.7~~ ~~million and $1.9~~ ~~million, respectively. For the three and nine months ended December 31, 2018, we made payments of $5.0~~ ~~million and $6.1~~ ~~million, respectively, to satisfy the current obligations of the contingent consideration arrangements.~~

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16.	BUSINESS COMBINATIONS

~~16.BUSINESS COMBINATIONS~~

ABS Technology

On August 23, 2019, our subsidiary, ~~ePlus~~ePlus Technology, inc., acquired certain assets and liabilities of ABS Technology, a Virginia Beach, Virginia- headquartered solutions provider with deep expertise in managed services, networking, collaboration, and security solutions. ABS Technology ~~will enhance ePlus’~~enhances ePlus’ existing solutions portfolio and market position in Richmond and southern Virginia.

Our ~~preliminary~~ sum of consideration transferred iswas $15.3 million consisting of $13.8 million paid in cash at closing plus $1.7 million that ~~is being~~was paid primarily during the year ended March 31, 2020, upon the collection of certain accounts receivable ~~of which $0.6~~ ~~million was paid by December 31, 2019,~~ and less $0.2 million that was repaid to us in December 2019 due to a working capital adjustment. Our ~~preliminary~~ 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	$	9,208			9,208
Other assets		743			743
Identified intangible assets		5,720			5,720
Accounts payable and other current liabilities		(6,715	)		(6,715	)
Performance obligation		(1,140	)		(1,140	)

Total identifiable net assets		7,816			7,816
Goodwill		7,461			7,461

Total purchase consideration	$	15,277		$	15,277

~~As of our filing date the initial accounting for the business combination is incomplete in respect to our determination of accounts receivable and of the consideration transferred.~~

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

We recognized goodwill related to this transaction of $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 as though the acquisition date had been April 1, 2019, is not material.

~~SLAIT Consulting, LLC~~

~~On January 18, 2019, our subsidiary,~~ ePlus Technology, inc., acquired 100% of the stock of SLAIT, an IT consulting and solutions provider with a focus on security advisory and managed services, managed help desk, specialized IT, staffing, and data center solutions. SLAIT is headquartered in Virginia Beach, Virginia and has locations in Richmond, Virginia, and Charlotte, North Carolina. SLAIT provides consultative services in governance, risk management and compliance; bespoke help desk and managed services solutions; and has relationships with fast-growing emerging vendors and related sales and engineering capabilities.

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Our sum of consideration transferred is $50.0 million consisting of $50.7 million paid in cash at closing, less $1.0 million cash acquired, and plus a working capital adjustment of $0.3 million that we paid in May 2019.~~Our allocation of the final purchase consideration to the assets acquired and liabilities assumed is presented below (in thousands):~~

Acquisition Date
Amount

Accounts receivable $ 10,209
Other assets 1,050
Identified intangible assets 18,190
Accounts payable and other current liabilities (8,611 )
Performance obligation (5,110 )

Total identifiable net assets 15,728
Goodwill 34,301

Total purchase consideration $ 50,029

The identified intangible assets of $18.2 million consist of customer relationships with an estimated useful life of 10 years. The fair value of acquired receivables equals the gross contractual amounts receivable. We collected all acquired receivables.

We recognized goodwill related to this transaction of $34.3 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 reporting period ending March 31, 2019 as though the acquisition date had been April 1, 2018, is not material.

The amounts above reflect a measurement period adjustment recorded in our quarter ended December 31, 2019 that increased the purchase consideration related to a working capital adjustment by $8 thousand, increased identifiable net assets by $59 thousand and decreased goodwill by $51 thousand.

17.	SEGMENT REPORTING

Our operations are conducted through 2 operating segments that are also both reportable segments. Our technology segment includes sales of IT products, third-party software, third-party maintenance, advanced professional and managed services, and our proprietary software to commercial enterprises, state and local governments, and government contractors. Our financing segment consists of the 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~~for the three- and six-month periods ended September 30, 2020, and 2019 are summarized in the following tables (in thousands):

	Three Months Ended												Three Months Ended
	December 31, 2019						December 31, 2018						September 30, 2020						September 30, 2019
	Technology		Financing		Total		Technology		Financing		Total		Technology		Financing		Total		Technology		Financing		Total

Sales
Product	$	360,206	$	18,363	$	378,569	$	299,490	$	10,953	$	310,443	$	369,934	$	13,722	$	383,656	$	349,650	$	13,847	$	363,497
Service		50,422		-		50,422		35,221		-		35,221		49,425		0		49,425		48,068		0		48,068
Net sales	$	410,628	$	18,363	$	428,991	$	334,711	$	10,953	$	345,664		419,359		13,722		433,081		397,718		13,847		411,565

Cost of Sales
Product		290,980		2,229		293,209		239,843		2,013		241,856		301,006		1,957		302,963		276,475		2,388		278,863
Service		32,086		-		32,086		20,895		-		20,895		31,156		0		31,156		29,671		0		29,671
Total cost of sales		323,066		2,229		325,295		260,738		2,013		262,751		332,162		1,957		334,119		306,146		2,388		308,534
Gross Profit		87,562		16,134		103,696		73,973		8,940		82,913		87,197		11,765		98,962		91,572		11,459		103,031

Selling, general, and administrative		67,759		5,331		73,090		56,607		3,121		59,728		62,586		4,303		66,889		67,189		3,334		70,523
Depreciation and amortization		3,619		28		3,647		2,714		5		2,719		3,313		28		3,341		3,529		28		3,557
Interest and financing costs		-		694		694		-		443		443		1		246		247		0		576		576
Operating expenses		71,378		6,053		77,431		59,321		3,569		62,890		65,900		4,577		70,477		70,718		3,938		74,656

Operating income		16,184		10,081		26,265		14,652		5,371		20,023		21,297		7,188		28,485		20,854		7,521		28,375

Other income						997						721						184						(40	)

Earnings before tax					$	27,262					$	20,744					$	28,669					$	28,335

Net Sales
Contracts with customers	$	404,918	$	1,689	$	406,607	$	329,635	$	813	$	330,448	$	412,357	$	1,028	$	413,385	$	394,585	$	1,411	$	395,996
Financing and other		5,710		16,674		22,384		5,076		10,140		15,216		7,002		12,694		19,696		3,133		12,436		15,569
Net Sales	$	410,628	$	18,363	$	428,991	$	334,711	$	10,953	$	345,664	$	419,359	$	13,722	$	433,081	$	397,718	$	13,847	$	411,565

Selected Financial Data - Statement of Cash Flow

Depreciation and amortization	$	3,691	$	1,449	$	5,140	$	2,910	$	1,564	$	4,474	$	3,499	$	1,182	$	4,681	$	3,658	$	1,455	$	5,113
Purchases of property, equipment and operating lease equipment	$	786	$	1,535	$	2,321	$	1,496	$	545	$	2,041	$	990	$	0	$	990	$	1,426	$	1,944	$	3,370

Selected Financial Data - Balance Sheet

Total assets	$	733,174	$	219,434	$	952,608	$	613,494	$	184,695	$	798,189	$	812,633	$	226,078	$	1,038,711	$	690,648	$	223,618	$	914,266

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Nine Months Ended
December 31, 2019 December 31, 2018
Technology Financing Total Technology Financing Total

Sales
Product $ 1,032,620 $ 45,047 $ 1,077,667 $ 911,839 $ 30,896 $ 942,735
Service 144,261 - 144,261 104,504 - 104,504
Net sales 1,176,881 45,047 1,221,928 1,016,343 30,896 1,047,239

Cost of Sales
Product 825,509 6,626 832,135 730,311 5,491 735,802
Service 90,427 - 90,427 62,321 - 62,321
Cost of sales 915,936 6,626 922,562 792,632 5,491 798,123
Gross Profit 260,945 38,421 299,366 223,711 25,405 249,116

Selling, general, and administrative 197,615 11,785 209,400 166,199 8,200 174,399
Depreciation and amortization 10,555 112 10,667 8,243 7 8,250
Interest and financing costs - 1,898 1,898 - 1,403 1,403
Operating expenses 208,170 13,795 221,965 174,442 9,610 184,052

Operating income 52,775 24,626 77,401 49,269 15,795 65,064

Other income 912 1,140

Earnings before tax $ 78,313 $ 66,204

Net Sales
Contracts with customers $ 1,163,184 $ 3,889 $ 1,167,073 $ 1,000,776 $ 2,469 $ 1,003,245
Financing and other 13,697 41,158 54,855 15,567 28,427 43,994
Net sales $ 1,176,881 $ 45,047 $ 1,221,928 $ 1,016,343 $ 30,896 $ 1,047,239

Selected Financial Data - Statement of Cash Flow

Depreciation and amortization $ 10,974 $ 4,243 $ 15,217 $ 8,895 $ 4,446 $ 13,341
Purchases of property, equipment and operating lease equipment $ 3,461 $ 3,748 $ 7,209 $ 4,472 $ 4,020 $ 8,492

Selected Financial Data - Balance Sheet

Total assets $ 733,174 $ 219,434 $ 952,608 $ 613,494 $ 184,695 $ 798,189

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

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

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

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

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

Other income						282						(85	)

Earnings before tax					$	53,764					$	51,051

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

Selected Financial Data - Statement of Cash Flow

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

Selected Financial Data - Balance Sheet

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

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Technology Segment Disaggregation of Revenue

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

	Three Months Ended December 31,						Nine Months Ended December 31,						Three Months Ended September 30,						Six Months Ended September 30,
	2019			2018			2019			2018			2020			2019			2020			2019
Customer end market:
Technology	$	77,841		$	61,549		$	251,523		$	219,783		$	76,321		$	97,502		$	146,288		$	173,682
Telecom, Media & Entertainment		84,707			58,377			218,217			144,657			96,927			71,044			153,579			133,510
Financial Services		56,395			54,411			149,241			147,048			46,732			44,605			94,153			92,847
SLED		55,908			43,846			198,964			173,442
State and local government and educational institutions														76,492			71,866			147,055			143,057
Healthcare		60,275			48,121			176,202			145,652			59,252			59,818			105,788			115,926
All others		75,502			68,407			182,734			185,761			63,635			52,883			113,720			107,231
Net sales		410,628			334,711			1,176,881			1,016,343			419,359			397,718			760,583			766,253

Financing and other		(5,710	)		(5,076	)		(13,697	)		(15,567	)
Less: Revenue from financing and other														(7,002	)		(3,133	)		(14,239	)		(7,987	)

Revenue from contracts with customers	$	404,918		$	329,635		$	1,163,184		$	1,000,776		$	412,357		$	394,585		$	746,344		$	758,266

	Three Months Ended December 31,						Nine Months Ended December 31,						Three Months Ended September 30,						Six Months Ended September 30,
	2019			2018			2019			2018			2020			2019			2020			2019
Vendor
Cisco Systems	$	169,265		$	131,949		$	488,051		$	423,249		$	173,166		$	172,605		$	301,098		$	318,786
NetApp		15,799			12,408			38,997			37,447			9,914			9,771			25,335			23,198
HP Inc. & HPE		15,853			22,042			57,952			59,020			16,395			18,986			33,433			42,099
Dell EMC		12,025			17,201			38,300			49,599			15,349			12,494			46,430			26,275
Arista Networks		12,862			13,668			60,578			44,139			13,443			26,766			20,263			47,716
Juniper Networks		27,419			18,681			58,843			40,341			24,716			24,370			38,295			31,424
All others		157,405			118,762			434,160			362,548			166,376			132,726			295,729			276,755
Net sales		410,628			334,711			1,176,881			1,016,343			419,359			397,718			760,583			766,253

Financing and other		(5,710	)		(5,076	)		(13,697	)		(15,567	)
Less: Revenue from financing and other														(7,002	)		(3,133	)		(14,239	)		(7,987	)

Revenue from contracts with customers	$	404,918		$	329,635		$	1,163,184		$	1,000,776		$	412,357		$	394,585		$	746,344		$	758,266

Financing Segment Disaggregation of Revenue

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

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Item 2.

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

This discussion is intended to further the reader’s understanding of our consolidated financial condition and results of operations. It should be read in conjunction with the financial statements included in this quarterly report on Form 10-Q and our ~~2019~~2020 Annual Report. These historical financial statements may not be indicative of our future performance. This Management’s Discussion and Analysis of Financial Condition and Results of Operations may contain forward-looking statements, all of which are based on our current expectations and could be affected by the uncertainties and risks described in Part I, Item 1A, “Risk Factors,” in our ~~2019~~2020 Annual ~~Report,~~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 using IT and consulting solutions to drive business agility and innovation. Leveraging our engineering talent, we assess, plan, deliver, and secure solutions comprised of leading technologies and consumption models aligned with our customers’ needs. Our expertise and experience enable 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 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 IT and other assets for more than 2930 years.

Our primary focus is to deliver integrated solutions that address our customers’ business needs, leveraging the appropriate technologies, both on-premise and in the cloud. Our approach is to lead with advisory consulting to understand our customers’ needs, design, deploy and manage solutions aligned to their objectives. Underpinning the broader areas of ~~cloud, security, networking, data center~~Cloud, Security, Networking, Data Center and ~~collaboration~~Collaboration are specific skills in orchestration and automation, application modernization, DevOps, data management, data visualization, analytics, network modernization, edge compute and other advanced and emerging technologies. These solutions are comprised of class leading technologies from partners such as Amazon Web Services, Arista Networks, Blue Coat, Check Point, Cisco Systems, Citrix, Commvault, Dell EMC, Extreme Networks, F5 Networks, Fortinet, Gigamon, HPE, Juniper Networks, Lenovo, Microsoft, NetApp, Nutanix, NVIDIA, Oracle, Palo Alto Networks, Proofpoint, Pure Storage, 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 to stay current with emerging technology trends. Our expertise in core and emerging technologies, buttressed by our robust portfolio of consulting, professional, and managed services has enabled ePlus to remain a trusted advisor for our customers. In addition, we offer a wide range of consumption options including leasing and financing for technology and other capital assets. We believe our lifecycle approach offering of integrated solutions, services, financing, and our proprietary supply chain software, are 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 permits ePlus to deploy ever-more-sophisticated solutions enabling our customers’ business outcomes.

Our go-to-market strategy focuses primarily on diverse end-markets for middle market to large enterprises. For the trailing twelve-month period ended ~~December 31, 2019,~~September 30, 2020, the percentage of revenue by customer end market within our technology segment includes technology industry ~~22%~~19%, telecommunications, media and entertainment 20%, state and local government and educational institutions (“SLED”) ~~17%, telecommunications, media and entertainment 17%~~16%, healthcare 15%, and financial services ~~14%~~13%. The majority of our sales were generated within the United States (“US”); however, we have the ability to support our customers nationally and internationally, including physical ~~presence~~locations in the United Kingdom (“UK”)~~, India,~~ and ~~Singapore.~~India. Our technology segment accounts for ~~96%~~97% of our net sales, and ~~68%~~73% of our operating income, while our financing segment accounts for 4%3% of our net sales, and ~~32%~~27% of our operating income, for the ~~nine~~six months ended ~~December 31, 2019.~~September 30, 2020.

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Impact of COVID-19 on Our Business Operations

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

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

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

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

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

Key Business Metrics

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

These key indicators include financial information that is prepared in accordance with US GAAP and presented in our unaudited 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 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 six-month periods ended September 30, 2020, and 2019 are ~~as follows~~summarized in the following tables (dollars in thousands):

	Three Months Ended December 31,						Nine Months Ended December 31,						Three Months Ended September 30,						Six Months Ended September 30,
Consolidated	2019			2018			2019			2018			2020			2019			2020			2019
Net sales	$	428,991		$	345,664		$	1,221,928		$	1,047,239		$	433,081		$	411,565		$	788,112		$	792,937

Gross profit	$	103,696		$	82,913		$	299,366		$	249,116		$	98,962		$	103,031		$	197,519		$	195,670
Gross margin		24.2	%		24.0	%		24.5	%		23.8	%		22.9	%		25.0	%		25.1	%		24.7	%
Operating income margin		6.1	%		5.8	%		6.3	%		6.2	%		6.6	%		6.9	%		6.8	%		6.4	%

Net earnings	$	19,550		$	14,864		$	55,836		$	48,140		$	19,846		$	20,098		$	37,206		$	36,286
Net earnings margin		4.6	%		4.3	%		4.6	%		4.6	%		4.6	%		4.9	%		4.7	%		4.6	%
Net earnings per common share - diluted	$	1.46		$	1.10		$	4.16		$	3.54		$	1.48		$	1.51		$	2.78		$	2.71

Non-GAAP: Net earnings (1)	$	21,941		$	17,501		$	65,628		$	55,712		$	22,470		$	24,228		$	42,677		$	43,687
Non-GAAP: Net earnings per common share - diluted (1)	$	1.64		$	1.29		$	4.89		$	4.10		$	1.68		$	1.81		$	3.19		$	3.26

Adjusted EBITDA (2)	$	31,856		$	25,554		$	95,828		$	80,804		$	33,561		$	35,405		$	64,275		$	63,972
Adjusted EBITDA margin		7.4	%		7.4	%		7.8	%		7.7	%		7.7	%		8.6	%		8.2	%		8.1	%

Purchases of property and equipment used internally	$	786		$	1,496		$	3,461		$	4,472		$	990		$	1,426		$	3,101		$	2,675
Purchases of equipment under operating leases		1,535			545			3,748			4,020			-			1,944			166			2,213
Total capital expenditures	$	2,321		$	2,041		$	7,209		$	8,492		$	990		$	3,370		$	3,267		$	4,888

Technology Segment
Net sales	$	410,628		$	334,711		$	1,176,881		$	1,016,343		$	419,359		$	397,718		$	760,583		$	766,253
Adjusted gross billings (3)	$	586,308		$	478,447		$	1,713,755		$	1,446,603		$	601,064		$	579,084		$	1,147,458		$	1,127,447

Gross profit	$	87,562		$	73,973		$	260,945		$	223,711		$	87,197		$	91,572		$	174,038		$	173,383
Gross margin		21.3	%		22.1	%		22.2	%		22.0	%		20.8	%		23.0	%		22.9	%		22.6	%

Operating income	$	16,184		$	14,652		$	52,775		$	49,269		$	21,297		$	20,854		$	38,829		$	36,591
Adjusted EBITDA (2)	$	21,687		$	20,074		$	70,895		$	64,699		$	26,275		$	27,789		$	49,436		$	49,208

Financing Segment
Net sales	$	18,363		$	10,953		$	45,047		$	30,896		$	13,722		$	13,847		$	27,529		$	26,684

Gross profit	$	16,134		$	8,940		$	38,421		$	25,405		$	11,765		$	11,459		$	23,481		$	22,287

Operating Income	$	10,081		$	5,371		$	24,626		$	15,795		$	7,188		$	7,521		$	14,653		$	14,545
Adjusted EBITDA (2)	$	10,169		$	5,480		$	24,933		$	16,105		$	7,286		$	7,616		$	14,839		$	14,764

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

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We use non-GAAP net earnings per common share as a supplemental measure of our performance to gain insight into our operating performance. We believe that the exclusion of other income (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 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 to understand and evaluate our operating results. However, our use of non-GAAP information as analytical tools has limitations, and you should not consider them in isolation or as substitutes for analysis of our financial results as reported under GAAP. In addition, other companies, including companies in our industry, might calculate similar non-GAAP net earnings and non-GAAP net earnings per common share or similarly titled measures differently, which may reduce their usefulness as comparative measures.

Three Months Ended
December 31,

Nine Months Ended
December 31,

2019 2018 2019 2018
GAAP: Earnings before tax $ 27,262 $ 20,744 $ 78,313 $ 66,204
Share based compensation 1,944 1,857 6,021 5,418
Acquisition and integration expense - 955 1,739 2,072
Acquisition related amortization expense 2,421 1,552 6,953 5,035
Other income (997 ) (721 ) (912 ) (1,140 )
Non-GAAP: Earnings before provision for income taxes 30,630 24,387 92,114 77,589

GAAP: Provision for income taxes 7,712 5,880 22,477 18,064
Share based compensation 553 526 1,736 1,534
Acquisition and integration expense - 270 506 586
Acquisition related amortization expense 668 414 1,938 1,343
Other income (283 ) (204 ) (258 ) (322 )
Tax benefit on restricted stock 39 - 87 672
Non-GAAP: Provision for income taxes 8,689 6,886 26,486 21,877

Non-GAAP: Net earnings $ 21,941 $ 17,501 $ 65,628 $ 55,712

GAAP: Net earnings per common share - diluted $ 1.46 $ 1.10 $ 4.16 $ 3.54

Non-GAAP: Net earnings per common share - diluted $ 1.64 $ 1.29 $ 4.89 $ 4.10

Table of Contents

	Three Months Ended December 31,						Nine Months Ended December 31,						Three Months Ended September 30,					Six Months Ended September 30,
	2019			2018			2019			2018			2020			2019		2020			2019
GAAP: Net earnings per common share - diluted	$	1.46		$	1.10		$	4.16		$	3.54

GAAP: Earnings before tax													$	28,669		$	28,335	$	53,764		$	51,051
Share based compensation		0.10			0.10			0.32			0.30			1,764			2,135		3,671			4,077
Acquisition and integration expense		-			0.05			0.09			0.10			(30	)		1,338		(1	)		1,739
Acquisition related amortization expense		0.14			0.08			0.38			0.27			2,172			2,345		4,400			4,532
Other (income) expense		(0.05	)		(0.04	)		(0.05	)		(0.07	)		(184	)		40		(282	)		85
Tax benefit on restricted stock		(0.01	)		-			(0.01	)		(0.04	)
Total non-GAAP adjustments - net of tax		0.18			0.19			0.73			0.56
Non-GAAP: Earnings before provision for income taxes														32,391			34,193		61,552			61,484

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

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

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

Non-GAAP: Net earnings per common share - diluted	$	1.64		$	1.29		$	4.89		$	4.10		$	1.68		$	1.81	$	3.19		$	3.26

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

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

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

(2)

We define adjusted EBITDA as net earnings calculated in accordance with GAAP, adjusted for the following: interest expense, depreciation and amortization, share based compensation, acquisition and integration expenses,provision for income taxes, and other income (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 EBITDA calculation. We provide below a reconciliation of adjusted EBITDA to net earnings, which is the most directly comparable financial measure to this non-GAAP financial measure. Adjusted EBITDA margin is our calculation of adjusted EBITDA divided by net sales.

Table of ~~$6.2 million, or 9.6%, for the nine months ended December 31, 2019, compared to $64.7 million in the prior year period.~~Contents

Financing Segment

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

	Three Months Ended December 31,				Nine Months Ended December 31,				Three Months Ended September 30,				Six Months Ended September 30,
	2019		2018		2019		2018		2020		2019		2020		2019
Net product sales	$	18,363	$	10,953	$	45,047	$	30,896
Cost of product sales		2,229		2,013		6,626		5,491
Net sales									$	13,722	$	13,847	$	27,529	$	26,684

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

Gross profit		16,134		8,940		38,421		25,405		11,765		11,459		23,481		22,287

Selling, general, and administrative		5,331		3,121		11,785		8,200		4,303		3,334		8,214		6,454
Depreciation and amortization		28		5		112		7		28		28		56		84
Interest and financing costs		694		443		1,898		1,403		246		576		558		1,204
Operating expenses		6,053		3,569		13,795		9,610		4,577		3,938		8,828		7,742

Operating income	$	10,081	$	5,371	$	24,626	$	15,795	$	7,188	$	7,521	$	14,653	$	14,545

Adjusted EBITDA	$	10,169	$	5,480	$	24,933	$	16,105	$	7,286	$	7,616	$	14,839	$	14,764

Net sales: Net sales ~~increased~~decreased by ~~$7.4~~$0.1 million, or ~~67.7%~~0.9%, to ~~$18.4~~$13.7 million for the three months ended ~~December 31, 2019,~~September 30, 2020, as compared to ~~$11.0 million in the~~ prior year results due to ~~higher transactional gains~~a reduction in post contract earnings and portfolio ~~earnings.~~earnings, which were mostly offset by higher other financing revenues and transactional gains. During the three months ended ~~December 31,~~September 30, 2020, and 2019, ~~and 2018,~~ we recognized net gains on sales of financial assets of ~~$9.5~~$4.5 million and ~~$2.4~~$4.1 million, respectively, and the fair value of assets received from these sales were ~~$246.0~~$118.5 million and ~~$95.2~~$95.1 million, respectively. ~~The increase in transactional gains was due to several large transactions that were completed during the quarter.~~

For the ~~nine~~six months ended ~~December 31, 2019,~~September 30, 2020, net sales increased to ~~$45.0~~$27.5 million, an increase of ~~$14.2~~$0.8 million, or ~~45.8%,~~3.2% as compared to the same period in the prior year of ~~$30.9~~$26.7 million due to higher ~~transactional gains,~~other financing revenues and portfolio earnings, which were partially offset by lower post-contract earnings and ~~post-contract earning.~~transactional gains. During the ~~nine~~six months ended ~~December 31,~~September 30, 2020, and 2019, ~~and 2018,~~ we recognized net gains on sales of financial assets of ~~$17.0~~$7.0 million and ~~$5.0~~$7.5 million, respectively, and the fair value of assets received from these sales were ~~$414.6~~$191.7 million and ~~$189.2~~$172.0 million, respectively. At ~~December 31, 2019,~~September 30, 2020, we had ~~$162.7~~$180.7 million in financing receivables and operating leases, compared to ~~$162.1~~$188.2 million as of ~~December 31, 2018, an increase~~September 30, 2019, a decrease of ~~$0.7~~$7.5 million, or ~~0.4%~~4.0%.

~~Table of Contents~~

Cost of ~~sales:~~sales: Cost of sales ~~increased $0.2~~decreased $0.4 million and ~~$1.1~~$0.3 million for the three and ~~nine~~six months ended ~~December 31, 2019, compared to the same periods in the prior year,~~September 30, 2020, respectively, which consists of depreciation expense from operating leases. Gross profit increased by ~~80.5%~~2.7% to ~~$16.1~~$11.8 million, for the three months ended ~~December 31, 2019,~~September 30, 2020, and increased by ~~51.2%~~5.4% to ~~$38.4~~$23.5 million, for the ~~nine~~six months ended ~~December 31, 2019~~September 30, 2020, as compared to the prior ~~year.~~year periods.

Selling, general and ~~administrative:~~administrative: For the three and ~~nine~~six months ended ~~December 31, 2019,~~September 30, 2020, selling, general, and administrative expenses increased by ~~$2.2~~$1.0 million or ~~70.8%~~29.1%, and ~~increased $3.6~~$1.8 million, or ~~43.7%~~27.3%, respectively, which was due primarily to an increase ~~variable~~in allowance for credit losses of $0.8 million and $1.1 million for the three and six months ended September 30, 2020, as compared to the same periods in the prior year. Variable compensation also increased due to higher gross ~~profit.~~profit for both the three and six months ended September 30, 2020.

Interest and financing costs: Interest and financing costs ~~increased~~decreased by ~~56.7%~~57.3% to ~~$0.7~~$0.2 million for the three months ended ~~December 31, 2019~~September 30, 2020, and ~~increased~~decreased by ~~35.3%~~53.7% to ~~$1.9~~$0.6 million for the ~~nine~~six months ended ~~December 31, 2019,~~September 30, 2020, compared to the same periods in the prior year, due to ~~an increase~~a decrease in the average balance and interest rate on total notes payable ~~outstanding over the same periods for the prior year.~~outstanding. Total notes payable ~~were $68.4~~for the financing segment was $40.3 million as of ~~December 31, 2019, an increase~~September 30, 2020, a decrease of ~~$1.8~~$45.7 million, or ~~2.7%~~53.1%, as compared to ~~$66.6~~$86.0 million as of ~~December 31, 2018.~~September 30, 2019. Our weighted average interest rate for non-recourse notes payable was ~~3.69%~~3.15% and ~~4.54%~~3.98%, as of ~~December 31,~~September 30, 2020, and 2019, ~~and 2018,~~ respectively.

Segment operating income: As a result of the foregoing, operating income and adjusted EBITDA both ~~increased $4.7~~decreased $0.3 million or ~~87.7%~~4.4% and ~~85.6%~~4.3%, to ~~$10.1~~$7.2 million and ~~$10.2~~$7.3 million, respectively, for the three months ended ~~December 31, 2019, as compared to~~September 30, 2020, over the prior year period. For the ~~nine~~six months ended ~~December 31, 2019,~~September 30, 2020, operating income and adjusted EBITDA both increased ~~$8.8~~$0.1 million, respectively, or ~~55.9%~~0.7% and ~~54.8%~~0.5%, to ~~$24.6~~$14.7 million and ~~$24.9~~$14.8 million, respectively.

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Consolidated

Other income: Other income ~~for~~increased to $0.2 million and $0.3 million due to the favorable foreign exchange rate during the three and six months ended ~~December 31, 2019, was $1.0 million,~~September 30, 2020, respectively, compared to ~~$0.7 million~~an expense of $40 thousand and $85 thousand due to the unfavorable foreign exchange rate in the three and six month periods in the prior year. During the three months ended December 31, 2019, we recognized a distribution from a claim of $0.8 million. Other income for the nine months ended December 31, 2019, was $0.9 million, compared to and $1.1 million in the prior year.year, respectively.

Income taxes: Our provision for income tax expense was ~~$7.7~~$8.8 million and ~~$22.5~~$16.6 million for the three and ~~nine~~six months ended ~~December 31, 2019,~~September 30, 2020, as compared to ~~$5.9~~$8.2 million and ~~$18.1~~$14.8 million for the same periods in the prior year. Our effective income tax rates for both the three and ~~nine~~six months ended ~~December 31, 2019~~September 30, 2020, was ~~28.3% and 28.7%~~30.8%, compared to ~~28.3%~~29.1% and ~~27.3%~~28.9% for the three and ~~nine~~six months ended ~~December 31, 2018.~~September 30, 2019. The ~~increase~~change in our effective ~~income~~ tax rate iswas due to ~~a decrease in~~an adjustment to the ~~tax~~federal benefit from ~~the vesting of restricted stock.~~state taxes.

Net earnings: The foregoing resulted in net earnings of ~~$19.6~~$19.8 million for the three months ended ~~December 31, 2019, an increase~~September 30, 2020, a decrease of ~~31.5%~~$0.3 million, or 1.3%, as compared to ~~$14.9~~$20.1 million ~~during~~of the ~~three~~same period in the prior year. For the six months ended ~~December 31, 2018. For the nine months ended December 31, 2019,~~September 30, 2020, net earnings were ~~$55.8~~$37.2 million, an increase of ~~$7.7~~$0.9 million, or ~~16.0%~~2.5%, as compared to ~~$48.1~~$36.3 million ~~for~~in the same period in the prior year.

Basic and fully diluted earnings per common share ~~were $1.47 and $1.46~~was $1.48 for the three months ended ~~December 31, 2019, an increase~~September 30, 2020, a decrease of ~~33.6% and 32.7%, respectively,~~2.0% as compared to ~~$1.10~~$1.51 for both the basic and fully diluted earnings per common share for the same period in the prior year. For the ~~nine~~six months ended ~~December 31, 2019,~~September 30, 2020, basic and fully diluted earnings per common share were ~~$4.19~~$2.79 and ~~$4.16,~~$2.78, an increase for both of ~~17.4% and 17.5%~~0.3%, as compared to ~~$3.57~~$2.72 and ~~$3.54~~$2.71, respectively, for the same period in the prior ~~year, respectively.~~year.

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

Weighted average common shares outstanding used in the calculation of basic and diluted earnings per common share for ~~both~~ the three months ending September 30, 2020 was $13.4 million and ~~nine~~for the six months ended ~~December 31, 2019~~September 30, 2020 was ~~13.3 million.~~$13.3 million and $13.4 million respectively. Weighted average common shares outstanding used in the calculation of basic and diluted earnings per common share for both the three and ~~nine~~six months ended ~~December 31,~~September 30, 2019, was 13.3 million and 13.4 million.

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.

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

~~As of December 31, 2019, the facility had an aggregate limit of $250~~ million for the two components, and the accounts receivable component had a sub-limit of $50 million, which bears interest assessed at a rate of the One Month LIBOR plus two- and one-half percent. We have an election beginning July 1 in each year to temporarily increase the aggregate limit of the two components to $325 million ending the earlier of 90 days following the election or October 31 of that same year.

After a customer places a purchase order with us and we have completed our credit review, we place an order for the equipment with one of our vendors. Generally, most purchase orders from us to our vendors are first financed under the floor plan component and reflected in “accounts payable—floor plan” in our consolidated balance sheets. Payments on the floor plan component are due on three specified dates each month, generally 30-60 days from the invoice date. On the due date of the invoices financed by the floor plan component, the invoices are paid by the accounts receivable component of the credit facility. The balance of the accounts receivable component is then reduced by payments from our available cash. The outstanding balance under the accounts receivable component is recorded as recourse notes payable on our consolidated balance sheets. There was no outstanding balance at December 31, 2019 or December 31, 2018, while the maximum credit limit was $50 million for both periods. The borrowings and repayments under the floor plan component are reflected as “net borrowings (repayments) on floor plan facility” in the cash flows from the financing activities section of our consolidated statements of cash flows.

Most customer payments in our technology segment are remitted to our lockboxes. Once payments are cleared, the monies in the lockbox accounts are automatically transferred to our operating account on a daily basis. On the due dates of the floor plan component, we make cash payments to WFCDF. These payments from the accounts receivable component to the floor plan component and repayments from our cash are reflected as “net borrowings on floor plan facility” in the cash flows from the financing activities section of our consolidated statements of cash flows. We engage in this payment structure 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~~enough to finance our working capital, capital expenditures, and other requirements for at least the next ~~12 calendar months.~~year.

Our ability to continue to ~~fund our planned growth,~~expand, both ~~internally~~organically and ~~externally,~~through acquisitions, is dependent upon our ability to generate ~~sufficient~~enough cash flow from operations or ~~to obtain additional funds through equity~~from borrowing 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, or if our supply of products is delayed or interrupted, our cash flows from operations may be substantially affected.

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

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Cash Flows

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

	Nine Months Ended December 31,						Six Months Ended September 30,
	2019			2018			2020			2019
Net cash provided by (used) in operating activities	$	(74,728	)	$	2,172
Net cash provided by (used in) operating activities							$	8,408		$	(54,404	)
Net cash used in investing activities		(20,044	)		(48,009	)		(2,811	)		(18,050	)
Net cash provided by financing activities		74,648			11,801			69,730			48,356
Effect of exchange rate changes on cash		(137	)		172			(477	)		114

Net Decrease in Cash and Cash Equivalents	$	(20,261	)	$	(33,864	)
Net increase (decrease) in cash and cash equivalents							$	74,850		$	(23,984	)

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Cash flows from operating activities. We ~~used $74.7 million from operating activities during the nine months ended December 31, 2019, compared to $2.2~~had $8.4 million provided by operating activities during the ~~nine~~six months ended ~~December 31, 2018.~~September 30, 2020, compared to $54.4 million used in operating activities for the six months ended September 30, 2019. See below for a breakdown of operating cash flows by segment (in thousands):

	Nine Months Ended December 31,						Six Months Ended September 30,
	2019			2018			2020			2019
Technology segment	$	(18,146	)	$	4,033		$	44,367		$	3,833
Financing segment		(56,582	)		(1,861	)		(35,959	)		(58,237	)
Net cash used in operating activities	$	(74,728	)	$	2,172
Net cash provided by (used in) operating activities							$	8,408		$	(54,404	)

Technology Segment: In the ~~nine~~six months ended ~~December 31,~~September 30, 2020, our technology segment provided $44.4 million from operating activities primarily due to cash generated from earnings. Additionally, we had net borrowing on the floor plan component of our credit facility of $91.6 million which was partially offset by repayment of $35.0 million in borrowings under the accounts receivable component of our Technology segment credit facility. The net borrowing is primarily the result of extended payment terms from certain vendor partners that deferred $76.3 million in payments for an additional 30 days. The majority of these programs relate to COVID-19 and ended in October 2020. We use this facility to manage working capital needs. We present changes in this balance as financing activity in our consolidated statement of cash flows.

In the six months ended September 30, 2019, operating cash flows ~~used~~provided by our technology segment was ~~$18.1~~$3.8 million as cash generated from earnings ~~were exceeded by~~exceeding changes in working capital. In addition, cash provided by the accounts payable – floor plan facility was ~~$28.4~~$13.6 million. Accounts payable – floor plan is a facility used to manage working capital needs and we are required to present changes in this balance as financing activity in our consolidated statement of cash flows.

In the nine months ended December 31, 2018, our technology segment provided $4.0 million from operating activities due to cash generated from earning exceeding changes in working capital. Partially offsetting the cash used in operations were changes in the accounts payable - floor plan balance of $12.5 million.

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,
	2019			2018			As of September 30,
							2020			2019
(DSO) Days sales outstanding (1)		57			54			61			59
(DIO) Days inventory outstanding (2)		10			11			14			10
(DPO) Days payable outstanding (3)		(41	)		(39	)		(54	)		(46	)
Cash conversion cycle		26			26			21			23

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

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

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

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Our cash conversion cycle ~~was 26~~decreased to 21 days at September 30, 2020, compared to 23 days at September 30, 2019. Our standard payment term for ~~both December 31, 2019, and 2018. An increase in~~customers is between 30-60 days; however, certain customer orders may be approved for extended payment terms. Our DPO increased 8 days. Invoices processed through 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 ~~from 54 days to 57 day in December 2019 was offset by a reduction of 1 day in DIO and~~increased 2 days ~~in DPO. Our December 31, 2019 DSO and DPO was impacted by a substantial increase in the quarterly sales of 24.1% and cost of sales of 23.8%, respectively; resulting in~~due to an increase in ~~accounts receivable~~sales during the quarter ended September 30, 2020, to customers with terms greater than or equal to net 60 days. The 4 day increase in DIO was due to an increase in average inventory balances of 45.1%, or $24.0 million, due to pending projects for our customers and ~~accounts payable levels as of December 31, 2019.~~some delays in receiving by our customers whose offices were temporarily closed due to COVID-19.

Financing Segment: In the ~~nine~~six months ended ~~December 31, 2019,~~September 30, 2020, our financing segment used ~~$56.6 million from operating activities, primarily due to the issuance of new financing receivables. In the nine months ended December 31, 2018, our financing segment used $1.9~~$36.0 million from operating activities, primarily due to changes in ~~working capital. When we adopted ASC 842, we elected the transition option to not restate comparative periods.~~ financing receivables- net of $54.4 million, partially offset by earnings of $10.4 million and an increase in accounts payable trade of $13.0 million. In the ~~comparative period,~~six months ended September 30, 2019, our financing segment used $58.2 million from operating activities, primarily due to changes in financing ~~receivables not sourced through us are reflected in cash flows from investing activities. With the adoption~~receivables- net of ~~ASC 842, for periods beginning after April 1, 2019, we~~$76.4 million. We recognize the change in financing receivables, including the issuance of financing receivables offset by repayments of financing receivables and the proceeds from the transfer of financing receivables, when we account for the transfer as a sale, as part of operating activities.

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Cash flows related to investing activities. In the ~~nine~~six months ended ~~December 31, 2019,~~September 30, 2020, we used ~~$20.0~~$2.8 million from investing activities, consisting of ~~$14.2 million for acquisitions and $7.2~~$3.3 million for purchases of property, equipment and operating lease equipment ~~and~~ offset by ~~$1.4~~$0.5 million of proceeds from the sale of property, equipment, and operating lease equipment. In the six months ended September 30, 2019, we used $18.1 million from investing activities, consisting of $13.8 million for acquisitions, $4.9 million for purchases of property, equipment and operating lease equipment offset by $0.7 million of proceeds from the sale of property, equipment, and operating lease equipment.

~~In the nine months ended December 31, 2018, we used $48.0 million from investing activities, including $8.5 million for purchases of property, equipment and operating lease equipment.~~ ~~We elected not to update our cash flows using the transition option available when we adopted ASC 842 in this period. Therefore,~~ cash used in investing activities also included net cash outflows related to financing receivables of $55.2 million, consisting of the issuance of financing receivables of $140.3 million, purchases of assets to be leased or financed of $13.9 million, and was partially offset by cash proceeds from the repayment of financing receivables of $55.2 million, and the sale of financing receivables of $57.0 million.

Cash flows from financing activities. In the ~~nine~~six months ended ~~December 31,~~September 30, 2020, cash provided by financing activities was $69.7 million consisting of net borrowings on floor plan facility of $91.6 million, net borrowings of non-recourse and recourse notes payable of $18.1 million, which was partially offset by repayment of $35.0 million in borrowings under the accounts receivable component of our Technology segment credit facility and $4.5 million in repurchase of common stock.

In the six months ended September 30, 2019, cash provided by financing activities was ~~$74.6~~$48.4 million, consisting of net borrowings of non-recourse and recourse notes payable of ~~$65.7~~$49.2 million, net borrowings on floor plan facility of ~~$28.4~~$13.6 million, and offset by $13.7 million in repurchase of common stock and ~~$5.8~~$0.8 million ~~in repayments~~paid to sellers of ~~financing~~SLAIT as part of ~~acquisitions.~~

Cash provided by financing activities was $11.8 million during the nine months ended December 31, 2018, which was primarily due to net borrowings of non-recourse and recourse notes payable of $23.2 million, and net borrowing on floor plan facility of $12.5 million, ~~partially offset by~~ ~~cash used for the repurchase of common stock of $16.3 million, and~~ ~~repayment of financing of acquisitions of $7.6 million.~~a working capital adjustment.

Our borrowing of non-recourse and recourse notes payable primarily arises from our financing segment when we transfer contractual payments due to us 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 ~~and~~or recourse notes payable.

Non-Cash Activities

. We ~~assign~~transfer contractual payments due to us under lease and financing agreements to third-party financial institutions. As a condition ~~to the assignment agreement,~~of these agreements, certain financial institutions may request that the customer remit their contractual payments to a trust, rather than to us, and the trust pays the financial institution. Alternatively, the customer will make payments to us, and we will remit the payment to the financial institution. The economic impact to us under either structure is similar, in that the assigned contractual payments are paid by the customer and remitted to the lender. However, when our customer makes payments through a trust, such payments represent non-cash transactions.

~~In addition,~~ Also, in certain assignment agreements, we may direct the third-party financial institution to pay some of the proceeds from the assignment directly to the vendor or vendors that have supplied the assets being leased ~~and/~~and or financed. In these situations, the portion of the proceeds paid directly to our vendors are non-cash transactions.

~~Liquidity and Capital Resources~~

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Secured borrowings – Financing segment

We may ~~utilize non-recourse notes payable to~~ finance ~~approximately 80% to 100%~~all or most of the ~~purchase price~~cost of the assets ~~being leased~~that we finance for customers by transferring all or ~~financed by our customers. Any balance~~part of the ~~purchase price remaining after~~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 ~~funding~~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 ~~any upfront payments received from~~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, ~~(our equity investment in~~is against the ~~equipment) must generally be financed by cash flows from our operations,~~customer and the ~~sale of the~~specific equipment ~~leased to third-parties, or other internal means. Although~~under lease. While we expect that the credit quality of our financing arrangements and our residual return history will continue to allow us to obtain such financing, such financing may not be available on acceptable terms, or at all.

~~The financing necessary~~As a result of COVID-19, credit markets have tightened. Our lenders are more discerning and are taking longer to ~~support our leasing~~approve transactions. In addition, certain lenders have narrowed their demand to certain types of transactions and/or credit quality and ~~financing activities has been provided by our cash and non-recourse borrowings. We monitor our exposure closely. We are~~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 ~~obtain financing through~~transfer certain receivables to financial institutions which may result in investing our ~~traditional lending sources using primarily non-recourse borrowings from third-party banks and finance companies. Non-recourse financings are loans whose repayment is~~capital or declining 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.

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At December 31, 2019, our non-recourse notes payable increased 36.0% to $66.1 million, as compared to $48.6 million at March 31, 2019. Recourse notes payable as of December 31, 2019 were $2.2 million, compared to $28 thousand as of March 31, 2019. In total notes payable increased $40.6%, or $19.7 million to $68.4 million as of December 31, 2019, as compared to March 31, 2019.

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.transaction.

Credit ~~Facility~~facility — Technology segment

Our subsidiary, ePlus Technology, inc., and certain of its ~~subsidiaries.~~subsidiaries have a financing facility from WFCDF to finance ~~its~~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. ~~This facility has full recourse to~~ ePlus Technology, inc. and certain subsidiaries. and is secured by a blanket lien against all its assets, such as chattel paper, receivables and inventory. As of December 31, 2019, the facility had an aggregate limit of the two components of $250 million with an accounts receivable sub-limit of $50 million.

On ~~July 27, 2017,~~May 15, 2020, we executed an amendment to the WFCDF credit facility that ~~temporarily~~ increased the aggregate limit of the two components, ~~from $250 million~~except during a temporary uplift, to ~~$325 million from the date of the agreement through October 31, 2017 and provides us~~$275.0 million. Additionally, we have an election beginning July 1 in each subsequent year to similarly temporarily increase the aggregate limit of the two components to $325 million ending the earlier of 90 days following the date of election and October 31 of that same year. On July 31, 2019, we elected to temporarily increase the aggregate limit to ~~$325 million.~~

~~Availability under~~$350.0 million for a period of not less than 30 days, provided that all such periods shall not exceed 150 days in the ~~facility may be limited by~~aggregate in any calendar year. Further, the ~~asset value of equipment we purchase or~~amendment increased the limit on the accounts receivable ~~and may be further limited by certain covenants and terms and conditions~~component of the ~~facility. These covenants include but are not limited~~WFCDF credit facility to ~~a minimum excess availability~~$100.0 million, changed the interest rate to two percent (2.00%) plus the greater of ~~the facility~~one month LIBOR or seventy-five hundredths of one percent (0.75%), and modified certain restrictions on ePlus Technology, inc.’s ~~minimum earnings before interest, taxes, depreciation~~ability to pay dividends to ePlus inc.

As of September 30, 2020, the limit of the two components of the credit facility was $275 million, and ~~amortization. We were in compliance with these covenants as~~the accounts receivable component had a sub-limit of ~~December 31, 2019. Interest on the~~$100 million.

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

The credit facility restricts the ~~One Month LIBOR plus two-~~ability of ePlus Technology, inc. and ~~one-half percent if~~certain of its subsidiaries to pay dividends to ePlus inc. unless their available borrowing meets certain thresholds. As of September 30, 2020, their available borrowing met the ~~payments are not made on the three specified dates each month.~~ 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 ~~subsidiaries.~~of its subsidiaries be provided within 45 days ~~of the end~~ 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 ~~the credit facility~~ with 90 ~~days~~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. and certain of its subsidiaries. This credit facility is secured by the assets of only~~ e~~Plus Technology, inc. and certain of its subsidiaries and the guaranty as described below.~~

~~The WFCDF credit facility 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 a certain date. We have delivered the annual audited financial statements for the year ended March 31, 2019, as required.~~ 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.

Floor Plan Component

~~Purchases by~~ e~~Plus Technology, inc.~~. After a customer places a purchase order with us and ~~certain subsidiaries. including computer technology products, software, maintenance and services~~after we have completed our credit 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 ~~in part~~first financed ~~through a~~under the floor plan component and reflected in ~~which interest expense for the first thirty to sixty days, in general, is not charged. The floor plan liabilities are recorded as accounts~~“accounts payable—floor ~~plan on~~plan” in our consolidated balance ~~sheets, as they~~sheets. Payments on the floor plan component are ~~normally repaid~~due on three specified dates each month, generally 30-60 days from the invoice date. In addition, certain suppliers have temporarily extended their repayment terms to us due 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 the due dates of the floor plan component, we make cash payments to WFCDF. Our borrowings and repayments under the floor plan component are included in “net borrowings (repayments) on floor plan facility” within cash flows from the fifteen to sixty-day time frame and represent assigned accounts payable originally generated with the manufacturer/distributor. In some cases, we are able to pay invoices early and receive a discount, but if the fifteen to sixty-day obligation is not paid timely, interest is then assessed at stated contractual rates.financing activities in our consolidated statements of cash flows.

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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, 2019

Balance as of
December 31, 2019

Maximum Credit Limit
at March 31, 2019

Balance as of
March 31, 2019

$ 250,000 $ 144,483 $ 250,000 $ 116,083

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

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

Accounts Receivable Component

. ePlus Technology, inc. and certain of its subsidiaries have an accounts receivable component included within the WFCDF credit facility, which has a revolving line of credit. On the due date of the invoices financed by the floor plan component, the invoices are paid by the accounts receivable component of the credit facility. The balance of the accounts receivable component is then reduced by payments from our available cash. The outstanding balance under the accounts receivable component is recorded as recourse notes payable on our consolidated balance sheets. ~~There~~Our borrowings and repayments under the accounts receivable component are included in “borrowings of non-recourse and recourse notes payable” and “repayments of non-recourse and recourse notes payable”, respectively, within cash flows from the financing activities in our consolidated statements of cash flows.

As of March 31, 2020, there was noan outstanding balance ~~outstanding~~ for the accounts receivable component ~~at December 31, 2019, or~~of $35.0 million. As of September 30, 2020, there was no outstanding balance for the accounts receivable component. As of September 30, 2020, and March 31, ~~2019, while~~2020, the maximum credit limit was ~~$50~~$100.0 million ~~for both periods.~~and $50.0 million, respectively. We may maintain a balance on the accounts receivable component to assist in mitigating risk arising from COVID-19.

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, 2019,~~September 30, 2020, we were not involved in any unconsolidated special purpose entity transactions.

Adequacy of Capital Resources

The continued implementation of our business strategy will require a significant investment in both resources and managerial focus. In addition, we may selectively acquire other companies that have attractive customer relationships and skilled sales and/or engineering forces. We may also open offices in new geographic areas, which may require a significant investment of cash. We may also acquire technology companies to expand and enhance the platform of bundled solutions to provide additional functionality and value-added services. We may continue to use our internally generated funds to finance investments in leased assets or investments in notes receivables due from our customers. These actions may result in increased working capital needs as the business expands. As a result, we may require additional financing to fund our strategy, implementation, potential future acquisitions, and working capital needs, which may include additional debt and equity financing. The impacts of COVID-19 may limit or eliminate our access to capital. While the future is uncertain, we do not believe our credit facility will be terminated by the lender or us. Our lending partners in our financing segment have tightened credit availability and are more discerning in their approval process. However, currently we have funding resources available for our transactions.

Inflation

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

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Potential Fluctuations in Quarterly Operating Results

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

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Our quarterly results of operations are susceptible to fluctuations for a number of reasons, including, but not limited to the worldwide impacts from COVID-19, currency fluctuations, reduction in IT spending, any reduction of expected residual values related to the equipment under our leases, the timing and mix of specific transactions, the reduction of manufacturer incentive programs, and other factors. Quarterly operating results could also fluctuate as a result of our sale of equipment in our lease portfolio to a lessee or third-party at the expiration of a lease term or prior to such expiration, and the transfer of financial assets. Sales of equipment and transfers of financial assets may have the effect of increasing revenues and net income during the quarter in which the sale occurs and reducing revenues and net income otherwise expected in subsequent quarters. See Part I, Item 1A, “Risk Factors,” in our ~~2019~~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

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

AAlthough a substantial portion of our liabilities are non-recourse, fixed-interest-rate instruments, ~~which were aligned with the customer financing rate creating an interest rate spread that is our profit. Should~~ we not fund these transactions with debt at inception and interest rates rise above our interest rate with our customer, we may not be able to fund the transaction without reduced profit or a loss, thus inhibiting our ability to generate proceeds from the transaction. We utilize ~~our~~ lines of credit and other financing facilities that are subject to fluctuations in short-term interest rates. ~~These~~Our non-recourse instruments, which are ~~generally~~ denominated in 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, 2019,~~September 30, 2020, the aggregate fair value of our recourse and non-recourse borrowings approximated their carrying value.

We have transactions in foreign currencies, primarily in British Pounds, Euros, and 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 our subsidiary’s functional currency. To date, our foreign operations are insignificant in relation to total consolidated operations, and we believe that potential fluctuations in currency exchange rates will not have a material effect on our financial position.

The UK referendum (“Brexit”) to leave the European Union ~~(“Brexit”)~~ could impact revenue items, cost items, tax, ~~immigration, trade,~~ goodwill impairments and liquidity, among others. The most obvious immediate impact is the effect of foreign exchange fluctuations on revenue and cost items. ~~We evaluate Brexit-related developments on a regular basis to determine if such developments are anticipated to have a material impact on the Company’s results on operations and financial position.~~

We have determined that our foreign currency exposure for our UK operations is insignificant in relation to total consolidated operations, and we believe those potential fluctuations in currency exchange rates and other Brexit-related economic and operational risks will not have a material effect on our results of operations and financial position.

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

We lease assets in foreign countries, including Canada, the UK ~~Canada, Iceland,~~ and ~~Spain.~~several other European countries. As a lessor, we ~~have entered into~~ lease ~~contracts and non-recourse, fixed-interest-rate financing~~assets for amounts denominated in British Pounds, Euros, and Canadian ~~Dollars, Icelandic Krona, and Euros. To date,~~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 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, 2019.~~September 30, 2020.

~~Table of Contents~~

Changes in Internal Control Over Financial Reporting.

There have not been any changes in our internal control over financial reporting during the ~~three months~~quarter ended ~~December 31, 2019,~~September 30, 2020, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on the Effectiveness of Controls

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

PART II. OTHER INFORMATION

Item 1.

Legal Proceedings

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

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

Table of Contents

Item 1A.

Risk Factors

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

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

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

Part I. Financial Information:

Item 1.	Financial Statements

		Unaudited Consolidated Balance Sheets as of ~~December~~September 30, ~~2019~~2020 and March 31, ~~2019~~ 2020	5

		Unaudited Consolidated Statements of Operations for the Three and ~~Nine~~Six Months Ended ~~December 31,~~September 30, 2020 and 2019 ~~and 2018~~	6

		Unaudited Consolidated Statements of Comprehensive Income for the Three and ~~Nine~~Six Months Ended ~~December 31,~~September 30, 2020 and 2019 ~~and 2018~~	7

		Unaudited Consolidated Statements of Cash Flows for the ~~Nine~~Three and Six Months Ended ~~December 31,~~September 30, 2020 and 2019 ~~and 2018~~	8

		Unaudited Consolidated Statements of Stockholders’ Equity for the ~~Nine~~Three and Six Months Ended ~~December 31,~~September 30, 2020 and 2019 ~~and 2018~~	10

		Notes to Unaudited Consolidated Financial Statements	11

Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations	29 26

Item 3.		Quantitative and Qualitative Disclosures About Market Risk	45 43

Item 4.		Controls and Procedures	45 44

Part II. Other Information:

~~Item 1.~~	~~Legal Proceedings~~	46

~~Item 1A.~~	~~Risk Factors~~	46

Item 1.	Legal Proceedings	44

Item 1A.	Risk Factors	45

Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds	47 45

Item 3.		Defaults Upon Senior Securities	45

Item 4.	Mine Safety Disclosures	45

Item 5.	47Other Information	45

Item 6.	Exhibits	46


~~Item 4.~~	~~Mine Safety Disclosures~~	47

~~Item 5.~~	~~Other Information~~	47

~~Item 6.~~	~~Exhibits~~	48

Signatures & Certifications		49 47

Remainder of Year ending March 31, 2020	$	9,439
Year ending March 31, 2021		20,100
Year ending March 31, 2022		9,589
Year ending March 31, 2023		2,935
Year ending March 31, 2024		467
Year ending March 31, 2025 and thereafter		443
Total remaining performance obligations	$	42,973

Remainder of year ending March 31, 2020	$	36,224
Year ending March 31, 2021		23,059
Year ending March 31, 2022		13,728
Year ending March 31, 2023		5,946
Year ending March 31, 2024 and thereafter		2,492
Total	$	81,449

Remainder of year ending March 31, 2020	$	1,476
Year ending March 31, 2021		4,380
Year ending March 31, 2022		2,961
Year ending March 31, 2023		1,626
Year ending March 31, 2024 and thereafter		443
Total	$	10,886

	December 31, 2019
Remainder of year ending March 31, 2020	$	1,084
Year ending March 31, 2021		5,460
Year ending March 31, 2022		4,020
Year ending March 31, 2023		3,049
Year ending March 31, 2024		1,206
Thereafter		762
Total lease payments	$	15,581
Less: Interest		(965	)
Present value of lease liabilities	$	14,616

	Goodwill		Accumulated Impairment Loss			Net Carrying Amount

Beginning balance March 31, 2019	$	119,480	$	(8,673	)	$	110,807
Acquisitions		7,410		-			7,410
Foreign currency translations		8		-			8
Ending balance December 31, 2019	$	126,898	$	(8,673	)	$	118,225

	December 31, 2019		March 31, 2019
Recourse notes payable with interest rates at 2.55% as of December 31, 2019 and 4.00% as of March 31, 2019
Current	$	2,239	$	28

Non-recourse notes payable secured by certain financing receivables and investments in operating leases with interest rates ranging from 2.90% to 8.45% as of December 31, 2019 and 3.23% to 8.45% as of March 31, 2019.
Current	$	59,015	$	38,117
Long-term		7,120		10,502
Total non-recourse notes payable	$	66,135	$	48,619

	Acquisition Date Amount
Accounts receivable	$	10,209
Other assets		1,050
Identified intangible assets		18,190
Accounts payable and other current liabilities		(8,611	)
Performance obligation		(5,110	)

Total identifiable net assets		15,728
Goodwill		34,301

Total purchase consideration	$	50,029

	Nine Months Ended
	December 31, 2019						December 31, 2018
	Technology		Financing		Total		Technology		Financing		Total

Sales
Product	$	1,032,620	$	45,047	$	1,077,667	$	911,839	$	30,896	$	942,735
Service		144,261		-		144,261		104,504		-		104,504
Net sales		1,176,881		45,047		1,221,928		1,016,343		30,896		1,047,239

Cost of Sales
Product		825,509		6,626		832,135		730,311		5,491		735,802
Service		90,427		-		90,427		62,321		-		62,321
Cost of sales		915,936		6,626		922,562		792,632		5,491		798,123
Gross Profit		260,945		38,421		299,366		223,711		25,405		249,116

Selling, general, and administrative		197,615		11,785		209,400		166,199		8,200		174,399
Depreciation and amortization		10,555		112		10,667		8,243		7		8,250
Interest and financing costs		-		1,898		1,898		-		1,403		1,403
Operating expenses		208,170		13,795		221,965		174,442		9,610		184,052

Operating income		52,775		24,626		77,401		49,269		15,795		65,064

Other income						912						1,140

Earnings before tax					$	78,313					$	66,204

Net Sales
Contracts with customers	$	1,163,184	$	3,889	$	1,167,073	$	1,000,776	$	2,469	$	1,003,245
Financing and other		13,697		41,158		54,855		15,567		28,427		43,994
Net sales	$	1,176,881	$	45,047	$	1,221,928	$	1,016,343	$	30,896	$	1,047,239

Selected Financial Data - Statement of Cash Flow

Depreciation and amortization	$	10,974	$	4,243	$	15,217	$	8,895	$	4,446	$	13,341
Purchases of property, equipment and operating lease equipment	$	3,461	$	3,748	$	7,209	$	4,472	$	4,020	$	8,492

Selected Financial Data - Balance Sheet

Total assets	$	733,174	$	219,434	$	952,608	$	613,494	$	184,695	$	798,189

	Twelve Months Ended September 30,
	2020			2019			Change
Revenue by customer end market:
Technology		19	%		22	%		(3	%)
Telecom, Media & Entertainment		20	%		16	%		4	%
SLED		16	%		17	%		(1	%)
Healthcare		15	%		15	%		0	%
Financial Services		13	%		14	%		(1	%)
All others		17	%		16	%		1	%
Total		100	%		100	%

	Twelve Months Ended December 31,
	2019			2018			Change
Revenue by customer end market:
Technology		22	%		22	%		0	%
SLED		17	%		17	%		0	%
Financial Services		14	%		15	%		(1	%)
Healthcare		15	%		14	%		1	%
Telecom, Media & Entertainment		17	%		14	%		3	%
All others		15	%		18	%		(3	%)
Total		100	%		100	%

Maximum Credit Limit at December 31, 2019				Balance as of December 31, 2019				Maximum Credit Limit at March 31, 2019				Balance as of March 31, 2019
$	250,000			$	144,483			$	250,000			$	116,083

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, 2019 through April 30, 2019		-	$	-		-		385,419	(2	)
May 1, 2019 through May 27, 2019		2,301	$	83.38		1,300		0	(3	)
May 28, 2019 through May 31, 2019		68,207	$	72.32		68,207		431,793	(4	)
June 1, 2019 through June 30, 2019		117,093	$	71.15		79,283		352,510	(5	)
July 1, 2019 through July 31, 2019		3,260	$	72.87		254		352,256	(6	)
August 1, 2019 through August 31, 2019		-	$	-		-		352,256	(7	)
September 1, 2019 through September 30, 2019		-	$	-		-		352,256	(8	)
October 1, 2019 through October 31, 2019		-	$	-		-		352,256	(9	)
November 1, 2019 through November 30, 2019		-	$	-		-		352,256	(10	)
December 1, 2019 through December 31, 2019		-	$	-		-		352,256	(11	)

~~3.1~~ Exhibit Number	~~ePlus~~	Exhibit Description

3.1		ePlus inc. Amended and Restated Certificate of Incorporation as amended September 15, 2008 (Incorporated herein by reference as Exhibit 3.1 to our Current Report on Form 8-K filed on September 19, 2008).

3.2		Amended and Restated Bylaws of ~~ePlus~~ePlus inc., as amended February 15, 2018 (Incorporated herein by reference to Exhibit 3.1 to our Current Report on Form 8-K filed on February 20, 2018).

~~10.1~~	~~Amendment No. 1, effective November 14, 2019, to Amended and Restated Employment Agreement, effective September 6, 2017, by and between ePlus inc. and Elaine D. Marron.~~

~~10.2~~	~~Amendment No. 2, effective November 14, 2019, to Amended and Restated Employment Agreement, effective September 6, 2017, by and between ePlus inc. and Mark P. Marron.~~
31.1
~~10.3~~	~~Amendment No. 1, effective November 14, 2019, to Amended and Restated Employment Agreement, effective May 7, 2018, by and between ePlus inc. and Darren S Raiguel.~~

~~10.4~~	Amendment No. 8, dated November 12, 2019, to Amended and Restated Business Financing Agreement and Amended and Restated Wholesale Financing Agreement between ePlus Technology, inc. and Wells Fargo Commercial Distribution Finance, LLC.

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

101.SCH	~~Inline~~	XBRL Taxonomy Extension Schema Document

101.CAL	~~Inline~~	XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF	~~Inline~~	XBRL Taxonomy Extension Definition Linkbase Document

101.LAB	~~Inline~~	XBRL Taxonomy Extension Label Linkbase Document

101.PRE	~~Inline~~	XBRL Taxonomy Extension Presentation Linkbase Document

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

	e~~Plus~~ePlus inc.

Date: ~~February 5,~~November 4, 2020	/s/ MARK P. MARRON
	By: Mark P. Marron,
	Chief Executive Officer and President
	(Principal Executive Officer)

Date: ~~February 5,~~November 4, 2020	/s/ ELAINE D. MARION
	By: Elaine D. Marion
	Chief Financial Officer
	(Principal Financial Officer)