Eplus Inc 10-Q for FY2024 Q1
Eplus Inc (PLUS)
10-Q
2023-08-07
For: 2023-06-30
View Original
Added on
April 12, 2026
About this 10-Q
Eplus Inc filed this 10-Q on August 7, 2023, covering the quarter ended June 30, 2023 (FY2024 Q1).
Headline figures
Quarter ended June 30, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $574.18M
- up 25.3% from $458.36M a year earlier
- Net income
- $33.85M
- up 51.5% from net income of $22.34M a year earlier
- Diluted EPS
- $1.27
- up 51.2% from $0.84 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended June 30, 2023
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from____ to ____.
Commission file number: 1-34167
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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(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:
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Title of each class
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Trading Symbol(s)
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Name of each exchange on which registered
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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.
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).
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:
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Accelerated filer ☐
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Non-accelerated filer ☐
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Smaller reporting company
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Emerging growth company
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised
financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐
No ☒
The number of shares of common stock outstanding as of August 2, 2023, was 26,937,903 .
ePlus inc. AND SUBSIDIARIES
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Part I. Financial Information:
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Item 1.
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Financial Statements
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5
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6
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7
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8
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10
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11
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Item 2.
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27
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Item 3.
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44
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Item 4.
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44
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Part II. Other Information:
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Item 1.
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45
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Item 1A.
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45
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Item 2.
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45
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Item 3.
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45
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Item 4.
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45
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Item 5.
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46
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Item 6.
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46
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47
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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:
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significant adverse changes in, reductions in, or loss of one or more of our larger volume customers or vendors;
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supply chain issues, including a shortage of Information Technology (“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;
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our dependence on key personnel to maintain certain customer relationships, and our ability to hire, train, and retain sufficient qualified personnel;
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maintaining and increasing advanced professional services by recruiting and retaining highly skilled, competent personnel, and vendor certifications;
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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;
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ongoing remote work trends, and the increase in cybersecurity attacks that have occurred while employees work remotely;
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loss of our credit facility or credit lines with our vendors may restrict our current and future operations;
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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;
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rising interest rates or the loss of key lenders or the constricting of credit markets;
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our ability to manage a diverse product set of solutions in highly competitive markets with a number of key vendors;
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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;
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the possibility of a reduction of vendor incentives provided to us;
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our dependency on continued innovations in hardware, software, and services offerings by our vendors and our ability to partner with them;
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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;
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our ability to identify acquisition candidates, or perform sufficient due diligence prior to completing an acquisition, or failure to integrate a completed
acquisition may affect our earnings;
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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 our ability to increase prices to our customers, which may result in adverse changes in our gross profit;
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significant and rapid inflation may cause price, wage, and interest rate increases, as well as increases in operating costs that may impact the arrangements that have pricing
commitments over the term of the agreement;
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a natural disaster or other adverse event at one of our primary configuration centers, data centers, or a third-party provider location could negatively impact our business;
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a possible decrease in the capital spending budgets of our customers or a decrease in purchases from us;
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changes in the 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”);
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our ability to increase the total number of customers using integrated solutions by up-selling within our customer base and gaining new customers;
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our ability to increase 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;
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our ability to perform professional and managed services competently;
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our ability to implement comprehensive plans for the integration of sales forces, cost containment, asset rationalization, systems integration, and other key strategies;
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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;
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domestic and international economic regulations uncertainty (e.g., tariffs, sanctions, and
trade agreements);
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our contracts may not be adequate to protect us, 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;
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failure to comply with public sector contracts, or applicable laws or regulations;
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our ability to maintain our proprietary software and update our technology infrastructure to remain competitive in the marketplace;
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fluctuations in foreign currency exchange rates may impact our results of operation and financial position; and
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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, the costs associated with licensing required technology.
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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 Part II,
Item 1A, “Risk Factors” and Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections contained elsewhere in this report, as well as other reports that we file with the Securities and Exchange
Commission (“SEC”).
PART I. FINANCIAL INFORMATION
| Item 1. |
Financial Statements
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e
Plus inc. AND SUBSIDIARIES
(in thousands, except per share amounts)
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June 30, 2023
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March 31, 2023
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ASSETS
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Current assets:
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Cash and cash equivalents
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$
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$
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Accounts receivable—trade, net
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Accounts receivable—other, net
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Inventories
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Financing receivables—net, current
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Deferred costs
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Other current assets
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Total current assets
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Financing receivables and operating leases—net
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Deferred tax asset
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Property, equipment, and other assets
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Goodwill
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Other intangible assets—net
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TOTAL ASSETS
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$
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$
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LIABILITIES AND STOCKHOLDERS’ EQUITY
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LIABILITIES
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Current liabilities:
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Accounts payable
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$
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$
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Accounts payable—floor plan
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Salaries and commissions payable
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Deferred revenue
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Recourse notes payable—current
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Non-recourse notes payable—current
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Other current liabilities
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Total current liabilities
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Non-recourse notes payable - long-term
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| Deferred tax liability |
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Other liabilities
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TOTAL LIABILITIES
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COMMITMENTS AND CONTINGENCIES (Note 9)
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STOCKHOLDERS’ EQUITY
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Preferred stock, $
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Common stock, $
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Additional paid-in capital
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Treasury stock, at cost,
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(
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(
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Retained earnings
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Accumulated other comprehensive income—foreign currency translation adjustment
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Total Stockholders’ Equity
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TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
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$
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$
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See Notes to Unaudited Consolidated Financial Statements.
ePlus inc. AND SUBSIDIARIES
(in thousands, except per share amounts)
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Three Months Ended
June 30,
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2023
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2022
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Net sales
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Product
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$
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$
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Services
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Total
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Cost of sales
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Product
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Services
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Total
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Gross profit
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Selling, general, and administrative
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Depreciation and amortization
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Interest and financing costs
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Operating expenses
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Operating income
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Other income (expense), net
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(
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)
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Earnings before tax
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Provision for income taxes
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Net earnings
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$
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$
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Net earnings per common share—basic
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$
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$
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Net earnings per common share—diluted
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$
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$
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Weighted average common shares outstanding—basic
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Weighted average common shares outstanding—diluted
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See Notes to Unaudited Consolidated Financial Statements.
ePlus inc. AND SUBSIDIARIES
(in thousands)
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Three Months Ended
June 30,
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2023
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2022
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NET EARNINGS
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$
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$
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OTHER COMPREHENSIVE INCOME, NET OF TAX:
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Foreign currency translation adjustments
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(
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)
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Other comprehensive income (loss)
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(
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)
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TOTAL COMPREHENSIVE INCOME
|
$
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$
|
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||||
See Notes to Unaudited Consolidated Financial Statements.
ePlus inc. AND SUBSIDIARIES
(in thousands)
|
Three Months Ended June 30,
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2023
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2022
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Cash flows from operating activities:
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Net earnings
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$
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$
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Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:
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Depreciation and amortization
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Provision for credit losses
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Share-based compensation expense
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Gain on disposal of property, equipment, and operating lease equipment
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(
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)
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(
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)
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Changes in:
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Accounts receivable
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(
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)
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(
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)
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Inventories-net
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(
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)
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Financing receivables—net
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(
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)
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(
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)
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Deferred costs and other assets
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(
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)
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Accounts payable-trade
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Salaries and commissions payable, deferred revenue, and other liabilities
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Net cash used in operating activities
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(
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)
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(
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)
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Cash flows from investing activities:
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Proceeds from sale of property, equipment, and operating lease equipment
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Purchases of property, equipment and operating lease equipment
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(
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)
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(
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)
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Cash used in acquisitions, net of cash acquired
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( |
) | ||||||
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Net cash used in investing activities
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(
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)
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(
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)
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Cash flows from financing activities:
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Borrowings of non-recourse and recourse notes payable
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Repayments of non-recourse and recourse notes payable
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(
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)
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(
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)
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||||
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Proceeds from issuance of common stock
|
||||||||
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Repurchase of common stock
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(
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)
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(
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)
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Net borrowings (repayments) on floor plan facility
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(
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)
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|||||
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Net cash provided by financing activities
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|
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Effect of exchange rate changes on cash
|
(
|
)
|
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|||||
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Net decrease in cash and cash equivalents
|
(
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)
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(
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)
|
||||
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Cash and cash equivalents, beginning of period
|
|
|
||||||
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Cash and cash equivalents, end of period
|
$
|
|
$
|
|
||||
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS - continued
(in thousands)
|
Three Months Ended June 30,
|
||||||||
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2023
|
2022
|
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Supplemental disclosures of cash flow
information:
|
||||||||
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Cash paid for interest
|
$
|
|
$
|
|
||||
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Cash paid for income taxes
|
$
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$
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|
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Cash paid for amounts included in the measurement of lease liabilities
|
$
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$
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|
||||
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Schedule of non-cash investing and
financing activities:
|
||||||||
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Proceeds from sale of property, equipment, and leased equipment
|
$
|
|
$
|
|
||||
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Purchases of property, equipment, and operating lease equipment
|
$
|
(
|
)
|
$
|
(
|
)
|
||
|
Borrowing of non-recourse and recourse notes payable
|
$
|
|
$
|
|
||||
|
Vesting of share-based compensation
|
$
|
|
$
|
|
||||
|
Repurchase of common stock
|
$ |
( |
) | $ |
||||
|
New operating lease assets obtained in exchange for lease obligations
|
$
|
|
$
|
|
||||
See Notes to Unaudited Consolidated Financial Statements.
ePlus inc. AND SUBSIDIARIES
(in thousands)
|
Three Months Ended June 30, 2023
|
||||||||||||||||||||||||||||
| Accumulated | ||||||||||||||||||||||||||||
| Additional | Other | |||||||||||||||||||||||||||
|
Common Stock
|
Paid-In
|
Treasury
|
Retained
|
Comprehensive
|
||||||||||||||||||||||||
|
Shares
|
Par Value
|
Capital
|
Stock
|
Earnings
|
Income
|
Total
|
||||||||||||||||||||||
|
Balance, March 31, 2023
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
$
|
|
$
|
|
||||||||||||||
|
Issuance of restricted stock awards
|
|
|
(
|
)
|
|
|
|
|
||||||||||||||||||||
| Issuance of common stock |
||||||||||||||||||||||||||||
|
Share-based compensation
|
|
|
|
|
|
|
|
|||||||||||||||||||||
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Repurchase of common stock
|
(
|
)
|
|
|
(
|
)
|
|
|
(
|
)
|
||||||||||||||||||
|
Net earnings
|
-
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Foreign currency translation adjustment
|
-
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Balance, June 30, 2023
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
$
|
|
$
|
|
||||||||||||||
|
Three Months Ended June 30, 2022
|
||||||||||||||||||||||||||||
| Accumulated | ||||||||||||||||||||||||||||
| Additional | Other | |||||||||||||||||||||||||||
|
Common Stock
|
Paid-In
|
Treasury
|
Retained
|
Comprehensive
|
||||||||||||||||||||||||
|
Shares
|
Par Value
|
Capital
|
Stock
|
Earnings
|
Income
|
Total
|
||||||||||||||||||||||
|
Balance, March 31, 2022
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||||||||||
|
Issuance of restricted stock awards
|
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Share-based compensation
|
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Repurchase of common stock
|
(
|
)
|
|
|
(
|
)
|
|
|
(
|
)
|
||||||||||||||||||
|
Net earnings
|
-
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Foreign currency translation adjustment
|
-
|
|
|
|
|
(
|
)
|
(
|
)
|
|||||||||||||||||||
|
Balance, June 30, 2022
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||||||||||
See 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 IT solutions that enable organizations to optimize their IT environment and supply chain processes. We also provide consulting, professional services, managed services, and complete lifecycle management services including flexible
financing solutions. We focus on selling to medium and large enterprises in the United States (“US”) and in select international markets including the United Kingdom (“UK”), the European Union (“EU”), India, Singapore, and Israel.
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. During the quarter ended June 30, 2023, we split our
technology segment into new segments-- product, professional services, and managed services-- to provide our management the ability to better manage and allocate resources among the separate components of our technology business. Our professional
services and managed services are a significant component of our growth and long-term strategic initiatives. Subsequently, we manage and report our operating results through four operating segments: product, professional services, managed services, and financing. For additional information, see Note 16, “Segment Reporting”.
INTERIM FINANCIAL STATEMENTS — The unaudited consolidated
financial statements for the three months ended June 30, 2023, and 2022, 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, 2023, and 2022, are not necessarily indicative of results that may be expected for any other interim
period or for the full fiscal year ended March 31, 2024, 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, 2023 (“2023 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 45 % of our technology business net sales for
the three months ended June 30, 2023, and 35 % for the three months ended June 30, 2022.
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, 2023, except for the changes provided in Note 2, “Recent Accounting
Pronouncements.”
|
2.
|
RECENT ACCOUNTING PRONOUNCEMENTS
|
RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS— In September 2022, the Financial Accounting Standards Board (“FASB”) issued ASU
2022-04, Liabilities—Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations. This update requires buyers in a supplier finance program to disclose certain qualitative and quantitative information about the
program. It is intended to provide information about an entity’s use of supplier finance programs and their effect on the entity’s working capital, liquidity, and cash flows. This update is effective for us beginning in the first quarter of our
fiscal year ending March 31, 2024, except for a requirement to provide a roll forward of our obligations during the annual period, which is effective for us beginning in the first quarter of our fiscal year ending March 31, 2025. We adopted the
standard during the first quarter of fiscal year ending March 31, 2024, as reflected in this Quarterly Report on Form 10-Q, except for the roll forward requirement, which will be adopted during the first quarter of fiscal year ending March 31,
2025. The adoption of the standard resulted in new disclosures only for amounts presented within Accounts payable – floor plan. For additional information on the new disclosures, see Note 8, “Notes Payable and Credit Facility”.
| 3. |
REVENUES
|
CONTRACT BALANCES
Accounts receivable – trade
consists entirely of amounts due from contracts with customers. In addition, we had $58.5 million and $70.4 million of receivables from contracts with customers included within financing receivables as of June 30, 2023, and March 31, 2023, respectively. The
following table provides the balance of contract liabilities from contracts with customers (in thousands):
|
June 30, 2023
|
March 31, 2023
|
|||||||
|
Current (included in deferred revenue)
|
$
|
|
$
|
|
||||
|
Non-current (included in other liabilities)
|
$
|
|
$
|
|
||||
Revenue recognized from the
beginning contract liability balance was $30.9 million and $24.9 million for the three months ended June 30, 2023, and 2022, 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):
|
|
$
|
|
||
|
|
|
|||
|
|
|
|||
|
|
|
|||
|
|
|
|||
|
Total remaining performance obligations
|
$
|
|
The table does not include the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less, and (ii) contracts where
we recognize revenue at the amount that we have the right to invoice for services performed.
| 4. |
FINANCING RECEIVABLES AND OPERATING LEASES
|
Our financing receivables and operating leases consist primarily of leases of IT and communication equipment
and notes receivable from financing customer purchases of third-party software, maintenance, and services. Our leases often include elections for the lessee to purchase the
underlying asset at the end of the lease term. Occasionally, our leases provide the lessee a bargain purchase option.
The following table provides the profit recognized for sales-type leases at their commencement date, including modifications that are recognized on a net basis, for the
three months ended June 30, 2023, and 2022 (in thousands):
|
Three months Ended June 30,
|
||||||||
|
2023
|
2022
|
|||||||
|
Net sales
|
$
|
|
$
|
|
||||
|
Cost of sales
|
|
|
||||||
|
Gross profit
|
$
|
|
$
|
|
||||
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, 2023, and 2022 (in thousands):
|
Three months Ended June 30,
|
||||||||
|
2023
|
2022
|
|||||||
|
Interest income on sales-type leases
|
$
|
|
$
|
|
||||
|
Lease income on operating leases
|
$
|
|
$
|
|
||||
FINANCING RECEIVABLES—NET
The following tables provide a disaggregation of our financing receivables – net (in thousands):
| Notes | Lease | Financing | ||||||||||
|
June 30, 2023
|
Receivable
|
Receivables
|
Receivables
|
|||||||||
|
Gross receivables
|
$
|
|
$
|
|
$
|
|
||||||
|
Unguaranteed residual value (1)
|
|
|
|
|||||||||
|
Unearned income
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Allowance for credit losses (2)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Total, net
|
$
|
|
$
|
|
$
|
|
||||||
|
Reported as:
|
||||||||||||
|
Current
|
$
|
|
$
|
|
$
|
|
||||||
|
Long-term
|
|
|
|
|||||||||
|
Total, net
|
$
|
|
$
|
|
$
|
|
||||||
| (1) |
|
| (2) |
|
| Notes | Lease | Financing | ||||||||||
|
March 31, 2023
|
Receivable
|
Receivables
|
Receivables
|
|||||||||
|
Gross receivables
|
$
|
|
$
|
|
$
|
|
||||||
|
Unguaranteed residual value (1)
|
|
|
|
|||||||||
|
Unearned income
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Allowance for credit losses (2)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Total, net
|
$
|
|
$
|
|
$
|
|
||||||
|
Reported as:
|
||||||||||||
|
Current
|
$
|
|
$
|
|
$
|
|
||||||
|
Long-term
|
|
|
|
|||||||||
|
Total, net
|
$
|
|
$
|
|
$
|
|
||||||
| (1) |
|
| (2) |
Refer to Note 7, “Allowance for Credit Losses”
for details.
|
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, | March 31, | |||||||
|
2023
|
2023
|
|||||||
|
Cost of equipment under operating leases
|
$
|
|
$
|
|
||||
|
Accumulated depreciation
|
(
|
)
|
(
|
)
|
||||
|
Investment in operating lease equipment—net (1)
|
$
|
|
$
|
|
||||
| (1) |
|
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, 2023, and March 31,
2023, we had financing receivables of $22.0 million and $35.7 million, respectively, and operating leases of $2.1 million and $2.5 million, respectively, which were collateral for non-recourse notes payable. See Note 8, “Notes Payable and Credit Facility.”
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, 2023, and 2022, we recognized net gains of $1.3
million and $1.8 million, respectively, and total proceeds from these sales were $61.4 million and $52.5 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, 2023, and March 31, 2023, 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 in the event that the
lessee elects to early terminate the lease. As of June 30, 2023, and March 31, 2023, our total potential liability that could result from these indemnities is immaterial.
| 5. |
LESSEE ACCOUNTING
|
We lease office space for periods up to six years and lease
warehouse space for periods of up to 10 years, and we have some lease options that can be exercised to extend beyond those lease term
limits. 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 $1.5 million and $1.3 million for the three months ended June 30, 2023, and June 30, 2022, respectively.
| 6. |
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, 2023 (in thousands):
|
Technology Segment
|
Product
|
Professional Services
|
Managed Services
|
Total
|
||||||||||||||||
|
Balance March 31, 2023
|
||||||||||||||||||||
|
Goodwill
|
$
|
|
$
|
|
|
|
|
|||||||||||||
|
Accumulated impairment losses
|
(
|
)
|
|
|
|
(
|
)
|
|||||||||||||
|
Net carrying amount
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||
|
|
||||||||||||||||||||
|
Reporting unit change
|
(
|
)
|
|
|
|
|
||||||||||||||
|
Acquisitions
|
|
|
|
|
|
|||||||||||||||
|
Impairment losses
|
|
|
|
|
|
|||||||||||||||
|
Foreign currency translations
|
|
|
|
|
|
|||||||||||||||
|
Balance June 30, 2023
|
||||||||||||||||||||
|
Goodwill
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||
|
Accumulated impairment losses
|
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
|||||||||||
|
Net carrying amount
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||
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. As of March 31, 2023, our entire balance related to our technology segment, which we had also determined to be one reporting unit. During the first quarter ended June 30, 2023, we separated our technology segment into three different reporting units: product, professional services, and managed services. As such, we allocated our goodwill and impairment losses to the
reporting units affected using a relative fair value.
The carrying value of goodwill was $158.3 million and $136.1 million as of
June 30, 2023, and March 31, 2023, respectively. Our goodwill balance increased by $22.2 million over the three months ended June 30,
2023, due to $22.1 million in goodwill additions from our acquisition of Network Solutions Group (“NSG”), and from foreign currency
translations of $0.1 million. Please refer to Note 15, “Business Combinations” for details of our acquisition.
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, 2022, we performed a quantitative
assessment of goodwill and concluded that the fair value of our technology reporting unit exceeded its carrying value. Our conclusions would not be impacted by a ten percent change in our estimate of the fair value of the reporting unit.
OTHER INTANGIBLE ASSETS
Our other intangible assets consist of the following on June 30, 2023, and March 31, 2023 (in thousands):
|
June 30, 2023
|
March 31, 2023
|
|||||||||||||||||||||||
|
Gross
Carrying
Amount
|
Accumulated
Amortization
|
Net
Carrying
Amount
|
Gross
Carrying
Amount
|
Accumulated
Amortization
|
Net Carrying
Amount
|
|||||||||||||||||||
|
Purchased intangibles
|
$
|
|
$
|
(
|
)
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
||||||||||
|
Capitalized software development
|
|
(
|
)
|
|
|
(
|
)
|
|
||||||||||||||||
|
Total
|
$
|
|
$
|
(
|
)
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
||||||||||
Purchased intangibles, consisting mainly of customer relationships, 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 $3.5 million and $2.2 million for the three months ended June 30, 2023, and June 30, 2022, respectively.
| 7. |
ALLOWANCE FOR CREDIT LOSSES
|
The following table provides the activity in our allowance for credit losses for the three months ended June 30, 2023, and 2022 (in thousands):
|
Accounts Receivable
|
Notes
Receivable
|
Lease
Receivables
|
Total
|
|||||||||||||
|
Balance April 1, 2023
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
Provision for credit losses
|
|
(
|
)
|
(
|
)
|
|
||||||||||
|
Write-offs and other
|
(
|
)
|
|
|
(
|
)
|
||||||||||
|
Balance June 30,
2023
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
Accounts
Receivable
|
Notes
Receivable
|
Lease
Receivables
|
Total
|
|||||||||||||
|
Balance April 1, 2022
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
Provision for credit losses
|
|
|
|
|
||||||||||||
|
Write-offs and other
|
(
|
)
|
|
|
(
|
)
|
||||||||||
|
Balance June 30,
2022
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
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
|
|
•
|
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 in the range of
|
|
•
|
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 greater than
|
The following table provides the amortized cost basis of our financing receivables by CQR and by credit origination year as of June 30, 2023 (in thousands):
|
Amortized cost basis by origination year ending March 31,
|
||||||||||||||||||||||||||||||||||||
|
2024
|
2023
|
2022
|
2021
|
2020
|
2019 and
prior
|
Total
|
Transfers
(2)
|
Net credit
exposure
|
||||||||||||||||||||||||||||
|
Notes receivable:
|
||||||||||||||||||||||||||||||||||||
|
High CQR
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||||||||||||||
|
Average CQR
|
|
|
|
|
|
|
|
(
|
)
|
|
||||||||||||||||||||||||||
|
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||||||||||||||
|
Lease receivables:
|
||||||||||||||||||||||||||||||||||||
|
High CQR
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||||||||||||||
|
Average CQR
|
|
|
|
|
|
|
|
(
|
)
|
|
||||||||||||||||||||||||||
|
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||||||||||||||
|
Total amortized cost (1)
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||||||||||||||
| (1) |
|
|
(2)
|
|
The following table provides the amortized cost basis of our financing receivables by CQR and by credit origination year as of March 31, 2023 (in thousands):
|
Amortized cost basis by origination year ending March 31,
|
||||||||||||||||||||||||||||||||||||
|
2023
|
2022
|
2021
|
2020
|
2019
|
2018 and
prior
|
Total
|
Transfers
(2)
|
Net credit
exposure
|
||||||||||||||||||||||||||||
|
Notes receivable:
|
||||||||||||||||||||||||||||||||||||
|
High CQR
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$ |
||||||||||||||||||
|
Average CQR
|
|
|
|
|
|
|
|
(
|
)
|
|||||||||||||||||||||||||||
|
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$ |
||||||||||||||||||
|
Lease receivables:
|
||||||||||||||||||||||||||||||||||||
|
High CQR
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$ |
||||||||||||||||||
|
Average CQR
|
|
|
|
|
|
|
|
(
|
)
|
|||||||||||||||||||||||||||
|
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$ |
||||||||||||||||||
|
Total amortized cost (1)
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$ |
||||||||||||||||||
| (1) |
|
|
(2)
|
|
The following table provides an aging analysis of our financing receivables as of June 30, 2023 (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
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
|
Lease receivables
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
The following table provides an aging analysis of our financing receivables as of March 31, 2023 (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
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
|
Lease receivables
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
Our financial assets on nonaccrual status were not significant as of June 30, 2023, and March 31, 2023.
| 8. |
NOTES PAYABLE AND CREDIT FACILITY
|
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 business through a credit facility with Wells Fargo Commercial Distribution Finance, LLC (“WFCDF”). The WFCDF
credit facility (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 entirety their then-existing credit agreements with WFCDF. On October 31, 2022, the Borrowers entered into the First Amendment to the credit agreement.
Under this agreement and its amendment, the credit facility is provided by a syndicate of banks (collectively, the “Lenders”) for which WFCDF acts as administrative agent and consists of a discretionary senior secured floor plan facility in favor
of the Borrowers.
On March 10, 2023, the Borrowers entered into a Second Amendment to the credit agreement that amended the credit agreement to increase the maximum aggregate amount of principal available under the floor plan facility to $500.0 million and increase the maximum aggregate amount of principal available under the Revolving Facility to $200.0 million.
Under the accounts payable floor plan facility, we had an outstanding balance of $182.9
million and $134.6 million as of June 30, 2023, and March 31, 2023,
respectively. On our balance sheet, our liability under the accounts payable floor plan facility is presented as accounts payable – floor plan.
We use the floor plan to facilitate the purchase of inventory from designated suppliers. The Lenders pay our suppliers and provide us extended payment terms. We pay down the floor plan facility on three specified dates each month, generally 30 -60 days from the invoice date. We do not incur any interest or other incremental expenses for the floor plan facility. We are not involved in
establishing the terms or conditions of the arrangements between our suppliers and the Lenders.
Under the revolving credit facility, we had $52.0 million outstanding as of June 30, 2023, and no balance outstanding as of
March 31, 2023. 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, 2023, and March 31, 2023.
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 Term SOFR Rate plus a Term SOFR Adjustment of 0.10 % plus an Applicable Margin of 1.75 %.
Our borrowings under the WFCDF Credit Facility are secured by the assets of the Borrowers. Additionally, the WFCDF Credit Facility requires a
guaranty of $10.5 million by ePlus inc.
Under the 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, 2023, and March 31, 2023,
their available borrowing met the thresholds such that there were no restrictions on their ability to pay dividends.
The WFCDF Credit Facility has an initial one-year
term, which automatically renews for successive one-year terms thereafter. However, either the Borrowers or WFCDF may terminate the WFCDF Credit Facility at any time by providing a written termination notice to the other party no less than 90 days prior to such termination.
The loss of the WFCDF Credit Facility could have a material adverse effect on our
future results as we currently rely on this facility and its components for daily working capital and liquidity for our technology business and as an operational function of our accounts payable process.
RECOURSE NOTES PAYABLE
Recourse notes payable consist of borrowings that, in the event of default, the lender has recourse against us. As of June 30, 2023,
we had $58.1 million in recourse notes payable consisting of $52.0 million outstanding under our revolving WFCDF Credit Facility, $4.0 million arising from one installment payment arrangement within our technology
business, and $2.1 million arising from borrowings that that were collateralized by financial receivables held by our financing
segment. As of March 31, 2023, we had $6.0 million in recourse notes payable arising entirely from one installment payment
arrangement within our technology business. 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 6.27 % as of June 30, 2023.
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,
2023, and March 31, 2023, we had $22.7 million and $34.3 million, respectively, of non-recourse borrowings that were collateralized by investments in notes and leases. Principal and interest payments are generally due periodically
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 5.22 % and 5.01 %, as of June 30, 2023, and March 31, 2023, respectively.
| 9. |
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 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 our expectations, our financial condition and operating results for that period may
be adversely affected. As of June 30, 2023, 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 us in the future, and these matters could relate to prior, current, or future transactions or events.
| 10. |
EARNINGS PER SHARE
|
Basic earnings per share is calculated by dividing net earnings available to common shareholders by the basic weighted average number of shares of common stock outstanding
during each period. Diluted earnings per share is calculated by dividing net earnings available to common shareholders by the basic weighted average number of shares of common stock outstanding plus common stock equivalents during each period.
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, 2023, and 2022, respectively (in
thousands, except per share data).
|
Three Months Ended June 30,
|
||||||||
|
2023
|
2022
|
|||||||
|
Net earnings attributable to common shareholders - basic and diluted
|
$
|
|
$
|
|
||||
|
Basic and diluted common shares outstanding:
|
||||||||
|
Weighted average common shares outstanding — basic
|
|
|
||||||
|
Effect of dilutive shares
|
|
|
||||||
|
Weighted average shares common outstanding — diluted
|
|
|
||||||
|
Earnings per common share - basic
|
$
|
|
$
|
|
||||
|
Earnings per common share - diluted
|
$
|
|
$
|
|
||||
| 11. |
STOCKHOLDERS’ EQUITY
|
SHARE REPURCHASE PLAN
On March 22, 2023, 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, 2023. 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. 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.
During the three months ended June 30, 2023, we purchased 93,541 shares of our outstanding common stock at a value of $4.4 million under the share repurchase plan; we also purchased 53,945 shares of common stock at a value of $3.0 million to satisfy tax
withholding obligations relating to the vesting of employees’ restricted stock.
During the 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 58,080 shares of common stock at a value of $3.3 million to satisfy tax
withholding obligations relating to the vesting of employees’ restricted stock.
| 12. |
SHARE-BASED COMPENSATION
|
SHARE-BASED PLANS
As
of June 30, 2023, 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, 2023, we granted 862 shares under the 2017 Director LTIP, and 152,865 restricted shares under the 2021 Employee LTIP. 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.
The
following table provides a summary of the non-vested restricted shares for the three months ended June 30, 2023:
|
Number of
Shares
|
Weighted Average
Grant-date Fair Value
|
|||||||
|
Nonvested April 1, 2023
|
|
$
|
|
|||||
|
Granted
|
|
$
|
|
|||||
|
Vested
|
(
|
)
|
$
|
|
||||
|
Forfeited
|
( |
) | $ | |||||
|
Nonvested June 30,
2023
|
|
$
|
|
|||||
EMPLOYEE STOCK PURCHASE PLAN
On September 15, 2022, our stockholders approved the 2022 Employee Stock Purchase Plan (“ESPP”) through which eligible employees may
purchase up to an aggregate of 2.50 million shares of our stock at 6 -month intervals at a discount off the lesser of the closing market price on the first or the last trading day of each offering period. Our inaugural offering period under
the ESPP was January 1, 2023, to June 30, 2023. During the three months ended June 30, 2023, we issued 36,697 shares at a price of $38.10 per share under the ESPP. As of June 30, 2023, there were 2.46 million shares remaining under the ESPP.
COMPENSATION EXPENSE
The following table provides a
summary of our total share-based compensation expense, including for restricted stock awards and our ESPP, and the related income tax benefit for the three months ended June 30, 2023, and 2022 (in thousands):
|
Three Months Ended June 30,
|
||||||||
|
2023
|
2022
|
|||||||
|
Equity-based compensation expense
|
$
|
|
$
|
|
||||
|
Income tax benefit
|
(
|
)
|
(
|
)
|
||||
We recognized the income tax benefit as a reduction to our provision for income taxes. As of June 30, 2023, the total
unrecognized compensation expense related to non-vested restricted stock was $16.2 million, which is expected to be recognized over a
weighted-average period of 36 months.
We also provide our employees with a contributory 401(k) profit sharing plan, to which we may contribute from time to time
at our sole discretion. Employer contributions to the plan are always fully vested. Our estimated contribution expense to the plan for the three months ended June 30, 2023, and 2022, was $1.4 million and $1.1 million, respectively.
| 13. |
INCOME TAXES
|
Our provision for income tax expense was $12.7
million for the three months ended June 30, 2023, as compared to $8.7
million for the same period in the prior year. Our effective income tax rate for the three months ended June 30, 2023, was 27.2 %, compared to 28.0 % for the same period in the prior year, primarily due to a lower state effective tax rate. The effective tax rate for the three months ended June 30, 2023, and June 30, 2022, differed from the US
federal statutory rate of 21.0
| 14. |
FAIR VALUE OF FINANCIAL INSTRUMENTS
|
The following table summarizes the fair value hierarchy of our financial instruments as of June 30, 2023,
and March 31, 2023 (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, 2023
|
||||||||||||||||
|
Assets:
|
||||||||||||||||
|
Money market funds
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
March 31, 2023
|
||||||||||||||||
|
Assets:
|
||||||||||||||||
|
Money market funds
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
15.
|
BUSINESS COMBINATIONS
|
NETWORK
SOLUTIONS GROUP (NSG)
On April 30, 2023, our subsidiary, ePlus Technology, inc., acquired certain assets and liabilities of NSG, formerly a business unit of CCI Systems, Inc., a Michigan-based provider of
networking services and solutions. This acquisition will help drive additional growth for us in the service provider end-markets with enhanced engineering, sales, and services delivery capabilities specific to the industry.
Our preliminary sum for consideration transferred is $48.6 million consisting of $59.6 million paid in cash at closing minus $11.0
million that is due to us from the sellers based on adjustments to our determination of the total net assets delivered. Our
preliminary allocation of the purchase consideration to the assets acquired and liabilities assumed is presented below (in thousands):
|
Acquisition Date
Amount
|
||||
|
Accounts receivable
|
$
|
|
||
|
Other assets
|
|
|||
|
Identified intangible assets
|
|
|||
|
Accounts payable and other liabilities
|
(
|
)
|
||
|
Contract liabilities
|
(
|
)
|
||
|
Total identifiable net assets
|
|
|||
|
Goodwill
|
|
|||
|
Total purchase consideration
|
$
|
|
||
The identified intangible assets of $30.0 million consists of customer relationships with an estimated useful life of seven years . The fair value of acquired receivables equals the gross contractual amounts receivable. We expect to collect all acquired receivables.
We recognized goodwill related to this transaction of $22.1
million, of which $19.7 million and $2.4
million were assigned to our product and professional services reporting units, respectively. The goodwill recognized in the acquisition is attributable to the acquired assembled workforce and expected synergies, none of which qualify for
recognition as a separate intangible asset. The total amount of goodwill is expected to be deductible for tax purposes.
The amount of revenues and earnings of the acquiree since the acquisition date are not material. Likewise, the impact to the revenue and earnings of the combined entity for the current reporting period as though the
acquisition date had been April 1, 2023, is not material.
| 16. |
SEGMENT REPORTING
|
Prior to the start of the
fiscal year ending March 31, 2024, we had two segments: technology and financing. During the quarter ended June 30, 2023, we split our
technology segment into new segments-- product, professional services, and managed services-- to provide our management the ability to better manage and allocate resources among the separate components of our technology business. Our professional
services and managed services are a significant component of our growth and long-term strategic initiatives. Subsequently, we manage and report our operating results through four operating segments: product, professional services, managed services, and financing. Our product segment includes sales of IT products, third-party software, and
third-party maintenance, software assurance, and other third-party services. Our professional services segment includes our advanced professional services, staff augmentation, project management services, cloud consulting services and security
services. Our managed services segment includes our advanced managed services, service desk, storage-as-a-service, cloud hosted services, cloud managed services and managed security services. 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 within our technology business based on gross profit, while we measure our financing segment based on operating income. We do not present asset information for our reportable segments as we do not provide asset
information to our chief operating decision maker (“CODM”).
The following table provides reportable segment information for the three-month
periods ended June 30, 2023, and 2022 (in thousands):
|
Three Months Ended June 30,
|
||||||||
|
2023
|
2022
|
|||||||
|
Net Sales
|
||||||||
|
Product
|
$
|
|
$
|
|
||||
|
Professional Services
|
|
|
||||||
|
Managed Services
|
|
|
||||||
|
Financing
|
|
|
||||||
|
Total
|
|
|
||||||
|
Gross Profit
|
||||||||
|
Product
|
|
|
||||||
|
Professional Services
|
|
|
||||||
|
Managed Services
|
|
|
||||||
|
Financing
|
|
|
||||||
|
Total
|
|
|
||||||
|
Operating income
|
||||||||
|
Technology Business
|
|
|
||||||
|
Financing
|
|
|
||||||
|
Total
|
|
|
||||||
|
Other income (expense), net
|
|
(
|
)
|
|||||
|
Earnings before tax
|
$
|
|
$
|
|
||||
|
Depreciation and amortization
|
||||||||
|
Technology Business
|
$
|
|
$
|
|
||||
|
Financing
|
|
|
||||||
|
Total
|
$
|
|
$
|
|
||||
|
Interest and financing costs
|
||||||||
|
Technology Business
|
$
|
|
$
|
|
||||
|
Financing
|
|
|
||||||
|
Total
|
$
|
|
$
|
|
||||
|
Selected Financial Data - Statement of Cash Flow
|
||||||||
|
Purchases of property, equipment and operating lease equipment Technology Business
|
$
|
|
$
|
|
||||
|
Financing
|
|
|
||||||
|
Total
|
$
|
|
$
|
|
||||
The following table provides a disaggregation of net sales by source and further disaggregates our revenue
recognized from contracts with customers by timing and our position as principal or agent for the three-month period ended June 30, 2023 (in thousands):
|
Three months ended June 30, 2023
|
||||||||||||||||||||
|
Product
|
Professional
Services |
Managed Services
|
Financing
|
Total
|
||||||||||||||||
|
Net Sales
|
||||||||||||||||||||
|
Contracts with customers
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||
|
Financing and other
|
|
|
|
|
|
|||||||||||||||
|
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||
|
Timing and position as
principal or agent
|
||||||||||||||||||||
|
Transferred at a point in
time as principal
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||
|
Transferred at a point in
time as agent
|
|
|
|
|
|
|||||||||||||||
|
Transferred over time as
principal
|
|
|
|
|
|
|||||||||||||||
|
Total revenue from
contracts with customers
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||
The following table provides a disaggregation of net sales by source and
further disaggregates our revenue recognized from contracts with customers by timing and our position as principal or agent for the three-month period ended June 30, 2022 (in thousands):
|
Three months ended June 30, 2022
|
||||||||||||||||||||
|
Product
|
Professional
Services |
Managed Services
|
Financing
|
Total
|
||||||||||||||||
|
Net Sales
|
||||||||||||||||||||
|
Contracts with customers
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||
|
Financing and other
|
|
|
|
|
|
|||||||||||||||
|
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||
|
Timing and position as
principal or agent
|
||||||||||||||||||||
|
Transferred at a point in
time as principal
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||
|
Transferred at a point in
time as agent
|
|
|
|
|
|
|||||||||||||||
|
Transferred over time as
principal
|
|
|
|
|
|
|||||||||||||||
|
Total revenue from
contracts with customers
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||
TECHNOLOGY BUSINESS DISAGGREGATION OF REVENUE
The following table provides a disaggregation of our revenue from contracts with customers for our technology business by customer end market and by type (in
thousands):
|
Three Months Ended June 30,
|
||||||||
|
2023
|
2022
|
|||||||
|
Customer end market:
|
||||||||
|
Telecom, media & entertainment
|
$
|
|
$
|
|
||||
|
SLED
|
|
|
||||||
|
Healthcare
|
|
|
||||||
|
Technology
|
|
|
||||||
|
Financial services
|
|
|
||||||
|
All others
|
|
|
||||||
|
Net sales
|
|
|
||||||
|
Less: revenue from financing and other
|
(
|
)
|
(
|
)
|
||||
|
Total revenue from contracts with customers
|
$
|
|
$
|
|
||||
|
Type:
|
||||||||
|
Product
|
||||||||
|
Networking
|
$
|
|
$
|
|
||||
|
Cloud
|
|
|
||||||
|
Security
|
|
|
||||||
|
Collaboration
|
|
|
||||||
|
Other
|
|
|
||||||
|
Total product
|
|
|
||||||
|
Professional services
|
|
|
||||||
|
Managed services
|
|
|
||||||
|
Net sales
|
|
|
||||||
|
Less: revenue from financing and other
|
(
|
)
|
(
|
)
|
||||
|
Total revenue from contracts with customers
|
$
|
|
$
|
|
||||
We do not disaggregate sales by customer end market beyond the technology business level.
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 our revenues from contracts with customers within our financing segment is from the sales of
off-lease equipment.
| Item 2. |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
This discussion is intended to further the reader’s understanding of our consolidated financial condition and results of operations. It should be read in conjunction with the unaudited consolidated financial statements
included in this Quarterly Report on Form 10-Q and the audited consolidated financial statements included in our 2023 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 2023 Annual Report, as well as in our other filings with the SEC.
EXECUTIVE OVERVIEW
BUSINESS DESCRIPTION
We are a leading solutions provider in the areas of security, cloud, networking, collaboration, artificial intelligence, and emerging technologies to domestic and foreign organizations across all industry segments. 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 services in the areas of security, cloud, networking, collaboration, and emerging
technologies. 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-premises 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, and collaboration are specific skills in orchestration and automation,
application modernization, DevSecOps, zero-trust architectures, 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, Crowdstrike, Deepwatch, Dell EMC, F5 Networks, Foresite, Fortinet, Gigamon, HPE, Juniper Networks, Lenovo, Microsoft, NetApp,
Nutanix, NVIDIA, Oracle, Palo Alto Networks, Proficio, Pure Storage, Rubrik, Splunk, Varonis, and VMware, among many others. We are an authorized reseller of over 1,500 vendors, which enable us to provide our customers with new and evolving IT
solutions. 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 at 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 us 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 us to deploy sophisticated
solutions to enable 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 account for most of our sales, and to customers in select international markets including the United Kingdom (“UK”), the
European Union (“EU”), India, Singapore, and Israel. Our technology business segments accounted for 99% of our net sales and 94% of our operating income, while our financing segment accounted for 1% of our net sales and 6% of our operating income,
for the three months ended June 30, 2023.
BUSINESS TRENDS
We believe the following key business trends are impacting our business performance and our ability to achieve business results:
| • |
General economic concerns including inflation, rising interest rates, staffing shortages, remote work trends, 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 in the industry, we are experiencing ongoing supply constraints that have affected,
and could continue to further affect, lead times for delivery of products, our having to carry more inventory for longer periods, the cost 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 service 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. Accordingly, inflation
could 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, work from anywhere, 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 and maintain their desired outcome.
|
| • |
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, which may include invoicing over the term of the agreement.
|
| • |
Rapid cloud adoption has led to customer challenges around increasing costs, security concerns, and skillset gaps. These challenges are consistent across all industries and sizes. We have developed a Cloud Managed Services portfolio to
address these needs, allowing our clients to focus on driving business outcomes via optimized and secure cloud platforms.
|
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, and net earnings per common share, in each case based on information prepared in accordance with US GAAP, as well as the non-GAAP financial measures and ratios, including Adjusted EBITDA, Adjusted
EBITDA margin, Non-GAAP: Net earnings and Non-GAAP: Net earnings per common 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. We use Gross billings as an operational metric to assess the volume of transactions within our Technology business as well as to understand changes in our accounts receivable. We believe Gross billings will aid
investors in the same manner.
These key indicators include financial information that is prepared in accordance with US GAAP and presented in our consolidated financial statements, as well as non-GAAP and operational 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 correspondingly not normally excluded or included in the most directly comparable
measure calculated and presented in accordance with US GAAP. 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 reported under
GAAP, as these measures used by management may differ from similar measures used by other companies, even when similar terms are used to identify such measures.
Set forth in footnotes (1) and (2) of the tables that immediately follow this paragraph, we set forth our reasons for using and presenting Adjusted EBITDA, Adjusted EBITDA margin, Non-GAAP: Net earnings and Non-GAAP: Net
earnings per common share-diluted in the tables and discussion that follow.
The following table provides our key business metrics (in thousands, except per share amounts):
|
Three Months Ended June 30,
|
||||||||
|
Consolidated
|
2023
|
2022
|
||||||
|
Financial Metrics
|
||||||||
|
Net sales
|
$
|
574,175
|
$
|
458,359
|
||||
|
Gross profit
|
$
|
142,273
|
$
|
113,523
|
||||
|
Gross margin
|
24.8
|
%
|
24.8
|
%
|
||||
|
Operating income margin
|
8.1
|
%
|
7.2
|
%
|
||||
|
Net earnings
|
$
|
33,847
|
$
|
22,339
|
||||
|
Net earnings margin
|
5.9
|
%
|
4.9
|
%
|
||||
|
Net earnings per common share - diluted
|
$
|
1.27
|
$
|
0.84
|
||||
|
Non-GAAP Financial Metrics
|
||||||||
|
Non-GAAP: Net earnings (1)
|
$
|
37,687
|
$
|
26,513
|
||||
|
Non-GAAP: Net earnings per common share - diluted (1)
|
$
|
1.41
|
$
|
0.99
|
||||
|
Adjusted EBITDA (2)
|
$
|
53,879
|
$
|
38,304
|
||||
|
Adjusted EBITDA margin
|
9.4
|
%
|
8.4
|
%
|
||||
|
|
||||||||
|
Technology Business
|
||||||||
|
Financial Metrics
|
||||||||
|
Net sales
|
$
|
565,685
|
$
|
448,785
|
||||
|
Gross profit
|
$
|
135,912
|
$
|
105,651
|
||||
|
Gross margin
|
24.0
|
%
|
23.5
|
%
|
||||
|
Operating income
|
$
|
43,498
|
$
|
29,219
|
||||
|
Non-GAAP Financial Metric
|
||||||||
|
Adjusted EBITDA (2)
|
$
|
50,949
|
$
|
34,254
|
||||
|
Operational Metric
|
||||||||
|
Gross billings (3)
|
||||||||
|
Cloud
|
$
|
258,924
|
$
|
253,337
|
||||
|
Networking
|
276,645
|
165,626
|
||||||
|
Security
|
147,343
|
145,349
|
||||||
|
Collaboration
|
22,161
|
34,775
|
||||||
|
Other
|
69,761
|
49,009
|
||||||
|
Product gross billings
|
774,834
|
648,096
|
||||||
|
Service gross billings
|
67,136
|
68,167
|
||||||
|
Total gross billings
|
$
|
841,970
|
716,263
|
|||||
|
Financing Segment
|
||||||||
|
Financial Metrics
|
||||||||
|
Net sales
|
$
|
8,490
|
$
|
9,574
|
||||
|
|
||||||||
|
Gross profit
|
$
|
6,361
|
$
|
7,872
|
||||
|
|
||||||||
|
Operating income
|
$
|
2,834
|
$
|
3,964
|
||||
|
Non-GAAP Financial Metric
|
||||||||
|
Adjusted EBITDA (2)
|
$
|
2,930
|
$
|
4,050
|
||||
| (1) |
Non-GAAP: Net earnings and Non-GAAP: Net earnings per common share – diluted are based on net earnings calculated in accordance with US 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 and Non-GAAP: Net earnings per common share – diluted as supplemental measures of our performance to gain insight into our operating performance and performance trends.
We believe that the exclusion of other income and acquisition-related amortization expense in calculating Non-GAAP: Net earnings and Non-GAAP: Net earnings per common share – diluted 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 and Non-GAAP: Net earnings
per common share – diluted 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 US 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
– diluted or similarly titled measures differently, which may reduce their usefulness as comparative measures.
The following table provides our calculation of Non-GAAP: Net earnings and Non-GAAP: Net earnings per common share – diluted (in thousands, except per share amounts):
|
Three Months Ended June 30,
|
||||||||
|
2023
|
2022
|
|||||||
|
GAAP: Earnings before tax
|
$
|
46,522
|
$
|
31,030
|
||||
|
Share based compensation
|
2,205
|
1,773
|
||||||
|
Acquisition related amortization expense
|
3,469
|
2,183
|
||||||
|
Other (income) expense
|
(190
|
)
|
2,153
|
|||||
|
Non-GAAP: Earnings before provision for income taxes
|
52,006
|
37,139
|
||||||
|
GAAP: Provision for income taxes
|
12,675
|
8,691
|
||||||
|
Share based compensation
|
607
|
508
|
||||||
|
Acquisition related amortization expense
|
952
|
617
|
||||||
|
Other (income) expense
|
(52
|
)
|
616
|
|||||
|
Tax benefit (expense) on restricted stock
|
137
|
194
|
||||||
|
Non-GAAP: Provision for income taxes
|
14,319
|
10,626
|
||||||
|
Non-GAAP: Net earnings
|
$
|
37,687
|
$
|
26,513
|
||||
|
Three Months Ended June 30,
|
||||||||
|
2023
|
2022
|
|||||||
|
GAAP: Net earnings per common share - diluted
|
$
|
1.27
|
$
|
0.84
|
||||
|
Share based compensation
|
0.06
|
0.04
|
||||||
|
Acquisition and integration expense
|
-
|
-
|
||||||
|
Acquisition related amortization expense
|
0.09
|
0.06
|
||||||
|
Other (income) expense
|
-
|
0.06
|
||||||
|
Tax benefit (expense) on restricted stock
|
(0.01
|
)
|
(0.01
|
)
|
||||
|
Total non-GAAP adjustments - net of tax
|
0.14
|
0.15
|
||||||
|
Non-GAAP: Net earnings per common share - diluted
|
$
|
1.41
|
$
|
0.99
|
||||
| (2) |
We define Adjusted EBITDA as net earnings calculated in accordance with US 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 US 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. In the table below, we provide 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.
|
We use Adjusted EBITDA as a supplemental measure of our performance to gain insight into our operating performance and performance trends. 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 US 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.
The following table provides our calculations of Adjusted EBITDA (in thousands):
|
Three Months Ended June 30,
|
||||||||
|
Consolidated
|
2023
|
2022
|
||||||
|
Net earnings
|
$
|
33,847
|
$
|
22,339
|
||||
|
Provision for income taxes
|
12,675
|
8,691
|
||||||
|
Share based compensation
|
2,205
|
1,773
|
||||||
|
Interest and financing costs
|
550
|
138
|
||||||
|
Depreciation and amortization
|
4,792
|
3,210
|
||||||
|
Other income (expense)
|
(190
|
)
|
2,153
|
|||||
|
Adjusted EBITDA
|
$
|
53,879
|
$
|
38,304
|
||||
|
Technology Business
|
||||||||
|
Operating income
|
$
|
43,498
|
$
|
29,219
|
||||
|
Depreciation and amortization
|
4,764
|
3,182
|
||||||
|
Share based compensation
|
2,137
|
1,715
|
||||||
|
Interest and financing costs
|
550
|
138
|
||||||
|
Adjusted EBITDA
|
$
|
50,949
|
$
|
34,254
|
||||
|
Financing Segment
|
||||||||
|
Operating income
|
$
|
2,834
|
$
|
3,964
|
||||
|
Depreciation and amortization
|
28
|
28
|
||||||
|
Share based compensation
|
68
|
58
|
||||||
|
Adjusted EBITDA
|
$
|
2,930
|
$
|
4,050
|
||||
| (3) |
Gross billings are the total dollar value of customer purchases of goods and services including shipping charges during the period, net of customer returns and credit memos, sales, or other taxes. Gross billings includes the transaction
values for certain sales transactions that are recognized on a net basis, and, therefore, includes amounts that will not be recognized as revenue.
|
CONSOLIDATED RESULTS OF OPERATIONS
Net sales: Net sales for the three months ended June 30, 2023, increased 25.3% to $574.2 million, or an increase of $115.8 million compared to $458.4 million in the same three-month
period in the prior year. The increase in net sales was driven by higher revenues from our technology business segments, offset by lower revenues from our financing segment. The increase in sales from the technology business segments was due to
increases in both product and managed services sales, driven by increased demand from our customers, including customers from the Network Solutions Group (“NSG”) and Future Com acquisitions. These increases were offset by lower professional service
sales due to lower staff augmentation revenues due to softer demand by our customers. The decline in revenues from our financing segment was due to lower transactional gains from the sale of financial assets and lower month-to-month rents.
Gross billings from our technology business segments for the three months ended June 30, 2023, increased by 17.6%, or $125.7 million, to $842.0 million compared to $716.3 million in the same three-month period in the prior
year. Gross billings increased due to both organic customer demand as well as from the acquisitions of NSG and Future Com.
Gross profit: Gross profit for the three months ended June 30, 2023, increased 25.3%, to $142.3 million, compared to $113.5 million in the same three-month period in the prior year
due to increased net sales volume. Overall, gross margins were consistent quarter over quarter as higher product margins in our technology business were offset by lower margins in our financing segment.
Operating expenses: Operating expenses for the three months ended June 30, 2023, increased $15.6 million, or 19.4%, to $95.9 million, as compared to $80.3 million for the same
three-month period in the prior year. Our increase in operating expenses was primarily due to an increase of $12.1 million in salaries and benefits, mainly driven by an increase in headcount as well as higher variable compensation corresponding to
the increase in gross profit. As of June 30, 2023, we had 1,853 employees, an increase of 13.2% from 1,637 as of June 30, 2022.
General and administrative expenses also increased $1.6 million for the three-months ended June 30, 2023, compared to the three months ended June 30, 2022, as we had higher software, subscription and maintenance fees and
travel and entertainment costs. Travel and entertainment increased due to the return of in-person business meetings and events. In addition, we had higher professional fees, mainly driven by certain internal projects.
Depreciation and amortization increased $1.6 million for the three months ended June 30, 2023, compared to the three months ended June 30, 2022, due to increased amortization of intangible assets from the acquisition of
NSG. Interest and financing costs increased $0.5 million for the three months ended June 30, 2023, compared to the same three-month period in the prior year due to higher outstanding borrowings. Offsetting these increases was a decrease of $0.2
million in provision for credit losses.
Operating income: As a result of the foregoing, operating income for the three months ended June 30, 2023, increased $13.1 million, or 39.6%, to $46.3 million, as compared to $33.2
million for the three months ended June 30, 2022, and operating margin increased by 90 basis points to 8.1%. The increase in operating income was due to increases from our technology business segments, which was offset by lower operating income
from our financing segment.
Adjusted EBITDA for the three months ended June 30, 2023, was $53.9 million, an increase of $15.6 million, or 40.7%, compared to the same three-month period in the prior year. Adjusted EBITDA margin for the three months
ended June 30, 2023, increased 100 basis points to 9.4%, as compared to the three months ended June 30, 2022, of 8.4%. The increase in Adjusted EBITDA was due to increases from our technology business, which was offset by lower Adjusted EBITDA from
our financing segment.
Net earnings per common share diluted for the three months ended June 30, 2023, increased $0.43, or 51.2%, to $1.27 per share, as compared to $0.84 per share in the same three-month period in the prior year. Non-GAAP: Net
earnings per common share diluted for the three months ended June 30, 2023, increased $0.42, or 42.4%, to $1.41 per share, as compared to $0.99 per share for the three months ended June 30, 2022.
SEGMENT OVERVIEW
TECHNOLOGY BUSINESS SEGMENTS
Our technology business includes three segments: product, professional services and managed services as further discussed below.
| • |
Product segment: Our product segment consists of the sale of third-party hardware, third-party perpetual and subscription software, and third-party maintenance, software assurance, and other third-party services. The product segment also
includes internet-based business-to-business supply chain management solutions for IT products.
|
| • |
Professional services segment: Our professional services segment includes our advanced professional services to our customers that are performed under time and materials, fixed fee, or milestone contracts. Professional services include
cloud consulting, staff augmentation services, and project management services.
|
| • |
Managed services segment: Our managed services segment includes our advanced managed services that include managing various aspects of our customers’ environments and are billed in regular intervals over a contract term, usually between
three to five years. Managed services also include security solutions, storage-as-a-service, cloud hosted services, cloud managed services, and service desk.
|
This is the first quarterly period in which we are reporting these three separate segments within our technology business as we previously consolidated this information within a single technology segment. Based upon our
current business and operations, we intend to continue reporting these three segments that will comprise our technology business.
Our technology business segments sell primarily to corporations, state and local governments, and higher education institutions. Customers of our technology business may have a customer master agreement (“CMA”) with our
company, which stipulates the terms and conditions of the commercial relationship. Some CMAs contain pricing arrangements, and most contain mutual voluntary termination clauses. Our other customers place orders using purchase orders without a CMA in
place or with other documentation customary for the business. Often, our work with state and local governments is based on public bids and our written bid responses. Our service engagements are generally governed by statements of work and are
primarily fixed price (with allowance for changes); however, some service agreements are based on time and materials.
We endeavor to minimize the cost of sales in our product segment through incentive programs provided by vendors and distributors. The programs we qualify for are generally set by our reseller authorization level with the
vendor. The authorization level we achieve and maintain governs the types of products we can resell as well as such items as variable discounts applied against the list price, funds provided for the marketing of these products and other special
promotions. These authorization levels are achieved by us through purchase volume, certifications held by sales executives or engineers and/or contractual commitments by us. The authorization levels are costly to maintain, and these programs
continually change; therefore, there is no guarantee of future reductions of costs provided by these vendor consideration programs.
FINANCING SEGMENT
Our financing segment offers financing solutions to corporations, government contractors, state and local governments, and educational institutions in the US, which accounts for most of our transactions, and to corporations
in select international markets including Canada, the UK, and the EU. The financing segment derives revenue from leasing IT equipment, medical equipment, and other equipment, and the disposition of that equipment at the end of the lease. The
financing segment also derives revenues from the financing of third-party software licenses, software assurance, maintenance, and other services.
Financing revenue generally falls into the following three categories:
| • |
Portfolio income: Interest income from financing receivables and rents due under operating leases.
|
| • |
Transactional gains: Net gains or losses on the sale of financial assets.
|
| • |
Post-contract earnings: Month-to-month rents; early termination, prepayment, make-whole, or buyout fees; and the sale of off-lease (used) 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, currency 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 hiring additional staff for specific targeted
market areas and roles whenever we can find both experienced personnel and desirable geographic areas over the longer term, which may impact our operating results.
SEGMENT RESULTS OF OPERATIONS
The three months ended June 30, 2023, compared to the three months ended June 30, 2022
TECHNOLOGY BUSINESS SEGMENTS
The results of operations for our technology business segments were as follows (dollars in thousands):
|
Three Months Ended June 30,
|
||||||||||||||||
|
2023
|
2022
|
Change
|
Percent
Change
|
|||||||||||||
|
Financial Metrics
|
||||||||||||||||
|
Net sales
|
||||||||||||||||
|
Product
|
$
|
498,166
|
$
|
385,676
|
$
|
112,490
|
29.2
|
%
|
||||||||
|
Professional Services
|
35,556
|
37,168
|
(1,612
|
)
|
(4.3
|
%)
|
||||||||||
|
Managed Services
|
31,963
|
25,941
|
6,022
|
23.2
|
%
|
|||||||||||
|
Total
|
565,685
|
448,785
|
116,900
|
26.0
|
%
|
|||||||||||
|
Gross Profit
|
||||||||||||||||
|
Product
|
111,391
|
83,168
|
28,223
|
33.9
|
%
|
|||||||||||
|
Professional Services
|
14,724
|
15,055
|
(331
|
)
|
(2.2
|
%)
|
||||||||||
|
Managed Services
|
9,797
|
7,428
|
2,369
|
31.9
|
%
|
|||||||||||
|
Total
|
135,912
|
105,651
|
30,261
|
28.6
|
%
|
|||||||||||
|
Selling, general, and administrative
|
87,100
|
73,112
|
13,988
|
19.1
|
%
|
|||||||||||
|
Depreciation and amortization
|
4,764
|
3,182
|
1,582
|
49.7
|
%
|
|||||||||||
|
Interest and financing costs
|
550
|
138
|
412
|
298.6
|
%
|
|||||||||||
|
Operating expenses
|
92,414
|
76,432
|
15,982
|
20.9
|
%
|
|||||||||||
|
Operating income
|
$
|
43,498
|
$
|
29,219
|
$
|
14,279
|
48.9
|
%
|
||||||||
|
Key Metrics & Other Information
|
||||||||||||||||
|
Gross billings
|
$
|
841,970
|
$
|
716,263
|
$
|
125,707
|
17.6
|
%
|
||||||||
|
|
||||||||||||||||
|
Adjusted EBITDA
|
$
|
50,949
|
$
|
34,254
|
$
|
16,695
|
48.7
|
%
|
||||||||
|
Product margin
|
22.4
|
%
|
21.6
|
%
|
||||||||||||
|
Professional service margin
|
41.4
|
%
|
40.5
|
%
|
||||||||||||
|
Managed service margin
|
30.7
|
%
|
28.6
|
%
|
||||||||||||
|
|
||||||||||||||||
|
Net sales by customer end market:
|
||||||||||||||||
|
Telecom, media & entertainment
|
$
|
141,335
|
$
|
128,277
|
$
|
13,058
|
10.2
|
%
|
||||||||
|
SLED
|
109,405
|
64,602
|
44,803
|
69.4
|
%
|
|||||||||||
|
Healthcare
|
86,656
|
68,512
|
18,144
|
26.5
|
%
|
|||||||||||
|
Technology
|
73,403
|
69,862
|
3,541
|
5.1
|
%
|
|||||||||||
|
Financial services
|
65,690
|
33,299
|
32,391
|
97.3
|
%
|
|||||||||||
|
All others
|
89,196
|
84,233
|
4,963
|
5.9
|
%
|
|||||||||||
|
Total
|
$
|
565,685
|
$
|
448,785
|
$
|
116,900
|
26.0
|
%
|
||||||||
|
Net sales by type:
|
||||||||||||||||
|
Networking
|
$
|
245,188
|
$
|
142,641
|
$
|
102,547
|
71.9
|
%
|
||||||||
|
Cloud
|
172,044
|
164,733
|
7,311
|
4.4
|
%
|
|||||||||||
|
Security
|
45,796
|
47,995
|
(2,199
|
)
|
(4.6
|
%)
|
||||||||||
|
Collaboration
|
12,956
|
12,980
|
(24
|
)
|
(0.2
|
%)
|
||||||||||
|
Other
|
22,182
|
17,327
|
4,855
|
28.0
|
%
|
|||||||||||
|
Total Products
|
498,166
|
385,676
|
112,490
|
29.2
|
%
|
|||||||||||
|
|
||||||||||||||||
|
Professional services
|
35,556
|
37,168
|
(1,612
|
)
|
(4.3
|
%)
|
||||||||||
|
Managed services
|
31,963
|
25,941
|
6,022
|
23.2
|
%
|
|||||||||||
|
Total
|
$
|
565,685
|
$
|
448,785
|
$
|
116,900
|
26.0
|
%
|
||||||||
Net sales: Net sales of the combined technology business for the three months ended June 30, 2023, increased compared to the three months ended June 30, 2022, driven by demand from
customers in telecom, media, and entertainment, financial services, SLED, and healthcare industries.
Product segment sales for the three months ended June 30, 2023, increased compared to the same three-month period in the prior year due to higher sales of networking equipment and cloud products. These changes were driven
by the timing of purchases by existing customers, which are determined by their buying cycles, and the timing of specific IT related initiatives. In addition, the increase in net product sales during this three-month period, was due to demand from
customers from the NSG and Future Com acquisitions, which combined contributed $34.8 million to the increase in product net sales. Also contributing to the increase in product sales were improvements in the supply chain, particularly networking
products.
Professional services segment sales for the three months ended June 30, 2023, decreased compared to the three months ended June 30, 2022, due to a decrease in staff augmentation revenue of $1.9 million primarily related to
softer demand from customers. Offsetting this decline was higher project related services of $0.3 million.
Managed services segment sales for the three months ended June 30, 2023, increased compared to the three months ended June 30, 2022, due to ongoing expansion of these service offerings primarily related to ongoing growth in
Enhanced Maintenance Support (“EMS”) and Security Operations Center (“SOC”) revenue.
Gross profit: Gross profit of the combined technology business segments for the three months ended June 30, 2023, increased compared to the three months ended June 30, 2022, due to
the increase in product and managed service sales. Gross margin increased during this three-month period due to higher product, professional service, and managed service margins.
Product segment margin for the three months ended June 30, 2023, increased by 80 basis points from the same three-month period in the prior year as higher up-front margins were offset by lower vendor rebates and a lower
proportion of sales of third-party maintenance, software assurance, subscriptions/SaaS licenses, and services, which was recognized on a net basis. The increase in margin was due to the timing of customer buying cycles and specific IT initiatives.
Professional services segment margins for the three months ended June 30, 2023, increased by 90 basis points from the same three-month period in the prior year primarily due to a shift in mix toward higher margin
project-based services.
Managed services segment margins for the three months ended June 30, 2023, increased by 210 basis points from the same three-month period in the prior year due to improved margins as we continue to scale these service
offerings.
Selling, general, and administrative: Selling, general, and administrative
expenses for the three technology business segments for the three months ended June 30, 2023, increased compared to the three months ended June 30, 2022, mainly due to increases in salaries and benefits.
Salaries and benefits for the three months ended June 30, 2023, increased $12.4 million, or 20.1% to $74.1 million, as compared to $61.7 million for the same period in the prior year, due to an increase of $8.0 million in
salaries and benefits, mainly driven by increased headcount, and an increase of $4.4 million in variable compensation because of the increase in gross profit. Our three technology business segments had an aggregate of 1,818 employees as of June 30,
2023, an increase of 216 from 1,602 as of June 30, 2022, of which 83 were from the acquisition of NSG. In total, we added 171 additional customer-facing employees for the three months ended June 30, 2023, compared to the same three-month period in
the prior year, of which 84 were professional services and technical support personnel due to demand for our services.
General and administrative expenses for the three technology business segments for the three months ended June 30, 2023, increased $1.4 million, or 12.5%, to $12.5 million, as compared to $11.1 million for the same
three-month period in the prior year, due to higher professional fees of $0.8 million, mainly driven by certain internal projects. In addition, we incurred higher travel and entertainment costs of $0.2 million due to the return of in-person business
meetings and events.
Provision for credit losses for the three technology business segments for the three months ended June 30, 2023, was $0.5 million, as compared to $0.3 million for the same three-month period in the prior year. Our higher
provision for credit losses for the three months ended June 30, 2023, was due to changes in our net credit exposure.
Depreciation and amortization: Depreciation and amortization of the three
technology business segments for the three months ended June 30, 2023, increased compared to the three months ended June 30, 2022, primarily due to more amortization from intangible assets acquired in the NSG acquisition.
Interest and financing costs: Interest and financing costs of the three
technology business segments for the three months ended June 30, 2023, increased compared to the three months ended June 30, 2022, due to higher average borrowings outstanding and higher interest rates under our WFCDF Credit Facility.
FINANCING SEGEMENT
The results of operations for our financing segment were as follows (dollars in thousands):
|
Three Months Ended June 30,
|
||||||||||||||||
|
2023
|
2022
|
Change
|
Percent
Change
|
|||||||||||||
|
Financial Metrics
|
||||||||||||||||
|
Portfolio earnings
|
$
|
3,073
|
$
|
2,673
|
$
|
400
|
15.0
|
%
|
||||||||
|
Transactional gains
|
1,279
|
1,835
|
(556
|
)
|
(30.3
|
%)
|
||||||||||
|
Post-contract earnings
|
3,634
|
4,726
|
(1,092
|
)
|
(23.1
|
%)
|
||||||||||
|
Other
|
504
|
340
|
164
|
48.2
|
%
|
|||||||||||
|
Net sales
|
$
|
8,490
|
$
|
9,574
|
$
|
(1,084
|
)
|
(11.3
|
%)
|
|||||||
|
|
||||||||||||||||
|
Gross profit
|
6,361
|
7,872
|
(1,511
|
)
|
(19.2
|
%)
|
||||||||||
|
|
||||||||||||||||
|
Selling, general, and adminstrative
|
3,198
|
3,655
|
(457
|
)
|
(12.5
|
%)
|
||||||||||
|
Depreciation and amortization
|
28
|
28
|
-
|
0.0
|
%
|
|||||||||||
|
Interest and financing costs
|
301
|
225
|
76
|
33.8
|
%
|
|||||||||||
|
Operating expenses
|
3,527
|
3,908
|
(381
|
)
|
(9.7
|
%)
|
||||||||||
|
|
||||||||||||||||
|
Operating income
|
$
|
2,834
|
$
|
3,964
|
$
|
(1,130
|
)
|
(28.5
|
%)
|
|||||||
|
Key Metrics & Other Information
|
||||||||||||||||
|
Adjusted EBITDA
|
$
|
2,930
|
$
|
4,050
|
$
|
(1,120
|
)
|
(27.7
|
%)
|
|||||||
Net sales: Net sales for the three months ended June 30, 2023, decreased due to lower post-contract earnings and transactional gains. Post-contract earnings decreased due to lower
month-to-month rents. Transactional gains decreased compared to the prior year due to lower margin from financial assets sold during the quarter. Total proceeds from sales of financing receivables were $61.4 million and $52.5 million for the three
months ended June 30, 2023, and 2022, respectively.
Gross Profit: Gross profit for the three months ended June 30, 2023, decreased compared to the three months ended June 30, 2022, due to higher cost of sales on off-lease equipment
and direct lease costs, which were offset slightly by lower depreciation expense from operating leases.
Selling, general and administrative: Selling, general, and administrative expenses for the three months ended June 30, 2023, decreased
compared to the three months ended June 30, 2022, due to reduced provision for credit losses because of changes in our net credit exposure. In addition, salaries and benefits decreased, mainly driven by a decrease in variable compensation due to
the decline in gross profit. These decreases are offset by a slight increase in general and administrative costs due to the deployment of a hosted lease accounting software in August 2022, as we incurred higher professional fees following the
implementation of this software platform, as well as higher software license and maintenance costs including amortization of the costs to implement the hosted software.
Interest and financing costs: Interest and financing costs for the three months ended June 30, 2023, increased slightly compared to the three months ended June 30, 2022, due to
higher interest rates. As of June 30, 2023, our non-recourse notes payable decreased to $20.2 million from $26.4 million in the prior year. Our weighted average interest rate for non-recourse notes payable was 5.22% and 3.78% as of June 30, 2023,
and 2022, respectively.
CONSOLIDATED
Other income (expense), net: Other income (expense), net, for the three
months ended June 30, 2023, increased to $0.2 million, compared to a net expense of $2.2 million in the prior year. We incurred $0.4 million of interest and dividend income on investments, offset by foreign currency transaction losses of $0.2
million during the three months ended June 30, 2023, compared to foreign currency transaction losses of $2.2 million in the same three-month period in the prior year.
Provision for income taxes: Our provision for income tax
expense was $12.7 million for the three months ended June 30, 2023, as compared to $8.7 million for the same three-month period in the prior year. Our effective tax rate for the three months ended June 30, 2023, was 27.2%, compared with 28.0% for
the same period in the prior year. Our effective tax rate was lower for the three months ended June 30, 2023, as compared to the prior year, primarily due to a lower state effective tax rate.
Net earnings: Net earnings for the three months ended June 30, 2023, were $33.8 million, an increase of 51.5% or $11.5 million, as compared to $22.3 million in
the prior year. The net earnings increase was due primarily to the increase in operating profits from our technology business.
Basic and fully diluted earnings per common share were both $1.27, for the three months ended June 30, 2023, an increase of 51.2% over the prior year. Basic and fully diluted earnings per common share were both $0.84, for
the three months ended June 30, 2022.
Weighted average common shares outstanding used in the calculation of basic and diluted earnings per common share were both 26.6 million for the three months ended June 30, 2023. Weighted average common shares outstanding
used in the calculation of basic and diluted earnings per common share were 26.5 million and 26.7 million, respectively, for the three months ended and June 30, 2022.
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 business segments are 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.
We believe that cash on hand and funds generated from operations, together with available credit under our credit facility, will be enough to finance our working capital, capital expenditures, and other requirements for at
least the next year.
Our ability to continue to expand, both organically and through acquisitions, is dependent upon our ability to generate enough cash flow from operations or from borrowing or other sources of financing as may be required.
While at this time we do not anticipate requiring any additional sources of financing to fund operations, if demand for IT products declines, or if our supply of products is delayed or interrupted, our cash flows from operations may be substantially
affected.
CASH FLOWS
The following table summarizes our sources and uses of cash for the three months ended June 30, 2023, and 2022 (in thousands):
|
Three Months Ended June 30,
|
||||||||
|
2023
|
2022
|
|||||||
|
Net cash used in operating activities
|
$
|
(20,900
|
)
|
$
|
(102,943
|
)
|
||
|
Net cash used in investing activities
|
(63,097
|
)
|
(1,692
|
)
|
||||
|
Net cash provided by (used in) financing activities
|
82,605
|
31,111
|
||||||
|
Effect of exchange rate changes on cash
|
(127
|
)
|
1,634
|
|||||
|
Net deccrease in cash and cash equivalents
|
$
|
(1,519
|
)
|
$
|
(71,890
|
)
|
||
Cash flows from operating activities: We used $20.9 million in operating activities during the three months ended June 30, 2023, compared to using $102.9 million for the three
months ended June 30, 2022. See below for a breakdown of operating cash flows by segment (in thousands):
|
Three Months Ended June 30,
|
||||||||
|
2023
|
2022
|
|||||||
|
Technology business
|
$
|
(48,259
|
)
|
$
|
(104,645
|
)
|
||
|
Financing segment
|
27,359
|
1,702
|
||||||
|
Net cash used in operating activities
|
$
|
(20,900
|
)
|
$
|
(102,943
|
)
|
||
Technology business: For the three months ended June 30, 2023, our technology business used $48.3 million from operating
activities primarily due to increases in our accounts receivable of $159.3 million, offset by an increase in accounts payable - trade of $60.2 million and net earnings. Further, we had net borrowings on the floor plan component of our credit
facility of $32.3 million. We use this credit facility to manage working capital needs, however, we present changes in this balance as financing activity in our consolidated statement of cash flows.
For the three months ended June 30, 2022, our technology business used $104.6 million from operating activities primarily due to increases in our accounts receivable and inventories,
offset by net earnings. Further, we had net repayments on the floor plan component of our credit facility of $7.3 million.
To manage our working capital, we monitor our cash conversion cycle for our technology business, 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 business:
|
As of June 30,
|
||||||||
|
2023
|
2022
|
|||||||
|
(DSO) Days sales outstanding (1)
|
62
|
59
|
||||||
|
(DIO) Days inventory outstanding (2)
|
32
|
30
|
||||||
|
(DPO) Days payable outstanding (3)
|
(46
|
)
|
(45
|
)
|
||||
|
Cash conversion cycle
|
48
|
44
|
||||||
| (1) |
Represents the rolling three-month average of the balance of trade accounts receivable-trade, net for our technology business at the end of the period divided by Gross billings for the same three-month period.
|
| (2) |
Represents the rolling three-month average of the balance of inventory, net for our technology business at the end of the period divided by the direct cost of products and services billed to our customers 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 business at the end of the period divided by the direct cost of products and services billed to
our customers for the same three-month period.
|
Our cash conversion cycle increased to 48 days as of June 30, 2023, as compared to 44 days as of June 30, 2022. 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 1 day as of June 30, 2023. 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 30-60 days from the invoice date. Our DSO increased 3 days to 62 days as of June 30, 2023, compared to June 30, 2022, reflecting higher sales to customers with terms greater than or equal to net 60 days. Our DIO increased to 32 days as of
June 30, 2023, compared to 30 days as of June 30, 2022.
Financing segment: For the three months ended June 30, 2023, our financing segment provided $27.4 million from operating
activities, primarily due to an increase in accounts payable-trade offset by increases in financing receivables-net. In 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.
Cash flows related to investing activities: For the three months ended June 30, 2023, we used $63.1 million from investing activities, consisting of $59.6 million for the
acquisition of NSG, and $3.7 million for purchases of property, equipment and operating lease equipment offset by $0.2 million of proceeds from the sale of property, equipment, and operating lease equipment. 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.
Cash flows from financing activities: For the three months ended June 30, 2023, cash provided by financing activities was $82.6 million, consisting of net borrowings of non-recourse
and recourse notes payable of $56.4 million, net borrowings on the floor plan component of our credit facility of $32.3 million, and proceeds of issuance of common stock to employees under an employee stock purchase plan of $1.4 million, partially
offset by $7.5 million in cash used to repurchase outstanding shares of our common stock. 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.
Our borrowing of recourse and non-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. 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 or financed. In these situations, the portion of the proceeds paid directly to
our vendors are non-cash transactions.
SECURED BORROWINGS – FINANCING SEGMENT
We may finance all or most of the cost of the assets that we finance for customers by transferring all or part of the contractual payments due to us to third-party financing institutions. When we account for the transfer as
a secured borrowing, we recognize the proceeds as either recourse or non-recourse notes payable. Our customers are responsible for repaying the debt from a secured borrowing. The lender typically secures a lien on the financed assets at the time the
financial assets are transferred and releases it upon collecting all the transferred payments. We are not liable for the repayment of non-recourse loans unless we breach our representations and warranties in the loan agreements. The lender assumes
the credit risk and their only recourse, upon default by the customer, is against the customer and the specific equipment under lease. While we expect that the credit quality of our financing arrangements and our residual return history will continue
to allow us to obtain such financing, such financing may not be available on acceptable terms, or at all. Interest rates have been rising and may continue to rise. To preserve our expected internal rate of return, we generally quote rates that are
indexed. Some of our lenders will not commit to rates for a length of time, resulting in exposure to us if the rates rise and we cannot pass such exposure to the customer.
CREDIT FACILITY – TECHNOLOGY BUSINESS
We finance the operations of our subsidiaries ePlus Technology, inc., ePlus Technology Services, inc. and SLAIT Consulting, LLC
(collectively, the “Borrowers”) in our technology business through a credit facility with WFCDF. The WFCDF Credit Facility has a floor plan facility and a revolving credit facility.
Please refer to Note 8 “Notes Payable and Credit Facility” to the accompanying Consolidated Financial Statements included in “Part I, Item 1. Financial Statements” for additional information
concerning our WFCDF Credit Facility.
The loss of the WFCDF Credit Facility could have a material adverse effect on our future results as we currently rely on this facility and its components for daily working capital and liquidity for our technology business
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, 2023, and March 31, 2023, we had a maximum credit limit of $500.0 million, and an outstanding balance on the floor plan facility of $182.9 million and $134.6 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.
As of June 30, 2023, the outstanding balance under the revolving credit facility was $52.0 million. On our balance sheet, our liability under the revolving credit facility is presented as part of recourse notes payable –
current. As of March 31, 2023, we did not have any outstanding balance under the revolving credit facility. The maximum credit limit under this facility was $200.0 million as of both June 30, 2023, and March 31, 2023.
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 the 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, 2023, 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 facilities in new geographic areas, which may require a significant investment of cash. We may also acquire technology companies to expand and enhance our
geographic footprint, or the platform of bundled solutions to provide additional functionality and value-added services. We may require additional capital due to increases in inventory to accommodate our customers’ IT installation schedules. We may
continue to use our internally generated funds to finance investments in leased assets or investments in notes receivable 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. While the future is uncertain, we do not believe our WFCDF 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 of ours.
Our quarterly results of operations are susceptible to fluctuations for a number of reasons, including, but not limited to 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 2023 Annual Report, as supplemented in subsequently filed reports, and in Part II, Item 1A. “Risk Factors” in this Report.
We believe that comparisons of quarterly results of our operations are not necessarily meaningful and that results for one quarter should not be relied upon as an indication of future performance.
CRITICAL ACCOUNTING ESTIMATES
As disclosed in Note 2, “Recent Accounting Pronouncements,” we adopted a new standard on accounting for contract assets and contract liabilities from contracts with
customers in a business combination in the second quarter of our fiscal year 2023. Under this new standard, we apply Accounting Standards Codification Topic 606, Contracts with Customers, to recognize and measure contract assets and contract
liabilities from contracts with customers. Other than this change, 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 2023 Annual Report.
| Item 3. |
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
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, 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. Borrowings
under the WFCDF Credit Facility bear interest at a market-based variable rate. As of June 30, 2023, 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 other ePlus 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, 2023.
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, 2023, 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.
PART II. OTHER INFORMATION
| Item 1. |
LEGAL PROCEEDINGS
|
Please refer to Note 9, “Commitment and Contingencies” to the accompanying Consolidated Financial Statements included in “Part I, Item 1. 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, 2023.
| Item 2. |
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
The following table provides information regarding our purchases of common stock during the three months ended June 30, 2023.
|
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
of shares that may
yet be purchased
under the plans or
programs (2)
|
||||||||||||
|
April 1, 2023 through April 30, 2023
|
40,180
|
$
|
48.14
|
40,180
|
957,320
|
|||||||||||
|
May 1, 2023 through May 31, 2023
|
47,685
|
$
|
44.43
|
47,685
|
909,635
|
|||||||||||
|
June 1, 2023 through June 30, 2023
|
59,621
|
$
|
55.64
|
5,676
|
994,324
|
|||||||||||
|
Total
|
147,486
|
93,541
|
||||||||||||||
| (1) |
All shares were acquired in open-market purchases, except for 53,945 shares, which were repurchased in June 2023 to satisfy tax withholding obligations that arose due to the vesting of shares of restricted stock.
|
| (2) |
The amounts presented in this column are the remaining number of shares that may be repurchased after repurchases during the month. As of May 27, 2023, the authorization under the then-existing share repurchase plan expired. On March 22,
2023, 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, 2023.
|
The timing and expiration date of the current stock repurchase authorizations are included in Note 11, “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.
| Item 5. |
OTHER INFORMATION
|
Insider Trading Arrangements and Policies
During the three months ended June 30, 2023, no director or officer of ePlus inc. adopted terminated
| Item 6. |
EXHIBITS
|
|
Exhibit Number
|
|
Exhibit Description
|
|
|
|
|
|
|
ePlus inc. Amended and Restated Certificate of Incorporation, as last amended November 9, 2021 (Incorporated herein by reference to Exhibit
3.1 to our Annual Report on Form 10-K for the period ended March 31, 2023).
|
|
|
|
|
|
|
|
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)
|
|
|
|
|
|
|
|
Form of Restricted Stock Award Agreement (for awards granted to U.S. employees under and subject to the provisions of the ePlus inc. 2021 Employee Long-Term Incentive Plan)
|
|
|
|
|
|
|
|
Form of Restricted Stock Award Agreement (for awards granted to U.K. employees under and subject to the provisions of the ePlus inc. 2021 Employee Long-Term Incentive Plan)
|
|
|
|
|
|
|
|
Form of Stock Agreement (for awards granted to non-employee directors under and subject to the provisions of the ePlus inc. 2017 Non-Employee Director Long-Term Incentive Plan)
|
|
|
|
|
|
| 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).
|
|
|
Certification of the Chief Financial Officer of ePlus inc. pursuant to the Securities Exchange Act Rules 13a-14(a) and 15d-14(a).
|
||
|
|
|
|
|
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)
|
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 7, 2023
|
/s/ MARK P. MARRON
|
|
|
By: Mark P. Marron
|
||
|
Chief Executive Officer and
|
||
|
President
|
||
|
(Principal Executive Officer)
|
||
|
Date: August 7, 2023
|
/s/ ELAINE D. MARION
|
|
|
By: Elaine D. Marion
|
||
|
Chief Financial Officer
|
||
|
(Principal Financial Officer)
|
||
47
Exhibit 10.1
ePlus inc.
Restricted Stock Award Agreement
| 1. |
Restricted Stock Award – Terms and Conditions. This Agreement confirms the grant under and subject to the provisions of the ePlus inc. 2021 Employee Long-Term Incentive Plan (the “Plan”) and the terms and conditions set forth herein (“Terms and Conditions”) to the above-named Participant of the number of a Restricted Stock award of such number of shares of common stock, $0.01 par value per share (the “Common Stock”), of
the Company as set forth above. The Restricted stock is granted to Participant in consideration of the services to be rendered by Participant to the Company or its subsidiaries. This Agreement merely evidences such grant, and does not
constitute property of any nature or type or confer any additional rights. This grant is subject in all respects to the applicable terms of the Plan. A copy of the Plan (or related Prospectus delivered to you with this Agreement) may be
obtained at no cost by contacting the HR Department at hr@eplus.com.
|
| 2. |
Restriction Period. For purposes of this Agreement, the Restriction Period is the period beginning on the grant date and ending on vesting date(s) or, if earlier, upon termination of employment as the result
of Participant’s death or Disability or upon a Change in Control, as defined in the Plan, provided Participant is in employment with the Company on the date of the Change in Control (the “Restriction Period”).
Upon termination of Participant’s employment for any other reason prior to the date that Participant becomes 100% vested in the Award, the unvested Shares shall be forfeited immediately and Participant shall have no right with respect to the
unvested Shares. No additional Shares shall vest after the date of termination of Participant’s employment.
|
| 3. |
Restrictions and Forfeiture. The Restricted Stock is granted to the Participant subject to the prohibitions on transfer set forth in Section 6 below, which shall lapse, if at all, upon the expiration of the
Restriction Period as described in Section 7 below.
|
| 4. |
Rights During Restriction Period. During the Restriction Period, the Participant shall be the record owner of the Restricted Stock and may exercise full voting rights with respect to all Common Stock subject
to the award. The Restricted Stock shall accrue dividends that will be credited in the form of cash or securities, as applicable, to the Participant’s account, on the date the dividend is issued. At the end of the Restriction Period, all
credited cash dividends or securities, as applicable, will be distributed to the Participant. If the number of outstanding shares of Common Stock is changed as a result of a stock dividend, stock split or the like, without additional
consideration to the Company, the Restricted Stock subject to this award shall be adjusted to correspond to the change in the outstanding shares of the Company’s Common Stock.
|
| 5. |
Release of Award. Provided the award has not previously been forfeited, as soon as reasonably practicable following the expiration of the Restriction Period and the satisfaction of the applicable tax
withholding obligations, the Company shall at its option, cause the Restricted Stock to which the Participant is entitled pursuant hereto (i) to be released without restriction on transfer by delivery to the custody of the Participant of a
stock certificate in the name of the Participant or his or her designee, or (ii) to be credited without restriction on transfer to a book-entry account for the benefit of the Participant or his or her designee maintained by the Company’s
stock administrator, stock transfer agent or its designee.
|
| 6. |
Prohibition Against Transfer. Until the expiration of the Restriction Period, the award and the Restricted Stock subject to the award and the rights granted under the Terms and Conditions and this Agreement
are not transferable except to family members or trusts by will or by the laws of descent and distribution, provided that the award and the Restricted Stock may not be so transferred to family members or trusts except as permitted by
applicable law or regulations. Without limiting the generality of the foregoing, except as aforesaid, until the expiration of the Restriction Period, the award and shares of Restricted Stock may not be sold, exchanged, assigned, transferred,
pledged, hypothecated, encumbered or otherwise disposed of, shall not be assignable by operation of law, and shall not be subject to execution, attachment, charge, alienation or similar process. Any attempt to effect any of the foregoing
shall be wholly ineffective.
|
1
| 7. |
Forfeiture; Termination of Employment. Shares of Restricted Stock that are included in this award shall be forfeited by the Participant upon the Participant’s termination of employment prior to vesting for
any reason other than death or Disability, as defined in the Plan. All shares of Restricted Stock will immediately vest upon a Change in Control, as defined in the Plan, provided Participant is in employment with the Company on the date of
the Change in Control.
|
| 8. |
Tax Withholding. Participant shall be required to meet any applicable tax withholding obligations in accordance with the provisions of the Plan. The Committee shall be authorized, in its sole discretion, to
establish such rules and procedures relating to the use of Shares to satisfy any tax withholding obligations as it deems necessary and appropriate. Notwithstanding any action the Company takes with respect to any or all income tax, social
insurance, payroll tax, or other tax-related withholding, the ultimate liability for all tax-related items is and remains the Participant’s responsibility.
|
| 9. |
Tax Elections. Participant acknowledges that Participant has considered the advisability of all tax elections in connection with the purchase of the Shares, including the making of an election under Section
83(b) under the Internal Revenue Code of 1986, as amended (“Code”); Participant further acknowledges that the Company has no responsibility for the making of such Section 83(b) election. In the event Participant determines to make a Section
83(b) election, Participant agrees to timely provide a copy of the election to the Company as required under the Code.
|
| 10. |
Miscellaneous. These Terms and Conditions and other portions of this Agreement: (a) shall be binding upon and inure to the benefit of any successor of the Company; (b) shall be governed by the laws of the
State of Delaware and any applicable laws of the United States; and (c) except as permitted under Sections 7 and 8 of the Plan, may not be amended without the written consent of both the Company and the Participant.
|
| 11. |
No Agreement to Employ. The Agreement shall not in any way interfere with or limit the right of the Company to terminate the Participant’s employment or service with the Company at any time, and no contract
or right of employment shall be implied by the Terms and Conditions and this Agreement of which they form a part.
|
| 12. |
Incorporation of Plan Provisions. The Terms and Conditions and this Agreement are made pursuant to the Plan, the provisions of which are hereby incorporated by reference (including without limitation,
Section 6(g)(xii) of the Plan, such that the Participant may be subject to the forfeiture of the unvested portion of this Restricted Stock award and must return any vested shares already delivered pursuant to this Agreement in certain
circumstances described in that section). Capitalized terms not otherwise defined herein shall have the meanings set forth for such terms in the Plan. In the event of a conflict between the terms of the Terms and Conditions and this
Agreement, and the Plan, the terms of Plan shall govern.
|
| 13. |
Adjustment of Award. In the event it is determined that the grant, vesting or Common Stock delivery or cash payment under an award of Restricted Stock was made based on incorrect financial results, the
Compensation Committee of the Board of Directors will review such grant, vesting, delivery or payment. If the amount of the grant, vesting, delivery or payment would have been lower had the level of achievement of applicable financial
performance goals been calculated based on the correct financial results, the Compensation Committee may, in its sole discretion, adjust (i.e., lower) the amount of such grant, vesting, delivery or
payment so that it reflects the amount that would have applied based on the correct financial results and, to the extent permitted by applicable law, require the reimbursement by the Participant of any amount delivered or paid to or received
by the Participant with respect to such award. Additionally, Common Stock deliveries or cash payments under this Agreement are subject to recovery by the Company to the extent required by the Dodd-Frank Wall Street Reform and Consumer
Protection Act of 2010 and the Sarbanes-Oxley Act of 2002 and any regulations promulgated thereunder.
|
2
| 14. |
Parachute Payments. In the event that any payment or benefit received or to be received by the Participant under this Agreement or any other award under the Plan in connection with a Change in Control, as
defined in the Plan, (collectively, the “Change in Control Payments”) would (i) constitute (together with other payments or benefits contingent on a Change in Control) a “parachute payment” within the meaning of Section 280G of the Code or any successor provision and (ii) but for this section, be subject to the excise tax imposed by Section 4999 of the Code or any successor provision (the “Excise Tax”), then the Participant shall receive:
|
| (A) |
the full amount of such Change in Control Payments, or
|
| (B) |
such lesser amount of such Change in Control Payments, which would result in no portion of such Change in Control Payments being subject to the Excise Tax,
|
whichever of the foregoing amounts, taking into account the applicable federal, state and local income taxes and the Excise Tax, results in the receipt by the Participant, on an
after-tax basis, of the greatest amount of payments or benefits contingent on the Change in Control (including without limitation the Change in Control Payments), notwithstanding that all or some portion of such Change in Control Payments may be
taxable under Section 4999 of the Code.
Any determination required under this section shall be made in writing by an independent public accounting firm or other independent third party selected by the Company (the “Accountants”), whose costs shall be paid by the Company and whose determination shall be conclusive and binding upon the Participant and the Company for all purposes. For purposes of making the calculations
required by this section, the Accountants may make reasonable assumptions concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code. The Company and
Participant shall furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make a determination under this section. In the event the Accountants determine the Change in Control Payments are to
be reduced under (B) above, such reduction shall first be made as to any such Common Stock payment or benefit under any Plan awards in reverse chronological order of the grant date, then any such cash payment or benefit under any Plan awards in
reverse chronological order of the grant date.
| 15. |
Committee Authority. The Committee will have the power to interpret the Plan and this Award Agreement and to adopt such rules for the administration, interpretation and application of the Plan as are
consistent therewith and to interpret or revoke any such rules (including, but not limited to, the determination of whether or not any Shares of Restricted Stock have vested). Any dispute regarding the interpretation of this Agreement or the
Plan shall be submitted by the Participant or the Company to the Committee for review. All actions taken and all interpretations and determinations made by the Committee in good faith will be final and binding upon Participant, the Company
and all other interested persons.
|
| 16. |
Entire Agreement. This Agreement and the Plan constitute the entire agreement between the parties with respect to the subject matter hereof and supersede all prior or contemporaneous written or oral
agreements and understandings of the parties, either express or implied.
|
3
Exhibit 10.2
ePlus inc.
Restricted Stock Award Agreement
| 1. |
Restricted Stock Award – Terms and Conditions. This Agreement confirms the grant under and subject to the provisions of the ePlus inc. 2021 Employee Long-Term Incentive Plan (the “Plan”) and the terms and conditions set forth herein (“Terms and Conditions”) to the above-named Participant of the number of a Restricted Stock award of such number of shares of common stock, $0.01 par value per share (the “Common Stock”), of
the Company as set forth above. The Restricted Stock is granted to Participant in consideration of the services to be rendered by Participant to the Company or its subsidiaries. This Agreement merely evidences such grant, and does not
constitute property of any nature or type or confer any additional rights. This grant is subject in all respects to the applicable terms of the Plan. A copy of the Plan (or related Prospectus delivered to you with this Agreement) may be
obtained at no cost by contacting the HR Department at hr@eplus.com.
|
| 2. |
Restriction Period. For purposes of this Agreement, the Restriction Period is the period beginning on the grant date and ending on vesting date(s) or, if earlier, upon termination of employment as the result
of Participant’s death or Disability or upon a Change in Control, as defined in the Plan, provided Participant is in employment with the Company on the date of the Change in Control (the “Restriction Period”).
Upon termination of Participant’s employment for any other reason prior to the date that Participant becomes 100% vested in the Award, the unvested Shares shall be forfeited immediately and Participant shall have no right with respect to the
unvested Shares. No additional Shares shall vest after the date of termination of Participant’s employment.
|
| 3. |
Restrictions and Forfeiture. The Restricted Stock is granted to the Participant subject to the prohibitions on transfer set forth in Section 6 below, which shall lapse, if at all, upon the expiration of the
Restriction Period as described in Section 7 below.
|
| 4. |
Rights During Restriction Period. During the Restriction Period, the Participant shall be the record owner of the Restricted Stock and may exercise full voting rights with respect to all Common Stock subject
to the award. The Restricted Stock shall accrue dividends that will be credited in the form of cash or securities, as applicable, to the Participant’s account, on the date the dividend is issued. At the end of the Restriction Period, all
credited cash dividends or securities, as applicable, will be distributed to the Participant. If the number of outstanding shares of Common Stock is changed as a result of a stock dividend, stock split or the like, without additional
consideration to the Company, the Restricted Stock subject to this award shall be adjusted to correspond to the change in the outstanding shares of the Company’s Common Stock.
|
| 5. |
Release of Award. Provided the award has not previously been forfeited, as soon as reasonably practicable following the expiration of the Restriction Period and the satisfaction of the applicable tax
withholding obligations, the Company shall at its option, cause the Restricted Stock to which the Participant is entitled pursuant hereto (i) to be released without restriction on transfer by delivery to the custody of the Participant of a
stock certificate in the name of the Participant or his or her designee, or (ii) to be credited without restriction on transfer to a book-entry account for the benefit of the Participant or his or her designee maintained by the Company’s
stock administrator, stock transfer agent or its designee.
|
| 6. |
Prohibition Against Transfer. Until the expiration of the Restriction Period, the award and the Restricted Stock subject to the award and the rights granted under the Terms and Conditions and this Agreement
are not transferable except to family members or trusts by will or by the laws of descent and distribution, provided that the award and the Restricted Stock may not be so transferred to family members or trusts except as permitted by
applicable law or regulations. Without limiting the generality of the foregoing, except as aforesaid, until the expiration of the Restriction Period, the award and shares of Restricted Stock may not be sold, exchanged, assigned, transferred,
pledged, hypothecated, encumbered or otherwise disposed of, shall not be assignable by operation of law, and shall not be subject to execution, attachment, charge, alienation or similar process. Any attempt to effect any of the foregoing
shall be wholly ineffective.
|
1
| 7. |
Forfeiture; Termination of Employment. Shares of Restricted Stock that are included in this award shall be forfeited by the Participant upon the Participant’s termination of employment prior to vesting for
any reason other than death or Disability, as defined in the Plan. All shares of Restricted Stock will immediately vest upon a Change in Control, as defined in the Plan, provided Participant is in employment with the Company on the date of
the Change in Control.
|
| 8. |
Tax Withholding. Participant shall be required to meet any applicable tax withholding obligations in accordance with the provisions of the Plan. The Committee shall be authorized, in its sole discretion, to
establish such rules and procedures relating to the use of Shares to satisfy any tax withholding obligations as it deems necessary and appropriate. Notwithstanding any action the Company takes with respect to any or all income tax, national
insurance contributions including primary class 1 (employee’s) national insurance contributions [and secondary class 1 (employer’s) national insurance contributions] or their equivalent in any jurisdiction, which may lawfully be recovered
from the Participant, payroll tax, or other tax-related withholding, the ultimate liability for all tax-related items is and remains the Participant’s responsibility.
|
| 9. |
Tax Elections. Participant acknowledges that Participant has considered the advisability of all tax elections in connection with the purchase of the Shares, including the making of an election under Section
431(1) of the Income Tax (Earnings & Pensions) Act 2003 in a form prescribed by HM Revenue & Customs pursuant to which the Participant elects to pay income tax (if any) on the amount equal to the difference between the unrestricted
market value of the Restricted Stock and the consideration paid for them, and such election be entered into with Participant’s employing company no later than 14 days after the date on which the Participant has acquired Shares of Restricted
Stock.
|
| 10. |
Miscellaneous. These Terms and Conditions and other portions of this Agreement: (a) shall be binding upon and inure to the benefit of any successor of the Company; (b) shall be governed by the laws of the
State of Delaware and any applicable laws of the United States; and (c) except as permitted under Sections 7 and 8 of the Plan, may not be amended without the written consent of both the Company and the Participant.
|
| 11. |
No Agreement to Employ. The Agreement shall not in any way interfere with or limit the right of the Company to terminate the Participant’s employment or service with the Company at any time, and no contract
or right of employment shall be implied by the Terms and Conditions and this Agreement of which they form a part.
|
| 12. |
Incorporation of Plan Provisions. The Terms and Conditions and this Agreement are made pursuant to the Plan, the provisions of which are hereby incorporated by reference (including without limitation,
Section 6(g)(xii) of the Plan, such that the Participant may be subject to the forfeiture of the unvested portion of this Restricted Stock award and must return any vested shares already delivered pursuant to this Agreement in certain
circumstances described in that section). Capitalized terms not otherwise defined herein shall have the meanings set forth for such terms in the Plan. In the event of a conflict between the terms of the Terms and Conditions and this
Agreement, and the Plan, the terms of Plan shall govern.
|
| 13. |
Adjustment of Award. In the event it is determined that the grant, vesting or Common Stock delivery or cash payment under an award of Restricted Stock was made based on incorrect financial results, the
Compensation Committee of the Board of Directors will review such grant, vesting, delivery or payment. If the amount of the grant, vesting, delivery or payment would have been lower had the level of achievement of applicable financial
performance goals been calculated based on the correct financial results, the Compensation Committee may, in its sole discretion, adjust (i.e., lower) the amount of such grant, vesting, delivery or
payment so that it reflects the amount that would have applied based on the correct financial results and, to the extent permitted by applicable law, require the reimbursement by the Participant of any amount delivered or paid to or received
by the Participant with respect to such award. Additionally, Common Stock deliveries or cash payments under this Agreement are subject to recovery by the Company to the extent required by the Dodd-Frank Wall Street Reform and Consumer
Protection Act of 2010 and the Sarbanes-Oxley Act of 2002 and any regulations promulgated thereunder.
|
2
| 14. |
Parachute Payments. In the event that any payment or benefit received or to be received by the Participant under this Agreement or any other award under the Plan in connection with a Change in Control, as
defined in the Plan, (collectively, the “Change in Control Payments”) would (i) constitute (together with other payments or benefits contingent on a Change in Control) a “parachute payment” within the meaning of Section 280G of the Code or any successor provision and (ii) but for this section, be subject to the excise tax imposed by Section 4999 of the Code or any successor provision (the “Excise Tax”), then the Participant shall receive:
|
| (A) |
the full amount of such Change in Control Payments, or
|
| (B) |
such lesser amount of such Change in Control Payments, which would result in no portion of such Change in Control Payments being subject to the Excise Tax,
|
whichever of the foregoing amounts, taking into account the applicable federal, state and local income taxes and the Excise Tax, results in the receipt by the Participant, on an
after-tax basis, of the greatest amount of payments or benefits contingent on the Change in Control (including without limitation the Change in Control Payments), notwithstanding that all or some portion of such Change in Control Payments may be
taxable under Section 4999 of the Code.
Any determination required under this section shall be made in writing by an independent public accounting firm or other independent third party selected by the Company (the “Accountants”), whose costs shall be paid by the Company and whose determination shall be conclusive and binding upon the Participant and the Company for all purposes. For purposes of making the calculations
required by this section, the Accountants may make reasonable assumptions concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code. The Company and
Participant shall furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make a determination under this section. In the event the Accountants determine the Change in Control Payments are to
be reduced under (B) above, such reduction shall first be made as to any such Common Stock payment or benefit under any Plan awards in reverse chronological order of the grant date, then any such cash payment or benefit under any Plan awards in
reverse chronological order of the grant date.
| 15. |
Committee Authority. The Committee will have the power to interpret the Plan and this Award Agreement and to adopt such rules for the administration, interpretation and application of the Plan as are
consistent therewith and to interpret or revoke any such rules (including, but not limited to, the determination of whether or not any Shares of Restricted Stock have vested). Any dispute regarding the interpretation of this Agreement or the
Plan shall be submitted by the Participant or the Company to the Committee for review. All actions taken and all interpretations and determinations made by the Committee in good faith will be final and binding upon Participant, the Company
and all other interested persons.
|
| 16. |
Entire Agreement. This Agreement and the Plan constitute the entire agreement between the parties with respect to the subject matter hereof and supersede all prior or contemporaneous written or oral
agreements and understandings of the parties, either express or implied.
|
3
Exhibit 10.3
ePlus inc.
Stock Agreement
| Recipient: |
%%FIRST_NAME%-% %%MIDDLE_NAME%-%%%LAST_NAME%-% |
| Grant Number: |
%%OPTION_NUMBER%-% |
| Date of Award: |
%%OPTION_DATE%-% |
| Total Number of Shares: |
%%TOTAL_SHARES_GRANTED%-% |
| 1. |
Stock – Terms and Conditions. This Agreement confirms the issuance under and subject to the provisions of the ePlus inc. 2017 Non-Employee Director Long-Term Incentive Plan (the “Plan”) and the terms and conditions set forth herein (“Terms and Conditions”) to the above-named participant of Stock in
lieu of cash compensation of such number of shares of common stock, $0.01 par value per share (the “Common Stock”), of the Company as set forth above. This Agreement merely evidences such issuance of
Stock, and does not constitute property of any nature or type or confer any additional rights. This issuance is subject in all respects to the applicable terms of the Plan. A copy of the Plan (or related Prospectus delivered to you with this
Agreement) may be obtained at no cost by contacting the Corporate Secretary at 13595 Dulles Technology Drive, Herndon, Virginia 20171.
|
| 2. |
Restriction Period. This Agreement reflects shares issued pursuant to the Recipient’s Stock Fee Election pursuant to Section 7(c) of the Plan. As more fully described in the Plan, the Shares are not subject to any Restriction
Period.
|
| 3. |
Restrictions and Forfeiture. The Stock shall not be subject to restrictions or forfeiture.
|
| 4. |
Release of Stock. As soon as reasonably practicable following the issuance of the Stock, the Company shall at its option, cause the Stock to which the participant is entitled pursuant hereto (i) to be released without restriction
on transfer by delivery to the custody of the participant of a stock certificate in the name of the participant or his or her designee, or (ii) to be credited without restriction on transfer to a book-entry account for the benefit of the
participant or his or her designee maintained by the Company’s stock transfer agent or its designee.
|
| 5. |
Taxes. Recipient acknowledges that he or she will incur a tax liability for the year in which the Stock is received. The number of shares shall be determined by dividing the cash compensation deferred for a calendar quarter of
service by the Fair Market Value on the date of grant (determined without regard to the restrictions applicable thereto) and the first trading day of the following calendar quarter shall be considered the grant date of the Restricted Stock
Award.
|
| 6. |
Miscellaneous. These Terms and Conditions and other portions of this Agreement: (a) shall be binding upon and inure to the benefit of any successor of the Company; (b) shall be governed by the laws of the State of Delaware and any
applicable laws of the United States; and (c) except as permitted under Sections 9 and 11 of the Plan, may not be amended without the written consent of both the Company and Recipient. The issuance of the Stock shall not constitute or be
evidence of any agreement or understanding, express or implied, that the Company will retain the director for any period of time, or at any particular rate of compensation.
|
| 7. |
Incorporation of Plan Provisions. The Terms and Conditions and this Agreement are made pursuant to the Plan, the provisions of which are hereby incorporated by reference. Capitalized terms not otherwise defined herein shall have
the meanings set forth for such terms in the Plan. In the event of a conflict between the terms of the Terms and Conditions and this Agreement, and the Plan, the terms of Plan shall govern, it being understood and mutually agreed that the
Stock is not subject to forfeiture.
|
Quarterly Stock Agreement, for stock issued in lieu of cash pursuant to Section 7(c) of the
2017 Non-Employee Director LTIP. Revised and approved by the Compensation Committee
On May 3, 2022, for awards granted on or after July 1, 2022_updated per NP for Oct 1, 2022.
| 8. |
Parachute Payments. In the event that any payment or benefit received or to be received by the participant under this Agreement or any other award under the Plan in connection with a Change in Control,
as defined in the Plan, (collectively, the “Change in Control Payments”) would (i) constitute (together with other payments or benefits contingent on a Change in Control) a “parachute payment” within the meaning of Section 280G of the Code or any successor provision and (ii) but for this section, be subject to the excise tax imposed by Section 4999 of the Code or any successor provision (the “Excise Tax”), then the participant shall receive:
|
| (A) |
the full amount of such Change in Control Payments, or
|
| (B) |
such lesser amount of such Change in Control Payments, which would result in no portion of such Change in Control Payments being subject to the Excise Tax,
|
whichever of the foregoing amounts, taking into account the applicable federal, state and local income taxes and the Excise Tax, results in the receipt by the participant, on an after-tax basis, of
the greatest amount of payments or benefits contingent on the Change in Control (including without limitation the Change in Control Payments), notwithstanding that all or some portion of such Change in Control Payments may be taxable under Section
4999 of the Code.
Any determination required under this section shall be made in writing by an independent public accounting firm or other independent third party selected by the Company (the “Accountants”), whose costs shall be paid by the Company and whose determination shall be conclusive and binding upon the participant and the Company for all purposes. For purposes of making the calculations required by this
section, the Accountants may make reasonable assumptions concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code. The Company and participant shall furnish
to the Accountants such information and documents as the Accountants may reasonably request in order to make a determination under this section. In the event the Accountants determine the Change in Control Payments are to be reduced under (B) above,
such reduction shall first be made as to any such Common Stock payment or benefit under any Plan awards in reverse chronological order of the grant date, then any such cash payment or benefit under any Plan awards in reverse chronological order of
the grant date.
Exhibit 31.1
CERTIFICATION
I, Mark P. Marron, certify that:
| 1. |
I have reviewed this quarterly report on Form 10-Q of ePlus inc.;
|
| 2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report;
|
| 3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
|
| 4. |
The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15 (f)) for the registrant and have:
|
| a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
| b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
| c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and
|
| d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case
of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
| 5. |
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the
registrant’s board of directors (or persons performing the equivalent functions):
|
| a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and
|
| b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date: August 7, 2023
|
/s/ MARK P. MARRON
|
|
|
Mark P. Marron
|
|
|
Chief Executive Officer and President
|
|
|
(Principal Executive Officer)
|
Exhibit 31.2
CERTIFICATION
I, Elaine D. Marion, certify that:
| 1. |
I have reviewed this quarterly report on Form 10-Q of ePlus inc.;
|
| 2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report;
|
| 3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
|
| 4. |
The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15 (f)) for the registrant and have:
|
| a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
| b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
| c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and
|
| d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case
of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
| 5. |
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the
registrant’s board of directors (or persons performing the equivalent functions):
|
| a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and
|
| b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date: August 7, 2023
|
/s/ ELAINE D. MARION
|
|
|
Elaine D. Marion
|
|
|
Chief Financial Officer
|
|
|
(Principal Financial Officer)
|
Exhibit 32
CERTIFICATION
PURSUANT TO 18 USC. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of ePlus inc. on Form 10-Q for the quarter ended June 30, 2023, as filed with the Securities and Exchange Commission on the date hereof (the
“Report”), the undersigned hereby certify, pursuant to 18 USC. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that to the undersigned’s best knowledge and belief:
| a) |
the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
|
| b) |
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of ePlus inc.
|
Date: August 7, 2023
|
/s/ MARK P. MARRON
|
|
|
Mark P. Marron, Chief Executive Officer
and President
|
|
|
(Principal Executive Officer)
|
|
|
/s/ ELAINE D. MARION
|
|
|
Elaine D. Marion, Chief Financial Officer
|
|
|
(Principal Financial Officer)
|
A signed original of this written statement required by Section 906 has been provided to ePlus and will be retained by us and furnished to the Securities and Exchange Commission or
its staff upon request.