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

FORM 10-Q

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

For the quarterly period ended June 30, 20202021

OR

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

For the transition period from____ to ____ .____.

Commission file number: 1-34167

ePlus inc.

(Exact name of registrant as specified in its charter)

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

13595 Dulles Technology Drive, Herndon, VA 20171-3413
(Address, including zip code, of principal executive offices)

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

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

Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $.01 par valuePLUSNASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☒   No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes ☒   No ☐

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

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

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐  No ☒
The number of shares of common stock outstanding as of August 2, 2021 3, 2020,, was 13,553,424.13,505,354.




TABLE OF CONTENTS
 
ePlus inc. AND SUBSIDIARIES

Part I. Financial Information: 
    
Item 1. Financial Statements 
    
  
Unaudited Consolidated Balance Sheets as of June 30, 20202021, and March 31, 20202021
5
    
  
Unaudited Consolidated Statements of Operations for the Three Months Ended June 30, 20202021, and 20192020
6
    
  
Unaudited Consolidated Statements of Comprehensive Income for the Three Months Ended June 30, 20202021, and 20192020
7
    
  
Unaudited Consolidated Statements of Cash Flows for the Three Months Ended June 30, 20202021, and 20192020
8
    
  
Unaudited Consolidated Statements of Stockholders’ Equity for the Three Months Ended June 30, 20202021, and 20192020
10
    
  
Notes to Unaudited Consolidated Financial Statements
11
    
Item 2.
 
Management’s Discussion and Analysis of Financial Condition and Results of Operations
25
24
    
Item 3.
 
Quantitative and Qualitative Disclosures About Market Risk
40
38
    
Item 4.
 
Controls and Procedures
40
39
    
Part II. Other Information:
 
    
Item 1.
 
Legal Proceedings
41
39
    
Item 1A.
 
Risk Factors
41
39
    
Item 2.
 
Unregistered Sales of Equity Securities and Use of Proceeds
42
Item 3.
Defaults Upon Senior Securities
40
42
Item 4.
Mine Safety Disclosures
42
Item 5.
Other Information
42
Item 6.
Exhibits
43
    
Item 3.
Defaults Upon Senior Securities
40
Item 4.
Mine Safety Disclosures
40
Item 5.
Other Information
40
Item 6.
Exhibits
41
Signatures & Certifications
44
42


2
Table of Contents

CAUTIONARY STATEMENT CONCERNINGLANGUAGE ABOUT FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q10-Q contains certain statements that are, or may be deemed to be, “forward-looking statements” within the meaning of Section 27A27A of the Securities Act of 1933, as amended, and Section 21E21E of the Securities Exchange Act of 1934, as amended, or “Exchange Act,” and are made in reliance upon the protections provided by such acts for forward-looking statements. Such statements are not based on historical fact;fact but are based upon numerous assumptions about future conditions that may not occur. Forward-looking statements are generally identifiable by use of forward-looking words such as “may,” “should,” “would,” “intend,” “estimate,” “will,” “potential,” “possible,” “could,” “believe,” “expect,” “intend,” “plan,” “anticipate,” “project,” and similar expressions. Readers are cautioned not to place undue reliance on any forward-looking statements made by us or on our behalf. Forward-looking statements are made based upon information that is currently available or management’s current expectations and beliefs concerning future developments and their potential effects upon us, speak only as of the date hereof, and are subject to certain risks and uncertainties. We do not undertake any obligation to publicly update or correct any forward-looking statements to reflect events or circumstances that subsequently occur, or of which we hereafter become aware. Actual events, transactions and results may materially differ from the anticipated events, transactions, or results described in such statements. Our ability to consummate such transactions and achieve such events or results is subject to certain risks and uncertainties. Such risks and uncertainties include, but are not limited to, the matters set forth below:

the duration and ongoing impact of the novel coronavirus pandemic (“COVID-19”), pandemic, which could materially adversely affect our financial condition and results of operations and has resulted in governmental authorities imposing numerous unprecedented measures to try to contain the virus that has impacted and may further impact our workforce and operations, the operations of our customers, and those of our respective vendors, suppliers, and partners;
national and international political instability fostering uncertainty and volatility in the global economy including exposure to fluctuation in foreign currency rates, interest rates, and downward pressure on prices;
significant adverse changes in, reductions in, or loss of our largest volume customer or one or more of our large volume customers, or vendors;
the creditworthiness of our customers and our ability to reserve adequately for credit losses;
loss of our credit facility or credit lines with our vendors may restrict our current and future operations;
uncertainty regarding the phase out of LIBOR may negatively affect our operating results;
a possible decrease in the capital spending budgets of our customers or a decrease in purchases from us;
•
our ability to raise capital, maintain or increase as needed our lines of credit with vendors or floor planning facility, obtain debt for our financing transactions, or the effect of those changes on our common stock price;
reliance on third parties to perform some of our service obligations to our customers;
changes in the Information Technology (“IT”) industry and/or rapid changes in product offerings, including the proliferation of the cloud, infrastructure as a service (“IaaS”), and software as a service (“SaaS”) and platform as a service (“PaaS”);
our dependency on continued innovations in hardware, software, and services offerings by our vendors and our ability to partner with them;
availability of products from our vendors;
significant and rapid inflation may cause price and wage increases, as well as increases in operating costs which may impact the arrangements that have pricing commitments over the term of the agreement.
future growth rates in our core businesses;
reduction of vendor incentives provided to us;
rising interest rates or the loss of key lenders or the constricting of credit markets;
the possibility of goodwill impairment charges in the future;
maintaining and increasing advanced professional services by recruiting and retaining highly skilled, competent personnel, and vendor certifications;
adapting to meet changes in markets and competitive developments;
increasing the total number of customers using integrated solutions by up-selling within our customer base and gaining new customers;
our ability to secure our own and our customers’ electronic and other confidential information, and remain secure during a cyber-security attack;
managing a diverse product set of solutions in highly competitive markets with a number of key vendors;
increasing the total number of customers who use our managed services and professional services and continuing to enhance our managed services offerings to remain competitive in the marketplace;
performing professional and managed services competently;

3
Table of Contents
our ability to implement comprehensive plans for the integration of sales forces, cost containment, asset rationalization, systems integration, and other key strategies;

3
Table of Contents
changes to or loss of members of our senior management team and/or failure to successfully implement succession plans;
exposure to changes in, interpretations of, or enforcement trends in legislation and regulatory matters;
domestic and international economic regulations uncertainty (e.g., tariffs, and trade agreements);
our contracts may not be adequate to protect us, and we are subject to audit in which we may not pass, and our professional and liability insurance policies coverage may be insufficient to cover a claim;
failure to comply with public sector contracts, or applicable laws or regulations;
our dependence on key personnel to maintain certain customer relationships, and our ability to hire, train, and retain sufficient qualified personnel;
maintaining our proprietary software and updating our technology infrastructure to remain competitive in the marketplace;
disruptions or a security breach in our or our vendors’ IT systems and data and audio communication networks;
our ability to realize our investment in leased equipment;
our ability to successfully perform due diligence and integrate acquired businesses;
significant changes in accounting standards including changesour ability to protect our intellectual property rights and successfully defend any challenges to the financial reportingvalidity of leases, which could impact the demand for our leasing services,patents or misclassification of products and servicesallegations that we sell resulting in the misapplication of revenue recognition policies or inaccurate costs and completion dates for our services, which could affect our estimates; and
•
our ability to protect our intellectual property rights and successfully defend any challenges to the validity of our patents or allegations that we are infringing upon any third-partyare 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”).

4
Table of Contents

PART I. FINANCIAL INFORMATION

Item 1.Financial Statements

ePlus inc. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)

 June 30, 2020  March 31, 2020  June 30, 2021  March 31, 2021 
ASSETS            
Current assets:            
Cash and cash equivalents $144,382  $86,231  $93,840  $129,562 
Accounts receivable—trade, net  393,044   374,998   465,424   391,567 
Accounts receivable—other, net  33,076   36,570   33,979   41,053 
Inventories  93,323   50,268   77,752   69,963 
Financing receivables—net, current  116,120   70,169   63,082   106,272 
Deferred costs  20,785   22,306   27,812   28,201 
Other current assets  6,102   9,256   12,309   10,976 
Total current assets  806,832   649,798   774,198   777,594 
                
Financing receivables and operating leases—net  68,862   74,158   98,277   90,165 
Deferred tax asset—net  1,468   1,468 
Property, equipment and other assets  33,025   32,596   41,282   42,289 
Goodwill  118,097   118,097   126,651   126,645 
Other intangible assets—net  32,046   34,464   35,540   38,614 
TOTAL ASSETS $1,058,862  $909,113  $1,077,416  $1,076,775 
                
LIABILITIES AND STOCKHOLDERS' EQUITY                
                
LIABILITIES                
                
Current liabilities:                
Accounts payable $136,507  $82,919  $149,685  $165,162 
Accounts payable—floor plan  175,701   127,416   139,574   98,653 
Salaries and commissions payable  26,460   30,952   31,758   36,839 
Deferred revenue  57,271   55,480   76,821   72,802 
Recourse notes payable—current  37,271   37,256   5,997   5,450 
Non-recourse notes payable—current  55,667   29,630   12,700   50,397 
Other current liabilities  30,683   22,986   29,870   30,061 
Total current liabilities  519,560   386,639   446,405   459,364 
        
Non-recourse notes payable—long term  5,500   5,872 
Deferred tax liability—net  2,731   2,730 
Recourse notes payable - long-term  11,016   12,658 
Non-recourse notes payable - long-term  2,587   5,664 
Other liabilities  28,346   27,727   33,789   36,679 
TOTAL LIABILITIES  556,137   422,968   493,797   514,365 
                
COMMITMENTS AND CONTINGENCIES (Note 10)
      
COMMITMENTS AND CONTINGENCIES (Note 9)  0   0 
                
STOCKHOLDERS' EQUITY                
                
Preferred stock, $0.01 per share par value; 2,000 shares authorized; NaN outstanding  -   - 
Common stock, $0.01 per share par value; 25,000 shares authorized; 13,553 outstanding at June 30, 2020 and 13,500 outstanding at March 31, 2020  145   144 
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; 13,536 outstanding at June 30, 2021 and 13,503 outstanding at March 31, 2021
  146   145 
Additional paid-in capital  147,082   145,197   154,101   152,366 
Treasury stock, at cost, 934 shares at June 30, 2020 and 896 shares at March 31, 2020  (71,127)  (68,424)
Treasury stock, at cost, 1,038 shares at June 30, 2021 and 993 shares at March 31, 2021
  (79,483)  (75,372)
Retained earnings  427,579   410,219   508,134   484,616 
Accumulated other comprehensive income—foreign currency translation adjustment  (954)  (991)  721   655 
Total Stockholders' Equity  502,725   486,145   583,619   562,410 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,058,862  $909,113  $1,077,416  $1,076,775 

See Notes to Unaudited Consolidated Financial Statements.

5
Table of Contents

ePlus inc. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)

 
Three Months Ended
June 30,
  
Three Months Ended
June 30,
 
 2020  2019  2021  2020 
            
Net sales            
Product $307,240  $335,601  $361,057  $307,240 
Services  47,791   45,771   55,592   47,791 
Total  355,031   381,372   416,649   355,031 
Cost of sales                
Product  226,634   260,063   277,227   226,634 
Services  29,840   28,670   33,910   29,840 
Total  256,474   288,733   311,137   256,474 
        
Gross profit  98,557   92,639   105,512   98,557 
                
Selling, general, and administrative  69,467   65,787   68,775   69,467 
Depreciation and amortization  3,516   3,463   3,926   3,516 
Interest and financing costs  577   628   359   577 
Operating expenses  73,560   69,878   73,060   73,560 
                
Operating income  24,997   22,761   32,452   24,997 
                
Other income (expense)  98   (45)
Other income  123   98 
                
Earnings before tax  25,095   22,716   32,575   25,095 
                
Provision for income taxes  7,735   6,528   9,057   7,735 
                
Net earnings $17,360  $16,188  $23,518  $17,360 
                
Net earnings per common share—basic $1.30  $1.21  $1.76  $1.30 
Net earnings per common share—diluted $1.30  $1.20  $1.75  $1.30 
                
Weighted average common shares outstanding—basic  13,322   13,356   13,333   13,322 
Weighted average common shares outstanding—diluted  13,388   13,457   13,441   13,388 

See Notes to Unaudited Consolidated Financial Statements.

6
Table of Contents


ePlus inc. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVECOMPREHENSIVE INCOME
(in thousands)

 
Three Months Ended
June 30,
 
 2020  2019  
Three Months Ended
June 30,
 
       2021  2020 
            
NET EARNINGS $17,360  $16,188  $23,518  $17,360 
                
OTHER COMPREHENSIVE INCOME, NET OF TAX:                
                
Foreign currency translation adjustments  37   (263)  66   37 
                
Other comprehensive income (loss)  37   (263)
Other comprehensive income  66   37 
                
TOTAL COMPREHENSIVE INCOME $17,397  $15,925  $23,584  $17,397 

See Notes to Unaudited Consolidated Financial Statements.

7
Table of Contents


ePlus inc. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

 Three Months Ended June 30, 
 2020  2019  Three Months Ended June 30, 
       2021  2020 
Cash flows from operating activities:            
Net earnings $17,360  $16,188  $23,518  $17,360 
                
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:                
Depreciation and amortization  4,779   4,964   6,082   4,779 
Reserve for credit losses  787   351   (261)  787 
Share-based compensation expense  1,885   1,919   1,735   1,885 
Deferred taxes  1   (3)  0   1 
Payments from lessees directly to lenders—operating leases  (8)  (22)  (32)  (8)
Gain on disposal of property, equipment, and operaing lease equipment  (25)  (203)  (148)  (25)
Changes in:                
Accounts receivable  (14,880)  (69,281)  (68,641)  (14,880)
Inventories-net  (43,038)  (7,774)  (7,800)  (43,038)
Financing receivables—net  (24,745)  (58,198)  193   (24,745)
Deferred costs and other assets  4,973   (14,379)  61   4,973 
Accounts payable-trade  53,675   21,089   (15,393)  53,675 
Salaries and commissions payable, deferred revenue, and other liabilities  5,630   17,955   (4,450)  5,630 
Net cash provided by (used in) operating activities  6,394   (87,394)  (65,136)  6,394 
                
Cash flows from investing activities:
                
Proceeds from sale of property, equipment, and operating lease equipment  118   292   843   118 
Purchases of property, equipment and operating lease equipment  (2,277)  (1,518)  (6,994)  (2,277)
Net cash used in investing activities  (2,159)  (1,226)  (6,151)  (2,159)
                
Cash flows from financing activities:                
Borrowings of non-recourse and recourse notes payable  10,332   41,394   3,199   10,332 
Repayments of non-recourse and recourse notes payable  (1,874)  (3,414)  (4,819)  (1,874)
Repurchase of common stock  (2,703)  (13,318)  (3,807)  (2,703)
Repayments of financing of acquisitions  -   (265)
Net borrowings on floor plan facility  48,285   19,930 
Net borrowings (repayments) on floor plan facility  40,921   48,285 
Net cash provided by financing activities  54,040   44,327   35,494   54,040 
                
Effect of exchange rate changes on cash  (124)  81   71   (124)
                
Net increase (decrease) in cash and cash equivalents  58,151   (44,212)  (35,722)  58,151 
                
Cash and cash equivalents, beginning of period  86,231   79,816   129,562   86,231 
                
Cash and cash equivalents, end of period $144,382  $35,604  $93,840  $144,382 

8
Table of Contents

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS - continued
(in thousands)

 Three Months Ended June 30,  Three Months Ended June 30, 
 2020  2019  2021  2020 
Supplemental disclosures of cash flow information:
            
Cash paid for interest $558  $595  $519  $558 
Cash paid for income taxes $193  $5,616  $7,275  $193 
Cash paid for amounts included in the measurement of lease liabilities $1,503  $1,081  $1,182  $1,503 
                
Schedule of non-cash investing and financing activities:
                
Proceeds from sale of property, equipment, and leased equipment $978  $0 
Purchases of property, equipment, and operating lease equipment $(237) $(1,947) $(2,619) $(237)
Borrowing of non-recourse and recourse notes payable $22,824  $30,046  $0  $22,824 
Repayments of non-recourse and recourse notes payable $(8) $(22) $(32) $(8)
Vesting of share-based compensation $7,472  $7,774  $7,493  $7,472 
Repurchase of common stock $-  $(137) $(304) $0 
New operating lease assets obtained in exchange for lease obligations $726  $1,291  $0  $726 

See Notes to Unaudited Consolidated Financial Statements.

9
Table of Contents


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

 Three Months Ended June 30, 2020  Three Months Ended June 30, 2021 
 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, 2020  13,500  $144  $145,197  $(68,424) $410,219  $(991) $486,145 
Balance, March 31, 2021
  13,503  $145  $152,366  $(75,372) $484,616  $655  $562,410 
Issuance of restricted stock awards  91   1   -   -   -   -   1   78   1   0   0   0   0   1 
Share-based compensation  -   -   1,885   -   -   -   1,885   0   0   1,735   0   0   0   1,735 
Repurchase of common stock  (38)  -   -   (2,703)  -   -   (2,703)  (45)  0   0   (4,111)  0   0   (4,111)
Net earnings  -   -   -   -   17,360   -   17,360   -   0   0   0   23,518   0   23,518 
Foreign currency translation adjustment  -   -   -   -   -   37   37   -   0   0   0   0   66   66 
                                                        
Balance, June 30, 2020  13,553  $145  $147,082  $(71,127) $427,579  $(954) $502,725 
Balance, June 30, 2021
  13,536  $146  $154,101  $(79,483) $508,134  $721  $583,619 

 Three Months Ended June 30, 2019  Three Months Ended June 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 

See Notes to Unaudited Consolidated Financial Statements.

10
Table of Contents


ePlus inc. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1.ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS — Our company was founded in 1990 and is a Delaware corporation. ePlus inc. is sometimes referred to in this Quarterly Report on Form 10-Q as “we,” “our,” “us,” “ourselves,” or “ePlus.” ePlus inc. is a holding company that through its subsidiaries provides information technology solutions whichthat enable organizations to optimize their IT environment and supply chain processes. We also provide consulting, professional and managed services and complete lifecycle management services including flexible financing solutions. We focus on selling to medium and large enterprises in North America, 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 months ended June 30,2020, 2021, and 2019,2020, 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 three months ended June 30,2020, 2021, and 20192020 are not necessarily indicative of results that may be expected for any other interim period or for the full fiscal year ending March 31,2021, 2022, 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-K10-K for the year ended March 31,2020 2021 (“20202021 Annual Report”), which should be read in conjunction with these interim consolidated financial statements.

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

CONCENTRATIONS OF RISK — A substantial portion of our sales are products from Cisco Systems, which were 37%42%  of our technology segment’s net sales for the three months ended June 30, 2020,2021, and 40%37% for the three months ended June 30, 2019.2020.

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, 2020,2021 except for changes from the adoption of Financial Accounting Standards Board (“FASB”) Accounting Standards Update ("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.

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 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. We are adopting this update in our quarter ending June 30, 2020. Our adoption of this update, including 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.


11
Table of Contents
3.REVENUES

Contract balancesCONTRACT BALANCES

Accounts receivable – trade consists entirely of amounts due from contracts with customers. In addition, we had $35.149.6 million and $33.154.6 million of receivables from contracts with customers included within financing receivables as of  June 3030,, 2020,2021, and March 31, 2020,2021, respectively. The following table provides the balance of contract liabilities from contracts with customers (in thousands):

Contract liabilities June 30, 2020  March 31, 2020 
 June 30, 2021  March 31, 2021 
Current (included in deferred revenue) $56,422  $54,486  $76,261  $72,299 
Non-current (included in other liabilities) $15,410  $16,395  $24,065  $26,042 

Revenue recognized from the beginning contract liability balance was $15.6$21.5 million and $15.8$15.6 million  for the three months ended June 30, 2020,2021, and 2019,2020, respectively.

Performance obligations
11
Table of Contents
PERFORMANCE OBLIGATIONS

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

Remainder of Year ending March 31, 2021 $24,863 
Year Ending March 31, 2022  13,072 
Year Ending March 31, 2023  4,991 
Year Ending March 31, 2024  789 
Year Ending March 31, 2025 and thereafter  653 
Total remaining performance obligations $44,368 
Remainder of the year ending March 31, 2022
 $31,218 
Year ending March 31, 2023
  18,709 
Year ending March 31, 2024
  9,023 
Year ending March 31, 2025
  1,161 
Year ending March 31, 2026 and thereafter
  461 
Total remaining performance obligations $60,572 

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

4.3.FINANCING RECEIVABLES AND OPERATING LEASES

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

The following table provides the profit recognized for new sales-type leases at their commencement date, including modifications that are recognized on a net basis, for the three months ended June 30,2020, 2021, and June 30,20192020 (in thousands) thousands):

Profit recognized for sales-type leases      
 Three months ended June 30, 
 
Three months ended
June 30, 2020
  
Three months ended
June 30, 2019
  2021  2020 
Net sales $10,163  $4,854  $3,817  $10,163 
Cost of sales  5,327   3,950   3,365   5,327 
Gross profit $4,836  $904  $452  $4,836 

12
Table of Contents
The following table provides interest income in aggregate on our sales-type leases and lease income on our operating leases for the three  months ended June 30,2020 2021, and June 30,20192020 (in thousands) thousands):

 Three months ended June 30, 
 
Three months ended
June 30, 2020
  
Three months ended
June 30, 2019
  2021  2020 
Interest income on sales-type leases $2,219  $2,095  $1,290  $2,219 
Lease income on operating leases $3,838  $5,359  $5,210  $3,838 

FINANCING RECEIVABLES—NET

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

June 30, 2020
 
Notes
Receivable
  
Lease
Receivables
  
Financing
Receivables
 
         
June 30, 2021
 
Notes
Receivable
  
Lease
Receivables
  
Financing
Receivables
 
Gross receivables $101,196  $64,197  $165,393  $80,654  $58,360  $139,014 
Unguaranteed residual value (1)  -   21,534   21,534   0   14,207   14,207 
Initial direct costs, net of amortization  552   -   552   242   0   242 
Unearned income  -   (10,079)  (10,079)  0   (7,691)  (7,691)
Reserve for credit losses (2)  (1,139)  (727)  (1,866)
Allowance for credit losses (2)  (1,289)  (873)  (2,162)
Total, net $100,609  $74,925  $175,534  $79,607  $64,003  $143,610 
Reported as:                        
Current $79,262  $36,858  $116,120  $39,452  $23,630  $63,082 
Long-term  21,347   38,067   59,414   40,155   40,373   80,528 
Total, net $100,609  $74,925  $175,534  $79,607  $64,003  $143,610 

(1)Includes unguaranteed residual values of $12,962$9,071 thousand that we retained after selling the related lease receivable.
(2)
Refer to Note 7,6, “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)  -   21,862   21,862 
March 31, 2021
 
Notes
Receivable
  
Lease
Receivables
  
Financing
Receivables
 
Gross receivables $112,641  $68,393  $181,034 
Unguaranteed residual value (1)  0   14,876   14,876 
Initial direct costs, net of amortization  212   247   459   425   0   425 
Unearned income  -   (11,612)  (11,612)  0   (8,393)  (8,393)
Reserve for credit losses (2)  (798)  (610)  (1,408)
Allowance for credit losses (2)  (1,212)  (1,171)  (2,383)
Total, net $54,831  $79,379  $134,210  $111,854  $73,705  $185,559 
Reported as:                        
Current $31,181  $38,988  $70,169  $73,175  $33,097  $106,272 
Long-term  23,650   40,391   64,041   38,679   40,608   79,287 
Total, net $54,831  $79,379  $134,210  $111,854  $73,705  $185,559 

(1)
Includes unguaranteed residual values of $14,9729,453 thousand for sales type leases, which have been sold and accounted for as sales.that we retained after selling the related lease receivable.
(2)
Refer to Note 76, “Allowance for Credit Losses” for details.

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

Remainder of the Year ending March 31, 2021 $38,966 
Year Ending March 31, 2022  14,156 
Year Ending March 31, 2023  8,381 
Year Ending March 31, 2024  1,985 
Year Ending March 31, 2025 and thereafter  709 
Total $64,197 


1312
Table of Contents
OPERATING LEASES—NET

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

OPERATING LEASES 
June 30,
2020
  
March 31,
2020
 
       
June 30,
2021
  
March 31,
2021
 
Cost of equipment under operating leases $21,263  $21,276  $26,434  $18,748 
Accumulated depreciation  (11,815)  (11,159)  (8,685)  (7,870)
Investment in operating lease equipment—net (1) $9,448  $10,117  $17,749  $10,878 

(1)Amounts include estimated unguaranteed residual values of $3.0$3.5 million and $3.1$2.5 million as of June 30, 2020,2021, and March 31, 2020,2021, respectively.

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

Remainder of the Year ending March 31, 2021 $2,821 
Year Ending March 31, 2022  2,472 
Year Ending March 31, 2023  1,528 
Year Ending March 31, 2024  477 
Year Ending March 31, 2025 and thereafter  34 
Total $7,332 

TRANSFERS OF FINANCIAL ASSETS

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

For transfers accounted for as a secured borrowing, the corresponding investments serve as collateral for non-recourse notes payable. As of June 30, 2020,2021, and March 31, 2020,2021, we had financing receivables of $69.7$12.4 million and $34.6$60.5 million, respectively, and operating leases of $6.1$5.7 million and $6.7$3.3 million, respectively, which were collateral for non-recourse notes payable. See Note 9, “Notes Payable8, "Credit Facility and Credit Facility.”Notes Payable."

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 June 30, 20202021, and 20192020, we recognized net gains of $2.5$3.2 million and $3.3$2.5 million, respectively, and total proceeds from these sales were $73.2$75.3 million and $69.9$73.2 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 June 30, 2020,2021, and March 31, 2020,2021, we had deferred revenue of $0.4$0.3 million for servicing obligations.

In a limited number of transfers accounted for as sales, we indemnified the assignee in the event thatif the lessee electedelects to early terminate the lease. As of June 30, 2020, our maximum2021, the total potential future payments related to such guaranteesthat could result from these indemnities is immaterial. We believe the likelihood of making any such payments to be remote.

13
Table of Contents
5.4.LESSEE ACCOUNTING

We lease office space for periods up to 6six 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 $1.6$1.3 million and $1.6 million for the three months ending June 30, 2021, and June 30, 2020, respectively, as part of selling, general, and administrative expenses for each of the three months ended June 30,2020, and 2019.

5.GOODWILL AND OTHER INTANGIBLE ASSETS

GOODWILL

The following table provides supplemental information aboutsummarizes the remaining lease terms and discount rates applied aschanges in the carrying amount of goodwill for the three months ended June 30,2020, and March 31,2020:

Lease term and Discount Rate June 30, 2020  March 31, 2020 
Weighted average remaining lease term (months)  36   38 
Weighted average discount rate  3.9%  3.9%


14
Table of Contents
The following table provides our future lease payments under our operating leases as of June 30, 20202021 (in thousands):

 June 30, 2020 
Remainder of the year ending March 31, 2021 $3,899 
Year ending March 31, 2022  4,287 
Year ending March 31, 2023  3,093 
Year ending March 31, 2024  1,248 
Year ending March 31, 2025 and thereafter  814 
Total lease payments $13,341 
Less: interest  (733)
Present value of lease liabilities $12,608 
 Three months ended June 30, 2021 
  Goodwill  
Accumulated
Impairment
Loss
  
Net
Carrying
Amount
 
Beginning balance $135,318  $(8,673) $126,645 
Foreign currency translations  6   -   6 
Ending balance $135,324  $(8,673) $126,651 

6.  GOODWILL AND OTHER INTANGIBLE ASSETS

GOODWILL

The carrying value of goodwill was $118.1 million for both June 30, 2020, and March 31,2020, as there were no additions or impairments, and changes due to foreign currency translations were insignificant.

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. All of our goodwillOur entire balance as of June 30, 2020,  is related2021, relates to our technology reportable segment, which we also determined to be 1 reporting unit.The change in our goodwill balance during the three months ended June 30, 2021, is due solely to foreign currency translation.

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, 2019,2020, we performed a qualitative assessment of goodwill and concluded that, more likely than not, the fair value of our technology reporting unit continued to substantially exceed its carrying value.

During the fourth quarter of fiscal year 2020, we determined that the uncertainty associated with the economic environment stemming from the COVID-19 pandemic was a triggering event and we elected to perform a quantitative goodwill impairment test. We concluded that the fair value of our technology reporting unit substantially exceeded its carrying value as of March 31, 2020. Our conclusions would not be impacted by a ten percent change in our estimate of the fair value of the reporting unit.

OTHER INTANGIBLE ASSETS

Our other intangible assets consist of the following aton June 30, 20202021, and March 31, 20202021 (in thousands):

 June 30, 2020  March 31, 2020 
 
Gross
Carrying
Amount
  
Accumulated
Amortization
  
Net
Carrying
Amount
  
Gross
Carrying
Amount
  
Accumulated
Amortization
  
Net
Carrying
Amount
  June 30, 2021  March 31, 2021 
                   
Gross
Carrying
Amount
  
Accumulated
Amortization
  
Net
Carrying
Amount
  
Gross
Carrying
Amount
  
Accumulated
Amortization
  
Net
Carrying
Amount
 
Customer relationships & other intangibles $63,006  $(35,228) $27,778  $63,006  $(33,000) $30,006  $77,345  $(44,819) $32,526  $77,335  $(42,115) $35,220 
Capitalized software development  10,500   (6,232)  4,268   10,385   (5,927)  4,458   10,486   (7,472)  3,014   10,553   (7,159)  3,394 
Total $73,506  $(41,460) $32,046  $73,391  $(38,927) $34,464  $87,831  $(52,291) $35,540  $87,888  $(49,274) $38,614 

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

Total amortization expense for customer relationships and other intangible assets was $2.5$3.0 million and $2.5 million for each of the three months ended June 30, 2021, and June 30, 2020, and 2019.respectively.


1514
Table of Contents
7.6.ALLOWANCE FOR CREDIT LOSSES

The following table provides the activity in our allowance for credit losses for the three months ended June 30, 2020,2021, and 20192020 (in thousands):

 
Accounts
Receivable
  
Notes
Receivable
  
Lease
Receivables
  Total  
Accounts
Receivable
  
Notes
Receivable
  
Lease
Receivables
  Total 
Balance April 1, 2020 $1,781  $798  $610  $3,189 
Balance April 1, 2021
 $2,064  $1,212  $1,171  $4,447 
Provision for credit losses  329   341   117   787   (40)  77   (298)  (261)
Write-offs and other  -   -   -   -   (22)  0   0   (22)
Balance June 30, 2020 $2,110  $1,139  $727  $3,976 
Balance June 30, 2021
 $2,002  $1,289  $873  $4,164 

 
Accounts
Receivable
  
Notes
Receivable
  
Lease
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  281   16   (16)  281   329   341   117   787 
Write-offs and other  (3)  (1)  (2)  (6)  0   0   0   0 
Balance June 30, 2019 $1,857  $520  $512  $2,889 
Balance June 30, 2020
 $2,110  $1,139  $727  $3,976 

The following table provides the amortized cost basis of our allowance forfinancing receivables by CQR and by credit losses and minimum payments associated with our notes receivables and lease-related receivables disaggregated based on our impairment methodorigination year as of March 31, 2020June 30, 2021 (in thousands):

 March 31, 2020 
  
Notes
Receivable
  
Lease
Receivables
 
Allowance for credit losses:      
Ending balance: collectively evaluated for impairment $736  $610 
Ending balance: individually evaluated for impairment  62   - 
Ending balance $798  $610 
         
Minimum payments:        
Ending balance: collectively evaluated for impairment $55,005  $69,492 
Ending balance: individually evaluated for impairment  412   - 
Ending balance $55,417  $69,492 
  Amortized cost basis by origination year ending March 31,          
 2022  2021  2020  2019  2018  
2017 and
prior
  Total  
Transfers
(2)
  
Net credit
exposure
 
Notes receivable:                           
High CQR $12,389  $47,165  $4,298  $529  $225  $15  $64,621  $(20,944) $43,677 
Average CQR  6,529   6,556   2,329   290   5   0   15,709   (3,449)  12,260 
Low CQR  0   0       324   0       324   0   324 
Total $18,918  $53,721  $6,627  $1,143  $230  $15  $80,654  $(24,393) $56,261 
                                     
Lease receivables:                                    
High CQR $9,322  $16,485  $4,423  $1,736  $247  $98  $32,311  $(7,301) $25,010 
Average CQR  6,020   13,634   2,719   754   186   31   23,344   (4,222)  19,122 
Low CQR  150   0   0   0   0   0   150   0   150 
Total $15,492  $30,119  $7,142  $2,490  $433  $129  $55,805  $(11,523) $44,282 
                                     
Total amortized cost (1) $34,410  $83,840  $13,769  $3,633  $663  $144  $136,459  $(35,916) $100,543 

(1)
Unguaranteed residual values of $9,071 thousand that we retained after selling the related lease receivable and initial direct costs of notes receivable of $242 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.

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%.

1615
Table of Contents


The following table provides the amortized cost basis of our financing receivables by CQR and by credit origination year as of June 30, 2020March 31, 2021 (in thousands):

 Amortized cost basis by origination year ending March 31,           Amortized cost basis by origination year ending March 31,          
 2021  2020  2019  2018  2017  2016 and prior  Total  
Transfers
(2)
  
Net
credit
exposure
  2021  2020  2019  2018  2017  Total  
Transfers
(2)
  
Net credit
exposure
 
                                                   
Notes receivable:                                                   
                           
High CQR $49,137  $15,822  $13,503  $1,024  $45  $-  $79,531  $(56,342) $23,189  $93,793  $6,250  $769  $771  $19  $101,602  $(63,471) $38,131 
Average CQR  3,426   16,395   1,195   76   -   -   21,092   (11,592)  9,500   7,689   2,468   550   8   0   10,715   (2,896)  7,819 
Low CQR  -   160   324   -   -   89   573   -   573   0   0   324   0   0   324   0   324 
Total $52,563  $32,377  $15,022  $1,100  $45  $89  $101,196  $(67,934) $33,262  $101,482  $8,718  $1,643  $779  $19  $112,641  $(66,367) $46,274 
                                                                    
Lease receivables:                                                                    
                                    
High CQR $15,995  $13,812  $4,620  $1,597  $387  $16  $36,427  $(18,580) $17,847   28,898  $5,885  $1,798  $463  $125  $37,169   (7,468) $29,701 
Average CQR  8,650   11,129   5,498   875   108   3   26,263   (10,123)  16,140   23,445   3,482   1,017   270   40   28,254   (4,592)  23,662 
Low CQR  -   -   -   -   -   -   -   -   -   0   0   0   0   0   0   0   0 
Total $24,645   24,941  $10,118  $2,472  $495  $19  $62,690  $(28,703) $33,987  $52,343  $9,367  $2,815  $733  $165  $65,423  $(12,060) $53,363 
                                
Total amortized cost (1) $77,208  $57,318  $25,140  $3,572  $540  $108  $163,886  $(96,637) $67,249  $153,825  $18,085  $4,458  $1,512   184  $178,064   (78,427) $99,637 

(1)
Unguaranteed residual values of $12,9629,453 thousand that we retained after selling the related lease receivable and initial direct costs of notes receivable of $552425 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 June 30, 20202021 (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
  
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 $933  $29  $1,316  $2,278  $22,943  $25,221  $75,975  $101,196  $38  $5  $555  $598  $5,042  $5,640  $75,014  $80,654 
Lease receivables  707   284   1,168   2,159   4,439   6,598   56,092   62,690   539   550   1,377   2,466   784   3,250   52,555   55,805 
Total $1,640  $313  $2,484  $4,437  $27,382  $31,819  $132,067  $163,886  $577  $555  $1,932  $3,064  $5,826  $8,890  $127,569  $136,459 

The following table provides an aging analysis of our leasefinancing receivables by CQR as of March 31, 20202021 (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  -   -   -   -   -   -   -   -   -   - 
Total $997  $212  $1,034  $2,243  $2,287  $64,962  $69,492  $(8,412) $(38,516) $22,564 

The following table provides an aging analysis of our notes 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
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   -   152   215   -   197   412   -   412 
Total $1,535  $46  $574  $2,155  $4,013  $49,249  $55,417  $(34,977) $20,440 
 
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 $648  $910  $673  $2,231  $3,240  $5,471  $107,170  $112,641 
Lease receivables  804   132   643   1,579   2,566   4,145   61,278   65,423 
Total $1,452  $1,042  $1,316  $3,810  $5,806  $9,616  $168,448  $178,064 

Our financial assets on nonaccrual status waswere not significant as of June 30, 2020,2021, and March 31, 2020.2021.

1716
Table of Contents

8.7.PROPERTY, EQUIPMENT, OTHER ASSETS AND LIABILITIES

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

 
June 30,
2020
  
March 31,
2020
  
June 30,
2021
  
March 31,
2021
 
Other current assets:            
Deposits & funds held in escrow $856  $926  $461  $759 
Prepaid assets  4,961   7,946   11,547   9,939 
Other  285   384   301   278 
Total $6,102  $9,256  $12,309  $10,976 
                
Property, equipment and other assets
                
Property and equipment, net $7,851  $7,153  $7,607  $7,388 
Deferred costs - non-current  10,366   10,957   17,645   19,063 
Right-of-use assets  12,405   13,066   7,580   8,763 
Other  2,403   1,420   8,450   7,075 
Total $33,025  $32,596  $41,282  $42,289 
                
        
Other current liabilities:
                
Accrued expenses $11,302  $10,024  $13,638  $13,598 
Accrued income taxes payable  6,659   406   6,564   4,439 
Contingent consideration - current  249   220 
Short-term lease liability  5,042   4,815   3,561   3,934 
Other  7,431   7,521   6,107   8,090 
Total $30,683  $22,986  $29,870  $30,061 
                
Other liabilities:
                
Deferred revenue $15,683  $16,693 
Deferred revenue - non-current $24,324  $26,309 
Long-term lease liability  7,566   8,326   4,180   5,040 
Other  5,097   2,708   5,285   5,330 
Total $28,346  $27,727  $33,789  $36,679 

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.

9.8.CREDIT FACILITY AND NOTES PAYABLE AND CREDIT FACILITY

Recourse Notes Payable
CREDIT FACILITY

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

The WFCDF credit facility has an aggregate limit for the 2 components, except during a temporary uplift, of $275 million. We may elect to temporarily increase the aggregate limit to $350 million for a period of not less than 30 days, provided that all such periods shall not exceed 150 days in the aggregate in any calendar year. Additionally, the WFCDF credit facility has a limit on the accounts receivable component of $100 million. WFCDF charges us an interest rate equal to two percent (2.00%) plus the greater of one month LIBOR or seventy-five hundredths of one percent (0.75%).

As of June 30, 2021, the limit of the 2 components of the credit facility was $275 million. On July 2, 2021, we elected to temporarily increase the aggregate limit to $350 million.

Our borrowing availability under the credit facility varies based upon the value of the receivables and inventory of ePlus Technology, inc., and certain of its subsidiaries. We had outstanding balances of $139.6 million and $98.7 million under the floor plan component as of June 30, 2021, and March 31, 2021, respectively. This component is presented as part of as accounts payable – floorplan. We had 0 outstanding balance under the accounts receivable component as of June 30, 2021, and as of March 31, 2021. This component is presented as part of recourse notes payable – current. The fair value of the outstanding balances under the WFCDF credit facility were approximately equal to their carrying value as of June 30, 2021, and March 31, 2021.

17
Table of Contents
The WFCDF credit facility is secured by the assets of ePlus Technology, inc. and certain of its subsidiaries. Additionally, the credit facility requires a guaranty of $10.5 million by ePlus inc.

The credit facility restricts the ability of ePlus Technology, inc. and certain of its subsidiaries to pay dividends to ePlus inc. unless their available borrowing meets certain thresholds. As of June 30, 2021, and March 31, 2021, their available borrowing met the threshold such that there were no restricted net assets of ePlus Technology, inc.

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

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

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 June 30, 2020, and March 31, 2020, weus. We had $2.3$17.0 million ofand $18.1 million in recourse borrowings that were collateralized by investments in notes receivable and leases. Our principal and interest payments are generally due monthly in amounts that equal to the total payments due from the customer under the leases or notes receivable that collateralize the notes payable. The weighted average interest rate for these borrowings was 2.55% as of June 30, 2020,2021, and March 31, 2020.2021, respectively, that is resulting from one installment payment arrangement. Our payments under this installment agreement are due quarterly in amounts that are correlated to the payments due to us from a customer under a related notes receivable. We discounted our payments to calculate our payable balance using an interest rate of 3.50% as of both June 30, 2021, and March 31, 2021.

Non-recourse Notes PayableNON-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 June 30, 2020,2021, and March 31, 2020,2021, we had $61.2$15.3 million and $35.5$56.1 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 was 3.54%3.66% and 3.84%3.35%, as of June 30, 2020,2021, and March 31, 2020,2021, respectively.

18
Table of Contents

Credit Facility

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

Under the floor plan component, we had outstanding balances of $175.7 million and $127.4 million as of June 30, 2020, and March 31, 2020, respectively. Under the accounts receivable component, we had an outstanding balance of $35.0 million as of both June 30, 2020, and March 31, 2020, which is included within recourse notes payable on the consolidated balance sheet. Our interest rate on this borrowing was 2.75% and 3.49% as of June 30, 2020 and March 31, 2020, respectively. The fair value of the outstanding balance under the credit facility was equal to its carrying value as of June 30, 2020 and March 31, 2020. We repaid the entire balance of the accounts receivable component on July 1, 2020.

On May 15, 2020, we executed an amendment to the WFCDF credit facility that increased the aggregate limit of the two components, except during a temporary uplift, to $275.0 million. Additionally, we have an election to temporarily increase the aggregate limit to $350.0 million for a period of not less than 30 days, provided that all such periods shall not exceed 150 days in the aggregate in any calendar year. Further, the amendment increased the limit on the accounts receivable component of the WFCDF credit facility to $100 million, changed the interest rate to two percent (2.00%) plus the greater of one month LIBOR or seventy-five hundredths of one percent (0.75%), and modified certain restrictions on ePlus Technology, inc.’s ability to pay dividends to ePlus inc.

As of June 30, 2020, the limit of the 2 components of the credit facility was $275 million, and the accounts receivable component had a sub-limit of $100 million.

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

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

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

The loss of the WFCDF credit facility, including during circumstances related to COVID-19, could have a material adverse effect on our future results as we currently rely on this facility and its components for daily working capital and liquidity for our technology segment and as an operational function of our accounts payable process.

On July 23, 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.


10.9.COMMITMENTS AND CONTINGENCIES

Legal ProceedingsLEGAL PROCEEDINGS

From timeWe are subject to time, the Company may be involved in routinevarious legal proceedings, as well as demands, claims and threatened litigation, that arise in the normal course of our business.business and have not been fully resolved. The ultimate amount of liability, if any, for any claims of any type (either alone or in the aggregate) may materially and adversely affect the Company’s financial condition, results of operations and liquidity. In addition, the ultimate outcome of any litigation is uncertain. When a loss related to a legal proceeding or claim is probable and reasonably estimable, we accrue our best estimate for the ultimate resolution of the matter. If one or more legal matters are resolved against us in a reporting period for amounts above management’s expectations, our financial condition and operating results for that period could be adversely affected. Any outcome, whether favorable or unfavorable, may materially and adversely affect the Companyus due to legal costs and expenses, diversion of management attention and other factors. The Company expensesWe expense legal costs in the period incurred. The CompanyWe cannot assure that additional contingencies of a legal nature or contingencies having legal aspects will not be asserted against the Companyus in the future, and these matters could relate to prior, current or future transactions or events.events.

11.10.EARNINGS PER SHARE

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

1918
Table of Contents

The following table provides a reconciliation of the numerators and denominators used to calculate basic and diluted net income per common share as disclosed on our unaudited consolidated statements of operations for the three months ended June 30, 2020,2021, and 2019,2020, respectively (in thousands, except per share data).

 
Three Months Ended
June 30,
  Three Months Ended June 30, 
 2020  2019  2021  2020 
            
Net earnings attributable to common shareholders - basic and diluted $17,360  $16,188  $23,518  $17,360 
                
Basic and diluted common shares outstanding:                
Weighted average common shares outstanding — basic  13,322   13,356   13,333   13,322 
Effect of dilutive shares  66   101   108   66 
Weighted average shares common outstanding — diluted  13,388   13,457   13,441   13,388 
                
Earnings per common share - basic $1.30  $1.21  $1.76  $1.30 
                
Earnings per common share - diluted $1.30  $1.20  $1.75  $1.30 


12.11.STOCKHOLDERS’ EQUITY

Share Repurchase PlanSHARE REPURCHASE PLAN

On May 24, 2019,March 18, 2021, 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, 2019,2021, and ending on May 27, 2020.2022. The plan authorized purchases to be made from time to time in the open market, or in privately negotiated transactions, subject to availability. Any repurchased shares will have the status of treasury shares and may be used, when needed, for general corporate purposes.

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

During the three months ended June 30,2020,30, 2021, we purchased 17,629 shares of our outstanding common stock at a value of $1.6 million under the share repurchase plan; we also purchased 27,715 shares of common stock at a value of $2.6 million to satisfy tax withholding obligations relating to the vesting of employees’ restricted stock.

During the three months ended June 30, 2020, 0 shares of our outstanding common stock were purchased under the share repurchase plan; we 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 three months ended June 30, 2019, we purchased 148,790 shares of our outstanding common stock at a value of $10.7 million under the share repurchase plan; we also purchased 38,811 shares of common stock at a value of $2.8 million to satisfy tax withholding obligations relating to the vesting of employees’ restricted stock.

13.12.SHARE-BASED COMPENSATION

Share-Based PlansSHARE-BASED PLANS

As of June 30, 2020,2021, 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.

20
Table of Contents

Restricted Stock ActivityRESTRICTED STOCK ACTIVITY

For the three months ended June 30, 2021, we granted 414 shares under the 2017 Director LTIP, and 77,861 restricted shares under the 2012 Employee LTIP. For the three months ended June 30, 2020, we granted 716 restricted shares under the 2017 Director LTIP, and 89,873 restricted shares under the 2012 Employee LTIP. For the three months ended June 30, 2019, we granted 454 restricted shares under the 2017 Director LTIP, and 85,132 restricted shares under the 2012 Employee LTIP. A summary of the restricted sharesgrants is as follows:

 
Number of
Shares
  
Weighted
Average Grant-
date Fair Value
 
       
Nonvested April 1, 2020  193,580  $73.74 
Granted  90,589  $71.80 
Vested  (104,071) $69.19 
Forfeited  -  $- 
Nonvested June 30, 2020  180,098  $75.39 
 
Number of
Shares
  
Weighted Average
Grant-date Fair Value
 
       
Nonvested April 1, 2021
  183,378  $74.97 
Granted  78,275  $92.20 
Vested  (81,276) $78.32 
Nonvested June 30, 2021
  180,377  $80.94 

19
Table of Contents
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 three months ended June 30, 2020, the Company had2021, we withheld 37,64027,715 shares of common stock at a value of $2.7$2.6 million, which was included in treasury stock.

Compensation ExpenseCOMPENSATION 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 June 30, 2020,2021, and 2019,2020, we recognized $1.9$1.7 million and $1.9 million of total share-based compensation expense, respectively. Unrecognized compensation expense related to non-vested restricted stock was $12.8$13.7 million as of June 30, 2020,2021, which will be fully recognized over the next 36 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 always fully vested at all times. vested. For both the three months ended June 30, 2021, and 2020, and 2019, ourour estimated contribution expense for the plan was $0.8 million and $0.7 million.million, respectively.

14.13.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 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 June 30, 2020,2021, and June 30, 2019.2020. We had 0 additions or reductions to our gross unrecognized tax benefits during the three months ended June 30, 2020.2021. We recognize accrued interest and penalties related to unrecognized tax benefits in income tax expense.


21
Table of Contents
15.14.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 June 30, 20202021, and March 31, 20202021 (in thousands):

    Fair Value Measurement Using 
  
Recorded
Amount
  
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
  
Significant Other
Observable Inputs
(Level 2)
  
Significant
Unobservable
Inputs
(Level 3)
 
             
June 30, 2020
            
Assets:            
Money market funds $20,128  $20,128  $-  $- 
                 
Liabilities:                
Contingent consideration $249  $-  $-  $249 
                 
March 31, 2020
                
Assets:                
Money market funds $128  $128  $-  $- 
                 
Liabilities:                
Contingent consideration $220  $-  $-  $220 

We recorded adjustments that increased the fair value of our liability for contingent consideration the three months ended June 30, 2020, and June 30,2019 by $29 thousand and $401 thousand, respectively There were 0 payments made to satisfy the current obligations of the contingent consideration arrangements for both the three months ended June 30, 2020, and 2019.
    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)
 
June 30, 2021
            
Assets:            
Money market funds $6,136  $6,136  $0  $0 
                 
March 31, 2021
                
Assets:                
Money market funds $45,134  $45,134  $0  $0 

16.15.BUSINESS COMBINATIONS

ABS TechnologySYSTEMS MANAGEMENT PLANNING (SMP)

On August 23, 2019,December 31, 2020, our subsidiary, ePlus Technology, inc., acquired certain assets and liabilities of ABS Technology, a Virginia Beach, Virginia- headquarteredSMP, an established provider of technology solutions provider with deep expertiseand services in managed services, networking,upstate New York and the Northeast. The acquisition enhances ePlus’ footprint across the region, broadens our technology solution offerings especially in the areas of collaboration and security solutions. ABS Technology enhances supporting virtual employees, and adds to ePlus’ existing solutions portfolioset of commercial, enterprise and market position in Richmondstate, local, and southern Virginia.education customers.

20
Table of Contents
Our sum of consideration transferred was $15.3$27.0 million consisting of $13.8$29.0 million paid in cash at closing plus $1.7less $2.0 million that was paid primarily during the yearback to us in our quarter ended March 31, 2020, upon the collection of certain accounts receivable and less $0.2 million that was repaid to us in December 2019 due2021, related to a working capital adjustment. Our allocation of the purchase consideration to the assets acquired and liabilities assumed is presented below (in thousands):

 
Acquisition Date
Amount
  
Acquisition
Date Amount
 
Accounts receivable $9,208  $14,526 
Other assets  743   3,344 
Identified intangible assets  5,720   14,280 
Accounts payable and other current liabilities  (6,715)  (11,424)
Performance obligation  (1,140)
    
Performance obligations  (2,020)
Total identifiable net assets  7,816   18,706 
Goodwill  7,461   8,328 
    
Total purchase consideration $15,277  $27,034 

The identified intangible assets of $5.7$14.3 million consistconsists of customer relationships with an estimated useful life of seven (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$8.3 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 current reporting period as though the acquisition date had been April 1, 2019,2020, is not material.

17.16.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.

21
Table of Contents
Our reportable segment information for the three month periods ended June 30, 2021, and 2020 are summarized in the following table (in thousands):

 Three Months Ended 
  June 30, 2021  June 30, 2020 
  Technology  Financing  Total  Technology  Financing  Total 
                   
Sales                  
Product $344,766  $16,291  $361,057  $293,433  $13,807  $307,240 
Service  55,592   0   55,592   47,791   0   47,791 
Net sales  400,358   16,291   416,649   341,224   13,807   355,031 
                         
Cost of Sales                        
Product  271,015   6,212   277,227   224,543   2,091   226,634 
Service  33,910   0   33,910   29,840   0   29,840 
Total cost of sales  304,925   6,212   311,137   254,383   2,091   256,474 
                         
Gross Profit  95,433   10,079   105,512   86,841   11,716   98,557 
                         
Selling, general, and administrative  66,153   2,622   68,775   65,556   3,911   69,467 
Depreciation and amortization  3,898   28   3,926   3,488   28   3,516 
Interest and financing costs  159   200   359   265   312   577 
Operating expenses  70,210   2,850   73,060   69,309   4,251   73,560 
                         
Operating income  25,223   7,229   32,452   17,532   7,465   24,997 
                         
Other income          123           98 
                         
Earnings before tax         $32,575          $25,095 
                         
Net Sales                        
Contracts with customers $396,541  $5,418  $401,959  $333,987  $960  $334,947 
Financing and other  3,817   10,873   14,690   7,237   12,847   20,084 
Net Sales $400,358  $16,291  $416,649  $341,224  $13,807  $355,031 
                         
Selected Financial Data - Statement of Cash Flow                        
                         
Depreciation and amortization $4,103  $1,979  $6,082  $3,634  $1,145  $4,779 
Purchases of property, equipment and operating lease equipment $1,307  $5,687  $6,994  $2,048  $229  $2,277 
                         
Selected Financial Data - Balance Sheet                        
                         
Total assets $868,276  $209,140  $1,077,416  $834,264  $224,598  $1,058,862 

22
Table of Contents

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

 Three Months Ended 
  June 30, 2020  June 30, 2019 
  Technology  Financing  Total  Technology  Financing  Total 
                   
Sales                  
Product $293,433  $13,807  $307,240  $322,764  $12,837  $335,601 
Service  47,791   -   47,791   45,771   -   45,771 
Net sales  341,224   13,807   355,031   368,535   12,837   381,372 
                         
Cost of Sales                        
Product  224,543   2,091   226,634   258,054   2,009   260,063 
Service  29,840   -   29,840   28,670   -   28,670 
Total cost of sales  254,383   2,091   256,474   286,724   2,009   288,733 
Gross Profit  86,841   11,716   98,557   81,811   10,828   92,639 
                         
Selling, general, and administrative  65,556   3,911   69,467   62,667   3,120   65,787 
Depreciation and amortization  3,488   28   3,516   3,407   56   3,463 
Interest and financing costs  265   312   577   -   628   628 
Operating expenses  69,309   4,251   73,560   66,074   3,804   69,878 
                         
Operating income  17,532   7,465   24,997   15,737   7,024   22,761 
                         
Other income          98           (45)
                         
Earnings before tax         $25,095          $22,716 
                         
Net Sales                        
Contracts with customers $333,987  $960  $334,947  $363,681  $789  $364,470 
Financing and other  7,237   12,847   20,084   4,854   12,048   16,902 
Net Sales $341,224  $13,807  $355,031  $368,535  $12,837  $381,372 
                         
Selected Financial Data - Statement of Cash Flow                        
                         
Depreciation and amortization $3,634  $1,145  $4,779  $1,339  $3,625  $4,964 
Purchases of property, equipment and operating lease equipment $2,048  $229  $2,277  $1,249  $269  $1,518 
                         
Selected Financial Data - Balance Sheet                        
                         
Total assets $834,264  $224,598  $1,058,862  $658,692  $216,121  $874,813 


23
Table of Contents
Technology Segment Disaggregation of RevenueTECHNOLOGY 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 below (in thousands):

 
Three Months Ended
June 30,
  Three Months Ended June 30, 
 2020  2019  2021  2020 
Customer end market:            
Telecom, Media & Entertainment $112,192  $56,652 
Technology $69,967  $76,180   69,140   69,967 
Telecom, Media & Entertainment  56,652   62,466 
State and local government and educational institutions  65,415   70,563 
Healthcare  54,688   46,535 
Financial Services  47,421   48,241   30,011   47,421 
SLED  70,563   71,190 
Healthcare  46,535   56,109 
All others  50,086   54,349   68,912   50,086 
Net sales  341,224   368,535   400,358   341,224 
                
Less: Revenue from financing and other  (7,237)  (4,854)  (3,817)  (7,237)
                
Revenue from contracts with customers $333,987  $363,681  $396,541  $333,987 

 
Three Months Ended
June 30,
  Three Months Ended June 30, 
 2020  2019  2021  2020 
Vendor            
Cisco Systems $127,932  $146,181  $166,902  $127,932 
Dell / EMC  26,340   31,081 
Juniper Networks  24,714   13,579 
HP Inc. & HPE  17,202   17,038 
Arista Networks  11,498   6,820 
NetApp  15,421   13,427   10,457   15,421 
HP Inc. & HPE  17,038   23,113 
Dell / EMC  31,081   13,781 
Arista Networks  6,820   20,950 
Juniper Networks  13,579   7,054 
All others  129,353   144,029   143,245   129,353 
Net sales  341,224   368,535   400,358   341,224 
                
Less: Revenue from financing and other  (7,237)  (4,854)  (3,817)  (7,237)
                
Revenue from contracts with customers $333,987  $363,681  $396,541  $333,987 

Financing Segment Disaggregation of RevenueFINANCING SEGMENT DISAGGREGATION OF REVENUE

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


24
23
Table of Contents

Item 2.          Management’s Discussion and Analysis of Financial Condition and Results of Operations
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 20202021 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 20202021 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 ePlusus 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 30 years.

Our primary focus is to deliver integrated solutions that address our customers’ business needs, leveraging the appropriate technologies, both on-premise and in the cloud. Our approach is to lead with advisory consulting to understand our customers’ needs, and then design, deploy and manage solutions aligned to their objectives. Underpinning the broader areas of Cloud, Security, Networking, Data Center and Collaboration are specific skills in orchestration and automation, application modernization, DevOps, data management, data visualization, analytics, network modernization, edge compute and other advanced and emerging technologies. These solutions are comprised of class leadingclass-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, SymantecVaronis, 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 emergingon the forefront of technology trends. Our expertise in core and emerging technologies, buttressed by our robust portfolio of consulting, professional, and managed services, has enabled ePlus to remain a trusted advisor for our customers. In addition, we offer a wide range of consumption options including leasing and financing for technology and other capital assets. We believe our lifecycle approach offering of integrated solutions, services and financing, asset management and our proprietary supply chain software, areis 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-sophisticatedsophisticated 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 June 30, 2020,2021, the percentage of revenue by customer end market within our technology segment includes technology industry 21%, telecommunications,telecom, media and entertainment 19%27%, technology 16%, state and local government and educational institutions (“SLED”) 16%15%, healthcare 15%13%, and financial services 13%12%. The majority of our sales were generated within We sell to customers in the United States (“US”); however, we have the ability, which accounts for most of our sales, and to support our customers nationally and internationally,in select international markets including physical locations in the United Kingdom (“UK”), the European Union (“EU”), India, and India.Singapore. Our technology segment accounts for 96% of our net sales, and 70%78% of our operating income, while our financing segment accounts for 4% of our net sales, and 30%22% of our operating income, for the three months ended June 30, 2020.2021.

2524
Table of Contents
Impact of Business Trends

COVID-19 on Our Business OperationsPandemic Update

The COVID-19novel coronavirus (“COVID-19”) pandemic continues to have widespread, rapidly evolving, and unpredictable impacts on global society, economies, financial markets, and business practices. Federal, state and local governments and public health authorities have orrequired and may havein the future requiredrequire measures to contain the virus, including social distancing, travel restrictions, border closures, limitations on public gatherings, work from home, safety-related modifications to workplaces, supply chain logistical changes, and closure of non-essential businesses.

As COVID-19 impacts continue to expand across the country and globe, we have been adjusting our business activities for the safety of our employees and to best serve our customers in this rapidly evolving environment. WeMost of our offices are open, with required health and safety protocols in place. However, 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 wishcustomers, and we will continue to returnevaluate returning 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.on an ongoing basis. 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 our employees’ business-related travel in accordance with health regulations and approve engineers traveling to customer sites to perform work.guidance. 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. For the quarter ended June 30, 2020, some of our customers’ locations were closed and therefore, unable to receive deliveries from us. 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.which has been impacted by materials shortages.

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;pandemic including the impact of variants; governmental, business, and individuals'individuals’ actions in response to the pandemic; the efficacy of vaccines, the duration of the vaccination distribution, and the willingness of people to be inoculated; and the impact on economic activity including the possibility of recession or financial market instability. These factors may adversely impact business and government spending on technology as well as our customers'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 20202021 Annual Report.

Supply Constraints

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

Key Business Metrics

Our management monitors a number ofseveral 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, adjustedAdjusted EBITDA, adjustedAdjusted EBITDA margin, adjustedAdjusted gross billings, and non-GAAP netNon-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-GAAPNon-GAAP performance measurement tools. Generally, a non-GAAPNon-GAAP financial measure is a numerical measure of a company’s performance or financial position that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with US GAAP. Non-GAAP measures used by management may differ from similar measures used by other companies, even when similar terms are used to identify such measures.

2625
Table of Contents
Our key business metrics for the three month periods ended June 30, 2021, and 2020 are as followssummarized in the following tables (dollars in thousands):

 Three Months Ended June 30,  Three Months Ended June 30, 
Consolidated 2020  2019  2021  2020 
Net sales $355,031  $381,372  $416,649  $355,031 
                
Gross profit $98,557  $92,639  $105,512  $98,557 
Gross margin  27.8%  24.3%  25.3%  27.8%
Operating income margin  7.0%  6.0%  7.8%  7.0%
                
Net earnings $17,360  $16,188  $23,518  $17,360 
Net earnings margin  4.9%  4.2%  5.6%  4.9%
Net earnings per common share - diluted $1.30  $1.20  $1.75  $1.30 
                
Non-GAAP: Net earnings (1) $20,207  $19,459  $26,353  $20,207 
Non-GAAP: Net earnings per common share - diluted (1) $1.51  $1.44  $1.96  $1.51 
                
Adjusted EBITDA (2) $30,714  $28,567  $38,272  $30,714 
Adjusted EBITDA margin  8.7%  7.5%  9.2%  8.7%
                
Purchases of property and equipment used internally $2,106  $1,249  $1,307  $2,106 
Purchases of equipment under operating leases  171   269   5,687   171 
Total capital expenditures $2,277  $1,518  $6,994  $2,277 
                
Technology Segment                
Net sales $341,224  $368,535  $400,358  $341,224 
Adjusted gross billings (3) $546,394  $548,363  $633,007  $546,394 
                
Gross profit $86,841  $81,811  $95,433  $86,841 
Gross margin  25.4%  22.2%  23.8%  25.4%
                
Operating income $17,532  $15,737  $25,223  $17,532 
Adjusted EBITDA (2) $23,161  $21,419  $30,958  $23,161 
                
Financing Segment                
Net sales $13,807  $12,837  $16,291  $13,807 
                
Gross profit $11,716  $10,828  $10,079  $11,716 
                
Operating Income $7,465  $7,024  $7,229  $7,465 
Adjusted EBITDA (2) $7,553  $7,148  $7,314  $7,553 

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

We use non-GAAP netNon-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 netNon-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 netNon-GAAP Net earnings per common share provide useful information to investors and others to understandin understanding and evaluateevaluating our operating results. However, our use of non-GAAPNon-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 netNon-GAAP Net earnings and non-GAAP netNon-GAAP Net earnings per common share or similarly titled measures differently, which may reduce their usefulness as comparative measures.

2726
Table of Contents

 Three Months Ended June 30,  Three Months Ended June 30, 
 2020  2019  2021  2020 
GAAP: Earnings before tax $25,095  $22,716  $32,575  $25,095 
Share based compensation  1,907   1,942   1,735   1,907 
Acquisition and integration expense  29   401   -   29 
Acquisition related amortization expense  2,228   2,187   2,696   2,228 
Other (income) expense  (98)  45 
Other income  (123)  (98)
Non-GAAP: Earnings before provision for income taxes  29,161   27,291   36,883   29,161 
                
GAAP: Provision for income taxes  7,735   6,528   9,057   7,735 
Share based compensation  587   559   496   587 
Acquisition and integration expense  9   115   -   9 
Acquisition related amortization expense  667   607   757   667 
Other (income) expense  (30)  13 
Tax (expense) benefit on restricted stock  (14)  10 
Other income  (35)  (30)
Tax benefit (expense) on restricted stock  255   (14)
Non-GAAP: Provision for income taxes  8,954   7,832   10,530   8,954 
                
Non-GAAP: Net earnings $20,207  $19,459  $26,353  $20,207 
                
GAAP: Net earnings per common share - diluted $1.30  $1.20  $1.75  $1.30 
                
Non-GAAP: Net earnings per common share - diluted $1.51  $1.44  $1.96  $1.51 

 Three Months Ended June 30,  Three Months Ended June 30, 
 2020  2019  2021  2020 
GAAP: Net earnings per common share - diluted $1.30  $1.20  $1.75  $1.30 
                
Share based compensation  0.10   0.10   0.09   0.10 
Acquisition and integration expense  -   0.02 
Acquisition related amortization expense  0.12   0.12   0.15   0.12 
Other (income) expense  (0.01)  - 
Tax benefit on restricted stock  -   - 
Other income  (0.01)  (0.01)
Tax benefit (expense) on restricted stock  (0.02)  - 
Total non-GAAP adjustments - net of tax  0.21   0.24   0.21   0.21 
                
Non-GAAP: Net earnings per common share - diluted $1.51  $1.44  $1.96  $1.51 

(2)
We define adjustedAdjusted EBITDA as net earnings calculated in accordance with GAAP, adjusted for the following: interest expense, depreciation and amortization, share basedshare-based compensation, acquisition and integration expenses,provision for income taxes, and other income (expense).income. Segment adjustedAdjusted EBITDA is defined as operating income calculated in accordance with GAAP, adjusted for interest expense, share basedshare-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 adjustedAdjusted EBITDA calculation. We provide below a reconciliation of adjustedAdjusted EBITDA to net earnings, which is the most directly comparable financial measure to this non-GAAPNon-GAAP financial measure. Adjusted EBITDA margin is our calculation of adjustedAdjusted EBITDA divided by net sales. The presentation of Adjusted EBITDA has been changed from prior period presentations to include adjustments for expenses related to acquisitions such as legal, accounting, tax, and adjustments to the fair value of contingent purchase price consideration as well as stock compensation.

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

2827
Table of Contents

 Three Months Ended June 30,  Three Months Ended June 30, 
Consolidated 2020  2019  2021  2020 
Net earnings $17,360  $16,188  $23,518  $17,360 
Provision for income taxes  7,735   6,528   9,057   7,735 
Share based compensation  1,907   1,942   1,735   1,907 
Interest and financing costs  265   -   159   265 
Acquisition and integration expense  29   401   -   29 
Depreciation and amortization  3,516   3,463   3,926   3,516 
Other (income) expense  (98)  45 
Other income  (123)  (98)
Adjusted EBITDA $30,714  $28,567  $38,272  $30,714 
                
Technology Segment                
Operating income $17,532  $15,737  $25,223  $17,532 
Depreciation and amortization  3,488   3,407   3,898   3,488 
Share based compensation  1,847   1,874   1,678   1,847 
Interest and financing costs  265   -   159   265 
Acquisition and integration expense  29   401   -   29 
Adjusted EBITDA $23,161  $21,419  $30,958  $23,161 
                
        
Financing Segment                
Operating income $7,465  $7,024  $7,229  $7,465 
Depreciation and amortization  28   56   28   28 
Share based compensation  60   68   57   60 
Adjusted EBITDA $7,553  $7,148  $7,314  $7,553 

(3)
We define adjustedAdjusted gross billings as our technology segment net sales calculated in accordance with US GAAP, adjusted to exclude the costs incurred related to sales of third-party maintenance, software assurance, and subscription/SaaS licenses, and services. We have provided below a reconciliation of adjustedAdjusted gross billings to technology segment net sales, which is the most directly comparable financial measure to this non-GAAPNon-GAAP financial measure. The presentation of adjusted gross billings has been updated to align with net sales for our technology segment.

 Three Months Ended June 30, 
  2021  2020 
Technology segment net sales $400,358  $341,224 
Costs incurred related to sales of third party maintenance, software assurance and subscription/Saas licenses, and services  232,649   205,170 
Adjusted gross billings $633,007  $546,394 

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

  Three Months Ended June 30, 
  2020  2019 
Technology segment net sales $341,224  $368,535 
Costs incurred related to sales of third party maintenance, software assurance and subscription/Saas licenses, and services  205,170   179,828 
Adjusted gross billings $546,394  $548,363 

Consolidated Results of Operations

During the three months ended June 30, 2020,2021, net sales decreased 6.9%increased 17.4%, or $26.3$61.6 million, to $355.0$416.6 million, as compared to $381.4$355.0 million for the same period in the prior fiscal year. Product sales for the three months ended June 30, 2020, decreased 8.5%2021, increased 17.5% to $361.1 million, an increase of $53.8 million from $307.2 million or a decrease of $28.4 million from $335.6 millionin the same period in the prior year. Services sales during the three months ended June 30, 2020,2021, increased 4.4%16.3% to $47.8$55.6 million, or an increase of $2.0$7.8 million over prior year services sales of $45.8 million. The decrease in products sales was$47.8 million due to a shiftincreases in mix to higher third-party maintenance, software assurance, subscriptions/SaaS licenses,both managed services and services whereprofessional services. In the technology segment, we recognize revenue on asaw increases in net basis. In addition, some orders could not be delivered tosales from customers in the customer because the customer’s offices were closed due to COVID-19. We sawtelecom, media and entertainment, healthcare, and smaller other categories of customers, which was partially offset by decreases in net sales from customers in financial services, SLED, and technology, during the three months ended June 30, 2021, compared to the prior year period.

28
Table of Contents
Adjusted gross billings increased 15.9%, or $86.6 million, to $633.0 million for the three months ended June 30, 2021, from $546.4 million for the same period in the prior fiscal year. There was an increase in adjusted gross billings from our technology,customers in telecom, media and entertainment, SLED, financial services,healthcare, and all the other categories of customers which was partially offset by a small increasedecreases in net sales to customers in the healthcare category, during the three months ended June 30, 2020, compared to the prior year.

29
Table of Contents
Adjusted gross billings decreased 0.4%, or $2.0 million, to $546.4 million for the three months ended June 30, 2020, from $548.4 million for the same period in the prior fiscal year. There was a decrease in adjusted gross billingsdemand from our customers in the healthcare, telecom, media and entertainment, and all the other categories of customers which was almost entirely offset by increases in demand from SLED, financial services, SLED, and technology markets. For the three months ended June 30, 2020, there was an increase in adjusted gross billings of $25.3 million, to $205.2 million for products that we recognize revenue on a net basis, such as, third-party maintenance, software assurance, subscriptions/SaaS licenses, and services.technology.

Consolidated gross profit for the three months ended June 30, 2020, rose 6.4%2021, increased $7.0 million, or 7.1%, to $98.6$105.5 million, compared with $92.6$98.6 million in the same period in the prior year. Consolidated gross margins were 25.3% for the three months ended June 30, 2019. Consolidated gross margins were 27.8% for the three months ended June 30, 2020,2021, which is an increasea decrease of 350250 basis points compared to 24.3%27.8% for the same period in the prior fiscal year. The increasedecrease in margins for the three-month period was primarily due to a shift in product mix, as we sold a higher proportion hardware and third-party licenses which are recognized on a gross basis and a lower proportion of third-party maintenance, software assurance and subscription/SaaS licenses, and services, which are recognizedrecorded on a net basis. Also contributing to the gross margin improvement was higher product margins, an increase in services revenue, and higher gross profit from of our financing segment.basis.

Our operating expenses for the three months ended June 30, 2020, increased 5.3%2021, decreased $0.5 million, or 0.7%, to $73.6$73.1 million, as compared to $69.9$73.6 million for the prior year period. The majority of this increase reflects increaseThis decrease is primarily due to a decrease in selling, general, and administrative expense of 5.6%1.0% or $3.7$0.7 million due,consisting of decreases in part to increases in variable compensation, employee salaries and benefits, and allowancethe provision for credit losses and variable compensation, partially offset by reductionsan increase in travelsalaries and entertainment, and general office related expenses.benefits. As of June 30, 2020,2021, we had 1,547 employees, including 102 employees joining ePlus from our December 31, 2020, acquisition of Systems Management and Planning, Inc. (“SMP”), an increase of 11 from 1,536 employees, a decreaseas of 2 from 1,538 last year.June 30, 2020. Depreciation and amortization expense increased $0.1$0.4 million primarily due to the ABS Technologyour December 31, 2020, acquisition in August 2019,of SMP and interest and financing costs decreased $0.1$0.2 million primarily due to a decrease in the average balance of recourse and non-recourse notes payable outstanding during the three months ended June 30, 2020,2021, as compared to the prior year.

As a result, operating income increased $2.2 million, or 9.8%, to $25.0 million and operating margin increased by 100 basis points to 7.0%, as compared tofor the three months ended June 30, 2019.2021, increased $7.5 million, or 29.8%, to $32.5 million as compared to $25.0 million for the same period in the prior year.

Consolidated net earnings for the three months ended June 30, 2020,2021, were $17.4$23.5 million, an increase of 7.2%35.5%, or $1.2$6.2 million, over the prior year’s results, due to the increase in gross profit partially offset by increasedand the decrease in operating expenses. Our effective tax rate for the current quarter was 30.8%27.8%, compared with 28.7%30.8% in the prior year quarter. The change in our effective income tax rate was primarily due to an adjustment to the federal benefit onfrom state taxes.taxes in the prior year period.

Adjusted EBITDA increased $2.1$7.6 million, or 7.5%24.6%, to $30.7$38.3 million and adjustedAdjusted EBITDA margin increased 12050 basis points to 8.7%9.2% for the three months ended June 30, 2020,2021, as compared to the prior year period of 7.5%8.7%.

Diluted earnings per share increased 8.3%34.6%, or $0.10,$0.45, to $1.75 per share for the three months ended June 30, 2021, as compared to $1.30 per share for the three months ended June 30, 2020, as compared2020. Non-GAAP diluted earnings per share increased 29.8%, or $0.45, to $1.20 per share$1.96 for the three months ended June 30, 2019. Non-GAAP diluted earnings per share increased 4.9%2021, as compared to $1.51 for the three months ended June 30, 2020,2020.

Cash and cash equivalents decreased by 27.6% to $93.8 million as of June 30, 2021, as compared to $1.44 for$129.6 million as of March 31, 2021, primarily due to increases in our accounts receivable and inventories and a decrease in accounts payable—trade, partially offset by net borrowings on the floor plan component of our credit facility. Additional uses of cash during the three months ended June 30, 2019.

Cash and2021, included cash equivalents increased $58.2paid of $3.8 million or 67.4% to $144.4 million at June 30, 2020, as compared to $86.2 million asrepurchase outstanding shares of March 31, 2020. The increase is primarily the result of the extension of payment terms by 30 days from certain vendor partners that deferred $34.2 million in payments and a payroll tax deferral under the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act that deferred $2.6 million in payments that will be paid in December 2021 and December 2022.our common stock. Our cash on hand, funds generated from operations, amounts available under our credit facility, and the possible monetization ofability to monetize our investment portfolio have provided sufficient liquidity for our business.

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

30
Table of Contents
Segment Overview

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

Technology Segment

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

Our technology segment derives revenue from the sales
29
Table of new equipment and service engagements. Included in net sales are revenues derived from performing advanced IT professional and managed services that may be sold together with and integral to third-party products and software. Our service engagements are generally governed by statements of work and are primarily fixed price (with allowance for changes); however, some service agreements are based on time and materials.Contents

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

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

Financing Segment

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

Financing revenue generally falls into the following three categories:

Portfolio income: Interest income from financing receivables and rents due under operating leases;
Transactional gains: Net gains or losses on the sale of financial assets; and
Post-contract earnings: Month-to-month rents; early termination, prepayment, make-whole, or buyout fees; and net gains on the sale of off-lease (used) equipment.

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

Fluctuations in Operating Results

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

31
Table of Contents
We expect to continue to expand by opening new sales locationsoffices and warehouses and by hiring additional staff for specific targeted market areas whenever we can find both experienced personnel and desirable geographic areas over the longer term, which may reduce our results from operations. COVID-19 may negatively affect market demand, which will likely lower our financial results, and may adversely impact our ability to expand. We are uncertain as to the extent and duration of theCOVID-19’s impact to the IT market demand for our products and services.

CRITICAL ACCOUNTING ESTIMATES

As disclosed in Note 2, “Recent Accounting Pronouncements”, we adopted a new credit loss standard on April 1, 2020. Under this new standard, we estimate an allowance for credit losses related to accounts receivable for future expected credit losses by using relevant information such as historical information, current conditions, and reasonable and supportable forecasts. The allowance is measured on a collective basis when similar risk characteristics exist, and a loss-rate for each group with similar risk characteristics is determined using historical credit loss experience as the basis for the estimation of expected credit losses. Adjustments to historical loss information are made for differences in current conditions, as well as changes in forecasted macroeconomic conditions. Our allowance reflects the forecasted credit deterioration due to the COVID-19 pandemic.

Our other critical accounting estimates have not changed from those reported in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 20202021 Annual Report.

SEGMENT RESULTS OF OPERATIONS

The three months ended June 30, 2020,2021, compared to the three months ended June 30, 20192020

30
Table of Contents
Technology Segment

The results of operations for our technology segment for the three months ended June 30, 2020, and 2019 were as follows (dollars in thousands):

 Three Months Ended June 30,        Three Months Ended June 30,       
 2020  2019  Change  2021  2020  Change 
Net sales                        
Product $293,433  $322,764  $(29,331)  (9.1%) $344,766  $293,433  $51,333   17.5%
Services  47,791   45,771   2,020   4.4%  55,592   47,791   7,801   16.3%
Total  341,224   368,535   (27,311)  (7.4%)  400,358   341,224   59,134   17.3%
                                
Cost of sales                                
Product  224,543   258,054   (33,511)  (13.0%)  271,015   224,543   46,472   20.7%
Services  29,840   28,670   1,170   4.1%  33,910   29,840   4,070   13.6%
Total  254,383   286,724   (32,341)  (11.3%)  304,925   254,383   50,542   19.9%
                                
Gross profit  86,841   81,811   5,030   6.1%  95,433   86,841   8,592   9.9%
                                
Selling, general, and administrative  65,556   62,667   2,889   4.6%  66,153   65,556   597   0.9%
Depreciation and amortization  3,488   3,407   81   2.4%  3,898   3,488   410   11.8%
Interest and financing costs  265   -   265   -   159   265   (106)  (40.0%)
Operating expenses  69,309   66,074   3,235   4.9%  70,210   69,309   901   1.3%
                
Operating income $17,532  $15,737  $1,795   11.4% $25,223  $17,532  $7,691   43.9%
                                
Adjusted gross billings $546,394  $548,363  $(1,969)  (0.4%) $633,007  $546,394  $86,613   15.9%
Adjusted EBITDA $23,161  $21,419  $1,742   8.1% $30,958  $23,161  $7,797   33.7%

32
Table of Contents
Net sales: Net sales for the three months ended June 30, 2020,2021, were $341.2$400.4 million compared to $368.5$341.2 million duringfor the same period in the prior year, an increase of 17.3% or $59.1 million, due to increases in net sales from customers in the telecom, media and entertainment, healthcare, and smaller other categories of customers, which was partially offset by decreases in net sales from customers in financial services, SLED, and technology. Product sales increased 17.5%, or $51.3 million, to $344.8 million due to increased customer demand. Services revenues increased 16.3%, or $7.8 million compared to the same period in the prior year to $55.6 million due to an increase in managed and professional services for the three months ended June 30, 2019, a decrease of 7.4% or $27.3 million, due to decreases in net sales to customers in the technology, telecom, media and entertainment, SLED, financial services, and all the other customer categories, which was partially offset by a small increase in sales to customers in the healthcare category. Product sales decreased 9.1%, or $29.3 million, to $293.4 million due to a shift in mix to third-party maintenance, software assurance, subscriptions/SaaS licenses, and services where we recognize revenue on a net basis. Services revenues increased 4.4%, or $2.0 million, $47.8 million to due to an increase in staffing and professional and managed services.2021.

Adjusted gross billings decreased 0.4%increased 15.9%, or $2.0$86.6 million, to $546.4$633.0 million for the three months ended June 30, 2020,2021, from $548.4$546.4 million for the same period in the prior fiscal year. A decrease in demand from our customers in the healthcare, telecom, media and entertainment, and all the other categories of customers, was almost entirely offset by increases in demand from SLED, financial services, and technology markets. For the three months ended June 30, 2020, there was anThe increase in adjusted gross billings of $25.3 million,was due, in part, to $205.2 million for products that we recognize revenue on a net basis, suchthe SMP acquisition as third-party maintenance, software assurance, subscriptions/SaaS licenses, and services.well as higher demand from our current customers.

We rely on our vendors to fulfill a large majority of shipments to our customers. As of June 30, 2021, we had open orders of $565.8 million and deferred revenue of $100.3 million. As of June 30, 2020, we had open orders of $426.8 million and deferred revenuerevenues of $71.8 million. As

31
Table of June 30, 2019, we had open orders of $210.6 million and deferred revenues of $60.9 million.Contents

We analyze net sales by customer end market and by vendor, as opposed to discrete product and service categories. The percentage of net sales by industry and vendor for the twelve-month periods ended June 30, 2021, and 2020 are summarized below:

 
Twelve Months Ended
June 30,
     
Twelve Months Ended
June 30,
    
 2020  2019  Change  2021  2020  Change 
Revenue by customer end market:                  
Telecom, Media & Entertainment  27%  19%  8%
Technology  21%  21%  0%  16%  21%  (5%)
SLED  16%  17%  (1%)  15%  16%  (1%)
Healthcare  13%  15%  (2%)
Financial Services  13%  15%  (2%)  12%  13%  (1%)
Healthcare  15%  15%  0%
Telecom, Media & Entertainment  19%  14%  5%
All others  16%  18%  (2%)  17%  16%  1%
Total  100%  100%      100%  100%    

 
Twelve Months Ended
June 30,
     
Twelve Months Ended
June 30,
    
 2020  2019  Change  2021  2020  Change 
Revenue by vendor:                  
Cisco Systems  39%  42%  (3%)  37%  39%  (2%)
Dell / EMC  7%  7%  0%
Juniper Networks  7%  5%  2%
HP Inc. & HPE  4%  4%  0%
Arista Networks  4%  4%  0%
NetApp  4%  4%  0%  3%  4%  (1%)
HP Inc. & HPE  4%  6%  (2%)
Dell/EMC  7%  5%  2%
Juniper Networks  5%  3%  2%
Arista Networks  4%  4%  0%
All others  37%  36%  1%  38%  37%  1%
Total  100%  100%      100%  100%    

Our revenues by customer end market have remained consistent over the year with over 80% of our revenues generated from customers within the five end markets identified above. During the trailing twelve-month period ended June 30, 2020,2021, we had an increase in the percentage of total revenues from customers in the telecom, media and entertainment industry, and all other customer category, and decreases in the percentage of total revenues in the technology, SLED, healthcare, and financial services markets. These changes were driven by changes caused by the COVID-19 pandemic, changes in customer buying cycles, and the timing of specific IT related initiatives, rather than the acquisition or loss of a customer or set of customers.

The majorityMost of our revenues by vendor are derived from our top six suppliers, which, when combined, is a fairly constant percentage of 63% and 64%accounted for over 60% of total revenues for the twelve-month periods ended June 30, 2020,2021, and 2019, respectively.2020. None of the vendors included within the “other” category exceeded 5% of total revenues.

33
Table of Contents
Cost of sales: The 11.3% decrease in costCost of sales was due to the decrease in service and product sales and a shift in product mix, as we sold a higher proportion of third-party software assurance, maintenance and services, which are recognized on a net basis resulting in an improvement in gross margin on product sales. Our gross margin increased 320 basis points to 25.4% for the three months ended June 30, 2020,2021 was $304.9 million compared to 22.2%$254.4 million for the same period in the prior year, an increase of 19.9% or $50.5 million due to the increases in sales of products and services. Our gross margin decreased 160 basis points to 23.8% for the three months ended June 30, 2021, compared to 25.4% in the same period in the prior year primarily due to an increase in our services revenues and a shift in our product mix. mix to a greater portion of our sales from products for which the revenues and cost of sales are presented on a gross basis. Vendor incentives earned as a percentage of sales increased 50decreased 10 basis points for the three months ended June 30, 2020,2021, resulting in a favorable impact onreduction to gross margin, as compared to same period in the prior year.

Selling, general, and administrative: Selling, general, and administrative expenses of $65.6$66.2 million for the three months ended June 30, 2020,2021, increased by $2.9$0.6 million, or 4.6%0.9% from $62.7$65.6 million in the same period in the prior year. Salaries and benefits increased $5.5$0.9 million, or 10.8%1.5% to $57.0$57.9 million, compared to $51.5$57.0 million during the prior year due to an increase due to higher variable compensation related to the increase in gross profit, and higher replacement costs from turnover. year. Our technology segment had 1,5001,514 employees as of June 30, 2020, a decrease2021, an increase of 514 from 1,505 at1,500 as of June 30, 2019. 2020. Our headcount as of June 30, 2021 incorporates the addition of 102 employees from the December 31, 2020, acquisition of SMP.

General and administrative expenses decreased $2.6increased $0.1 million, or 23.7%1.5%, to $8.5$8.3 million during the three months ended June 30, 2020,2021, compared to $11.2 millionthe same period in the prior year, due to a decreasean increase in travel and entertainment and other general office related expenses,expenses. There were no acquisition related expenses for the three months ended June 30, 2021, and travel and entertainment expenses resulting from restrictions on travel due to the COVID-19 pandemic.provision for credit losses was $0.4 million lower for the three months ended June 30, 2021 than in the same period in the prior year.

32
Table of Contents
Depreciation and amortization: Depreciation and amortization increased $0.1$0.4 million, or 2.4%11.8%, to $3.5$3.9 million during the three months ended June 30, 2020,2021, as compared to $3.4$3.5 million in the prior year period primarily due to the amortization of the intangible assets acquired in our acquisition of ABS Technology in August 2019.SMP.

Interest and financing costs:Interest and financing costs of $0.3$0.2 million were incurred in the three months ended June 30, 2020,2021, compared to none$0.3 million in the prior year. The increasedecrease is due to a reduction of $35.0 million in borrowings under the accounts receivable component of our Technology segment credit facility.facility as of June 30, 2021 compared to June 30,2020, offset by $17.0 million in borrowings through an installment payment arrangement as of June 30, 2021, for which there was no comparable borrowing as of June 30,2020.

Segment operating income: As a result of the foregoing, operating income was $17.5$25.2 million, an increase of $1.8$7.7 million, or 11.4%43.9%, for the three months ended June 30, 2020,2021, as compared to $15.7$17.5 million in the same period in the prior year period. year.

For the three months ended June 30, 2020, adjusted2021, Adjusted EBITDA was $23.2$31.0 million, an increase of $1.7$7.8 million, or 8.1%33.7%, compared to $21.4$23.2 million in the same period in the prior year period.year.

Financing Segment

The results of operations for our financing segment for the three months ended June 30, 2020, and 2019 were as follows (dollars in thousands):

 Three Months Ended June 30,        Three Months Ended June 30,       
 2020  2019  Change  2021  2020  Change 
Net product sales $13,807  $12,837  $970   7.6%
Net sales $16,291  $13,807  $2,484   18.0%
                                
Cost of product sales  2,091   2,009   82   4.1%
Cost of sales  6,212   2,091   4,121   197.1%
                                
Gross profit  11,716   10,828   888   8.2%  10,079   11,716   (1,637)  (14.0%)
                                
Selling, general, and administrative  3,911   3,120   791   25.4%  2,622   3,911   (1,289)  (33.0%)
Depreciation and amortization  28   56   (28)  (50.0%)  28   28   -   0.0%
Interest and financing costs  312   628   (316)  (50.3%)  200   312   (112)  (35.9%)
Operating expenses  4,251   3,804   447   11.8%  2,850   4,251   (1,401)  (33.0%)
                                
Operating income $7,465  $7,024  $441   6.3% $7,229  $7,465  $(236)  (3.2%)
                                
Adjusted EBITDA $7,553  $7,148  $405   5.7% $7,314  $7,553  $(239)  (3.2%)

Net sales: Net sales increased by $1.0$2.5 million, or 7.6%18.0%, to $13.8$16.3 million for the three months ended June 30, 2020,2021, as compared to prior year results due to higher post contract earnings and portfolio earnings, which partially were offset by lowerhigher transactional gains. During the quarters ended June 30, 2020,2021, and 2019,2020, we recognized net gains on sales of financial assets of $2.5$3.2 million and $3.3$2.5 million, respectively, and the fair value of assets received from these sales were $73.2$75.3 million and $69.9$73.2 million, respectively.

34
Table of Contents
At June 30, 2020,2021, we had $185.0$141.7 million in financing receivables and operating leases, compared to $169.5$185.0 million as of June 30, 2019, an increase2020, a decrease of $15.5$43.3 million, or 9.1%23.4%.

Cost of sales: Cost of sales increased $0.1$4.1 million for the three months ended June 30, 2020, which consists2021, compared to the prior year results due to higher cost of sales on off-lease equipment and higher depreciation expense from operating leases. Gross profit increaseddecreased by 8.2%14.0% to $11.7$10.1 million for the three months ended June 30, 2020,2021, as compared to $10.8$11.7 million in the prior year.

Selling, general and administrative: For the three months ended June 30, 2020,2021, selling, general, and administrative expenses increaseddecreased by $0.8$1.3 million or 25.4%33.0%, which was due primarily to an increasea decrease in the provision for credit losses and decrease in variable compensation due to higherlower gross profit and an increase in allowance for credit losses.profit.

Interest and financing costs: Interest and financing costs decreased by 50.3%35.9% to $0.3$0.2 million for the three months ended June 30, 2020,2021, compared to the prior year, due to a decrease in the average balance and interest rate on total notes payable outstanding. Total notes payable for the financing segment was $15.3 million as of June 30, 2021, a decrease of $48.2 million, or 75.9%, as compared to $63.4 million as of June 30, 2020, a decrease of $9.5 million, or 13.0%, as compared to $72.9 million as of June 30, 2019.2020. Our weighted average interest rate for non-recourse notes payable was 3.54%3.66% and 4.25%3.54%, as of June 30, 2021, and 2020, and 2019, respectively. Our weighted average interest rate for recourse notes payable was 2.55% as of June 30, 2020. We did not have any recourse debt as of June 30, 2021.

33
Table of Contents
Segment operating income: As a result of the foregoing, operating income and adjusted EBITDA both increased $0.4decreased $0.2 million or 6.3% and 5.7%,3.2% compared to $7.5 million and $7.6 million, respectively, for the three months ended June 30, 2020, oversame period in the prior year period.to $7.2 million. Likewise, Adjusted EBITDA decreased $0.2 million or 3.2% compared to the same period in the prior year to $7.3 million.

Consolidated

Other income: Other income increased towas a constant of $0.1 million due to favorable foreign exchange rate duringfor both the three months ended June 30, 2020, compared to unfavorable foreign exchange rate in the prior year period of $0.1 million, partially offset by interest income.2021, and June 30, 2020.

Income taxes: Our provision for income tax expense was $7.7$9.1 million for the three months ended June 30, 2020,2021, as compared to $6.5$7.7 million for the same period in the prior year. Our effective income tax rates for the three months ended June 30, 2021, and 2020 were 27.8% and 2019 were 30.8% and 28.7%, respectively. The change in our effective income tax rate was primarily due to an adjustment to the federal benefit from state taxes.taxes in the prior year period.

Net earnings: The foregoing resulted in net earnings of $17.4$23.5 million for the three months ended June 30, 2020,2021, an increase of 7.2%$6.2 million, or 35.5%, as compared to $16.2$17.4 million during the three months ended June 30, 2019.2020.

Basic and fully diluted earnings per common share was $1.30, for the three months ended June 30, 2020, an increase of 7.4%$1.76 and 8.3% as compared to $1.21 and $1.20,$1.75, respectively, for the three months ended June 30, 2019.2021, an increase of 35.4% and 34.6% as compared to $1.30 for both basic and fully diluted earnings per common share, for the three months ended June 30, 2020. Non-GAAP diluted earnings per share increased 4.9%29.8% to $1.96 for the three months ended June 30, 2021, as compared to $1.51 for the three months ended June 30, 2020, as compared to $1.44 for the three months ended June 30, 2019.2020.

Weighted average common shares outstanding used in the calculation of basic and diluted earnings per common share for both the three months ended June 30, 2021, and June 30, 2020, was 13.3 million and 13.4 million, respectively. Weighted average common shares outstanding used in the calculation of the basic and diluted earnings per common share for the three months ended June 30, 2019, was 13.4 million and 13.5 million, respectively.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity Overview

Our primary source of funding is cash from operations and borrowings which are accounted for as non-recourse and recourse notes payable. We use those funds to meet our capital requirements, which have historically consisted primarily of working capital for operational needs, capital expenditures, purchases of equipment for lease, payments of principal and interest on indebtedness outstanding, acquisitions and the repurchase of shares of our common stock.

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 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.

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

35
Table of Contents
Our ability to continue to expand, both organically and through acquisitions, is dependent upon our ability to generate enough cash flow from operations or from borrowing or other sources of financing as may be required. While at this time we do not anticipate requiring any additional sources of financing to fund operations, if demand for IT products declines, or if our supply of products is delayed or interrupted, our cash flows from operations may be substantially affected.

The extent of the impact of COVID-19 is uncertain and may impact our liquidity position over the longer term. As creditCredit markets have tightenedmay tighten as a result of COVID-19 and 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.

34
Table of Contents
Cash Flows

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

 Three Month Ended June 30,  Three Months Ended June 30, 
 2020  2019  2021  2020 
Net cash provided by (used in) operating activities $6,394  $(87,394) $(65,136) $6,394 
Net cash used in investing activities  (2,159)  (1,226)  (6,151)  (2,159)
Net cash provided by financing activities  54,040   44,327 
Net cash provided by (used in) financing activities  35,494   54,040 
Effect of exchange rate changes on cash  (124)  81   71   (124)
        
Net increase (decrease) in cash and cash equivalents $58,151  $(44,212)
Net increase in cash and cash equivalents $(35,722) $58,151 

Cash flows from operating activities. We had $6.4used $65.1 million provided byin operating activities during the three months ended June 30, 2020,2021, compared to $87.4$6.4 million used inprovided by operating activities for the three months ended June 30, 2019.2020. See below for a breakdown of operating cash flows by segment (in thousands):

 Three Month Ended June 30,  Three Months Ended June 30, 
 2020  2019  2021  2020 
Technology segment $11,191  $(42,072) $(65,980) $11,191 
Financing segment  (4,797)  (45,322)  844   (4,797)
Net cash provided by (used in) operating activities $6,394  $(87,394) $(65,136) $6,394 

Technology Segment: In the three months ended June 30, 2021, our technology segment used $66.0 million from operating activities primarily due to increases in our accounts receivable and inventories and a decrease in accounts payable-trade. Offsetting this, we had net borrowing on the floor plan component of our credit facility of $40.9 million. 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 three months ended June 30, 2020, our technology segment provided $11.2 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 $48.3 million. The net borrowing is primarily the result of extended payment terms from Cisco that deferred $34.2 million in payments. 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 three months ended June 30, 2019, our technology segment used $42.1 million from operating activities due to changes in working capital exceeding cash generated from earnings. Partially offsetting the cash used in operations were changes in the accounts payable - floor plan balance of $19.9 million, which is presented as financing activity in our consolidated statement of cash flows.

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

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

 As of June 30, 
 2020  2019  As of June 30, 
       2021  2020 
(DSO) Days sales outstanding (1)  61  53   61   61 
(DIO) Days inventory outstanding (2)  14  11   13   14 
(DPO) Days payable outstanding (3)  (45)  (40)  (42)  (45)
Cash conversion cycle  30   24   32   30 

(1)Represents the rolling three-monththree 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-monththree month period.
(2)Represents the rolling three-monththree 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-monththree month period.
(3)Represents the rolling three-monththree 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-monththree month period.

36
Table of Contents
Our cash conversion cycle increased to 32 days at June 30, 2021, compared to 30 days at June 30, 2020, compared to 24 days at June 30, 2019.2020. Our standard payment term for customers is between 30-60 days; however, certain customer orders may be approved for extended payment terms. Our DSO increased due to an increase in sales during the quarter ended June 30, 2020, to customers with terms greater than or equal to net 60 days. Our DPO increased 5decreased 3 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 ourdate. Our DSO remained the same at 61 days, which reflects higher sales to customers with terms greater than or equal to 90 days. The 3 day increasenet 60 days in DIO was due to an increase in average inventory balances of 28.1%, or $15.8 million, due to pending projects for our customers and some delays in receiving by our customers whose offices were closed due to COVID-19.both periods.

Financing Segment: In the three months ended June 30, 2021, our financing segment provided $0.8 million from operating activities, primarily due to earnings offset by decreases in accounts payable-trade. In the three months ended June 30, 2020, our financing segment used $4.8 million from operating activities, primarily due to changes in financing receivables net of $24.7 million. In the three months ended June 30, 2019, our financing segment used $45.3 million from operating activities, primarily due to changes in financing receivables- net

35
Table of $58.2 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.Contents

Cash flows related to investing activities. In the three months ended June 30, 2021, we used $6.2 million from investing activities, consisting of $7.0 million for purchases of property, equipment and operating lease equipment offset by $0.8 million of proceeds from the sale of property, equipment, and operating lease equipment. In the three months ended June 30, 2020, we used $2.2 million from investing activities, consisting of $2.3 million for purchases of property, equipment and operating lease equipment offset by $0.1 million of proceeds from the sale of property, equipment, and operating lease equipment. In the three months ended June 30, 2019, we used $1.2 million from investing activities, consisting of $1.5 million for purchases of property, equipment and operating lease equipment offset by $0.3 million of proceeds from the sale of property, equipment, and operating lease equipment.

Cash flows from financing activities. In the three months ended June 30, 2021, cash provided by financing activities was $35.5 million consisting of net borrowings on the floor plan component of our credit facility of $40.9 million partially offset by net repayments of non-recourse and recourse notes payable of $1.6 million, and $3.8 million in cash used to repurchase outstanding shares of our common stock. In the three months ended June 30, 2020, cash provided by financing activities was $54.0 million consisting of net borrowings of non-recourse and recourse notes payable of $8.5 million, net borrowings on floor plan facility of $48.3 million, and offset by $2.7 million in repurchase of common stock.

In the three months ended June 30, 2019, cash provided by financing activities was $44.3 million consisting of net borrowings of non-recourse and recourse notes payable of $38.0 million, net borrowings on floor plan facility of $19.9 million, and offset by $13.3 million in repurchase of common stock and $0.3 million paid to sellers of SLAIT Consulting, LLC as part of a working capital adjustment.

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

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

Secured borrowings – Financing segment

We may finance all or most of the cost of the assets that we finance for customers by transferring all or part of the contractual payments due to us to third-party financing institutions. When we account for the transfer as a secured borrowing, we recognize the proceeds as either recourse or non-recourse notes payable. Our customers are responsible for repaying the debt from a secured borrowing. The lender typically secures a lien on the financed assets at the time the financial assets are transferred and releases it upon collecting all the transferred payments. We are not liable for the repayment of non-recourse loans unless we breach our representations and warranties in the loan agreements. The lender assumes the credit risk and their only recourse, upon default by the customer, is against the customer and the specific equipment under lease. While we expect that the credit quality of our financing arrangements and our residual return history will continue to allow us to obtain such financing, such financing may not be available on acceptable terms, or at all. As a result of COVID-19, credit markets have tightened. We may no longer be able to transfer receivables from certain customers with lower credit quality to financial institutions.

37
Credit facility — Technology segment

Our subsidiary,Within our technology segment, ePlus Technology, inc., and certain of its subsidiaries have a financing facility from WFCDF to finance their workingoperations, in addition to funds generated from operations, with a credit facility with Wells Fargo Commercial Distribution Finance, LLC (“WFCDF”). This facility provides short-term capital requirements for inventories and accounts receivable.our technology segment. There are two components of thisthe WFCDF credit facility: (1) a floor plan component;component and (2) an accounts receivable component.

On May 15, 2020, we executed an amendment to theThe WFCDF credit facility that increased thehas an aggregate limit offor the two components, except during a temporary uplift, to $275.0of $275 million. Additionally, we have an electionWe may elect to temporarily increase the aggregate limit to $350.0$350 million for a period of not less than 30 days, provided that all such periods shall not exceed 150 days in the aggregate in any calendar year. Further,Additionally, the amendment increased theWFCDF credit facility has a limit on the accounts receivable component of the$100 million. WFCDF credit facility to $100.0 million, changed thecharges us an interest rate equal to two percent (2.00%) plus the greater of one month LIBOR or seventy-five hundredths of one percent (0.75%), and modified certain restrictions on ePlus Technology, inc.’s ability to pay dividends to ePlus inc..

As of June 30, 2020,2021, the limit of the two components of the credit facility was $275 million and. On July 2, 2021, we elected to temporarily increase the accounts receivable component had a sub-limitaggregate limit to $350 million.

36
The WFCDF credit facility is secured by the assets of ePlus Technology, inc. and certain of its subsidiaries, and varies available borrowing based upon the value of their receivables and inventory.subsidiaries. Additionally, the credit facility requires a guaranty of $10.5 million by ePlus inc.

The credit facility restricts the ability of ePlus Technology, inc. and certain of its subsidiaries to pay dividends to ePlus inc. unless their available borrowing meets certain thresholds. As of June 30, 2020,2021, and March 31, 2021, their available borrowing met the threshold such that there were no restricted net assets of ePlus Technology, inc.

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

The loss of the WFCDF credit facility including during circumstances related to COVID-19, could have a material adverse effect on our future results as we currently rely on this facility and its components for daily working capital and liquidity for our technology segment and as an operational function of our accounts payable process.

Floor Plan Component. After a customer places a purchase order with us and 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 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. dateIn 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 financing activities in our consolidated statements of cash flows.

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 June 30, 2020
  
Balance as of
June 30, 2020
  
Maximum Credit Limit
at March 31, 2020
  
Balance as of
March 31, 2020
 
Maximum Credit Limit
at June 30, 2021
Maximum Credit Limit
at June 30, 2021
  
Balance as of
June 30, 2021
  
Maximum Credit Limit
at March 31, 2021
  
Balance as of
March 31, 2021
 
$275,000  $175,701  $300,000  $127,416 275,000  $139,574  $275,000  $98,653 

On July 23, 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.

38
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. The outstanding balance under the accounts receivable component is recordedpresented as part of as recourse notes payablepayable- current on our consolidated balance sheets. 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”,payable,” respectively, within cash flows from the financing activities in our consolidated statements of cash flows.

As of June 30, 2020, and March 31, 2020, there was anWe did not have any outstanding balance forunder the accounts receivable component of $35.0 million. Asthe WFCDF as of either the period ended June 30, 2020, and2021, or March 31, 2020, the2021. The maximum credit limit under this facility was $100.0 million and $50.0 million, respectively. We may maintain a balance on the accounts receivable component to assist in mitigating risk arising from COVID-19.million.

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 thematerial 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 June 30, 2020,2021, we were not involved in any unconsolidated special purpose entity transactions.

37
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. OurAdditionally, while our lending partners in our financialfinancing segment have tightened credit availability and arebecome more discerning in their approval process. However,processes, we 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. In the most recent quarter, we have experienced some increases in prices from our suppliers as well as rising wages. We generally have been able to pass along these price increases to our customers. There can be no assurances, however, that inflation would not have a material impact on our sales or operating costs in the future.

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.

Our quarterly results of operations are susceptible to fluctuations for a number of reasons, including, but not limited to the worldwide impacts from COVID-19, currency fluctuations, reduction in IT spending, shortages of product from our vendors due to material shortages, any reduction of expected residual values related to the equipment under our leases, the timing and mix of specific transactions, the reduction of manufacturer incentive programs, and other factors. Quarterly operating results could also fluctuate as a result of our sale of equipment in our lease portfolio to a lessee or third-party at the expiration of a lease term or prior to such expiration, and the transfer of financial assets. Sales of equipment and transfers of financial assets may have the effect of increasing revenues and net income during the quarter in which the sale occurs and reducing revenues and net income otherwise expected in subsequent quarters. See Part I, Item 1A, “Risk Factors,” in our 20202021 Annual Report.

39
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
Item 3.Quantitative and Qualitative Disclosures About Market Risk

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

Although a substantial portion of our liabilities are non-recourse, fixed-interest-rate instruments, we utilize lines of credit and other financing facilities that are subject to fluctuations in short-term interest rates. TheseOur non-recourse instruments, which are denominated in US dollars, were entered for other than trading purposes and except for 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. Our financingFinancing transactions are funded with our cash flows, not debt, and may be subject to interest rate risk. If the market interest rate exceeds our internal rate of return, we may not fund the transaction to obtain the proceeds. Borrowings under the WFCDF facility bear interest at a market-based variable rate. As of June 30, 2020,2021, 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.

38
The UK referendum (“Brexit”) to leaveUK’s leaving the European Union (“Brexit”) could impact revenue items, cost items, tax, goodwill impairments and liquidity, among others. The most obvious immediate impact is the effect of foreign exchange fluctuations on revenue and cost items. We have determined that our foreign currency exposure for our 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’sour results on operations and financial position.

We lease assets in foreign countries, including Canada, the UK and several other European countries. As a lessor, we lease assets for amounts denominated in British Pounds, Euros, and Canadian dollars. As our foreign operations have been 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.

Item 4.          Controls and Procedures
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 June 30, 2020.2021.

40
Changes in Internal Control Over Financial Reporting.

There have not been any changes in our internal control over financial reporting during the quarter ended June 30, 2020,2021, 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

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

We are not currently involved in any litigation that we believe could have a materially adverse effect on our financial condition or results of operation. However, from time to time, we may be subject to legal proceedings that arise in the ordinary course of business. Legal proceedings which may arise in the ordinary course of business include, but are not limited to, preference payment claims asserted in customer bankruptcy proceedings; 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; claims relating to alleged security or privacy 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.

Item 1A.Risk Factors

Our risk factors are disclosed in “Part I, Item 1A. Risk FactorsFactors” of our Annual Report on Form 10-K for the fiscal year ended March 31, 2021. Updates to our risk factors due to recent events are provided below.

There has not
Supply chain issues, including a shortage of IT products, may increase our costs or cause a delay in fulfilling orders, resulting in an adverse impact on our financial results.

We depend upon the supply of products available from our vendors to fulfill orders from our customers on a timely basis. At present, there is a worldwide shortage of certain IT products resulting from shortages in semiconductors and other components of those products. Like others, we are experiencing ongoing supply constraints that have affected, and could continue to further affect, lead times for delivery of products, the costs of products, and our ability to meet customer demands. As a result of longer lead times, some sales to customers have been any material changedeferred. We believe extended lead times will likely persist for at least the next few quarters. If we are unable to mitigate these disruptions, our financial results may be adversely impacted. As a result of the worldwide shortage of certain IT products, we have experienced some increases in prices from our suppliers. Additionally, we have experienced an increase in wages. If we are unable to pass along these prices increases to customers, our financial results may be adversely impacted. We provide certain professional and managed services under fixed price contracts. If we fail to accurately estimate our costs, including due to inflation, the risk factors previously disclosed in Part I, Item 1Aprofitability of our 2020 Annual Report.contracts may be adversely affected.

4139

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

The following table provides information regarding our total purchases of 45,344 shares of ePlus inc. common stock during the three months ended June 30, 2020.2021, including a total of 17,629 shares purchased as part of the publicly announced share repurchase plans or programs.

Period 
Total
Number of
shares
purchased
(1)
  
Average
price
paid per
share
  
Total number of
shares
purchased as
part of publicly
announced plans
or programs
  
Maximum number (or
approximate dollar
value) of shares that
may yet be purchased
under the plans or
programs
 
April 1, 2020 through April 30, 2020  -  $-   -   339,324   (2)
May 1, 2020 through May 27, 2020  996  $66.75   -   339,324   (3)
May 28, 2020 through May 31, 2020  -       -   500,000   (4)
June 1, 2020 through June 30, 2020  36,644  $71.94   -   500,000   (5)
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, 2021 through April 30, 2021  -  $-   -   440,899   (2)
May 1, 2021 through May 27, 2021  999  $100.80   -   440,899   (3)
May 28, 2021 through May 31, 2021  -  $-   -   500,000   (4)
June 1, 2021 through June 30, 2021  44,345  $90.42   17,629   482,371   (5)

(1)AnyAll shares acquired were in open-market purchases, except for 37,64027,715 shares, out of which 996999 were repurchased in May 20202021 and 36,64426,716 in June 20202021 to satisfy tax withholding obligations that arose due to the vesting of shares of restricted stock.
(2)The share purchase authorization in place for the month ended April 30, 2020,2021, had purchase limitations on the number of shares of up to 500,000 shares. As of April 30, 2020,2021, the remaining authorized shares to be purchased were 339,324.440,899.
(3)As of May 27, 2019,2021, the authorization under the then existingthen-existing share repurchase plan expired.
(4)On May 20, 2020,March 18, 2021, the board of directors authorized the company to repurchase up to 500,000 shares of our outstanding common stock commencing on May 28, 2020,2021, and continuing to May 27, 2021.2022. As of May 31, 2020,2021, the remaining authorized shares to be purchased were 500,000.
(5)The share purchase authorization in place for the month ended June 30, 2020,2021, had purchase limitations on the number of shares of up to 500,000 shares. As of June 30, 2020,2021, the remaining authorized shares to be purchased were 500,000.482,371.

The timing and expiration date of the current stock repurchase authorizations are included in Note 12,11, “Stockholders’ Equity” to our unaudited condensed consolidated financial statements included elsewhere in this report.

Item 3.          Defaults Upon Senior Securities
Item 3. Defaults Upon Senior Securities

Not Applicable.

Item 4.          Mine Safety Disclosures
Item 4. Mine Safety Disclosures

Not Applicable.

Item 5.          Other Information
Item 5. Other Information

None.

4240

Item 6.          Exhibits
Item 6.Exhibits

Exhibit Number 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 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).
   
31.1
 
Certification of the Chief Executive Officer of ePlus inc. pursuant to the Securities Exchange Act Rules 13a-14(a) and 15d-14(a).
   
31.2
 
Certification of the Chief Financial Officer of ePlus inc. pursuant to the Securities Exchange Act Rules 13a-14(a) and 15d-14(a).
   
32
 
Certification of the Chief Executive Officer and Chief Financial Officer of ePlus inc. pursuant to 18 U.S.C. § 1350.
   
101.INS XBRL Instance Document
   
101.SCH XBRL Taxonomy Extension Schema Document
   
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
   
101.DEF XBRL Taxonomy Extension Definition Linkbase Document
   
101.LAB XBRL Taxonomy Extension Label Linkbase Document
   
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document
   
104 Cover Page Interactive Data File (formatted as inline XBRL and contained in  Exhibit 101).


4341
SIGNATURES

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

 
ePlus inc.
 
   
Date:  August 5, 20204, 2021/s/ MARK P. MARRON 
 By: Mark P. Marron
Chief Executive Officer and 
 
Chief Executive Officer and
President
 
 (Principal Executive Officer) 
   
Date:  August 5, 20204, 2021/s/ ELAINE D. MARION 
 By: Elaine D. Marion 
 Chief Financial Officer 
 (Principal Financial Officer)



44
42