ePlus - 10-Q quarterly report FY2023 Q1

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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, 2022

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

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

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically 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 1, 2022, was 26,891,568.

TABLE OF CONTENTS

ePlus inc. AND SUBSIDIARIES

Part I. Financial Information:

Item 1.	Financial Statements

	Unaudited Consolidated Balance Sheets as of June 30, 2022, and March 31, 2022	5

	Unaudited Consolidated Statements of Operations for the Three Months Ended June 30, 2022, and 2021	6

	Unaudited Consolidated Statements of Comprehensive Income for the Three Months Ended June 30, 2022, and 2021	7

	Unaudited Consolidated Statements of Cash Flows for the Three Months Ended June 30, 2022, and 2021	8

	Unaudited Consolidated Statements of Stockholders’ Equity for the Three Months Ended June 30, 2022, and 2021	10

	Notes to Unaudited Consolidated Financial Statements	11

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	39

Item 4.	Controls and Procedures	39

Part II. Other Information:

Item 1.	Legal Proceedings	40

Item 1A.	Risk Factors	40

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40

Item 3.	Defaults Upon Senior Securities	40

Item 4.	Mine Safety Disclosures	40

Item 5.	Other Information	41

Item 6.	Exhibits	41

Signatures		42

Table of Contents

CAUTIONARY LANGUAGE ABOUT FORWARD-LOOKING STATEMENTS

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

•

national and international political instability fostering uncertainty and volatility in the global economy including exposure to fluctuation in foreign currency rates, interest rates, and inflation, including increases in our costs and price increases to our customers which may result in adverse changes in our gross profit;

•	significant and rapid inflation may cause price, wage, and interest rate increases, as well as increases in operating costs which may impact the arrangements that have pricing commitments over the term of the agreement;

•	significant adverse changes in, reductions in, or loss of one or more of our larger volume customers or vendors;

•

supply chain issues, including a shortage of IT products, may increase our costs or cause a delay in fulfilling customer orders, or increase our need for working capital, or completing professional services, or purchasing IT products or services needed to support our internal infrastructure or operations, resulting in an adverse impact on our financial results;

•

the duration and ongoing impact of the novel coronavirus (“COVID-19”) pandemic, including but not limited to the impact and severity of new variants, vaccine efficacy, and immunization rates, the closure of non-essential business and other associated governmental containment actions, and the increase in cyber-security attacks that have occurred while employees work remotely;

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

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

•	our ability to secure our own and our customers’ electronic and other confidential information, while maintaining compliance with evolving data privacy and regulatory laws and regulations;

•	Our ability to remain secure during a cybersecurity attack, including both disruptions in our or our vendors’ IT systems and data and audio communication networks;

•	reliance on third-parties to perform some of our service obligations to our customers, and the reliance on a small number of key vendors in our supply chain with whom we do not have long-term supply agreements, guaranteed price agreements, or assurance of stock availability;

•	the 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;

•	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;

•	reduction of vendor incentives provided to us;

•	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”), 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;

•	future growth rates in our core businesses;

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

Table of Contents

•	the possibility of goodwill impairment charges in the future;

•	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;

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

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

•	performing professional and managed services competently;

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

•	exposure to changes in, interpretations of, or enforcement trends in, and customer and vendor actions in anticipation of or response to, legislation and regulatory matters;

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

•	our contracts may not be adequate to protect us, and we are subject to audit which we may not pass, and our professional and liability insurance policies coverage may be insufficient to cover a claim;

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

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

•	our ability to realize our investment in leased equipment;

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

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

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

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PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements

ePlus inc. AND SUBSIDIARIES

UNAUDITED CONSOLIDATEDBALANCE SHEETS

(in thousands, except per share amounts)

	June 30, 2022			March 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	83,488		$	155,378
Accounts receivable—trade, net		482,166			430,380
Accounts receivable—other, net		47,581			48,673
Inventories		246,873			155,060
Financing receivables—net, current		75,170			61,492
Deferred costs		34,104			32,555
Other current assets		15,961			13,944
Total current assets		985,343			897,482

Financing receivables and operating leases—net		68,719			64,292
Deferred tax asset—net		5,054			5,050
Property, equipment, and other assets		45,888			45,586
Goodwill		126,378			126,543
Other intangible assets—net		24,768			27,250
TOTAL ASSETS	$	1,256,150		$	1,166,203

LIABILITIES AND STOCKHOLDERS’ EQUITY

LIABILITIES

Current liabilities:
Accounts payable	$	165,793		$	136,161
Accounts payable—floor plan		138,047			145,323
Salaries and commissions payable		32,490			39,602
Deferred revenue		100,637			86,469
Recourse notes payable—current		47,529			7,316
Non-recourse notes payable—current		19,873			17,070
Other current liabilities		29,603			28,095
Total current liabilities		533,972			460,036

Recourse notes payable - long-term		3,878			5,792
Non-recourse notes payable - long-term		6,569			4,108
Other liabilities		35,443			35,529
TOTAL LIABILITIES		579,862			505,465

COMMITMENTS AND CONTINGENCIES (Note 8)

STOCKHOLDERS’ EQUITY

Preferred stock, $0.01per share par value; 2,000 shares authorized; none outstanding		-			-
Common stock, $0.01per share par value; 50,000 shares authorized; 26,893 outstanding at June 30, 2022 and 26,886 outstanding at March 31, 2022		271			270
Additional paid-in capital		161,253			159,480
Treasury stock, at cost, 258shares at June 30, 2022and 130 shares at March 31,2022		(13,958	)		(6,734	)
Retained earnings		530,185			507,846
Accumulated other comprehensive income—foreign currency translation adjustment		(1,463	)		(124	)
Total Stockholders’ Equity		676,288			660,738
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	1,256,150		$	1,166,203

See Notes to Unaudited Consolidated Financial Statements.

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ePlus inc. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

	Three Months Ended June 30,
	2022			2021

Net sales
Product	$	395,250		$	361,057
Services		63,109			55,592
Total		458,359			416,649
Cost of sales
Product		304,210			277,227
Services		40,626			33,910
Total		344,836			311,137

Gross profit		113,523			105,512

Selling, general, and administrative		76,767			68,775
Depreciation and amortization		3,210			3,926
Interest and financing costs		363			359
Operating expenses		80,340			73,060

Operating income		33,183			32,452

Other income (expense)		(2,153	)		123

Earnings before tax		31,030			32,575

Provision for income taxes		8,691			9,057

Net earnings	$	22,339		$	23,518

Net earnings per common share—basic	$	0.84		$	0.88
Net earnings per common share—diluted	$	0.84		$	0.87

Weighted average common shares outstanding—basic		26,513			26,666
Weighted average common shares outstanding—diluted		26,685			26,882

See Notes to Unaudited Consolidated Financial Statements.

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ePlus inc. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

	Three Months Ended June 30,
	2022			2021

NET EARNINGS	$	22,339		$	23,518

OTHER COMPREHENSIVE INCOME, NET OF TAX:

Foreign currency translation adjustments		(1,339	)		66

Other comprehensive income (loss)		(1,339	)		66

TOTAL COMPREHENSIVE INCOME	$	21,000		$	23,584

See Notes to Unaudited Consolidated Financial Statements.

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ePlus inc. AND SUBSIDIARIES

UNAUDITED CONSOLIDATEDSTATEMENTS OF CASH FLOWS

(in thousands)

	Three Months Ended June 30,
	2022			2021
Cash flows from operating activities:
Net earnings	$	22,339		$	23,518

Adjustments to reconcile net earnings to net cash used in operating activities:
Depreciation and amortization		4,472			6,082
Provision for credit losses		698			(261	)
Share-based compensation expense		1,773			1,735
Payments from lessees directly to lenders—operating leases		-			(32	)
Gain on disposal of property, equipment, and operaing lease equipment		(224	)		(148	)
Changes in:
Accounts receivable		(53,556	)		(68,641	)
Inventories-net		(92,678	)		(7,800	)
Financing receivables—net		(20,574	)		193
Deferred costs and other assets		(4,177	)		61
Accounts payable-trade		30,376			(15,393	)
Salaries and commissions payable, deferred revenue, and other liabilities		8,608			(4,450	)
Net cash used in operating activities		(102,943	)		(65,136	)

Cash flows from investing activities:
Proceeds from sale of property, equipment, and operating lease equipment		85			843
Purchases of property, equipment and operating lease equipment		(1,777	)		(6,994	)
Net cash used in investing activities		(1,692	)		(6,151	)

Cash flows from financing activities:
Borrowings of non-recourse and recourse notes payable		49,256			3,199
Repayments of non-recourse and recourse notes payable		(3,645	)		(4,819	)
Repurchase of common stock		(7,224	)		(3,807	)
Net borrowings (repayments) on floor plan facility		(7,276	)		40,921
Net cash provided by financing activities		31,111			35,494

Effect of exchange rate changes on cash		1,634			71

Net increase in cash and cash equivalents		(71,890	)		(35,722	)

Cash and cash equivalents, beginning of period		155,378			129,562

Cash and cash equivalents, end of period	$	83,488		$	93,840

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UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS - continued

(in thousands)

	Three Months Ended June 30,
	2022			2021
Supplemental disclosures of cash flow information:
Cash paid for interest	$	341		$	519
Cash paid for income taxes	$	7,532		$	7,275
Cash paid for amounts included in the measurement of lease liabilities	$	1,226		$	1,182

Schedule of non-cash investing and financing activities:
Proceeds from sale of property, equipment, and leased equipment	$	183		$	978
Purchases of property, equipment, and operating lease equipment	$	(63	)	$	(2,619	)
Borrowing of non-recourse and recourse notes payable	$	7,267		$	-
Repayments of non-recourse and recourse notes payable	$	-		$	(32	)
Vesting of share-based compensation	$	9,215		$	7,493
Repurchase of common stock	$	-		$	(304	)
New operating lease assets obtained in exchange for lease obligations	$	34		$	-

See Notes to Unaudited Consolidated Financial Statements.

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ePlus inc. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)

	Three Months Ended June 30, 2022
	Common Stock					Additional Paid-In		Treasury			Retained		Accumulated Other Comprehensive
	Shares			Par Value		Capital		Stock			Earnings		Income			Total
Balance, March 31, 2022		26,886		$	270	$	159,480	$	(6,734	)	$	507,846	$	(124	)	$	660,738
Issuance of restricted stock awards		135			1		-		-			-		-			1
Share-based compensation		-			-		1,773		-			-		-			1,773
Repurchase of common stock		(128	)		-		-		(7,224	)		-		-			(7,224	)
Net earnings		-			-		-		-			22,339		-			22,339
Foreign currency translation adjustment		-			-		-		-			-		(1,339	)		(1,339	)
Balance, June 30, 2022		26,893		$	271	$	161,253	$	(13,958	)	$	530,185	$	(1,463	)	$	676,288

	Three Months Ended June 30, 2021
	Common Stock					Additional Paid-In		Treasury			Retained		Accumulated Other Comprehensive
	Shares			Par Value		Capital		Stock			Earnings		Income		Total
Balance, March 31, 2021		27,006		$	145	$	152,366	$	(75,372	)	$	484,616	$	655	$	562,410
Issuance of restricted stock awards		156			1		-		-			-		-		1
Share-based compensation		-			-		1,735		-			-		-		1,735
Repurchase of common stock		(90	)		-		-		(4,111	)		-		-		(4,111	)
Net earnings		-			-		-		-			23,518		-		23,518
Foreign currency translation adjustment		-			-		-		-			-		66		66
Balance, June 30, 2021		27,072		$	146	$	154,101	$	(79,483	)	$	508,134	$	721	$	583,619

See Notes to Unaudited Consolidated Financial Statements.

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ePlus inc. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1.	ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS — Our company was founded in 1990 and is a Delaware corporation. ePlus inc. is sometimes referred to in this Quarterly Report on Form 10-Q as “we,” “our,” “us,” “ourselves,” or “ePlus.” ePlus inc. is a holding company that through its subsidiaries provides information technology solutions that 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, 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, 2022, and 2021, 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, 2022, and 2021, are not necessarily indicative of results that may be expected for any other interim period or for the full fiscal year ended March 31, 2023, or any other future period. These unaudited consolidated financial statements do not include all disclosures required by the accounting principles generally accepted in the United States (“US GAAP”) for annual financial statements. Our audited consolidated financial statements are contained in our annual report on Form 10-K for the year ended March 31, 2022 (“2022 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 35% of our technology segment’s net sales for the three months ended June 30, 2022, and 42% for the three months ended June 30, 2021.

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, 2022.

STOCK SPLIT — On December 13, 2021, we completed a two-for-one stock split in the form of a stock dividend. References made to outstanding shares or per share amounts in the accompanying financial statements and disclosures have been retroactively adjusted for this stock split.

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REVENUES

CONTRACT BALANCES

Accounts receivable – trade consists entirely of amounts due from contracts with customers. In addition, we had $57.1 million and $47.5 million of receivables from contracts with customers included within financing receivables as of June 30, 2022, and March 31, 2022, respectively. The following table provides the balance of contract liabilities from contracts with customers (in thousands):

	June 30, 2022		March 31, 2022
Current (included in deferred revenue)	$	100,092	$	85,826
Non-current (included in other liabilities)	$	30,574	$	30,086

Revenue recognized from the beginning contract liability balance was $24.9million and $21.5 million for the three months ended June 30, 2022, and 2021, respectively.

PERFORMANCE OBLIGATIONS

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

Remainder of the year ending March 31, 2023	$	43,194
Year ending March 31, 2024		24,954
Year ending March 31, 2025		9,466
Year ending March 31, 2026		2,510
Year ending March 31, 2027 and thereafter		986
Total remaining performance obligations	$	81,110

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.

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

The following table provides the profit recognized for sales-type leases at their commencement date, including modifications that are recognized on a net basis, for the three months ended June 30, 2022, and 2021 (in thousands):

	Three months ended June 30,
	2022		2021
Net sales	$	4,983	$	3,817
Cost of sales		4,067		3,365
Gross profit	$	916	$	452

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The following table provides interest income in aggregate on our sales-type leases and lease income on our operating leases for the three months ended June 30, 2022, and 2021 (in thousands):

	Three months ended June 30,
	2022		2021
Interest income on sales-type leases	$	861	$	1,290
Lease income on operating leases	$	4,582	$	5,210

FINANCING RECEIVABLES—NET

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

June 30,2022	Notes Receivable			Lease Receivables			Financing Receivables
Gross receivables	$	88,178		$	51,103		$	139,281
Unguaranteed residual value (1)		-			9,233			9,233
Unearned income		(3,346	)		(4,996	)		(8,342	)
Allowance for credit losses (2)		(792	)		(913	)		(1,705	)
Total, net	$	84,040		$	54,427		$	138,467
Reported as:
Current	$	52,547		$	22,623		$	75,170
Long-term		31,493			31,804			63,297
Total, net	$	84,040		$	54,427		$	138,467

(1)

Includes unguaranteed residual values of $5,607 thousand that we retained after selling the related lease receivable.

(2)

Refer to Note 6, “Allowance for Credit Losses” for details.

March 31,2022	Notes Receivable			Lease Receivables			Financing Receivables
Gross receivables	$	80,517		$	38,788		$	119,305
Unguaranteed residual value (1)		-			9,141			9,141
Unearned income		(2,728	)		(3,604	)		(6,332	)
Allowance for credit losses (2)		(708	)		(681	)		(1,389	)
Total, net	$	77,081		$	43,644		$	120,725
Reported as:
Current	$	45,415		$	16,077		$	61,492
Long-term		31,666			27,567			59,233
Total, net	$	77,081		$	43,644		$	120,725

(1)

Includes unguaranteed residual values of $6,424 thousand that we retained after selling the related lease receivable.

(2)

Refer to Note 6, “Allowance for Credit Losses” for details.

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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):

	June 30, 2022			March 31, 2022
Cost of equipment under operating leases	$	14,322		$	13,044
Accumulated depreciation		(8,900	)		(7,985	)
Investment in operating lease equipment—net (1)	$	5,422		$	5,059

(1)

Amounts include estimated unguaranteed residual values of $1.8 million and $1.7million as of June 30, 2022, and March 31, 2022, respectively.

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, 2022, and March 31, 2022, we had financing receivables of $29.0 million and $21.1 million, respectively, and operating leases of $1.8 million and $2.0 million, respectively, which were collateral for non-recourse notes payable. See Note 7, “Credit Facility and Notes Payable.”

For transfers accounted for as a sale, 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, 2022, and 2021, we recognized net gains of $1.8 million and $3.2 million, respectively, and total proceeds from these sales were $52.5 million and $75.3 million, respectively.

When we retain servicing obligations in transfers accounted for as sales, we allocate a portion of the proceeds to deferred revenue, which is recognized as we perform the services. As of June 30, 2022, and March 31, 2022, we had deferred revenue of $0.4 million and $0.5 million, respectively, for servicing obligations.

In a limited number of transfers accounted for as sales, we indemnified the assignee if the lessee elects to early terminate the lease. As of June 30, 2022, and March 31, 2022, the total potential payments that could result from these indemnities is immaterial.

4.	LESSEE ACCOUNTING

We lease office space for periods up to six 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 as part of selling, general and administrative expenses. We recognized rent expense of $1.3 million for both the three months ended June 30, 2022, and June 30, 2021.

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5.	GOODWILL AND OTHER INTANGIBLE ASSETS

GOODWILL

The following table summarizes the changes in the carrying amount of goodwill for the three months ended June 30, 2022 (in thousands):

	Three months ended June 30, 2022
	Goodwill			Accumulated Impairment Loss			Net Carrying Amount
Beginning balance	$	135,216		$	(8,673	)	$	126,543
Foreign currency translations		(165	)		-			(165	)
Ending balance	$	135,051		$	(8,673	)	$	126,378

Goodwill represents the premium paid over the fair value of the net tangible and intangible assets that are individually identified and separately recognized in business combinations. Our entire balance as of June 30, 2022, relates to our technology segment, which we also determined to be one reporting unit. The change in our goodwill balance during the three months ended June 30, 2022, 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, 2021, we performed a qualitative assessment of goodwill and concluded that, more likely than not, the fair value of our technology reporting unit continued to substantially exceed its carrying value.

OTHER INTANGIBLE ASSETS

Our other intangible assets consist of the following on June 30, 2022, and March 31, 2022 (in thousands):

	June 30, 2022							March 31, 2022
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Customer relationships & other intangibles	$	77,041	$	(54,101	)	$	22,940	$	77,224	$	(52,087	)	$	25,137
Capitalized software development		10,517		(8,689	)		1,828		10,517		(8,404	)		2,113
Total	$	87,558	$	(62,790	)	$	24,768	$	87,741	$	(60,491	)	$	27,250

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 $2.2 million and $2.7 million for the three months ended June 30, 2022, and June 30, 2021, respectively.

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6.	ALLOWANCE FOR CREDIT LOSSES

The following table provides the activity in our allowance for credit losses for the three months ended June 30, 2022, and 2021 (in thousands):

	Accounts Receivable			Notes Receivable		Lease Receivables		Total
Balance April 1, 2022	$	2,411		$	708	$	681	$	3,800
Provision for credit losses		382			84		232		698
Write-offs and other		(65	)		-		-		(65	)
Balance June 30,2022	$	2,728		$	792	$	913	$	4,433

	Accounts Receivable			Notes Receivable		Lease Receivables			Total
Balance April 1, 2021	$	2,064		$	1,212	$	1,171		$	4,447
Provision for credit losses		(40	)		77		(298	)		(261	)
Write-offs and other		(22	)		-		-			(22	)
Balance June 30,2021	$	2,002		$	1,289	$	873		$	4,164

We evaluate our customers using an internally assigned credit quality rating “CQR”. The CQR categories of our financing receivables are:

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

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

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

The following table provides the amortized cost basis of our financing receivables by CQR and by credit origination year as of June 30, 2022 (in thousands):

	Amortized cost basis by origination year ending March 31,
	2023		2022		2021		2020		2019		2018		Total		Non-recourse debt (2)			Net credit exposure
Notes receivable:
High CQR	$	22,785	$	18,879	$	24,314	$	969	$	158	$	3	$	67,108	$	(24,331	)	$	42,777
Average CQR		7,471		6,784		2,671		746		52		-		17,724		(8,280	)		9,444
Low CQR		-		-		-		-		-		-		-		-			-
Total	$	30,256	$	25,663	$	26,985	$	1,715	$	210	$	3	$	84,832	$	(32,611	)	$	52,221

Lease receivables:
High CQR	$	14,828	$	9,539	$	4,209	$	1,809	$	731	$	44	$	31,160	$	(3,531	)	$	27,629
Average CQR		6,654		9,029		2,334		473		39		44		18,573		(188	)		18,385
Low CQR		-		-		-		-		-		-		-		-			-
Total	$	21,482	$	18,568	$	6,543	$	2,282	$	770	$	88	$	49,733	$	(3,719	)	$	46,014

Total amortized cost (1)	$	51,738	$	44,231	$	33,528	$	3,997	$	980	$	91	$	134,565	$	(36,330	)	$	98,235

(1)	Unguaranteed residual values of $5,607 thousand that we retained after selling the related lease receivable is excluded from amortized cost.

(2)	Transfers consist of receivables that have been transferred to third-party financial institutions on a non-recourse basis.

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The following table provides the amortized cost basis of our financing receivables by CQR and by credit origination year as of March 31, 2022 (in thousands):

	Amortized cost basis by origination year ending March 31,
	2022		2021		2020		2019		2018		2017		Total		Transfers (2)			Net credit exposure

Notes receivable:
High CQR	$	35,264	$	28,005	$	1,297	$	345	$	2	$	4	$	64,917	$	(30,274	)	$	34,643
Average CQR		8,922		2,976		758		213		3		-		12,872		(4,763	)		8,109
Low CQR		-		-		-		-		-		-		-		-			-
Total	$	44,186	$	30,981	$	2,055	$	558	$	5	$	4	$	77,789	$	(35,037	)	$	42,752

Lease receivables:
High CQR	$	14,549	$	5,002	$	2,499	$	902	$	50	$	11	$	23,013	$	(3,385	)	$	19,628
Average CQR		10,936		3,092		741		47		72		-		14,888		(347	)		14,541
Low CQR		-		-		-		-		-		-		-		-			-
Total	$	25,485	$	8,094	$	3,240	$	949	$	122	$	11	$	37,901	$	(3,732	)	$	34,169

Total amortized cost (1)	$	69,671	$	39,075	$	5,295	$	1,507	$	127	$	15	$	115,690	$	(38,769	)	$	76,921

(1)	Unguaranteed residual values of $6,424 thousand that we retained after selling the related lease receivable is excluded from amortized cost.

(2)

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

The following table provides an aging analysis of our financing receivables as of June 30, 2022 (in thousands):

	31-60 Days Past Due		61-90 Days Past Due		> 90 Days Past Due		Total Past Due		Current		Total Billed		Unbilled		Amortized Cost
Notes receivable	$	268	$	425	$	97	$	790	$	5,623	$	6,413	$	78,419	$	84,832
Lease receivables		240		154		551		945		905		1,850		47,883		49,733
Total	$	508	$	579	$	648	$	1,735	$	6,528	$	8,263	$	126,302	$	134,565

The following table provides an aging analysis of our financing receivables as of March 31, 2022 (in thousands):

	31-60 Days Past Due		61-90 Days Past Due		> 90 Days Past Due		Total Past Due		Current		Total Billed		Unbilled		Amortized Cost
Notes receivable	$	187	$	37	$	23	$	247	$	5,307	$	5,554	$	72,235	$	77,789
Lease receivables		115		325		430		870		639		1,509		36,392		37,901
Total	$	302	$	362	$	453	$	1,117	$	5,946	$	7,063	$	108,627	$	115,690

Our financial assets on nonaccrual status were not significant as of June 30, 2022, and March 31, 2022.

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7.	CREDIT FACILITY AND NOTES PAYABLE

CREDIT FACILITY

We finance the operations of our subsidiaries ePlus Technology, inc., ePlus Technology Services, inc., and SLAIT Consulting, LLC (collectively, the “Borrowers”) in our technology segment through a credit facility with Wells Fargo Commercial Distribution Finance, LLC (“WFCDF”). The WFCDF credit facility has a floor plan facility and a revolving credit facility.

Under the floor plan facility, we had an outstanding balance of $138.0 million and $145.3 million as of June 30, 2022, and March 31, 2022, respectively. On our balance sheet, our liability under the floor plan facility is presented as accounts payable – floor plan.

Under the revolving credit facility, we had $40.0million outstanding as of June 30, 2022, and no balance outstanding as of March 31, 2022. On our balance sheet, our liability under the revolving credit facility is presented as part of recourse notes payable – current.

The fair value of the outstanding balances under the WFCDF credit facility were approximately equal to their carrying value as of June 30, 2022, and March 31, 2022.

On October 13, 2021, the Borrowers amended, restated, and replaced in entirety their then-existing credit agreements with WFCDF. The new credit facility is established by a syndicate of banks for which WFCDF acts as administrative agent and consists of a discretionary senior secured floorplan facility in favor of the Borrowers in the aggregate principal amount of up to $375 million, an increase from $275 million, together with a sublimit for a revolving credit facility for up to $100 million (collectively, the “2021 Credit Facility”).

The amount of principal available is subject to a borrowing base determined by, among other things, the Borrowers’ accounts receivable and inventory, each pursuant to a formula and subject to certain reserves. Loans accrue interest at a rate per annum equal to LIBOR plus 1.75%. The LIBOR rate is based upon one-month, three-month, six-month, and 12-month LIBOR periods, as selected by the Borrowers, and subject to a floor of 0.00%.

Our borrowings under the 2021 Credit Facility are secured by the assets of the Borrowers. Additionally, the 2021 Credit Facility requires a guaranty of $10.5 million by ePlus inc.

Under the 2021 Credit Facility, and under the predecessor WFCDF credit facility, the Borrowers are restricted in their ability to pay dividends to ePlus inc. unless their available borrowing meets or met certain thresholds. As of June 30, 2022, and March 31, 2022, their available borrowing met the thresholds such that there were no restrictions on their ability to pay dividends.

The 2021 Credit Facility has an initial one-yearterm, which automatically renews for successive one-year terms thereafter. However, either the Borrowers or WFCDF may terminate by providing a written termination notice to the other party no less than 90 days prior to such termination.

RECOURSE NOTES PAYABLE

Recourse notes payable consist of borrowings that, in the event of default, the lender has recourse against us. As of June 30, 2022, we had $51.4 million in recourse borrowings consisting of $40.0 million outstanding under our revolving WFCDF credit facility, and $11.4 million arising from one installment payment arrangement within our technology segment. Our payments under this installment agreement are due quarterly in amounts that are correlated to the payments due to us from a customer under a related notes receivable. We discounted our payments due under this installment agreement to calculate our payable balance using an interest rate of 3.50% as of both June 30, 2022, and March 31, 2022.

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NON-RECOURSE NOTES PAYABLE

Non-recourse notes payable consists of borrowings that, in the event of a default by a customer, the lender generally only has recourse against the customer, and the assets serving as collateral, but not against us. As of June 30, 2022, and March 31, 2022, we had $26.4 million and $21.2 million, respectively, of non-recourse borrowings that were collateralized by investments in notes and leases. Principal and interest payments are generally due 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 3.78% and 3.59%, as of June 30, 2022, and March 31, 2022, respectively.

8.	COMMITMENTS AND CONTINGENCIES

LEGAL PROCEEDINGS

We are subject to various legal proceedings, as well as demands, claims and threatened litigation, that arise in the normal course of our business and have not been fully resolved. The ultimate outcome of any litigation or any other legal dispute 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. As of June 30, 2022, we do not believe that there is a reasonable possibility that any material loss exceeding the amounts already recognized for these proceedings and matters, if any, has been incurred. Any outcome, whether favorable or unfavorable, may materially and adversely affect us due to legal costs and expenses, diversion of management attention and other factors. We expense legal costs in the period incurred. We cannot assure that additional contingencies of a legal nature or contingencies having legal aspects will not be asserted against the us in the future, and these matters could relate to prior, current, or future transactions or events.

9.	EARNINGS PER SHARE

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

The following table provides a reconciliation of the numerators and denominators used to calculate basic and diluted net income per common share as disclosed on our unaudited consolidated statements of operations for the three months ended June 30, 2022, and 2021, respectively (in thousands, except per share data).

	Three Months Ended June 30,
	2022		2021

Net earnings attributable to common shareholders - basic and diluted	$	22,339	$	23,518

Basic and diluted common shares outstanding:
Weighted average common shares outstanding — basic		26,513		26,666
Effect of dilutive shares		172		216
Weighted average shares common outstanding — diluted		26,685		26,882

Earnings per common share - basic	$	0.84	$	0.88

Earnings per common share - diluted	$	0.84	$	0.87

10.	STOCKHOLDERS’ EQUITY

SHARE REPURCHASE PLAN

On March 24, 2022, our board of directors authorized the repurchase of up to 1,000,000 shares of our outstanding common stock, over a 12-month period beginning May 28, 2022. On March 18, 2021, our board of directors authorized the repurchase of up to 1,000,000 shares of our outstanding common stock, over a 12-month period beginning May 28, 2021. Under both authorized programs, purchases may be made from time to time in the open market, or in privately negotiated transactions, subject to availability. Any repurchased shares will have the status of treasury shares and may be used, when needed, for general corporate purposes.

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During the three months ended June 30, 2022, we purchased 70,473 shares of our outstanding common stock at a value of $3.9 million under the share repurchase plan; we also purchased 58,080shares of common stock at a value of $3.3 million to satisfy tax withholding obligations relating to the vesting of employees’ restricted stock.

During the three months ended June 30, 2021, we purchased 35,258 shares of our outstanding common stock at a value of $1.6 million under the share repurchase plan; we also purchased 55,430shares of common stock at a value of $2.6 million to satisfy tax withholding obligations relating to the vesting of employees’ restricted stock.

11.	SHARE-BASED COMPENSATION

SHARE-BASED PLANS

As of June 30, 2022, we had share-based awards outstanding under the following plans: (1) the 2017 Non-Employee Director Long-Term Incentive Plan (“2017 Director LTIP”), (2) the 2012 Employee Long-Term Incentive Plan (“2012 Employee LTIP”), and (3) the 2021 Employee Long-Term Incentive Plan (“2021 Employee LTIP”).

The 2021 Employee LTIP was approved by our shareholders on September 16, 2021, and became effective October 1, 2021. The 2021 Employee LTIP replaced the 2012 Employee LTIP that had previously been approved by our stockholders on September 13, 2012. Beginning September 16, 2021, we permanently ceased issuing any additional shares under the 2012 Employee LTIP.

These share-based plans define fair market value as the closing sales price of a share of common stock as quoted on any established stock exchange for such date or the most recent trading day preceding such date if there were no trades on such date.

RESTRICTED STOCK ACTIVITY

For the three months ended June 30, 2022, we granted 774 shares under the 2017 Director LTIP, and 138,643 restricted shares under the 2021 Employee LTIP. For the three months ended June 30, 2021, we granted 828 shares under the 2017 Director LTIP, and 155,722 restricted shares under the 2012 Employee LTIP. A summary of our restricted stock activity, is as follows:

	Number of Shares			Weighted Average Grant-date Fair Value

Nonvested April 1, 2022		343,806		$	41.01
Granted		139,417		$	58.51
Vested		(163,034	)	$	39.25
Forfeited		(4,382	)	$	40.77
Nonvested June 30,2022		315,807		$	49.65

COMPENSATION EXPENSE

We recognize compensation cost for awards of restricted stock with graded vesting on a straight-line basis over the requisite service period. There are no additional conditions for vesting other than service conditions. During the three months ended June 30, 2022, and 2021, we recognized $1.8 million and $1.7 million of total share-based compensation expense, respectively. Unrecognized compensation expense related to unvested restricted stock was $14.9 million as of June 30, 2022, which will be fully recognized over the next 36months.

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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. Our estimated contribution expense to the plan for the three months ended June 30, 2022, and 2021, was $1.1 million and $0.8 million, respectively.

12.	INCOME TAXES

Our provision for income tax expense was $8.7 million for the three months ended June 30, 2022, as compared to $9.1 million for the same period in the prior year. Our effective income tax rate for the three months ended June 30, 2022, was 28.0%, comparable to 27.8% for the same period in the prior year. The effective tax rate for the three months ended June 30, 2022, and June 30, 2021, differed from the US federal statutory rate of 21.0% primarily due to state and local income taxes and non-deductible executive compensation.

13.	FAIR VALUE OF FINANCIAL INSTRUMENTS

The following table summarizes the fair value hierarchy of our financial instruments as of June 30, 2022, and March 31, 2022 (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, 2022
Assets:
Money market funds	$	23,193	$	23,193	$	-	$	-

March 31, 2022
Assets:
Money market funds	$	18,138	$	18,138	$	-	$	-

14.	BUSINESS COMBINATIONS

FUTURE COM

On July 15, 2022, our subsidiary, ePlus Technology, inc., acquired certain assets and liabilities of Future Com, Ltd., a Texas-based provider of cyber security solutions, cloud security and security consulting services throughout the US. Our acquisition provides access to enhanced engineering, sales, and services delivery capabilities in the South-Central US region, as well as bolstering the skills and expertise surrounding ePlus’ growing cyber security practice. Our preliminary total consideration transferred was $13.0 million, which was paid in cash at closing. As of our filing date, our initial accounting for the business combination is incomplete.

15.	SEGMENT REPORTING

Our operations are conducted through twooperating 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.

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Our reportable segment information for the three month periods ended June 30, 2022, and 2021 are summarized in the following table (in thousands):

	Three Months Ended
	June 30, 2022							June 30, 2021
	Technology		Financing		Total			Technology		Financing		Total

Net Sales
Product	$	385,676	$	9,574	$	395,250		$	344,766	$	16,291	$	361,057
Service		63,109		-		63,109			55,592		-		55,592
Total		448,785		9,574		458,359			400,358		16,291		416,649

Cost of Sales
Product		302,508		1,702		304,210			271,015		6,212		277,227
Service		40,626		-		40,626			33,910		-		33,910
Total		343,134		1,702		344,836			304,925		6,212		311,137

Gross Profit		105,651		7,872		113,523			95,433		10,079		105,512

Selling, general, and administrative		73,112		3,655		76,767			66,153		2,622		68,775
Depreciation and amortization		3,182		28		3,210			3,898		28		3,926
Interest and financing costs		138		225		363			159		200		359
Operating expenses		76,432		3,908		80,340			70,210		2,850		73,060

Operating income		29,219		3,964		33,183			25,223		7,229		32,452

Other income (expense)						(2,153	)						123

Earnings before tax					$	31,030						$	32,575

Net Sales
Contracts with customers	$	443,802	$	945	$	444,747		$	396,541	$	5,418	$	401,959
Financing and other		4,983		8,629		13,612			3,817		10,873		14,690
Total	$	448,785	$	9,574	$	458,359		$	400,358	$	16,291	$	416,649

Selected Financial Data - Statement of Cash Flow

Depreciation and amortization	$	3,515	$	957	$	4,472		$	4,103	$	1,979	$	6,082
Purchases of property, equipment and operating lease equipment	$	1,286	$	491	$	1,777		$	1,307	$	5,687	$	6,994

Selected Financial Data - Balance Sheet

Total assets	$	1,007,898	$	248,252	$	1,256,150		$	868,276	$	209,140	$	1,077,416

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TECHNOLOGY SEGMENT DISAGGREGATION OF REVENUE

We analyze net sales for our technology segment by customer end market and by vendor, as opposed to discrete product and service categories, which are summarized below (in thousands):

	Three Months Ended June 30,
	2022			2021
Customer end market:
Telecom, Media & Entertainment	$	128,277		$	112,192
Technology		69,862			69,140
Healthcare		68,512			54,688
State and local government and educational institutions		64,602			65,415
Financial Services		33,299			30,011
All others		84,233			68,912
Net sales		448,785			400,358

Less: Revenue from financing and other		(4,983	)		(3,817	)

Revenue from contracts with customers	$	443,802		$	396,541

	Three Months Ended June 30,
	2022			2021
Vendor:
Cisco Systems	$	156,878		$	166,902
Dell EMC		61,873			26,340
Juniper Networks		22,509			24,714
NetApp		13,985			10,457
Arista Networks		11,172			11,498
All others		182,368			160,447
Net sales		448,785			400,358

Less: Revenue from financing and other		(4,983	)		(3,817	)

Revenue from contracts with customers	$	443,802		$	396,541

FINANCING SEGMENT DISAGGREGATION OF REVENUE

We analyze our revenues within our financing segment based on the nature of the arrangement. Our financing revenue generally consists of portfolio income, transactional gains, and post-contract earnings including month-to-month rents and the sales of off-lease equipment. All of our revenues from contracts with customers within our financing segment is from the sales of off-lease equipment.

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Item 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT 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 2022 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 2022 Annual Report, as supplemented in subsequently filed reports, and in Part II, Item 1A. “Risk Factors” in this Report.

EXECUTIVE OVERVIEW

BUSINESS DESCRIPTION

We are a leading solutions provider in the areas of security, cloud, networking, data center, collaboration, and emerging technologies. We deliver actionable outcomes for organizations by using information technology (“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 us to craft optimized solutions that take advantage of the cost, scale, and efficiency of private, public and hybrid cloud in an evolving market. As part of our solutions, we provide consulting, professional services, managed services, IT staff augmentation, and complete lifecycle management. Additionally, we offer flexible financing for purchases from us and from third-parties. 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-leading technologies from partners such as Amazon Web Services, Arista Networks, Check Point, Cisco Systems, Citrix, Commvault, Dell EMC, F5 Networks, Fortinet, Gigamon, HPE, Juniper Networks, Lenovo, Microsoft, NetApp, Nutanix, NVIDIA, Oracle, Palo Alto Networks, Pure Storage, Rubrik, Splunk, Varonis, 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 on 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, is unique in the industry. This broad portfolio enables us to deliver a customized customer experience that spans the continuum from fast delivery of competitively priced products and services to subsequent management and maintenance, and through to end-of-life disposal services. This approach permits ePlus to deploy sophisticated solutions enabling our customers’ business outcomes.

Our go-to-market strategy focuses primarily on diverse end-markets for middle market to large enterprises. We serve customers in markets including telecom, media and entertainment, technology, state and local government and educational institutions (“SLED”), healthcare, and financial services. We sell to customers in the United States (“US”), which accounts for most of our sales, and to customers in select international markets including the United Kingdom (“UK”), the European Union (“EU”), India, and Singapore. Our technology segment accounted for 98% of our net sales and 88% of our operating income, while our financing segment accounted for 2% of our net sales and 12% of our operating income, for the three months ended June 30, 2022.

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BUSINESS TRENDS

We believe the following key factors are impacting our business performance and our ability to achieve business results:

•

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

•

A worldwide shortage of certain IT products is resulting from, among other things, shortages in semiconductors and other product components. Like others, 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, vendor return and cancellation policies, and our ability to meet customer demands. We continue to work closely with our suppliers to further mitigate disruptions outside our control. Despite these actions, we believe extended lead times will likely persist for at least the next few quarters.

•

We are experiencing increases in prices from our suppliers as well as rising wages and interest rates. We generally have been able to pass price increases to our customers. Our labor costs related to services we perform will take longer to pass to customers that have services engagements where prices may be set. Our financing quotes are generally indexed to market changes to enable us to change rates from time of quote to funding. Financing transactions funded with our cash flows, not debt, are subject to interest rate risk. If the market interest rate exceeds our internal rate of return, we may not fund the transaction to obtain the proceeds and lock in our profit on the transaction. There can be no assurances that inflation will not have a material impact on our sales, gross profit, or operating costs in the future.

•

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

•

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

KEY BUSINESS METRICS

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

These key indicators include financial information that is prepared in accordance with US GAAP and presented in our unaudited consolidated financial statements, as well as Non-GAAP performance measurement tools. Generally, a Non-GAAP financial measure is a numerical measure of a company’s performance or financial position that either excludes or includes amounts that are not normally 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.

Our key business metrics for the three month periods ended June 30, 2022, and 2021 are summarized in the following tables (dollars in thousands):

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	Three Months Ended June 30,
Consolidated	2022			2021
Net sales	$	458,359		$	416,649

Gross profit	$	113,523		$	105,512
Gross margin		24.8	%		25.3	%
Operating income margin		7.2	%		7.8	%

Net earnings	$	22,339		$	23,518
Net earnings margin		4.9	%		5.6	%
Net earnings per common share - diluted	$	0.84		$	0.87

Non-GAAP: Net earnings (1)	$	26,513		$	26,353
Non-GAAP: Net earnings per common share - diluted (1)	$	0.99		$	0.98

Adjusted EBITDA (2)	$	38,304		$	38,272
Adjusted EBITDA margin		8.4	%		9.2	%

Technology Segment
Net sales	$	448,785		$	400,358
Adjusted gross billings (3)	$	701,943		$	633,007

Gross profit	$	105,651		$	95,433
Gross margin		23.5	%		23.8	%

Operating income	$	29,219		$	25,223
Adjusted EBITDA (2)	$	34,254		$	30,958

Financing Segment
Net sales	$	9,574		$	16,291

Gross profit	$	7,872		$	10,079

Operating income	$	3,964		$	7,229
Adjusted EBITDA (2)	$	4,050		$	7,314

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

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

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	Three Months Ended June 30,
	2022		2021
GAAP: Earnings before tax	$	31,030	$	32,575
Share based compensation		1,773		1,735
Acquisition related amortization expense		2,183		2,696
Other (income) expense		2,153		(123	)
Non-GAAP: Earnings before provision for income taxes		37,139		36,883

GAAP: Provision for income taxes		8,691		9,057
Share based compensation		508		496
Acquisition related amortization expense		617		757
Other (income) expense		616		(35	)
Tax benefit on restricted stock		194		255
Non-GAAP: Provision for income taxes		10,626		10,530

Non-GAAP: Net earnings	$	26,513	$	26,353

	Three Months Ended June 30,
	2022			2021
GAAP: Net earnings per common share - diluted	$	0.84		$	0.87

Share based compensation		0.04			0.05
Acquisition related amortization expense		0.06			0.07
Other (income) expense		0.06			-
Tax benefit on restricted stock		(0.01	)		(0.01	)
Total non-GAAP adjustments - net of tax		0.15			0.11

Non-GAAP: Net earnings per common share - diluted	$	0.99		$	0.98

(2)

We define Adjusted EBITDA as net earnings calculated in accordance with GAAP, adjusted for the following: interest expense, depreciation and amortization, share-based compensation, acquisition and integration expenses, provision for income taxes, and other income. Segment Adjusted EBITDA is defined as operating income calculated in accordance with GAAP, adjusted for interest expense, share-based compensation, acquisition and integration expenses, and depreciation and amortization. We consider the interest on notes payable from our financing segment and depreciation expense presented within cost of sales, which includes depreciation on assets financed as operating leases, to be operating expenses. As such, they are not included in the amounts added back to net earnings in the Adjusted EBITDA calculation. We provide below a reconciliation of Adjusted EBITDA to net earnings, which is the most directly comparable financial measure to this Non-GAAP financial measure. Adjusted EBITDA margin is our calculation of Adjusted EBITDA divided by net sales. 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 Adjusted EBITDA as a supplemental measure of our performance to gain insight into our operating performance. We believe that the exclusion of other income in calculating Adjusted EBITDA and Adjusted EBITDA margin provides management and investors a useful measure for period-to-period comparisons of our business and operating results by excluding items that management believes are not reflective of our underlying operating performance. Accordingly, we believe that Adjusted EBITDA and Adjusted EBITDA margin provide useful information to investors and others in understanding and evaluating our operating results. However, our use of Adjusted EBITDA and Adjusted EBITDA margin as analytical tools has limitations, and you should not consider them in isolation or as substitutes for analysis of our financial results as reported under GAAP. In addition, other companies, including companies in our industry, might calculate Adjusted EBITDA and Adjusted EBITDA margin or similarly titled measures differently, which may reduce their usefulness as comparative measures.

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	Three Months Ended June 30,
Consolidated	2022		2021
Net earnings	$	22,339	$	23,518
Provision for income taxes		8,691		9,057
Share based compensation		1,773		1,735
Interest and financing costs		138		159
Depreciation and amortization		3,210		3,926
Other income (expense)		2,153		(123	)
Adjusted EBITDA	$	38,304	$	38,272

Technology Segment
Operating income	$	29,219	$	25,223
Depreciation and amortization		3,182		3,898
Share based compensation		1,715		1,678
Interest and financing costs		138		159
Adjusted EBITDA	$	34,254	$	30,958

Financing Segment
Operating income	$	3,964	$	7,229
Depreciation and amortization		28		28
Share based compensation		58		57
Adjusted EBITDA	$	4,050	$	7,314

(3)

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

	Three Months Ended June 30,
	2022		2021
Technology segment net sales	$	448,785	$	400,358
Costs incurred related to sales of third party maintenance, software assurance and subscription/SaaS licenses, and services		253,158		232,649
Adjusted gross billings	$	701,943	$	633,007

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

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CONSOLIDATED RESULTS OF OPERATIONS

Net sales for the three months ended June 30, 2022, increased $41.7 million, or 10.0%, to $458.4 million, as compared to $416.6 million for the same period in the prior year. Product sales for the three months ended June 30, 2022, increased $34.2 million, or 9.5%, to $395.3 million, as compared to $361.1 million for the same period in the prior year, due to increased demand and higher prices for some products in our technology segment. Service sales for the three months ended June 30, 2022, increased $7.5 million, or 13.5%, to $63.1 million, as compared to$55.6 million for the same period in the prior year, due to increases in both managed services and professional services. In the technology segment, we had increases in net sales to customers in telecom, media, and entertainment, healthcare, and professional services, which were partially offset by decreases in net sales to customers in manufacturing during the three months ended June 30, 2022, compared to the same period in the prior year.

Adjusted gross billings for the three months ended June 30, 2022, increased $68.9 million, or 10.9%, to $701.9 million, as compared to $633.0 million for the same period in the prior year. We had increases in adjusted gross billings to customers in telecom, media and entertainment, healthcare, financial services, professional services, and SLED, which were partially offset by decreases in adjusted gross billings to customers in the manufacturing market.

Consolidated gross profit for the three months ended June 30, 2022, increased $8.0 million, or 7.6%, to $113.5 million, as compared to $105.5 million for the same period in the prior year. Our increase in gross profit was due to higher net sales, offset by lower gross margin. Consolidated gross margins for the three months ended June 30, 2022, decreased 50 basis points to 24.8%, as compared to 25.3% for the same period in the prior year. Our decrease in gross margins was primarily due to a decrease in service margins, and a reduction in gross profit from our financing segment.

Operating expenses for the three months ended June 30, 2022, increased $7.3 million, or 10.0%, to $80.3 million, as compared to $73.1 million for the same period in the prior year. Our increase in operating expenses was primarily due to $4.0 million in higher salaries and benefits, $3.1 million in higher general and administrative expenses including higher software license and maintenance fees and higher travel and entertainment costs, $1.0 million in a higher provision for credit losses caused by an increase in our receivables over this period compared to a decrease in our receivables over the same period in the prior year, and offset by a $0.7 million decrease in depreciation and amortization. As of June 30, 2022, we had 1,637 employees, an increase of 90 from 1,547 as of June 30, 2021.

As a result of the foregoing, operating income for the three months ended June 30, 2022, increased $0.7 million, or 2.3%, to $33.2 million, as compared to $32.5 million for the same period in the prior year.

Consolidated net earnings for the three months ended June 30, 2022, decreased $1.2 million, or 5.0%, to $22.3 million, as compared to $23.5 million for the same period in the prior year, due to the increase in operating expenses and foreign exchange losses, offset by an increase in gross profit. Our effective tax rate for the three months ended June 30, 2022, was 28.0%, which is comparable to 27.8% in the prior year quarter.

Adjusted EBITDA for both the three months ended June 30, 2022, and 2021 was $38.3 million. Adjusted EBITDA margin for the three months ended June 30, 2022, decreased 80 basis points to 8.4%, as compared to the prior year period of 9.2%.

Diluted earnings per share for the three months ended June 30, 2022, decreased $0.03, or 3.4%, to $0.84 per share, as compared to $0.87 per share for same period in the prior year. Non-GAAP diluted earnings per share for the three months ended June 30, 2022, increased $0.01, or 1.0%, to $0.99, as compared to $0.98 for the same period in the prior year.

Cash and cash equivalents decreased $71.9 million, or 46.3%, to $83.5 million as of June 30, 2022, as compared to $155.4 million as of March 31, 2022. Our decrease in cash and cash equivalents was due to increases in our accounts receivable and inventory, partially offset by borrowings on our revolving credit facility. Additional uses of cash during the three months ended June 30, 2022, included cash paid of $7.2 million to repurchase outstanding shares of our common stock as part of our share repurchase plan and to satisfy the minimum tax withholding requirements on employee stock awards.

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SEGMENT OVERVIEW

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

TECHNOLOGY SEGMENT

Our technology segment earns revenues from sales of IT products, professional services, managed services, and staff augmentation. Our technology segment sells primarily to corporations, state and local governments, and higher education institutions. We sell across the US, which accounts for most of our sales, and in select international markets. Our technology segment also provides business-to-business supply chain management solutions for IT products.

Our customers generally purchase IT products and services from us under the terms and conditions of a customer master agreement (“CMA”). Our customers generally place orders for IT products using purchase orders. Customer orders from state and local governments may involve public bids and our written bid responses. Our customers generally purchase services from us under the terms of statements of work. Our charges for services may be fixed price or determined on time and materials.

We purchase IT products for resale from vendors and distributors. Our relationships with vendors are generally governed by our reseller authorization level. We achieve these authorization levels through purchase volume, certifications held by sales executives or engineers, and though contractual commitments. Our authorization level determines the types of products we can resell, variable discounts applied against the list price, funds provided for the marketing, and other special promotions.

We endeavor to minimize our cost of sales through vendor incentive programs. Our benefit from these programs is also determined by our reseller authorization level. These authorization levels are costly to maintain and vendors often change their incentive programs. As such, our ability to continue to reduce our costs of sales through participating in these programs is not guaranteed.

FINANCING SEGMENT

Our financing segment offers financing solutions to corporations, state and local governments, and higher education institutions. We provide financing across the US, which accounts for most of our sales, and in select international markets. Our financing segment earns revenues from leasing IT equipment, from financing purchases of third-party software licenses, software assurance, maintenance, and other services, and from selling IT equipment at the end of a lease.

Our financing revenue is generally earned from the following three sources:

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 on the sale of financial assets

•

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

FLUCTUATIONS IN OPERATING RESULTS

Our operating results may fluctuate due to customer demand for our products and services, supplier costs, product availability, changes in vendor incentive programs, interest rate fluctuations, the timing of sales of financial assets, general economic conditions, and differences between estimated residual values and actual amounts realized for leased equipment. We expect to continue to expand by opening new offices 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 impact our operating results.

CRITICAL ACCOUNTING ESTIMATES

Our 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 2022 Annual Report.

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SEGMENT RESULTS OF OPERATIONS

The three months ended June 30, 2022, compared to the three months ended June 30, 2021

TECHNOLOGY SEGMENT

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

	Three Months Ended June 30,				Change
	2022		2021		Change
Net sales
Product	$	385,676	$	344,766	$	40,910		11.9	%
Services		63,109		55,592		7,517		13.5	%
Total		448,785		400,358		48,427		12.1	%

Cost of sales
Product		302,508		271,015		31,493		11.6	%
Services		40,626		33,910		6,716		19.8	%
Total		343,134		304,925		38,209		12.5	%

Gross profit		105,651		95,433		10,218		10.7	%

Selling, general, and administrative		73,112		66,153		6,959		10.5	%
Depreciation and amortization		3,182		3,898		(716	)	(18.4	%)
Interest and financing costs		138		159		(21	)	(13.2	%)
Operating expenses		76,432		70,210		6,222		8.9	%

Operating income	$	29,219	$	25,223	$	3,996		15.8	%

Adjusted gross billings	$	701,943	$	633,007	$	68,936		10.9	%
Adjusted EBITDA	$	34,254	$	30,958	$	3,296		10.6	%

Net sales: Net sales for the three months ended June 30, 2022, increased $48.4 million, or 12.1%, to $448.8 million, as compared to $400.4 million for the same period in the prior year, due to increases in net sales from customers in telecom, media, and entertainment, healthcare, and professional services, which were partially offset by decreases in net sales to customers in manufacturing. Product sales for the three months ended June 30, 2022, increased $40.9 million, or 11.9%, to $385.7 million. Service sales for the three months ended June 30, 2022, increased $7.5 million, or 13.5%, to $63.1 million, as compared to $55.6 million for the same period in the prior year, due to increases in both managed services and professional services.

We rely on our vendors to fulfill a large majority of shipments to our customers. As of June 30, 2022, we had open orders of $1.0 billion and deferred revenue of $130.7 million. As of June 30, 2021, we had open orders of $565.8 million and deferred revenue of $100.3 million.

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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, 2022, and 2021 are summarized below:

	Twelve Months Ended June 30,						Change
Net sales by customer end market:	2022			2021			Change
Telecom, Media & Entertainment		29	%		27	%		2	%
Healthcare		16	%		13	%		3	%
Technology		14	%		16	%		(2	%)
SLED		14	%		15	%		(1	%)
Financial Services		9	%		12	%		(3	%)
All others		18	%		17	%		1	%
Total		100	%		100	%

	Twelve Months Ended June 30,						Change
Net sales by vendor:	2022			2021			Change
Cisco Systems		37	%		37	%		0	%
Dell EMC		10	%		7	%		3	%
Juniper Networks		5	%		7	%		(2	%)
NetApp		5	%		3	%		2	%
Arista Networks		2	%		4	%		(2	%)
All others		41	%		42	%		(1	%)
Total		100	%		100	%

Our revenues by customer end market have remained consistent over the year with over 80% of our revenues generated from customers within the five end markets identified above. During the trailing twelve month period ended June 30, 2022, we had an increase in the percentage of total revenues from customers in the telecom, media and entertainment and healthcare industry, and decreases in the percentage of total revenues in the financial services, technology, and SLED markets. These changes were driven by 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 majority of our revenues by vendor is derived from our top six suppliers. None of the vendors included within the “All others” category exceeded 5% of total revenues.

Cost of sales: Cost of sales for the three months ended June 30, 2022, increased $38.2 million, or 12.5%, to $343.1 million, as compared to $304.9 million for the same period in the prior year. Our gross margin decreased 30 basis points to 23.5% for the three months ended June 30, 2022, compared to 23.8% for the same period in the prior year. Our decrease in gross margins was primarily due to higher third-party costs incurred in providing our professional services.

Selling, general, and administrative: Selling, general, and administrative expenses for the three months ended June 30, 2022, increased $7.0 million, or 10.5%, to $73.1 million, as compared to $66.2 million for the same period in the prior year. Salaries and benefits increased $3.7 million, or 6.4% to $61.6 million, as compared to $57.9 million for the same period in the prior year, mainly due to an increase in variable compensation. Our technology segment had 1,602 employees as of June 30, 2022, an increase of 88 from 1,514 as of June 30, 2021. We added 77 additional customer facing employees, of which 59 were professional services and technical support personnel due to demand for our services.

General and administrative expenses for the three months ended June 30, 2022, increased $2.9 million, or 34.6%, to $11.1 million, as compared to $8.3 million for the same period in the prior year, due to higher software license and maintenance fees and higher travel and entertainment costs.

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Our provision for credit losses for the three months ended June 30, 2022 was $0.3 million, as compared to negligible expense for the same period in the prior year. Our higher provision for credit losses for the three months ended June 30, 2022 was due to changes in our net credit exposure.

Depreciation and amortization: Depreciation and amortization for the three months ended June 30, 2022, decreased $0.7 million, or 18.4%, to $3.2 million, as comparedto $3.9 million for the same period in the prior year, primarily due to less amortization from intangible assets acquired in past acquisitions as the rate of amortization declines each year.

Interest and financing costs: Interest and financing costs of $0.1 million were incurred in the three months ended June 30, 2022, as compared to $0.2 million for the same period in the prior year.

Segment operating income: As a result of the foregoing, operating income for the three months ended June 30, 2022, increased $4.0 million, or 15.8%, to $29.2 million, as compared to $25.2 million for the same period in the prior year.

Adjusted EBITDA for the three months ended June 30, 2022, increased $3.3 million, or 10.6%, to $34.3 million, as compared to $31.0 million for the same period in the prior year.

FINANCING SEGEMENT

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

	Three Months Ended June 30,				Change
	2022		2021		Change
Net sales	$	9,574	$	16,291	$	(6,717	)	(41.2	%)

Cost of sales		1,702		6,212		(4,510	)	(72.6	%)

Gross profit		7,872		10,079		(2,207	)	(21.9	%)

Selling, general, and administrative		3,655		2,622		1,033		39.4	%
Depreciation and amortization		28		28		-		0.0	%
Interest and financing costs		225		200		25		12.5	%
Operating expenses		3,908		2,850		1,058		37.1	%

Operating income	$	3,964	$	7,229	$	(3,265	)	(45.2	%)

Adjusted EBITDA	$	4,050	$	7,314	$	(3,264	)	(44.6	%)

Net sales: Net sales for the three months ended June 30, 2022, decreased $6.7 million, or 41.2%, to $9.6 million, as compared to $16.3 million for the same period in the prior year. The decrease in net sales was due to lower post contract earnings and transactional gains. For the three months ended June 30, 2022, we recognized net gains on sales of financial assets of $1.8 million and proceeds from these sales were $52.5 million. For the three months ended June 30, 2021, net gains on the sale of financial assets were $3.2 million and the proceeds from these sales were $75.3 million. As of June 30, 2022, our financing segment had $130.0 million in financing receivables and operating leases, compared to $141.7 million as of June 30, 2021, a decrease of $11.7 million, or 8.3%.

Cost of sales: Cost of sales for the three months ended June 30, 2022, decreased $4.5 million, or 72.6%, to $1.7 million, as compared to $6.2 million for the same period in the prior year, due to lower cost of sales on off-lease equipment and lower depreciation expense from operating leases. Gross profit decreased $2.2 million, or 21.9%, to $7.9 million for the three months ended June 30, 2022, as compared to $10.1 million in the prior year.

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Selling, general and administrative: Selling, general, and administrative expenses for the three months ended June 30, 2022, increased $1.0 million, or 39.4%, to $3.7 million, as compared to $2.6 million for the same period in the prior year, due to higher salaries and benefits consisting mostly of higher variable compensation, higher general and administrative expenses consisting mostly of higher business taxes, and a higher provision for credit losses caused by changes in our net credit exposure. Beginning in the second quarter of our fiscal year 2023, we anticipate completing our deployment of a new hosted software to manage our financing portfolio. Once we begin using the hosted software, we anticipate higher general and administrative costs of approximately $1.5 million per year related to amortizing the cost to implement the hosted software and annual fees paid to license the hosted software.

Interest and financing costs: Interest and financing costs for the both the three months ended June 30, 2022, and 2021, were $0.2 million. As of June 30, 2022, our notes payable was $26.4 million, an increase of $11.2 million, or 73.0% compared to notes payable of $15.3 million as of June 30, 2021. As of June 30, 2022, and 2021, our notes payable consisted entirely of non-recourse notes payable. Our weighted average interest rate for non-recourse notes payable was 3.78% and 3.66%, as of June 30, 2022, and 2021, respectively.

Segment operating income: As a result of the foregoing, both operating income and Adjusted EBITDA decreased $3.3 million to $4.0 million and $4.1 million, respectively, for the three months ended June 30, 2022, as compared to the prior year period.

CONSOLIDATED

Other income: Other income and expense for the three months ended June 30, 2022, was an expense of $2.2 million, due to foreign exchange losses, compared to income of $0.1 million in the prior year.

Income taxes: Our provision for income tax expense was $8.7 million for the three months ended June 30, 2022, as compared to $9.1 million for the same period in the prior year. Our effective income tax rate for the three months ended June 30, 2022, was 28.0%, which is comparable to 27.8% for the same period in the prior year.

Net earnings: As a result of the foregoing, our net earnings for the three months ended June 30, 2022, decreased $1.2 million, or 5.0%, to $22.3 million, as compared to $23.5 million during the same period in the prior year.

Basic and diluted earnings per common share were both $0.84 for the three months ended June 30, 2022, a decrease of $0.04 and $0.03, respectively, as compared to $0.88 and $0.87, respectively, for the same period in the prior year.

Non-GAAP diluted earnings per share for the three months ended June 30, 2022, increased $0.01, or 1.0%, to $0.99, as compared to $0.98 for the three months ended June 30, 2021.

Weighted average common shares outstanding was 26.5 million in the calculation of basic earnings per common share for the three months ended June 30, 2022, and 26.7 million in the calculation of diluted earnings per common share for the three months ended June 30, 2022. Weighted average common shares outstanding used in the calculation of basic earnings per common share, was 26.7 million for the three months ended June 30, 2021, and 26.9 million in the calculation of diluted earnings per common share for the three months ended June 30, 2021.

LIQUIDITY AND CAPITAL RESOURCES

LIQUIDITY OVERVIEW

We finance our operations through funds generated from operations and through borrowings. We use those funds to meet our capital requirements, which have historically consisted primarily of working capital for operational needs, capital expenditures, purchases of equipment for lease, payments of principal and interest on indebtedness outstanding, acquisitions and the repurchase of shares of our common stock.

Our borrowings in our technology segment are primarily through our WFCDF credit facility. Our borrowings in our financing segment are primarily through secured borrowings that involve transferring all or part of the contractual payments due to us to third-party financing institutions.

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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 standard business requirements for at least the next year.

Our ability to continue to expand, both organically and through acquisitions, is dependent upon our ability to generate enough cash flow from operations or from borrowing or other sources of financing as may be required.

CASH FLOWS

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

	Three Months Ended June 30,
	2022			2021
Net cash used in operating activities	$	(102,943	)	$	(65,136	)
Net cash used in investing activities		(1,692	)		(6,151	)
Net cash provided by financing activities		31,111			35,494
Effect of exchange rate changes on cash		1,634			71
Net decrease in cash and cash equivalents	$	(71,890	)	$	(35,722	)

Cash flows from operating activities: We used $102.9 million in operating activities during the three months ended June 30, 2022, compared to $65.1 million provided by operating activities for the three months ended June 30, 2021. See below for a breakdown of operating cash flows by segment (in thousands):

	Three Months Ended June 30,
	2022			2021
Technology segment	$	(104,645	)	$	(65,980	)
Financing segment		1,702			844
Net cash provided by (used in) operating activities	$	(102,943	)	$	(65,136	)

Technology segment: For the three months ended June 30, 2022, our technology segment used $104.6 million from operating activities primarily due to increases in our accounts receivable of $59.1 million and inventories of $92.7 million, offset by net earnings. Further, we had net repayments on the floor plan component of our credit facility of $7.3 million. We use this facility to manage working capital needs, however, we present changes in this balance as financing activity in our consolidated statement of cash flows.

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.

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,
	2022			2021
(DSO) Days sales outstanding (1)		61			61
(DIO) Days inventory outstanding (2)		30			13
(DPO) Days payable outstanding (3)		(45	)		(42	)
Cash conversion cycle		46			32

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

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

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

Our cash conversion cycle increased to 46 days as of June 30, 2022, as compared to 32 days as of June 30, 2021. Our standard payment term for customers is between 30-60 days; however, certain customer orders may be approved for extended payment terms. Our DPO increased 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. Our DSO remained the same at 61 days. The DSO for both June 30, 2022, and 2021, reflects higher sales to customers with terms greater than or equal to net 60 days. Our DIO increased to 30 days due to higher inventory balance. Inventory, which represents equipment ordered by customers but not yet delivered, increased 59.2% to $246.9 million as of June 30, 2022, up from $155.1 million as of March 31, 2022, due to ongoing projects with customers and supply constraints that lengthen the time over which we receive all the parts in an order for a completed delivery to our customers.

Financing segment: For the three months ended June 30, 2022, our financing segment provided $1.7 million from operating activities, primarily due to net earnings, decreases in accounts receivable, and increases in accounts payable-trade offset by increases in financing receivables-net. 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.

Cash flows related to investing activities: For the three months ended June 30, 2022, we used $1.7 million from investing activities, consisting of $1.8 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, 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.

Cash flows from financing activities: For the three months ended June 30, 2022, cash provided by financing activities was $31.1 million, consisting of net borrowings of non-recourse and recourse notes payable of $45.6 million, partially offset by $7.2 million in cash used to repurchase outstanding shares of our common stock and $7.3 million in net repayments on the floor plan component of our credit facility. 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.

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.

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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.

CREDIT FACILITY – TECHNOLOGY SEGMENT

We finance the operations of our subsidiaries ePlus Technology, inc., ePlus Technology Services, inc. and SLAIT Consulting, LLC (collectively, the “Borrowers”) in our technology segment through a credit facility with WFCDF. The WFCDF credit facility has a floor plan facility and a revolving credit facility.

On October 13, 2021, the Borrowers amended, restated, and replaced in their entirety their then-existing credit agreements with WFCDF. The new credit facility is established by a syndicate of banks for which WFCDF acts as administrative agent and consists of a discretionary senior secured floorplan facility in favor of the Borrowers in the aggregate principal amount of up to $375 million, together with a sublimit for a revolving credit facility for up to $100 million (collectively, the “2021 Credit Facility”).

Please refer to Note 7 “Credit Facility and Notes Payable” to the accompanying Consolidated Financial Statements included in "Part I, Item 1. Financial Statements" for additional information concerning our 2021 Credit Facility.

The loss of the 2021 Credit Facility could have a material adverse effect on our future results as we currently rely on this facility and its components for daily working capital and liquidity for our technology segment and as an operational function of our accounts payable process.

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

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

As of June 30, 2022, and March 31, 2022, we had a maximum credit limit of $375.0 million, and an outstanding balance on the floor plan facility of $138.0 million and $145.3 million, respectively. On our balance sheet, our liability under the floor plan facility is presented as part of accounts payable – floor plan.

Revolving credit facility: The outstanding balance under the revolving credit facility is presented as part of recourse notes payable- current on our consolidated balance sheets. Our borrowings and repayments under the revolving credit facility are included in “borrowings of non-recourse and recourse notes payable” and “repayments of non-recourse and recourse notes payable,” respectively, within cash flows from the financing activities in our consolidated statements of cash flows.

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As of June 30, 2022, the outstanding balance under the revolving credit facility was $40.0 million. As of March 31, 2022, we did not have any outstanding balance under the revolving credit facility. The maximum credit limit under this facility was $100.0 million as of both June 30, 2022, and March 31, 2022.

PERFORMANCE GUARANTEES

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

OFF-BALANCE SHEET ARRANGEMENTS

As part of our ongoing business, we do not participate in transactions that generate relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements, or other contractually narrow or limited purposes. As of June 30, 2022, we were not involved in any unconsolidated special purpose entity transactions.

ADEQUACY OF CAPITAL RESOURCES

The continued implementation of our business strategy will require a significant investment in both resources and managerial focus. In addition, we may selectively acquire other companies that have attractive customer relationships and skilled sales and/or engineering forces. We may also open 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 WFCDF or us. Additionally, while our lending partners in our financing segment have become more discerning in their approval processes, we currently have funding resources available for our transactions.

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 2022 Annual Report, as supplemented in subsequently filed reports, and in Part II, Item 1A. “Risk Factors” in this Report.

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

Item 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our cash flow may be adversely affected by the risks related to the COVID-19 pandemic, which may result in delays in the collections of our accounts receivables ornon-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. Our non-recourse instruments, which are denominated in US dollars, were entered for other than trading purposes and bear interest at a fixed rate. Because the interest rate on these instruments is fixed, changes in interest rates will not directly impact our cash flows. Financing transactions funded with our cash flows, not debt, and may be subject to interest rate risk. If the market interest rate exceeds our internal rate of return, we may not fund the transaction to obtain the proceeds. Borrowings under the WFCDF credit facility bear interest at a market-based variable rate. As of June 30, 2022, the aggregate fair value of our recourse and non-recourse borrowings approximated their carrying value.

We have foreign currency exposure when transactions are not denominated in our subsidiaries’ functional currency, which include purchases and sales of the products and services we provide, as well as loans with otherePlus entities. Additionally, 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. To date, foreign currency exposure associated with purchases and sales of the products and services we provide has not been significant. We have incurred foreign currency transaction gains and losses in certain foreign subsidiaries on US dollar denominated loans. Fluctuations in currency exchange rates may impact our results of operations and financial position.

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, 2022.

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, 2022, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

LIMITATIONS AND 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.

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PART II. OTHER INFORMATION

Item 1.

LEGAL PROCEEDINGS

Please refer to Note 8, “Commitment and Contingencies” to the accompanying Consolidated Financial Statements included in "Part I, Item 1. Financial Statements".

Item 1A.

RISK FACTORS

There has not been any material change in the risk factors disclosed in “Part I, Item 1A. Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended March 31, 2022.

Item 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table provides information regarding our total purchases of 128,553 shares of ePlus inc. common stock during the three months ended June 30, 2022, including a total of 70,473 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, 2022 through April 30, 2022		34,961	$	56.02		34,961		737,049	(2	)
May 1, 2022 through May 27, 2022		35,512	$	55.86		35,512		701,537	(3	)
May 28, 2022 through May 31, 2022		-	$	-		-		1,000,000	(4	)
June 1, 2022 through June 30, 2022		58,080	$	56.51		-		1,000,000	(5	)

(1)

All shares acquired were in open-market purchases, except for 58,080 shares, which were repurchased in June 2022 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, 2022, had purchase limitations on the number of shares of up to 1,000,000 shares. As of April 30, 2022, the remaining authorized shares to be purchased were 737,049.

(3)

As of May 27, 2022, the authorization under the then-existing share repurchase plan expired.

(4)

On March 24, 2022, the board of directors authorized the company to repurchase up to 1,000,000 shares of our outstanding common stock commencing on May 28, 2022, and continuing to May 27, 2023. As of May 31, 2022, the remaining authorized shares to be purchased were 1,000,000.

(5)

The share purchase authorization in place for the month ended June 30, 2022, had purchase limitations on the number of shares of up to 1,000,000 shares. As of June 30, 2022, the remaining authorized shares to be purchased were 1,000,000.

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

Item 3.

DEFAULTS UPON SENIOR SECURITIES

Not Applicable.

Item 4.

MINE SAFETY DISCLOSURES

Not Applicable.

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Item 5.

OTHER INFORMATION

None.

Item 6.

EXHIBITS

Exhibit Number		Exhibit Description

3.1		ePlus inc. Amended and Restated Certificate of Incorporation, as last amended November 9, 2021 (Incorporated herein by reference to Exhibit 3.1 to our Quarterly Report on Form 10-Q for the period ended December 31, 2021).

3.2		Amended and Restated Bylaws of ePlus inc., as of March 2, 2022. (Incorporated herein by reference to Exhibit 3.2 to our Annual Report on Form 10-K for the fiscal year ended March 31, 2022)

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

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

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

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

101.SCH		Inline XBRL Taxonomy Extension Schema Document

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document

104		Cover Page Interactive Data File (embedded within the Exhibit 101 Inline XBRL document)

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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 3, 2022	/s/ MARK P. MARRON
	By: Mark P. Marron
	Chief Executive Officer and President
	(Principal Executive Officer)

Date: August 3, 2022	/s/ ELAINE D. MARION
	By: Elaine D. Marion
	Chief Financial Officer
	(Principal Financial Officer)

ePlus - 10-Q quarterly report FY2023 Q1

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