10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.20549

FORM 10-Q

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

For the quarterly period ended December 31, 2019

OR

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

For the transition period from____ to ____ .

Commission file number: 1-34167

ePlus inc.

(Exact name of registrant as specified in its charter)

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

13595 Dulles Technology Drive, Herndon, VA 20171-3413

(Address, including zip code, of principal executive offices)

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

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

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

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

Yes ☒   No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒   No ☐

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

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

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐  No ☒

The number of shares of common stock outstanding as of February 3, 2020 was 13,512,815.

Table of Contents

TABLE OF CONTENTS

ePlus inc. AND SUBSIDIARIES

Part I. Financial Information:
Item 1.	Financial Statements
	Unaudited Consolidated Balance Sheets as of December 30, 2019 and March 31, 2019	5
	Unaudited Consolidated Statements of Operations for the Three and Nine Months Ended December 31, 2019 and 2018	6
	Unaudited Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended December 31, 2019 and 2018	7
	Unaudited Consolidated Statements of Cash Flows for the Nine Months Ended December 31, 2019 and 2018	8
	Unaudited Consolidated Statements of Stockholders’ Equity for the Nine Months Ended December 31, 2019 and 2018	10
	Notes to Unaudited Consolidated Financial Statements	11
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	45
Item 4.	Controls and Procedures	45
Part II. Other Information:
Item 1.	Legal Proceedings	46
Item 1A.	Risk Factors	46
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	47
Item 3.	Defaults Upon Senior Securities	47
Item 4.	Mine Safety Disclosures	47
Item 5.	Other Information	47
Item 6.	Exhibits	48
Signatures & Certifications		49

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CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

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

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

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

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

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

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

• reduction of vendor incentives provided to us;

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

• increasing the total number of customers using integrated solutions by up-selling within our customer base and gaining new customers;

• adapting to meet changes in markets and competitive developments;

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

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

• performing professional and managed services competently;

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

• reliance on third-parties to perform some of our service obligations to our customers;

• changes in the Information Technology (“IT”) industry and/or rapid changes in product offerings, including the proliferation of the cloud, infrastructure as a service (“IaaS”), and software as a service (“SaaS”);

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

• future growth rates in our core businesses;

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

• changes to or loss of members of our senior management team and/or failure to successfully implement succession plans;

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

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

• a possible decrease in the capital spending budgets of our customers or a decrease in purchases from us;

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

• disruptions or a security breach in our or our vendors’ IT systems and data and audio communication networks;

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• our ability to secure our own and our customers’ electronic and other confidential information, and remain secure during a cyber-security attack;

• our ability to raise capital, maintain or increase as needed our lines of credit with vendors or floor planning facility, obtain debt for our financing transactions, or the effect of those changes on our common stock price;

• our ability to realize our investment in leased equipment;

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

• the possibility of goodwill impairment charges in the future;

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

• significant changes in accounting standards including changes to the financial reporting of leases, which could impact the demand for our leasing services, or misclassification of products and services we sell resulting in the misapplication of revenue recognition policies or inaccurate costs and completion dates for our services, which could affect our estimates.

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

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

ePlus inc. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

	December 31, 2019			March 31, 2019
ASSETS
Current assets:
Cash and cash equivalents	$	59,555		$	79,816
Accounts receivable—trade, net		413,741			299,899
Accounts receivable—other, net		37,187			41,328
Inventories		61,065			50,493
Financing receivables—net, current		89,229			63,767
Deferred costs		20,421			17,301
Other current assets		8,809			7,499
Total current assets		690,007			560,103
Financing receivables and operating leases—net		73,506			59,032
Property, equipment and other assets		34,000			17,328
Goodwill		118,225			110,807
Other intangible assets—net		36,870			38,928
TOTAL ASSETS	$	952,608		$	786,198
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Current liabilities:
Accounts payable	$	126,154		$	86,801
Accounts payable—floor plan		144,483			116,083
Salaries and commissions payable		27,476			21,286
Deferred revenue		55,128			47,251
Recourse notes payable—current		2,239			28
Non-recourse notes payable—current		59,015			38,117
Other current liabilities		24,995			19,285
Total current liabilities		439,490			328,851
Non-recourse notes payable—long term		7,120			10,502
Deferred tax liability—net		4,924			4,915
Other liabilities		28,588			17,677
TOTAL LIABILITIES		480,122			361,945
COMMITMENTS AND CONTINGENCIES  (Note 10)
STOCKHOLDERS' EQUITY
Preferred stock, $0.01 per share par value; 2,000 shares authorized; none outstanding		-			-
Common stock, $0.01 per share par value; 25,000 shares authorized; 13,513 outstanding at December 31, 2019 and 13,611 outstanding at March 31, 2019		144			143
Additional paid-in capital		143,262			137,243
Treasury stock, at cost, 884 shares at December 31, 2019 and 693 shares at March 31, 2019		(67,691	)		(53,999	)
Retained earnings		396,973			341,137
Accumulated other comprehensive income—foreign currency translation adjustment		(202	)		(271	)
Total Stockholders' Equity		472,486			424,253
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	952,608		$	786,198

See Notes to Unaudited Consolidated Financial Statements.

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ePlus inc. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

	Three Months Ended December 31,				Nine Months Ended December 31,
	2019		2018		2019		2018
Net sales
Product	$	378,569	$	310,443	$	1,077,667	$	942,735
Services		50,422		35,221		144,261		104,504
Total		428,991		345,664		1,221,928		1,047,239
Cost of sales
Product		293,209		241,856		832,135		735,802
Services		32,086		20,895		90,427		62,321
Total		325,295		262,751		922,562		798,123
Gross profit		103,696		82,913		299,366		249,116
Selling, general, and administrative		73,090		59,728		209,400		174,399
Depreciation and amortization		3,647		2,719		10,667		8,250
Interest and financing costs		694		443		1,898		1,403
Operating expenses		77,431		62,890		221,965		184,052
Operating income		26,265		20,023		77,401		65,064
Other income		997		721		912		1,140
Earnings before tax		27,262		20,744		78,313		66,204
Provision for income taxes		7,712		5,880		22,477		18,064
Net earnings	$	19,550	$	14,864	$	55,836	$	48,140
Net earnings per common share—basic	$	1.47	$	1.10	$	4.19	$	3.57
Net earnings per common share—diluted	$	1.46	$	1.10	$	4.16	$	3.54
Weighted average common shares outstanding—basic		13,320		13,471		13,329		13,467
Weighted average common shares outstanding—diluted		13,378		13,544		13,410		13,592

See Notes to Unaudited Consolidated Financial Statements.

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ePlus inc. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

	Three Months Ended December 31,					Nine Months Ended December 31,
	2019		2018			2019		2018
NET EARNINGS	$	19,550	$	14,864		$	55,836	$	48,140
OTHER COMPREHENSIVE INCOME, NET OF TAX:
Foreign currency translation adjustments		682		(302	)		69		(1,102	)
Other comprehensive income (loss)		682		(302	)		69		(1,102	)
TOTAL COMPREHENSIVE INCOME	$	20,232	$	14,562		$	55,905	$	47,038

See Notes to Unaudited Consolidated Financial Statements.

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ePlus inc. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)

	Nine Months Ended December 31,
	2019			2018
Cash Flows From Operating Activities:
Net earnings	$	55,836		$	48,140
Adjustments to reconcile net earnings to net cash used in operating activities:
Depreciation and amortization		15,217			13,341
Reserve for credit losses		504			269
Share-based compensation expense		6,019			5,418
Deferred taxes		(3	)		(215	)
Payments from lessees directly to lenders—operating leases		(44	)		(118	)
Gain on disposal of property, equipment, and leased equipment		(614	)		(1,307	)
Gain on sale of financing receivables		-			(5,030	)
Changes in:
Accounts receivable		(102,093	)		(56,769	)
Inventories-net		(10,429	)		(11,674	)
Financing receivables—net		(87,633	)		(1,070	)
Deferred costs and other assets		(18,424	)		3,971
Accounts payable-trade		33,574			16,062
Salaries and commissions payable, deferred revenue, and other liabilities		33,362			(8,846	)
Net cash used in / provided by operating activities	$	(74,728	)	$	2,172
Cash Flows From Investing Activities:
Proceeds from sale of property, equipment, and leased equipment		1,404			2,550
Purchases of property, equipment, and operating lease equipment		(7,209	)		(8,492	)
Purchases of assets to be leased or financed		-			(13,941	)
Issuance of financing receivables		-			(140,307	)
Repayments of financing receivables		-			55,198
Proceeds from sale of financing receivables		-			56,983
Cash used in acquisitions, net of cash acquired		(14,239	)		-
Net cash used in investing activities	$	(20,044	)	$	(48,009	)

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UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS - continued

	Nine Months Ended December 31,
	2019			2018
Cash Flows From Financing Activities:
Borrowings of non-recourse and recourse notes payable	$	75,557		$	40,693
Repayments of non-recourse and recourse notes payable		(9,854	)		(17,447	)
Repurchase of common stock		(13,692	)		(16,261	)
Repayments of financing of acquisitions		(5,763	)		(7,634	)
Net borrowings (repayments) on floor plan facility		28,400			12,450
Net cash provided by financing activities		74,648			11,801
Effect of exchange rate changes on cash		(137	)		172
Net Decrease in Cash and Cash Equivalents		(20,261	)		(33,864	)
Cash and Cash Equivalents, Beginning of Period		79,816			118,198
Cash and Cash Equivalents, End of Period	$	59,555		$	84,334
Supplemental Disclosures of Cash Flow Information:
Cash paid for interest	$	1,721		$	1,364
Cash paid for income taxes	$	19,519		$	18,269
Cash paid for amounts included in the measurement of lease liabilities	$	4,113		$	-
Schedule of Non-Cash Investing and Financing Activities:
Proceeds from sale of property, equipment, and leased equipment	$	-		$	483
Purchases of property, equipment, and operating lease equipment	$	(425	)	$	(2,704	)
Purchases of assets to be leased or financed	$	-		$	2,437
Issuance of financing receivables	$	-		$	(96,406	)
Proceeds from sale of financing receivables	$	-		$	88,119
Consideration for acquisitions	$	(1,037	)	$	-
Borrowing of non-recourse and recourse notes payable	$	111,234		$	65,042
Repayments of non-recourse and recourse notes payable	$	(44	)	$	(118	)
Vesting of share-based compensation	$	8,990		$	12,795
Repurchase of common stock	$	-		$	(393	)
New operating lease assets obtained in exchange for lease obligations	$	6,035		$	-

See Notes to Unaudited Consolidated Financial Statements.

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ePlus inc. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)

	Nine Months Ended December 31, 2019
	Common Stock					Additional Paid-In		Treasury			Retained		Accumulated Other Comprehensive
	Shares			Par Value		Capital		Stock			Earnings		Income			Total
Balance, March 31, 2019		13,611		$	143	$	137,243	$	(53,999	)	$	341,137	$	(271	)	$	424,253
Issuance of restricted stock awards		86			1		-		-			-		-			1
Share-based compensation		-			-		1,919		-			-		-			1,919
Repurchase of common stock		(188	)		-		-		(13,455	)		-		-			(13,455	)
Net earnings		-			-		-		-			16,188		-			16,188
Foreign currency translation adjustment		-			-		-		-			-		(263	)		(263	)
Balance, June 30, 2019		13,509		$	144	$	139,162	$	(67,454	)	$	357,325	$	(534	)	$	428,643
Issuance of restricted stock awards		7			-		-		-			-		-			-
Share-based compensation		-			-		2,135		-			-		-			2,135
Repurchase of common stock		(3	)		-		-		(237	)		-		-			(237	)
Net earnings		-			-		-		-			20,098		-			20,098
Foreign currency translation adjustment		-			-		-		-			-		(350	)		(350	)
Balance, September 30, 2019		13,513		$	144	$	141,297	$	(67,691	)	$	377,423	$	(884	)	$	450,289
Issuance of restricted stock awards		-			-		-		-			-		-			-
Share-based compensation		-			-		1,965		-			-		-			1,965
Repurchase of common stock		-			-		-		-			-		-			-
Net earnings		-			-		-		-			19,550		-			19,550
Foreign currency translation adjustment		-			-		-		-			-		682			682
Balance, December 31, 2019		13,513		$	144	$	143,262	$	(67,691	)	$	396,973	$	(202	)	$	472,486

	Nine Months Ended December 31, 2018
	Common Stock					Additional Paid-In		Treasury			Retained		Accumulated Other Comprehensive
	Shares			Par Value		Capital		Stock			Earnings		Income			Total
Balance, March 31, 2018		13,761		$	142	$	130,000	$	(36,016	)	$	277,945	$	532		$	372,603
Issuance of restricted stock awards		70			1		-		-			-		-			1
Share-based compensation		-			-		1,693		-			-		-			1,693
Repurchase of common stock		(108	)		-		-		(9,059	)		-		-			(9,059	)
Net earnings		-			-		-		-			15,273		-			15,273
Foreign currency translation adjustment		-			-		-		-			-		(657	)		(657	)
Balance, June 30, 2018		13,723		$	143	$	131,693	$	(45,075	)	$	293,218	$	(125	)	$	379,854
Issuance of restricted stock awards		7			-		-		-			-		-			-
Share-based compensation		-			-		1,868		-			-		-			1,868
Repurchase of common stock		(3	)		-		-		(305	)		-		-			(305	)
Net earnings		-			-		-		-			18,003		-			18,003
Foreign currency translation adjustment		-			-		-		-			-		(143	)		(143	)
Balance, September 30, 2018		13,727		$	143	$	133,561	$	(45,380	)	$	311,221	$	(268	)	$	399,277
Issuance of restricted stock awards		(2	)		-		-		-			-		-			-
Share-based compensation		-			-		1,857		-			-		-			1,857
Repurchase of common stock		(85	)		-		-		(6,519	)		-		-			(6,519	)
Net earnings		-			-		-		-			14,864		-			14,864
Foreign currency translation adjustment		-			-		-		-			-		(302	)		(302	)
Balance, December 31, 2018		13,640		$	143	$	135,418	$	(51,899	)	$	326,085	$	(570	)	$	409,177

See Notes to Unaudited Consolidated Financial Statements.

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ePlus inc. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

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

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

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

CONCENTRATIONS OF RISK — A substantial portion of our sales are products from Cisco Systems, which were 41% of our technology segment’s net sales for the three months ended December 31, 2019, and 40% for the three months ended December 31, 2018, and 41% and 42% of our technology segment’s net sales for the nine months ended December 31, 2019, and 2018, respectively.

SIGNIFICANT ACCOUNTING POLICIES — The significant accounting policies used in preparing these Consolidated Financial Statements were applied on a basis consistent with those reflected in our Consolidated Financial Statements for the year ended March 31, 2019, except for changes from the adoption of Accounting Standards Update ("ASU") 2016-02, Leases (Topic 842), as amended (“ASU 2016-02”). This update establishes Codification Topic 842, Leases (“Codification Topic 842”) within the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“Codification”). The updates to our accounting policies from adopting ASU 2016-02 are provided below.

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

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

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

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

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

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

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

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

2. RECENT ACCOUNTING PRONOUNCEMENTS

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

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

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED — In June 2016, the FASB issued ASU 2016-13, Financial Instruments- Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The amendments in this update replace the incurred loss impairment methodology in current US GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. This update requires adoption under a modified retrospective approach and will become effective for us in the quarter ending June 30, 2020. We are currently evaluating the impact of this update on our financial statements.

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3. REVENUES

Contract balances

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

Contract liabilities	December 31, 2019		March 31, 2019
Current (included in deferred revenue)	$	54,482	$	46,356
Non-current (included in other liabilities)	$	16,874	$	13,593

Revenue recognized from the beginning contract liability balance was $15.9 million and $45.3 million for the three and nine months ended December 31, 2019, respectively, and $7.3 million and $28.2 million for the three and nine months ended December 31, 2018, 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. The table does not include the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts where we recognize revenue at the amount that we have the right to invoice for services performed.

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

4. FINANCING RECEIVABLES AND OPERATING LEASES

Our financing receivables and operating leases consist primarily of leases of IT and communication equipment and notes receivable from financing customer purchases of third-party software, maintenance, and services. Our leases often include elections for the lessee to purchase the underlying asset at the end of the lease term. Occasionally, our leases provide the lessee a bargain purchase option. We classify leases as either sales-type or operating lease in accordance with Codification Topic 842.

The following table provides the profit recognized for sales-type leases at their commencement date for the three and nine months ended December 31, 2019 (in thousands):

	Three months ended December 31, 2019		Nine months ended December 31, 2019
Net sales	$	5,710	$	13,697
Cost of sales		4,807		11,459
Gross Profit	$	903	$	2,238

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

	Three months ended December 31, 2019		Nine months ended December 31, 2019
Interest Income on sales-type leases	$	1,272	$	4,862
Lease income on operating leases	$	4,489	$	14,908

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FINANCING RECEIVABLES—NET

Our financing receivables - net consist of the following (in thousands):

December 31, 2019	Notes Receivables			Lease-Related Receivables			Total Financing Receivables
Minimum payments	$	60,234		$	81,450		$	141,684
Estimated unguaranteed residual value (1)		-			21,073			21,073
Initial direct costs, net of amortization (2)		297			319			616
Unearned income		-			(11,937	)		(11,937	)
Reserve for credit losses (3)		(788	)		(642	)		(1,430	)
Total, net	$	59,743		$	90,263		$	150,006
Reported as:
Current	$	41,350		$	47,879		$	89,229
Long-term		18,393			42,384			60,777
Total, net	$	59,743		$	90,263		$	150,006

(1) Includes estimated unguaranteed residual values of $15,883 thousand for sales type leases, which have been sold and accounted for as sales.

(2) Initial direct costs are shown net of amortization of $299 thousand.

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

March 31, 2019	Notes Receivables			Lease-Related Receivables			Total Financing Receivables
Minimum payments	$	40,563		$	64,201		$	104,764
Estimated unguaranteed residual value (1)		-			14,639			14,639
Initial direct costs, net of amortization (2)		377			332			709
Unearned income		-			(7,671	)		(7,671	)
Reserve for credit losses (3)		(505	)		(530	)		(1,035	)
Total, net	$	40,435		$	70,971		$	111,406
Reported as:
Current	$	30,852		$	32,914		$	63,766
Long-term		9,583			38,057			47,640
Total, net	$	40,435		$	70,971		$	111,406

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

(2) Initial direct costs are shown net of amortization of $275 thousand.

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

Future scheduled minimum lease payments for investments in sales-type leases as of December 31, 2019 are as follows (in thousands):

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

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OPERATING LEASES—NET

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

	December 31, 2019			March 31, 2019
Cost of equipment under operating leases	$	24,692		$	21,532
Accumulated depreciation		(11,963	)		(10,139	)
Investment in operating lease equipment—net (1)	$	12,729		$	11,393

(1) These totals include estimated unguaranteed residual values of $3.2 million and $2.9 million as of December 31, 2019 and March 31, 2019, respectively.

Future scheduled minimum lease rental payments as of December 31, 2019 are as follows (in thousands):

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

TRANSFERS OF FINANCIAL ASSETS

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

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

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

When we retain servicing obligations in transfers accounted for as sales, we allocate a portion of the proceeds to deferred revenues, which is recognized as we perform the services.  As of both December 31, 2019 and March 31, 2019, we had deferred revenue of $0.4 million for servicing obligations.

In a limited number of transfers accounted for as sales, we indemnified the assignee in the event that the lessee elected to early terminate the lease.  As of December 31, 2019, our maximum potential future payments related to such guarantees is $0.3 million. We believe the likelihood of making any such payments to be remote.

5. LESSEE ACCOUNTING

We lease office space for periods up to six years. We recognize our right-of-use assets as part of property, equipment and other assets. We recognize the current and long-term portions of our lease liability as part of other current liabilities and other liabilities, respectively. We recognized rent expense of $1.6 million and $4.7 million as part of selling, general, and administrative expenses during the three and nine months ended December 31, 2019.

Supplemental information about the remaining lease terms and discount rates applied as of December 31, 2019:

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

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Future lease payments under our operating leases as of December 31, 2019 (in thousands):

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

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

6. GOODWILL AND OTHER INTANGIBLE ASSETS

GOODWILL

The following table summarizes the changes in the carrying amount of goodwill for the nine months ended December 31, 2019 (in thousands):

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

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

We test goodwill for impairment on an annual basis, as of the first day of our third fiscal quarter, and between annual tests if an event occurs, or circumstances change, that would more likely than not reduce the fair value of a reporting unit below its carrying value. In our annual test as of October 1, 2019, we performed a qualitative assessment of goodwill and concluded that, more likely than not, the fair value of our technology reporting unit exceeded its carrying value. In our annual test as of October 1, 2018, we elected to bypass the qualitative assessment of goodwill and perform a quantitative goodwill impairment test. We concluded that the fair value of our technology reporting unit substantially exceeded its carrying value. Our conclusions would not be impacted by a ten percent change in our estimate of the fair value of the reporting unit.

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OTHER INTANGIBLE ASSETS

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

	December 31, 2019							March 31, 2019
	Gross Carrying Amount		Accumulated Amortization / Impairment Loss			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization / Impairment Loss			Net Carrying Amount
Customer relationships & other intangibles	$	63,141	$	(30,836	)	$	32,305	$	57,407	$	(23,865	)	$	33,542
Capitalized software development		10,193		(5,628	)		4,565		10,188		(4,802	)		5,386
Total	$	73,334	$	(36,464	)	$	36,870	$	67,595	$	(28,667	)	$	38,928

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

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

7. RESERVES FOR CREDIT LOSSES

Activity in our reserves for credit losses for the nine months ended December 31, 2019 and 2018 were as follows (in thousands):

	Accounts Receivable			Notes Receivable		Lease- Related Receivables			Total
Balance April 1, 2019	$	1,579		$	505	$	530		$	2,614
Provision for credit losses		107			283		114			504
Write-offs and other		(304	)		-		(2	)		(306	)
Balance December 31, 2019	$	1,382		$	788	$	642		$	2,812

	Accounts Receivable			Notes Receivable		Lease- Related Receivables			Total
Balance April 1, 2018	$	1,538		$	486	$	640		$	2,664
Provision for credit losses		275			50		(131	)		194
Write-offs and other		(246	)		-		-			(246	)
Balance December 31, 2018	$	1,567		$	536	$	509		$	2,612

Our reserves for credit losses and minimum payments associated with our notes receivables and lease-related receivables disaggregated based on our impairment method were as follows (in thousands):

	December 31, 2019				March 31, 2019
	Notes Receivable		Lease- Related Receivables		Notes Receivable		Lease- Related Receivables
Reserves for credit losses:
Ending balance: collectively evaluated for impairment	$	726	$	642	$	443	$	530
Ending balance: individually evaluated for impairment		62		-		62		-
Ending balance	$	788	$	642	$	505	$	530
Minimum payments:
Ending balance: collectively evaluated for impairment	$	60,145	$	81,450	$	40,501	$	64,201
Ending balance: individually evaluated for impairment		89		-		62		-
Ending balance	$	60,234	$	81,450	$	40,563	$	64,201

We place receivables on non-accrual status when events occur that indicate a receivable will not be collectable (such as a customer bankruptcy). We charge off uncollectable financing receivables when we stop pursuing collection.

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The age of the recorded minimum lease payments and net credit exposure associated with our investment in direct financing and sales-type leases that are past due disaggregated based on our internally assigned credit quality rating (“CQR”) were as follows as of December 31, 2019 and March 31, 2019 (in thousands):

	31-60 Days Past Due		61-90 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Current		Unbilled Minimum Lease Payments		Total Minimum Lease Payments		Unearned Income			Non- Recourse Notes Payable			Net Credit Exposure
December 31, 2019
High CQR	$	695	$	322	$	252	$	1,269	$	390	$	49,887	$	51,546	$	(4,890	)	$	(31,698	)	$	14,958
Average CQR		315		18		74		407		716		28,781		29,904		(2,111	)		(13,472	)		14,321
Low CQR		-		-		-		-		-		-		-		-			-			-
Total	$	1,010	$	340	$	326	$	1,676	$	1,106	$	78,668	$	81,450	$	(7,001	)	$	(45,170	)	$	29,279
March 31, 2019
High CQR	$	325	$	41	$	10	$	376	$	543	$	29,503	$	30,422	$	(2,799	)	$	(11,044	)	$	16,579
Average CQR		22		54		15		91		125		33,563		33,779		(2,508	)		(20,848	)		10,423
Low CQR		-		-		-		-		-		-		-		-			-			-
Total	$	347	$	95	$	25	$	467	$	668	$	63,066	$	64,201	$	(5,307	)	$	(31,892	)	$	27,002

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

	31-60 Days Past Due		61-90 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Current		Unbilled Notes Receivable			Total Notes Receivable		Non- Recourse Notes Payable			Net Credit Exposure
December 31, 2019
High CQR	$	578	$	49	$	240	$	867	$	1,422	$	42,648		$	44,937	$	(20,323	)	$	24,614
Average CQR		118		29		125		272		246		14,690			15,208		(6,307	)		8,901
Low CQR		90		-		29		119		352		(382	)		89		-			89
Total	$	786	$	78	$	394	$	1,258	$	2,020	$	56,956		$	60,234	$	(26,630	)	$	33,604
March 31, 2019
High CQR	$	990	$	40	$	30	$	1,060	$	3,813	$	28,113		$	32,986	$	(18,245	)	$	14,741
Average CQR		105		34		7		146		137		7,232			7,515		(1,507	)		6,008
Low CQR		-		-		62		62		-		-			62		-			62
Total	$	1,095	$	74	$	99	$	1,268	$	3,950	$	35,345		$	40,563	$	(19,752	)	$	20,811

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

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8. PROPERTY, EQUIPMENT, OTHER ASSETS AND LIABILITIES

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

	December 31, 2019		March 31, 2019
Other current assets:
Deposits & funds held in escrow	$	2,438	$	438
Prepaid assets		6,324		6,425
Other		47		636
Total other current assets	$	8,809	$	7,499
Property, equipment and other assets
Property and equipment, net	$	7,078	$	7,314
Deferred costs - non-current		11,338		8,856
Right-of-use assets		14,577		-
Other		1,007		1,158
Total other assets - long term	$	34,000	$	17,328
Other current liabilities:
Accrued expenses	$	9,639	$	7,813
Accrued income taxes payable		1,424		181
Contingent consideration - current		283		5,162
Short-term lease liability		5,231		-
Other		8,418		6,129
Total other current liabilities	$	24,995	$	19,285
Other liabilities:
Deferred revenue	$	17,076	$	13,789
Contingent consideration - long-term		-		3,780
Long-term lease liability		9,385		-
Other		2,127		108
Total other liabilities - long term	$	28,588	$	17,677

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

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

9. NOTES PAYABLE AND CREDIT FACILITY

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

	December 31, 2019		March 31, 2019
Recourse notes payable with interest rates at 2.55% as of  December 31, 2019 and 4.00% as of March 31, 2019
Current	$	2,239	$	28
Non-recourse notes payable secured by certain financing receivables and investments in operating leases with interest rates ranging from 2.90% to 8.45% as of December 31, 2019 and 3.23% to 8.45% as of March 31, 2019.
Current	$	59,015	$	38,117
Long-term		7,120		10,502
Total non-recourse notes payable	$	66,135	$	48,619

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

Our technology segment, primarily through our subsidiary ePlus Technology, inc., finances its operations with funds generated from operations, and with a credit facility with Wells Fargo Commercial Distribution Finance, LLC or (“WFCDF”). This facility provides short-term capital for our technology segment. There are two components of the WFCDF credit facility: (1) a floor plan component, and (2) an accounts receivable component. Under the floor plan component, we had outstanding balances of $144.5 million and $116.1 million as of December 31, 2019 and March 31, 2019, respectively. Under the accounts receivable component, we had no outstanding balances as of December 31, 2019 and March 31, 2019.

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

The credit facility has full recourse to ePlus Technology, inc. and certain subsidiaries and is secured by a blanket lien against all its assets, such as receivables and inventory. Availability under the facility may be limited by the asset value of equipment we purchase or accounts receivable and may be further limited by certain covenants and terms and conditions of the facility. These covenants include but are not limited to, a minimum excess availability of the facility and minimum earnings before interest, taxes, depreciation and amortization (“EBITDA”) of ePlus Technology, inc. and certain subsidiaries. We were in compliance with these covenants as of December 31, 2019. In addition, the facility restricts the ability of ePlus Technology, inc. and certain subsidiaries to transfer funds to its affiliates in the form of dividends, loans or advances with certain exceptions for dividends to ePlus inc. The facility also requires that financial statements of ePlus Technology, inc. and certain subsidiaries be provided within 45 days at the end of each quarter and 90 days of each fiscal year end, and that other operational reports be provided on a regular basis. Either party may terminate the credit facility with 90 days’ advance written notice. We are not, and do not believe that we are reasonably likely to be, in breach of the WFCDF credit facility. In addition, we do not believe that the covenants of the WFCDF credit facility materially limit our ability to undertake financing. In this regard, the covenants apply only to our subsidiary, ePlus Technology, inc. and certain subsidiaries. This credit facility is secured by the assets of only ePlus Technology, inc., and certain subsidiaries, and the guaranty as described below.

The WFCDF facility requires a guaranty of $10.5 million by ePlus inc. The guaranty requires ePlus inc. to deliver its annual audited financial statements by certain dates. We have delivered the annual audited financial statements for the year ended March 31, 2019, as required. The loss of the WFCDF credit facility could have a material adverse effect on our future results as we currently rely on this facility and its components for daily working capital and liquidity for our technology segment, and as an operational function of our accounts payable process.

Fair Value

As of December 31, 2019, and March 31, 2019, the fair value of our long-term recourse and non-recourse notes payable approximated their carrying value.

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10. COMMITMENTS AND CONTINGENCIES

Legal Proceedings

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

During the three and nine months ended December 31, 2019, we recognized distributions totaling $0.8 million and $1.0 million, respectively, from various claims, which were recognized within other income in our consolidated statement of operations.

11. EARNINGS PER SHARE

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

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

	Three Months Ended December 31,				Nine Months Ended December 31,
	2019		2018		2019		2018
Net earnings attributable to common shareholders - basic and diluted	$	19,550	$	14,864	$	55,836	$	48,140
Basic and diluted common shares outstanding:
Weighted average common shares outstanding — basic		13,320		13,471		13,329		13,467
Effect of dilutive shares		58		73		81		125
Weighted average shares common outstanding — diluted		13,378		13,544		13,410		13,592
Earnings per common share - basic	$	1.47	$	1.10	$	4.19	$	3.57
Earnings per common share - diluted	$	1.46	$	1.10	$	4.16	$	3.54

12. STOCKHOLDERS’ EQUITY

Share Repurchase Plan

On April 26, 2018, our board of directors authorized the repurchase up to 500,000 shares of our outstanding common stock over a 12-month period beginning on May 28, 2018 through May 27, 2019. The plan authorized purchases to be made from time to time in the open market, or in privately negotiated transactions, subject to availability. Any repurchased shares will have the status of treasury shares and may be used, when needed, for general corporate purposes.

On May 24, 2019, our board of directors authorized the repurchase up to 500,000 shares of our outstanding common stock over a 12-month period beginning on May 28, 2019 through May 27, 2020. The plan authorized purchases to be made from time to time in the open market, or in privately negotiated transactions, subject to availability. Any repurchased shares will have the status of treasury shares and may be used, when needed, for general corporate purposes.

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During the nine months ended December 31, 2019, we purchased 149,044 shares of our outstanding common stock at a value of $10.7 million under the share repurchase plan; we also purchased 41,817 shares of common stock at a value of $3.0 million to satisfy tax withholding obligations relating to the vesting of employees’ restricted stock.

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

13. SHARE-BASED COMPENSATION

Share-Based Plans

As of December 31, 2019, we had share-based awards outstanding under the following plans: (1) the 2017 Non-Employee Director Long-Term Incentive Plan (“2017 Director LTIP”), and (2) the 2012 Employee Long-Term Incentive Plan ("2012 Employee LTIP"). These share-based plans define fair market value as the previous trading day's closing price when the grant date falls on a date the stock was not traded.

Restricted Stock Activity

For the nine months ended December 31, 2019, we granted 8,646 restricted shares under the 2017 Director LTIP, and 85,132 restricted shares under the 2012 Employee LTIP. For the nine months ended December 31, 2018, we granted 8,531 restricted shares under the 2017 Director LTIP, and 69,847 restricted shares under the 2012 Employee LTIP. A summary of the restricted shares is as follows:

	Number of Shares			Weighted Average Grant- date Fair Value
Nonvested April 1, 2019		224,000		$	67.70
Granted		93,778		$	72.90
Vested		(123,250	)	$	62.07
Forfeited		(1,189	)	$	81.84
Nonvested December 31, 2019		193,339		$	73.73

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

Compensation Expense

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

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

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14. INCOME TAXES

We account for our tax positions in accordance with Codification Topic 740, Income Taxes. Under the guidance, we evaluate uncertain tax positions based on the two-step approach. The first step is to evaluate each uncertain tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained in an audit, including resolution of related appeals or litigation processes, if any. For tax positions that are not likely to be sustained upon audit, the second step requires us to estimate and measure the tax benefit as the largest amount that is more than 50 percent likely of being realized upon ultimate settlement.

Our total gross unrecognized tax benefits recorded for uncertain income tax, and interest and penalties thereon, were negligible as of December 31, 2019 and 2018. We had no additions or reductions to our gross unrecognized tax benefits during the three and nine months ended December 31, 2019. We recognize accrued interest and penalties related to unrecognized tax benefits in income tax expense.

15. FAIR VALUE OF FINANCIAL INSTRUMENTS

We account for the fair values of our assets and liabilities in accordance with Codification Topic 820, Fair Value Measurement and Disclosure. The following table summarizes the fair value hierarchy of our financial instruments as of December 31, 2019 and March 31, 2019 (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)
December 31, 2019
Assets:
Money market funds	$	127	$	127	$	-	$	-
Liabilities:
Contingent consideration	$	283	$	-	$	-	$	283
March 31, 2019
Assets:
Money market funds	$	50	$	50	$	-	$	-
Liabilities:
Contingent consideration	$	8,942	$	-	$	-	$	8,942

For the nine months ended December 31, 2019, we recorded adjustments to operating expenses that increased the fair value of our liability for contingent consideration by $1.5 million. There were no adjustments to operating expenses for the three months ended December 31, 2019. In September 2019, we reached a settlement in full of one of our contingent consideration arrangements in the amount of $9.6 million, which was paid in October 2019. Additionally, in September 2019, we paid $0.5 million to satisfy certain current obligations in another of these arrangements.

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

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16. BUSINESS COMBINATIONS

ABS Technology

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

Our preliminary sum of consideration transferred is $15.3 million consisting of $13.8 million paid in cash at closing plus $1.7 million that is being paid primarily upon the collection of certain accounts receivable, of which $0.6 million was paid by December 31, 2019, and less $0.2 million that was repaid to us in December 2019 due to a working capital adjustment. Our preliminary allocation of the purchase consideration to the assets acquired and liabilities assumed is presented below (in thousands):

	Acquisition Date Amount
Accounts receivable	$	9,208
Other assets		743
Identified intangible assets		5,720
Accounts payable and other current liabilities		(6,715	)
Performance obligation		(1,140	)
Total identifiable net assets		7,816
Goodwill		7,461
Total purchase consideration	$	15,277

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

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

We recognized goodwill related to this transaction of $7.5 million, which was assigned to our technology reporting unit. The goodwill recognized in the acquisition is attributable to the acquired assembled workforce and expected synergies, none of which qualify for recognition as a separate intangible asset. The total amount of goodwill is expected to be deductible for tax purposes. The amount of revenues and earnings of the acquiree since the acquisition date are not material. Likewise, the impact to the revenue and earnings of the combined entity for the current reporting period as though the acquisition date had been April 1, 2019, is not material.

SLAIT Consulting, LLC

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

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

	Acquisition Date Amount
Accounts receivable	$	10,209
Other assets		1,050
Identified intangible assets		18,190
Accounts payable and other current liabilities		(8,611	)
Performance obligation		(5,110	)
Total identifiable net assets		15,728
Goodwill		34,301
Total purchase consideration	$	50,029

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

We recognized goodwill related to this transaction of $34.3 million, which was assigned to our technology reporting unit. The goodwill recognized in the acquisition is attributable to the acquired assembled workforce and expected synergies, none of which qualify for recognition as a separate intangible asset. The total amount of goodwill is expected to be deductible for tax purposes. The amount of revenues and earnings of the acquiree since the acquisition date are not material. Likewise, the impact to the revenue and earnings of the combined entity for the reporting period ending March 31, 2019 as though the acquisition date had been April 1, 2018, is not material.

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

17. SEGMENT REPORTING

Our operations are conducted through two operating segments that are also both reportable segments. Our technology segment includes sales of IT products, third-party software, third-party maintenance, advanced professional and managed services, and our proprietary software to commercial enterprises, state and local governments, and government contractors. Our financing segment consists of the financing of IT equipment, software, and related services to commercial enterprises, state and local governments, and government contractors. We measure the performance of the segments based on operating income.

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

	Three Months Ended
	December 31, 2019						December 31, 2018
	Technology		Financing		Total		Technology		Financing		Total
Sales
Product	$	360,206	$	18,363	$	378,569	$	299,490	$	10,953	$	310,443
Service		50,422		-		50,422		35,221		-		35,221
Net sales	$	410,628	$	18,363	$	428,991	$	334,711	$	10,953	$	345,664
Cost of Sales
Product		290,980		2,229		293,209		239,843		2,013		241,856
Service		32,086		-		32,086		20,895		-		20,895
Total cost of sales		323,066		2,229		325,295		260,738		2,013		262,751
Gross Profit		87,562		16,134		103,696		73,973		8,940		82,913
Selling, general, and administrative		67,759		5,331		73,090		56,607		3,121		59,728
Depreciation and amortization		3,619		28		3,647		2,714		5		2,719
Interest and financing costs		-		694		694		-		443		443
Operating expenses		71,378		6,053		77,431		59,321		3,569		62,890
Operating income		16,184		10,081		26,265		14,652		5,371		20,023
Other income						997						721
Earnings before tax					$	27,262					$	20,744
Net Sales
Contracts with customers	$	404,918	$	1,689	$	406,607	$	329,635	$	813	$	330,448
Financing and other		5,710		16,674		22,384		5,076		10,140		15,216
Net Sales	$	410,628	$	18,363	$	428,991	$	334,711	$	10,953	$	345,664
Selected Financial Data - Statement of Cash Flow
Depreciation and amortization	$	3,691	$	1,449	$	5,140	$	2,910	$	1,564	$	4,474
Purchases of property, equipment and operating lease equipment	$	786	$	1,535	$	2,321	$	1,496	$	545	$	2,041
Selected Financial Data - Balance Sheet
Total assets	$	733,174	$	219,434	$	952,608	$	613,494	$	184,695	$	798,189

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	Nine Months Ended
	December 31, 2019						December 31, 2018
	Technology		Financing		Total		Technology		Financing		Total
Sales
Product	$	1,032,620	$	45,047	$	1,077,667	$	911,839	$	30,896	$	942,735
Service		144,261		-		144,261		104,504		-		104,504
Net sales		1,176,881		45,047		1,221,928		1,016,343		30,896		1,047,239
Cost of Sales
Product		825,509		6,626		832,135		730,311		5,491		735,802
Service		90,427		-		90,427		62,321		-		62,321
Cost of sales		915,936		6,626		922,562		792,632		5,491		798,123
Gross Profit		260,945		38,421		299,366		223,711		25,405		249,116
Selling, general, and administrative		197,615		11,785		209,400		166,199		8,200		174,399
Depreciation and amortization		10,555		112		10,667		8,243		7		8,250
Interest and financing costs		-		1,898		1,898		-		1,403		1,403
Operating expenses		208,170		13,795		221,965		174,442		9,610		184,052
Operating income		52,775		24,626		77,401		49,269		15,795		65,064
Other income						912						1,140
Earnings before tax					$	78,313					$	66,204
Net Sales
Contracts with customers	$	1,163,184	$	3,889	$	1,167,073	$	1,000,776	$	2,469	$	1,003,245
Financing and other		13,697		41,158		54,855		15,567		28,427		43,994
Net sales	$	1,176,881	$	45,047	$	1,221,928	$	1,016,343	$	30,896	$	1,047,239
Selected Financial Data - Statement of Cash Flow
Depreciation and amortization	$	10,974	$	4,243	$	15,217	$	8,895	$	4,446	$	13,341
Purchases of property, equipment and operating lease equipment	$	3,461	$	3,748	$	7,209	$	4,472	$	4,020	$	8,492
Selected Financial Data - Balance Sheet
Total assets	$	733,174	$	219,434	$	952,608	$	613,494	$	184,695	$	798,189

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Technology Segment Disaggregation of Revenue

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

	Three Months Ended December 31,						Nine Months Ended December 31,
	2019			2018			2019			2018
Customer end market:
Technology	$	77,841		$	61,549		$	251,523		$	219,783
Telecom, Media & Entertainment		84,707			58,377			218,217			144,657
Financial Services		56,395			54,411			149,241			147,048
SLED		55,908			43,846			198,964			173,442
Healthcare		60,275			48,121			176,202			145,652
All others		75,502			68,407			182,734			185,761
Net sales		410,628			334,711			1,176,881			1,016,343
Financing and other		(5,710	)		(5,076	)		(13,697	)		(15,567	)
Revenue from contracts with customers	$	404,918		$	329,635		$	1,163,184		$	1,000,776

	Three Months Ended December 31,						Nine Months Ended December 31,
	2019			2018			2019			2018
Vendor
Cisco Systems	$	169,265		$	131,949		$	488,051		$	423,249
NetApp		15,799			12,408			38,997			37,447
HP Inc. & HPE		15,853			22,042			57,952			59,020
Dell EMC		12,025			17,201			38,300			49,599
Arista Networks		12,862			13,668			60,578			44,139
Juniper Networks		27,419			18,681			58,843			40,341
All others		157,405			118,762			434,160			362,548
Net sales		410,628			334,711			1,176,881			1,016,343
Financing and other		(5,710	)		(5,076	)		(13,697	)		(15,567	)
Revenue from contracts with customers	$	404,918		$	329,635		$	1,163,184		$	1,000,776

Financing Segment Disaggregation of Revenue

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

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

This discussion is intended to further the reader’s understanding of our consolidated financial condition and results of operations. It should be read in conjunction with the financial statements included in this quarterly report on Form 10-Q and our 2019 Annual Report. These historical financial statements may not be indicative of our future performance. This Management’s Discussion and Analysis of Financial Condition and Results of Operations may contain forward-looking statements, all of which are based on our current expectations and could be affected by the uncertainties and risks described in Part I, Item 1A, “Risk Factors,” in our 2019 Annual Report, and in Part II, Item 1A. “Risk Factors” in this Report.

EXECUTIVE OVERVIEW

Business Description

We are a leading solutions provider that delivers actionable outcomes for organizations by using IT and consulting solutions to drive business agility and innovation. Leveraging our engineering talent, we assess, plan, deliver, and secure solutions comprised of leading technologies and consumption models aligned with our customers’ needs. Our expertise and experience enable ePlus to craft optimized solutions that take advantage of the cost, scale and efficiency of private, public and hybrid cloud in an evolving market. We also provide consulting, staffing, professional, managed, IT staff augmentation, and complete lifecycle management services including flexible financing and solutions in the areas of security, cloud, networking, data center, collaboration and emerging technologies. We have been in the business of selling, leasing, financing, and managing IT and other assets for more than 29 years.

Our primary focus is to deliver integrated solutions that address our customers’ business needs, leveraging the appropriate technologies, both on-premise and in the cloud. Our approach is to lead with advisory consulting to understand our customers’ needs, design, deploy and manage solutions aligned to their objectives. Underpinning the broader areas of cloud, security, networking, data center and collaboration are specific skills in orchestration and automation, application modernization, DevOps, data management, data visualization, analytics, network modernization, edge compute and other advanced and emerging technologies. These solutions are comprised of class leading technologies from partners such as Amazon Web Services, Arista Networks, Check Point, Cisco Systems, Citrix, Commvault, Dell EMC, F5 Networks, Fortinet, Gigamon, HPE, Juniper Networks, Lenovo, Microsoft, NetApp, Nutanix, NVIDIA, Oracle, Palo Alto Networks, Pure Storage, Rubrik, Splunk, and VMware, among many others. We possess top-level engineering certifications with a broad range of leading IT vendors that enable us to offer multi-vendor IT solutions that are optimized for each of our customers’ specific requirements. Our hosted, proprietary software solutions are focused on giving our customers more control over their IT supply chain, by automating and optimizing the procurement and management of their owned, leased, and consumption-based assets.

Our scale and financial resources have enabled us to continue investing in engineering and technology resources to stay current with emerging technology trends. Our expertise in core and emerging technologies, buttressed by our robust portfolio of consulting, professional, and managed services, has enabled ePlus to remain a trusted advisor for our customers. In addition, we offer a wide range of consumption options including leasing and financing for technology and other capital assets. We believe our lifecycle approach offering of integrated solutions, services, financing, and our proprietary supply chain software, are unique in the industry. This broad portfolio enables us to deliver a unique customer experience that spans the continuum from fast delivery of competitively priced products, services, subsequent management and upkeep, through to end-of-life disposal services. This approach permits ePlus to deploy ever-more-sophisticated solutions enabling our customers’ business outcomes.

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

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Key Business Metrics

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

These key indicators include financial information that is prepared in accordance with US GAAP and presented in our unaudited consolidated financial statements as well as non-GAAP performance measurement tools. Generally, a non-GAAP financial measure is a numerical measure of a company’s performance or financial position that either excludes or includes amounts that are not normally included in the most directly comparable measure calculated and presented in accordance with US GAAP. Non-GAAP measures used by management may differ from similar measures used by other companies, even when similar terms are used to identify such measures.

Our key business metrics are as follows (dollars in thousands):

	Three Months Ended December 31,						Nine Months Ended December 31,
Consolidated	2019			2018			2019			2018
Net sales	$	428,991		$	345,664		$	1,221,928		$	1,047,239
Gross profit	$	103,696		$	82,913		$	299,366		$	249,116
Gross margin		24.2	%		24.0	%		24.5	%		23.8	%
Operating income margin		6.1	%		5.8	%		6.3	%		6.2	%
Net earnings	$	19,550		$	14,864		$	55,836		$	48,140
Net earnings margin		4.6	%		4.3	%		4.6	%		4.6	%
Net earnings per common share - diluted	$	1.46		$	1.10		$	4.16		$	3.54
Non-GAAP: Net earnings (1)	$	21,941		$	17,501		$	65,628		$	55,712
Non-GAAP: Net earnings per common share - diluted (1)	$	1.64		$	1.29		$	4.89		$	4.10
Adjusted EBITDA (2)	$	31,856		$	25,554		$	95,828		$	80,804
Adjusted EBITDA margin		7.4	%		7.4	%		7.8	%		7.7	%
Purchases of property and equipment used internally	$	786		$	1,496		$	3,461		$	4,472
Purchases of equipment under operating leases		1,535			545			3,748			4,020
Total capital expenditures	$	2,321		$	2,041		$	7,209		$	8,492
Technology Segment
Net sales	$	410,628		$	334,711		$	1,176,881		$	1,016,343
Adjusted gross billings (3)	$	586,308		$	478,447		$	1,713,755		$	1,446,603
Gross profit	$	87,562		$	73,973		$	260,945		$	223,711
Gross margin		21.3	%		22.1	%		22.2	%		22.0	%
Operating income	$	16,184		$	14,652		$	52,775		$	49,269
Adjusted EBITDA (2)	$	21,687		$	20,074		$	70,895		$	64,699
Financing Segment
Net sales	$	18,363		$	10,953		$	45,047		$	30,896
Gross profit	$	16,134		$	8,940		$	38,421		$	25,405
Operating Income	$	10,081		$	5,371		$	24,626		$	15,795
Adjusted EBITDA (2)	$	10,169		$	5,480		$	24,933		$	16,105

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

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

	Three Months Ended December 31,						Nine Months Ended December 31,
	2019			2018			2019			2018
GAAP: Earnings before tax	$	27,262		$	20,744		$	78,313		$	66,204
Share based compensation		1,944			1,857			6,021			5,418
Acquisition and integration expense		-			955			1,739			2,072
Acquisition related amortization expense		2,421			1,552			6,953			5,035
Other income		(997	)		(721	)		(912	)		(1,140	)
Non-GAAP: Earnings before provision for income taxes		30,630			24,387			92,114			77,589
GAAP: Provision for income taxes		7,712			5,880			22,477			18,064
Share based compensation		553			526			1,736			1,534
Acquisition and integration expense		-			270			506			586
Acquisition related amortization expense		668			414			1,938			1,343
Other income		(283	)		(204	)		(258	)		(322	)
Tax benefit on restricted stock		39			-			87			672
Non-GAAP: Provision for income taxes		8,689			6,886			26,486			21,877
Non-GAAP: Net earnings	$	21,941		$	17,501		$	65,628		$	55,712
GAAP: Net earnings per common share - diluted	$	1.46		$	1.10		$	4.16		$	3.54
Non-GAAP: Net earnings per common share - diluted	$	1.64		$	1.29		$	4.89		$	4.10

	Three Months Ended December 31,						Nine Months Ended December 31,
	2019			2018			2019			2018
GAAP: Net earnings per common share - diluted	$	1.46		$	1.10		$	4.16		$	3.54
Share based compensation		0.10			0.10			0.32			0.30
Acquisition and integration expense		-			0.05			0.09			0.10
Acquisition related amortization expense		0.14			0.08			0.38			0.27
Other (income) expense		(0.05	)		(0.04	)		(0.05	)		(0.07	)
Tax benefit on restricted stock		(0.01	)		-			(0.01	)		(0.04	)
Total non-GAAP adjustments - net of tax		0.18			0.19			0.73			0.56
Non-GAAP: Net earnings per common share - diluted	$	1.64		$	1.29		$	4.89		$	4.10

(2) We define adjusted EBITDA as net earnings calculated in accordance with GAAP, adjusted for the following: interest expense, depreciation and amortization, share based compensation, acquisition and integration expenses, provision for income taxes, and other income (expense). Segment adjusted EBITDA is defined as operating income calculated in accordance with GAAP, adjusted for interest expense, share based compensation, acquisition and integration expenses, and depreciation and amortization. We consider the interest on notes payable from our financing segment and depreciation expense presented within cost of sales, which includes depreciation on assets financed as operating leases, to be operating expenses. As such, they are not included in the amounts added back to net earnings in the adjusted EBITDA calculation. We provide below a reconciliation of adjusted EBITDA to net earnings, which is the most directly comparable financial measure to this non-GAAP financial measure. Adjusted EBITDA margin is our calculation of adjusted EBITDA divided by net sales.

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

	Three Months Ended December 31,						Nine Months Ended December 31,
Consolidated	2019			2018			2019			2018
Net earnings	$	19,550		$	14,864		$	55,836		$	48,140
Provision for income taxes		7,712			5,880			22,477			18,064
Share based compensation		1,944			1,857			6,021			5,418
Acquisition and integration expense		-			955			1,739			2,072
Depreciation and amortization		3,647			2,719			10,667			8,250
Other income		(997	)		(721	)		(912	)		(1,140	)
Adjusted EBITDA	$	31,856		$	25,554		$	95,828		$	80,804
Technology Segment
Operating income	$	16,184		$	14,652		$	52,775		$	49,269
Depreciation and amortization		3,619			2,714			10,555			8,243
Share based compensation		1,884			1,753			5,826			5,115
Acquisition and integration expense		-			955			1,739			2,072
Adjusted EBITDA	$	21,687		$	20,074		$	70,895		$	64,699
Financing Segment
Operating income	$	10,081		$	5,371		$	24,626		$	15,795
Depreciation and amortization		28			5			112			7
Share based compensation		60			104			195			303
Adjusted EBITDA	$	10,169		$	5,480		$	24,933		$	16,105

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

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

	Three Months Ended December 31,				Nine Months Ended December 31,
	2019		2018		2019		2018
Technology segment net sales	$	410,628	$	334,711	$	1,176,881	$	1,016,343
Costs incurred related to sales of third party maintenance, software assurance and subscription/Saas licenses, and services		175,680		143,736		536,874	$	430,260
Adjusted gross billings	$	586,308	$	478,447	$	1,713,755	$	1,446,603

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Consolidated Results of Operations

During the three months ended December 31, 2019, net sales increased 24.1%, or $83.3 million, to $429.0 million, compared to $345.7 million for the same period in the prior fiscal year. Product sales for the three months ended December 31, 2019 increased 21.9%, or $68.1 million, to $378.6 million compared to $310.4 million in the prior year. Services sales during the three months ended December 31, 2019 increased 43.2%, or $15.2 million, to $50.4 million compared to prior year services sales of $35.2 million. The increase in net sales was organic growth and the acquisitions of SLAIT in January 2019 and ABS Technology in August 2019. There was an increase in demand for products across all customer end markets during the three months ended December 31, 2019 compared to the prior year. The greatest increases in demand were from our customers in the telecom, media and entertainment, technology, SLED, and healthcare industries.

For the nine months ended December 31, 2019, net sales increased 16.7%, or $174.7 million, to $1.222 billion, compared to $1.047 billion in the same period in the prior fiscal year. Product sales for the nine months ended December 31, 2019 increased 14.3%, or $134.9 million, to $1.078 billion compared to $0.943 billion in the prior year. Services sales during the nine months ended December 31, 2019 increased 38.0%, or $39.8 million, to $144.3 million compared to prior year services sales of $104.5 million. The increase in net sales was due to organic growth and the acquisitions of SLAIT in January 2019 and ABS Technology in August 2019. The greatest increase in demand for products was from our customers in the telecom, media and entertainment, healthcare, technology, and SLED customers, and a slight reduction in demand from all other categories of customers, during the nine months ended December 31, 2019 compared to the prior year.

Adjusted gross billings increased 22.5%, or $107.9 million, to $586.3 million for the three months ended December 31, 2019 from $478.4 million for the same period in the prior fiscal year. For the nine months ended December 31, 2019, adjusted gross billings increased 18.5%, or $267.2 million, to $1.714 billion, from $1.447 billion for the same period in the prior fiscal year. The increase in adjusted gross billings is due to higher demand from the same customer end markets that were previously identified for the increase in net sales and the acquisitions of SLAIT and ABS Technology.

Consolidated gross profit increased 25.1%, or $20.8 million to $103.7 million, compared with $82.9 million for the three months ended December 31, 2018. Consolidated gross margins were 24.2% for the three months ended December 31, 2019, which is an increase of 20 basis points compared to 24.0% for the same period in the prior fiscal year. The gross margin improvement was due to higher service revenues, and higher financing revenues and gross profit. For the nine months ended December 31, 2019, consolidated gross profit rose 20.2%, or $50.3 million, to $299.4 million, compared with $249.1 million for the same period in the prior fiscal year. Consolidated gross margins were 24.5% for the nine months ended December 31, 2019, an increase of 70 basis points compared to 23.8% for the same period in the prior fiscal year. The increase in margins for the nine-month period was primarily due to an increase in Financing segment gross profit and an increase in service revenues and gross profit.

Our operating expenses for the three months ended December 31, 2019 increased 23.1%, or $14.5 million, to $77.4 million, as compared to $62.9 million for the prior year period. The majority of this increase for the three months ended December 31, 2019 is due to the increase in selling, general, and administrative expense of 22.4% or $13.4 million, due in part to increases in variable compensation, as well as the operating expenses associated with the acquisitions of SLAIT and ABS Technology. As of December 31, 2019, we had 1,602 employees an increase of 337, or 26.6%, from 1,265 last year. This increase includes 223 employees as of December 31, 2019 from our acquisition of SLAIT, including the employees performing our staffing services and 78 employees as of December 31, 2019 from our recent acquisition of ABS Technology; the remaining increase in employment levels was due to internal growth.

For the nine months ended December 31, 2019, operating expenses increased 20.6%, or $37.9 million, to $222.0 million, as compared to $184.1 million in the prior year period. The majority of this increase for the nine months ended December 31, 2019, is due to the increase in selling, general, and administrative expense of 20.1%, or $35.0 million, due in part to increases in variable compensation, software license and maintenance, and the operating expenses associated with the acquisitions of SLAIT and ABS. Depreciation and amortization expense increased $0.9 million and $2.4 million for the three and nine months ended December 31, 2019, respectively, due to the SLAIT and ABS Technology acquisitions. Interest and financing costs increased $0.3 million and $0.5 million, for the three and nine months ended December 31, 2019, respectively due to an increase in the average balance of non-recourse notes payable outstanding during the nine months ended December 31, 2019, as compared to the prior year.

As a result, operating income for the three months ended December 31, 2019 increased 31.2%, or $6.2 million, to $26.3 million as compared to $20.0 million for the same period in the prior fiscal year. For the nine months ended December 31, 2019, operating income increased 19.0%, or $12.3 million, to $77.4 million, as compared to $65.1 million for the same period in the prior fiscal year.

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Our effective tax rate was 28.3% for both the three months ended December 31, 2019 and 2018. Consolidated net earnings for the three months ended December 31, 2019, were $19.6 million, an increase of 31.5%, or $4.7 million, over the prior fiscal year’s results, due to the increase in revenues and gross profit, which was partially offset by increased operating expenses. Our effective tax rate for the nine months ended December 31, 2019 was 28.7%, compared to 27.3%, for the same period in the prior fiscal year, during which time the consolidated net earnings were $55.8 million, an increase of 16.0%, or $7.7 million, compared to the prior fiscal year’s results, due to the increase in revenues and gross profit, which was partially offset by increased operating expenses and acquisition related expenses. The increase in our effective income tax rate for the nine months ended December 31, 2019 is due to a decrease in the tax benefit from the vesting of restricted stock.

Adjusted EBITDA increased $6.3 million, or 24.7%, to $31.9 million and adjusted EBITDA margin was 7.4% for both the three months ended December 31, 2019 and 2018. For the nine months ended December 31, 2019, adjusted EBITDA increased $15.0 million, or 18.6%, to $95.8 million and the adjusted EBITDA margin increased 10 basis points to 7.8% as compared to the prior fiscal year period of 7.7% for the nine months ended December 31, 2019, compared to the prior fiscal year.

Diluted earnings per share increased 32.7%, or $0.36, to $1.46 per share for the three months ended December 31, 2019, as compared to $1.10 per share for the same period in the prior year. Non-GAAP diluted earnings per share increased 27.1%, or $0.35, to $1.64 for the three months ended December 31, 2019 as compared to $1.29 per share for the same period in the prior year. For the nine months ended December 31, 2019, diluted earnings per share increased 17.5%, or $0.62, to $4.16 per share, as compared to $3.54 per share compared to the prior year period. Non-GAAP diluted earnings per share increased 19.3%, or $0.79, to $4.89 for the nine months ended December 31, 2019, as compared to $4.10 for the nine months ended December 31, 2018.

Cash and cash equivalents decreased $20.3 million or 25.4% to $59.6 million at December 31, 2019, as compared to $79.8 million as of March 31, 2019. The decrease is primarily the result of share repurchases, investments in our financing portfolio, acquisition of ABS Technology, and working capital required for the growth in our technology segment, which was partially offset by cash flows from operations. Our cash on hand, funds generated from operations, amounts available under our credit facility and the possible monetization of our investment portfolio have provided sufficient liquidity for our business.

Segment Overview

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

Technology Segment

The technology segment sells IT equipment and software and related services primarily to corporate customers globally, state and local governments, and higher education institutions on a nationwide basis, with geographic concentrations relating to our physical locations. The technology segment also provides Internet-based business-to-business supply chain management solutions for IT products.

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

Customers who purchase IT equipment and services from us may have customer master agreements, or CMAs, with our company, which stipulate the terms and conditions of the relationship. Some CMAs contain pricing arrangements, and most contain mutual voluntary termination clauses. Our other customers place orders using purchase orders without a CMA in place or with other documentation customary for the business. Often, our work with state and local governments is based on public bids and our written bid responses.

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

Financing Segment

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

Financing revenue generally falls into the following three categories:

• Portfolio income: Interest income from financing receivables and rents due under operating leases;

• Transactional gains: Net gains or losses on the sale of financial assets; and

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

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

Fluctuations in Revenues

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

We expect to continue to expand by opening new sales locations and hiring additional staff for specific targeted market areas in the near future whenever we can find both experienced personnel and desirable geographic areas. These investments may reduce our results from operations in the short term.

CRITICAL ACCOUNTING ESTIMATES

The preparation of financial statements in conformity with US GAAP requires management to use judgment in the application of accounting policies, including making estimates and assumptions. If our judgment or interpretation of the facts and circumstances relating to various transactions had been different, or different assumptions were made, it is possible that alternative accounting policies would have been applied, resulting in a change in financial results. On an ongoing basis, we reevaluate our estimates, including those related to revenue recognition, residual values, vendor incentives, lease classification, goodwill and intangibles, and reserves for credit losses and income taxes specifically relating to uncertain tax positions. We base estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. For all such estimates, we caution that future events rarely develop exactly as forecasted, and therefore, these estimates may require adjustment.

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 2019 Annual Report.

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SEGMENT RESULTS OF OPERATIONS

The three and nine months ended December 31, 2019, compared to the three and nine months ended December 31, 2018

Technology Segment

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

	Three Months Ended December 31,				Nine Months Ended December 31,
	2019		2018		2019		2018
Net sales
Product	$	360,206	$	299,490	$	1,032,620	$	911,839
Services		50,422		35,221		144,261		104,504
Total		410,628		334,711		1,176,881		1,016,343
Cost of sales
Product		290,980		239,843		825,509		730,311
Services		32,086		20,895		90,427		62,321
Total		323,066		260,738		915,936		792,632
Gross profit		87,562		73,973		260,945		223,711
Selling, general, and administrative		67,759		56,607		197,615		166,199
Depreciation and amortization		3,619		2,714		10,555		8,243
Operating expenses		71,378		59,321		208,170		174,442
Operating income	$	16,184	$	14,652	$	52,775	$	49,269
Adjusted gross billings	$	586,308	$	478,447	$	1,713,755	$	1,446,602
Adjusted EBITDA	$	21,687	$	20,074	$	70,895	$	64,699

Net sales: Net sales for the three months ended December 31, 2019, were $410.6 million compared to $334.7 million during the three months ended December 31, 2018, an increase of 22.7% or $75.9 million, due to increases in demand from all customer end markets, with the greatest increases from customers in the telecom, media and entertainment, technology, SLED, and healthcare industries. Product sales for the three months ended December 31, 2019 were $360.2 million, an increase of 20.3%, or $60.7 million due to higher demand from our customers. Service revenues increased 43.2%, or $15.2 million, to $50.4 million due to an increase in staffing and professional and managed services primarily from the SLAIT acquisition. For the nine months ended December 31, 2019, net sales increased 15.8%, or $160.5 million to $1.177 billion compared to $1.016 billion during the same period in the prior year. Product sales for the nine months ended December 31, 2019 increased 13.2%, or $120.8 million, to $1.033 billion due to higher demand primarily from our customers in the telecom, media and entertainment, technology, SLED, and healthcare industries. Services revenues increased 38.0%, or $39.8 million, to $144.3 million, due to an increase in staffing and professional and managed services primarily from the SLAIT acquisition.

Adjusted gross billings for the three months ended December 31, 2019 increased to $586.3 million, or 22.5%, from $478.4 million during the three months ended December 31, 2018. The increase in adjusted gross billings was due, in part, to the SLAIT and ABS Technology acquisitions as well as higher demand from our current customers. For the nine months ended December 31, 2019, adjusted gross billings increased by 18.5% to $1,714 billion compared to $1.447 billion during the same period in the prior year. As of December 31, 2019, we had open orders of $253.8 million and deferred revenue of $71.4 million. As of December 31, 2018, we had open orders of $152.7 million and deferred revenues of $51.6 million.

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We analyze net sales by customer end market and by vendor, as opposed to discrete product and service categories. Our revenues by customer end market have remained consistent over the year with over 80% of our revenues generated from customers within the five end markets identified below. These changes in revenue by customer end market were driven by changes in customer buying cycles and specific IT related initiatives. The percentage of net sales by industry are summarized below:

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

Cisco systems and HP companies, combined, produced the majority of our revenues by vendor, at 47% and 46% of

revenues for the twelve-month period ended December 31, 2019 and 2018, respectively. None of the vendors included within the “other” category exceeded 5% of revenues. The percentage of net sales by vendor are summarized below:

	Twelve Months Ended December 31,
	2019			2018			Change
Revenue by vendor:
Cisco Systems		42	%		41	%		1	%
NetApp		3	%		3	%		0	%
HP Inc. & HPE		5	%		5	%		0	%
Dell/EMC		3	%		5	%		(2	%)
Juniper Networks		5	%		4	%		1	%
Arista Networks		5	%		4	%		1	%
All others		37	%		38	%		(1	%)
Total		100	%		100	%

Cost of sales: The 23.9% increase in cost of sales was due to the increase in sales. Our gross margin was at 21.3% for the three months ended December 31, 2019 and 22.1% for the three months ended December 31,2018. The decrease in gross margin was due to a 70-basis point decline in product margin to 19.2%, and service margin declined to 36.4% for the three months ended December 31, 2019, as compared to 40.7% in the prior year period. For the nine months ended December 31, 2019, gross margin of 22.2% increased by 20 basis points compared to the prior year period; product margin also increased by 20 basis points to 20.1%, as compared to 19.9% in the prior year period. Gross margin was not affected by a reduction in service margin to 37.3% as compared to 40.4% in the prior year, due to an offsetting increase in service sales. Vendor incentives earned as a percentage of sales decreased 20 basis points for both the three and nine months ended December 31, 2019, respectively, as compared to same period in the prior year.

Selling, general, and administrative: Selling, general, and administrative expenses were $67.8 million for the three months ended December 31, 2019, an increase of $11.2 million, or 19.7% from $56.6 million in the prior year. Salaries and benefits increased $9.8 million, or 20.8% to $56.8 million, compared to $47.0 million during the prior year. The increase is due to both an increase in employment levels and higher variable compensation related to the increase in gross profit. Approximately 39.4% of the increase in salaries and benefits is due to variable compensation. Our technology segment had 1,567 employees as of December 31, 2019, an increase of 345, or 28.2%, from 1,222 at December 31, 2018. As of December 31, 2019, this increase included 78 employees as a result of our acquisition of ABS Technology, and 223 employees from our acquisition of SLAIT, including the employees performing our staffing services; the remaining increase in employment levels is due to internal growth.

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For the nine months ended December 31, 2019, selling, general, and administrative expenses increased by $31.4 million, or 18.9%, to $197.6 million compared to $166.2 million the prior year. Salaries and benefits increased $26.0 million, or 19.0% to $162.9 million, compared to $137.0 million during the prior year due to increased employment levels. Approximately 38.4% of this increase is due to higher variable compensation related to the increase in gross profit.

General and administrative expenses, including acquisition related expenses increased $1.6 million, or 17.0%, to $11.2 million during the three months ended December 31, 2019, compared to $9.5 million the prior year. For the nine months ended December 31, 2019, general and administrative expenses increased $5.7 million, or 19.7%, to $34.7 million, compared to $29.0 million the prior year. The increase in general and administrative expenses was primarily due to the acquisition of SLAIT and ABS Technology, as well as other acquisition related expenses.

Depreciation and amortization: Depreciation and amortization increased $0.9 million, or 33.3%, to $3.6 million during the three months ended December 31, 2019 as compared to $2.7 million in the prior year, due to the acquisition of SLAIT in January 2019 and ABS Technology in August 2019, and increased $2.3 million, or 28.0%, to $10.6 million for the nine months ended December 31, 2019, compared to $8.2 million in the prior year period.

Segment operating income: As a result of the foregoing, operating income was $16.2 million, an increase of $1.5 million, or 10.5%, for the three months ended December 31, 2019 as compared to $14.7 million in the prior year period. For the nine months ended December 31, 2019, operating income was $52.8 million, compared to $49.3 million in the prior year, an increase of $3.5 million, or 7.1%. For the three months ended December 31, 2019, adjusted EBITDA was $21.7 million, an increase of $1.6 million, or 8.0%, compared to $20.1 million in the prior year period. Adjusted EBITDA was $70.9 million, an increase of $6.2 million, or 9.6%, for the nine months ended December 31, 2019, compared to $64.7 million in the prior year period.

Financing Segment

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

	Three Months Ended December 31,				Nine Months Ended December 31,
	2019		2018		2019		2018
Net product sales	$	18,363	$	10,953	$	45,047	$	30,896
Cost of product sales		2,229		2,013		6,626		5,491
Gross profit		16,134		8,940		38,421		25,405
Selling, general, and administrative		5,331		3,121		11,785		8,200
Depreciation and amortization		28		5		112		7
Interest and financing costs		694		443		1,898		1,403
Operating expenses		6,053		3,569		13,795		9,610
Operating income	$	10,081	$	5,371	$	24,626	$	15,795
Adjusted EBITDA	$	10,169	$	5,480	$	24,933	$	16,105

Net sales: Net sales increased by $7.4 million, or 67.7%, to $18.4 million for the three months ended December 31, 2019, as compared to $11.0 million in the prior year due to higher transactional gains and portfolio earnings. During the three months ended December 31, 2019 and 2018, we recognized net gains on sales of financial assets of $9.5 million and $2.4 million, respectively, and the fair value of assets received from these sales were $246.0 million and $95.2 million, respectively. The increase in transactional gains was due to several large transactions that were completed during the quarter. For the nine months ended December 31, 2019, net sales increased to $45.0 million, an increase of $14.2 million, or 45.8%, as compared to prior year of $30.9 million, due to higher transactional gains, portfolio earnings, and post-contract earning. During the nine months ended December 31, 2019 and 2018, we recognized net gains on sales of financial assets of $17.0 million and $5.0 million, respectively, and the fair value of assets received from these sales were $414.6 million and $189.2 million, respectively. At December 31, 2019, we had $162.7 million in financing receivables and operating leases, compared to $162.1 million as of December 31, 2018, an increase of $0.7 million, or 0.4%.

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Cost of sales: Cost of sales increased $0.2 million and $1.1 million for the three and nine months ended December 31, 2019, compared to the same periods in the prior year, respectively, which consists of depreciation expense from operating leases. Gross profit increased by 80.5% to $16.1 million, for the three months ended December 31, 2019, and increased by 51.2% to $38.4 million, for the nine months ended December 31, 2019 as compared to the prior year.

Selling, general and administrative: For the three and nine months ended December 31, 2019, selling, general, and administrative expenses increased by $2.2 million, or 70.8%, and increased $3.6 million, or 43.7%, respectively, which was due primarily to an increase variable compensation due to higher gross profit.

Interest and financing costs increased by 56.7% to $0.7 million for the three months ended December 31, 2019 and increased by 35.3% to $1.9 million for the nine months ended December 31, 2019, compared to the prior year, due to an increase in the average total notes payable outstanding over the same periods for the prior year. Total notes payable were $68.4 million as of December 31, 2019, an increase of $1.8 million, or 2.7%, as compared to $66.6 million as of December 31, 2018. Our weighted average interest rate for non-recourse notes payable was 3.69% and 4.54%, as of December 31, 2019 and 2018, respectively.

Segment operating income: As a result of the foregoing, operating income and adjusted EBITDA both increased $4.7 million, or 87.7% and 85.6%, to $10.1 million and $10.2 million, for the three months ended December 31, 2019, as compared to the prior year period. For the nine months ended December 31, 2019, operating income and adjusted EBITDA both increased $8.8 million, respectively, or 55.9% and 54.8%, to $24.6 million and $24.9 million, respectively.

Consolidated

Other income: Other income for the three months ended December 31, 2019, was $1.0 million, compared to $0.7 million in the prior year. During the three months ended December 31, 2019, we recognized a distribution from a claim of $0.8 million. Other income for the nine months ended December 31, 2019, was $0.9 million, compared to and $1.1 million in the prior year.

Income taxes: Our provision for income tax expense was $7.7 million and $22.5 million for the three and nine months ended December 31, 2019, as compared to $5.9 million and $18.1 million for the same periods in the prior year. Our effective income tax rates for the three and nine months ended December 31, 2019 was 28.3% and 28.7%, compared to 28.3% and 27.3% for the three and nine months ended December 31, 2018. The increase in our effective income tax rate is due to a decrease in the tax benefit from the vesting of restricted stock.

Net earnings: The foregoing resulted in net earnings of $19.6 million for the three months ended December 31, 2019, an increase of 31.5%, as compared to $14.9 million during the three months ended December 31, 2018. For the nine months ended December 31, 2019, net earnings were $55.8 million, an increase of $7.7 million, or 16.0%, as compared to $48.1 million for the same period in the prior year.

Basic and fully diluted earnings per common share were $1.47 and $1.46 for the three months ended December 31, 2019, an increase of 33.6% and 32.7%, respectively, as compared to $1.10 for both the basic and fully diluted earnings per common share for the same period in the prior year. For the nine months ended December 31, 2019, basic and fully diluted earnings per common share were $4.19 and $4.16, an increase of 17.4% and 17.5%, as compared to $3.57 and $3.54 for the same period in the prior year, respectively.

Weighted average common shares outstanding used in the calculation of basic earnings per common share for both the three and nine months ended December 31, 2019 was 13.3 million. Weighted average common shares outstanding used in the calculation of diluted earnings per common share for both the three and nine months ended December 31, 2019 was 13.4 million.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity Overview

Our primary sources of liquidity have historically been cash and cash equivalents, internally generated funds from operations, and borrowings, both non-recourse and recourse. We have used those funds to meet our capital requirements, which have historically consisted primarily of working capital for operational needs, capital expenditures, purchases of equipment for lease, payments of principal and interest on indebtedness outstanding, acquisitions, and the repurchase of shares of our common stock.

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

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

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

Most customer payments in our technology segment are remitted to our lockboxes. Once payments are cleared, the monies in the lockbox accounts are automatically transferred to our operating account on a daily basis. On the due dates of the floor plan component, we make cash payments to WFCDF. These payments from the accounts receivable component to the floor plan component and repayments from our cash are reflected as “net borrowings on floor plan facility” in the cash flows from the financing activities section of our consolidated statements of cash flows. We engage in this payment structure to minimize our interest expense and bank fees in connection with financing the operations of our technology segment.

We believe that cash on hand and funds generated from operations, together with available credit under our credit facility, will be sufficient to finance our working capital, capital expenditures, and other requirements for at least the next 12 calendar months.

Our ability to continue to fund our planned growth, both internally and externally, is dependent upon our ability to generate sufficient cash flow from operations or to obtain additional funds through equity or debt financing, or from other sources of financing, as may be required. While at this time we do not anticipate requiring any additional sources of financing to fund operations, if demand for IT products declines, 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 over the periods indicated (in thousands):

	Nine Months Ended December 31,
	2019			2018
Net cash provided by (used) in operating activities	$	(74,728	)	$	2,172
Net cash used in investing activities		(20,044	)		(48,009	)
Net cash provided by financing activities		74,648			11,801
Effect of exchange rate changes on cash		(137	)		172
Net Decrease in Cash and Cash Equivalents	$	(20,261	)	$	(33,864	)

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

	Nine Months Ended December 31,
	2019			2018
Technology segment	$	(18,146	)	$	4,033
Financing segment		(56,582	)		(1,861	)
Net cash used in operating activities	$	(74,728	)	$	2,172

Technology Segment: In the nine months ended December 31, 2019, operating cash flows used by our technology segment was $18.1 million as cash generated from earnings were exceeded by changes in working capital. In addition, cash provided by the accounts payable – floor plan facility was $28.4 million. Accounts payable – floor plan is a facility used to manage working capital needs and we are required to present changes in this balance as financing activity in our consolidated statement of cash flows.

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

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

	As of December 31,
	2019			2018
(DSO) Days sales outstanding (1)		57			54
(DIO) Days inventory outstanding (2)		10			11
(DPO) Days payable outstanding (3)		(41	)		(39	)
Cash conversion cycle		26			26

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

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

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

Our cash conversion cycle was 26 days for both December 31, 2019, and 2018. An increase in DSO from 54 days to 57 day in December 2019 was offset by a reduction of 1 day in DIO and 2 days in DPO. Our December 31, 2019 DSO and DPO was impacted by a substantial increase in the quarterly sales of 24.1% and cost of sales of 23.8%, respectively; resulting in an increase in accounts receivable and accounts payable levels as of December 31, 2019.

Financing Segment: In the nine months ended December 31, 2019, our financing segment used $56.6 million from operating activities, primarily due to the issuance of new financing receivables. In the nine months ended December 31, 2018, our financing segment used $1.9 million from operating activities, primarily due to changes in working capital. When we adopted ASC 842, we elected the transition option to not restate comparative periods. In the comparative period, changes in financing receivables not sourced through us are reflected in cash flows from investing activities. With the adoption of ASC 842, for periods beginning after April 1, 2019, we recognize the change in financing receivables, including the issuance of financing receivables offset by repayments of financing receivables and the proceeds from the transfer of financing receivables when we account for the transfer as a sale, as part of operating activities.

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Cash flows related to investing activities. In the nine months ended December 31, 2019, we used $20.0 million from investing activities, consisting of $14.2 million for acquisitions and $7.2 million for purchases of property, equipment and operating lease equipment, and offset by $1.4 million of proceeds from the sale of property, equipment, and operating lease equipment.

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

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

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

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

Non-Cash Activities

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

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

Liquidity and Capital Resources

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

The financing necessary to support our leasing and financing activities has been provided by our cash and non-recourse borrowings. We monitor our exposure closely. We are able to obtain financing through our traditional lending sources using primarily non-recourse borrowings from third-party banks and finance companies. Non-recourse financings are loans whose repayment is the responsibility of a specific customer, although we may make representations and warranties to the lender regarding the specific contract or have ongoing loan servicing obligations. Under a non-recourse loan, we borrow from a lender an amount based on the present value of the contractually committed payments at a fixed rate of interest, and the lender secures a lien on the financed assets. When the lender is fully repaid, the lien is released, and all further proceeds are ours. We are not liable for the repayment of non-recourse loans unless we breach our representations and warranties in the loan agreements. The lender assumes the credit risk, and the lender’s only recourse, upon default, is against the customer and the specific equipment.

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

Whenever desirable, we arrange for equity investment financing, which includes selling lease payments, including the residual portions, to third-parties and financing the equity investment on a non-recourse basis. We generally retain customer control and operational services and have minimal residual risk. We usually reserve the right to share in remarketing proceeds of the equipment on a subordinated basis after the investor has received an agreed-to return on its investment.

Credit Facility — Technology

Our subsidiary, ePlus Technology, inc., and certain of its subsidiaries. have a financing facility from WFCDF to finance its working capital requirements for inventories and accounts receivable. There are two components of this facility: (1) a floor plan component; and (2) an accounts receivable component. This facility has full recourse to ePlus Technology, inc. and certain subsidiaries. and is secured by a blanket lien against all its assets, such as chattel paper, receivables and inventory. As of December 31, 2019, the facility had an aggregate limit of the two components of $250 million with an accounts receivable sub-limit of $50 million.

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

Availability under the facility may be limited by the asset value of equipment we purchase or accounts receivable and may be further limited by certain covenants and terms and conditions of the facility. These covenants include but are not limited to a minimum excess availability of the facility and ePlus Technology, inc.’s minimum earnings before interest, taxes, depreciation and amortization. We were in compliance with these covenants as of December 31, 2019. Interest on the facility is assessed at a rate of the One Month LIBOR plus two- and one-half percent if the payments are not made on the three specified dates each month. The facility also requires that financial statements of ePlus Technology, inc. and certain subsidiaries. be provided within 45 days of the end of each quarter and 90 days of each fiscal year end and other operational reports be provided on a regular basis. Either party may terminate the credit facility with 90 days advance written notice.

We are not, and do not believe that we are reasonably likely to be, in breach of the WFCDF credit facility. In addition, we do not believe that the covenants of the WFCDF credit facility materially limit our ability to undertake financing. In this regard, the covenants apply only to our subsidiary, ePlus Technology, inc. and certain of its subsidiaries. This credit facility is secured by the assets of only ePlus Technology, inc. and certain of its subsidiaries and the guaranty as described below.

The WFCDF credit facility requires a guaranty of $10.5 million by ePlus inc. The guaranty requires ePlus inc. to deliver its annual audited financial statements by a certain date. We have delivered the annual audited financial statements for the year ended March 31, 2019, as required. The loss of the WFCDF credit facility could have a material adverse effect on our future results as we currently rely on this facility and its components for daily working capital and liquidity for our technology segment and as an operational function of our accounts payable process.

Floor Plan Component

Purchases by ePlus Technology, inc. and certain subsidiaries. including computer technology products, software, maintenance and services are in part financed through a floor plan component in which interest expense for the first thirty to sixty days, in general, is not charged. The floor plan liabilities are recorded as accounts payable—floor plan on our consolidated balance sheets, as they are normally repaid within the fifteen to sixty-day time frame and represent assigned accounts payable originally generated with the manufacturer/distributor. In some cases, we are able to pay invoices early and receive a discount, but if the fifteen to sixty-day obligation is not paid timely, interest is then assessed at stated contractual rates.

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The respective floor plan component credit limits and actual outstanding balance payables for the dates indicated were as follows (in thousands):

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

Accounts Receivable Component

ePlus Technology, inc. and certain of its subsidiaries have an accounts receivable component included within the WFCDF credit facility, which has a revolving line of credit. On the due date of the invoices financed by the floor plan component, the invoices are paid by the accounts receivable component of the credit facility. The balance of the accounts receivable component is then reduced by payments from our available cash. The outstanding balance under the accounts receivable component is recorded as recourse notes payable on our consolidated balance sheets. There was no balance outstanding for the accounts receivable component at December 31, 2019, or March 31, 2019, while the maximum credit limit was $50 million for both periods.

Performance Guarantees

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

Off-Balance Sheet Arrangements

As part of our ongoing business, we do not participate in transactions that generate relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K, or other contractually narrow or limited purposes. As of December 31, 2019, we were not involved in any unconsolidated special purpose entity transactions.

Adequacy of Capital Resources

The continued implementation of our business strategy will require a significant investment in both resources and managerial focus. In addition, we may selectively acquire other companies that have attractive customer relationships and skilled sales and/or engineering forces. We may also open offices in new geographic areas, which may require a significant investment of cash. We may also acquire technology companies to expand and enhance the platform of bundled solutions to provide additional functionality and value-added services. We may continue to use our internally generated funds to finance investments in leased assets or investments in notes receivables due from our customers. These actions may result in increased working capital needs as the business expands. As a result, we may require additional financing to fund our strategy, implementation, potential future acquisitions, and working capital needs, which may include additional debt and equity financing.

Inflation

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

Potential Fluctuations in Quarterly Operating Results

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

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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, any reduction of expected residual values related to the equipment under our leases, the timing and mix of specific transactions, the reduction of manufacturer incentive programs, and other factors. Quarterly operating results could also fluctuate as a result of our sale of equipment in our lease portfolio to a lessee or third-party at the expiration of a lease term or prior to such expiration, and the transfer of financial assets. Sales of equipment and transfers of financial assets may have the effect of increasing revenues and net income during the quarter in which the sale occurs and reducing revenues and net income otherwise expected in subsequent quarters. See Part I, Item 1A, “Risk Factors,” in our 2019 Annual Report.

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

Item 3. Quantitative and Qualitative Disclosures About Market Risk

A substantial portion of our liabilities are non-recourse, fixed-interest-rate instruments, which were aligned with the customer financing rate creating an interest rate spread that is our profit. Should we not fund these transactions with debt at inception and interest rates rise above our interest rate with our customer, we may not be able to fund the transaction without reduced profit or a loss, thus inhibiting our ability to generate proceeds from the transaction. We utilize our lines of credit and other financing facilities that are subject to fluctuations in short-term interest rates. These instruments, which are generally denominated in US dollars, were entered into for other than trading purposes and, with the exception of amounts drawn under the WFCDF facility, bear interest at a fixed rate. Because the interest rate on these instruments is fixed, changes in interest rates will not directly impact our cash flows. Borrowings under the WFCDF facility bear interest at a market-based variable rate. As of December 31, 2019, the aggregate fair value of our recourse and non-recourse borrowings approximated their carrying value.

We have transactions in foreign currencies, primarily in British Pounds, Euros, and Indian Rupees. There is a potential for exposure to fluctuations in foreign currency rates resulting primarily from the translation exposure associated with the preparation of our consolidated financial statements. In addition, we have foreign currency exposure when transactions are not denominated in our subsidiary’s functional currency. To date, our foreign operations are insignificant in relation to total consolidated operations, and we believe that potential fluctuations in currency exchange rates will not have a material effect on our financial position.

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

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

We have assets in the UK, Canada, Iceland, and Spain. As a lessor, we have entered into lease contracts and non-recourse, fixed-interest-rate financing denominated in British Pounds, Canadian Dollars, Icelandic Krona, and Euros. To date, our foreign operations have been insignificant, and we believe that potential fluctuations in currency exchange rates will not have a material effect on our 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 December 31, 2019.

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Changes in Internal Control Over Financial Reporting.

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

Limitations on the Effectiveness of Controls

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

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

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

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

Item 1A. Risk Factors

There has not been any material change in the risk factors previously disclosed in Part I, Item 1A of our 2019 Annual Report.

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

The following table provides information regarding our purchases of ePlus inc. common stock during the nine months ended December 31, 2019.

Period	Total number of shares purchased (1)		Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs		Maximum number (or approximate dollar value) of shares that may yet be purchased under the plans or programs
April 1, 2019 through April 30, 2019		-	$	-		-		385,419	(2	)
May 1, 2019 through May 27, 2019		2,301	$	83.38		1,300		0	(3	)
May 28, 2019 through May 31, 2019		68,207	$	72.32		68,207		431,793	(4	)
June 1, 2019 through June 30, 2019		117,093	$	71.15		79,283		352,510	(5	)
July 1, 2019 through July 31, 2019		3,260	$	72.87		254		352,256	(6	)
August 1, 2019 through August 31, 2019		-	$	-		-		352,256	(7	)
September 1, 2019 through September 30, 2019		-	$	-		-		352,256	(8	)
October 1, 2019 through October 31, 2019		-	$	-		-		352,256	(9	)
November 1, 2019 through November 30, 2019		-	$	-		-		352,256	(10	)
December 1, 2019 through December 31, 2019		-	$	-		-		352,256	(11	)

(1) Any shares acquired were in open-market purchases, except for 38,811 shares, out of which 1,001 were repurchased in May 2019 and 37,810 in June 2019 to satisfy tax withholding obligations that arose due to the vesting of shares of restricted stock.

(2) The share purchase authorization in place for the month ended April 30, 2019 had purchase limitations on the number of shares of up to 500,000 shares. As of April 30, 2019, the remaining authorized shares to be purchased were 385,419.

(3) As of May 27, 2019, the authorization under the then existing share repurchase plan expired.

(4) On May 24, 2019, the board of directors authorized the company to repurchase up to 500,000 shares of our outstanding common stock commencing on May 28, 2019 and continuing to May 27, 2020. As of May 31, 2019, the remaining authorized shares to be purchased were 431,793.

(5) The share purchase authorization in place for the month ended June 30, 2019 had purchase limitations on the number of shares of up to 500,000 shares. As of June 30, 2019, the remaining authorized shares to be purchased were 352,510.

(6) The share purchase authorization in place for the month ended July 31, 2019 had purchase limitations on the number of shares of up to 500,000 shares. As of July 31, 2019, the remaining authorized shares to be purchased were 352,256.

(7) The share purchase authorization in place for the month ended August 31, 2019 had purchase limitations on the number of shares of up to 500,000 shares. As of August 31, 2019, the remaining authorized shares to be purchased were 352,256.

(8) The share purchase authorization in place for the month ended September 30, 2019 had purchase limitations on the number of shares of up to 500,000 shares. As of September 30, 2019, the remaining authorized shares to be purchased were 352,256.

(9) The share purchase authorization in place for the month ended October 31, 2019 had purchase limitations on the number of shares of up to 500,000 shares. As of October 31, 2019, the remaining authorized shares to be purchased were 352,256.

(10) The share purchase authorization in place for the month ended November 30, 2019 had purchase limitations on the number of shares of up to 500,000 shares. As of November 30, 2019, the remaining authorized shares to be purchased were 352,256.

(11) The share purchase authorization in place for the month ended December 31, 2019 had purchase limitations on the number of shares of up to 500,000 shares. As of December 31, 2019, the remaining authorized shares to be purchased were 352,256.

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

47

Table of Contents

Item 3. Defaults Upon Senior Securities

Not Applicable.

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

None.

48

Table of Contents

Item 6. Exhibits

3.1	ePlus inc. Amended and Restated Certificate of Incorporation as amended September 15, 2008 (Incorporated herein by reference as Exhibit 3.1 to our Current Report on Form 8-K filed on September 19, 2008)
3.2	Amended and Restated Bylaws of ePlus inc., as amended February 15, 2018 (Incorporated herein by reference to Exhibit 3.1 to our Current Report on Form 8-K filed on February 20, 2018)
10.1	Amendment No. 1, effective November 14, 2019, to Amended and Restated Employment Agreement, effective September 6, 2017, by and between ePlus inc. and Elaine D. Marron.
10.2	Amendment No. 2, effective November 14, 2019, to Amended and Restated Employment Agreement, effective September 6, 2017, by and between ePlus inc. and Mark P. Marron.
10.3	Amendment No. 1, effective November 14, 2019, to Amended and Restated Employment Agreement, effective May 7, 2018, by and between ePlus inc. and Darren S Raiguel.
10.4	Amendment No. 8, dated November 12, 2019, to Amended and Restated Business Financing Agreement and Amended and Restated Wholesale Financing Agreement between ePlus Technology, inc. and Wells Fargo Commercial Distribution Finance, LLC.
31.1	Certification of the Chief Executive Officer of ePlus inc. pursuant to the Securities Exchange Act Rules 13a-14(a) and 15d-14(a).
31.2	Certification of the Chief Financial Officer of ePlus inc. pursuant to the Securities Exchange Act Rules 13a-14(a) and 15d-14(a).
32	Certification of the Chief Executive Officer and Chief Financial Officer of ePlus inc. pursuant to 18 U.S.C. § 1350.
101.INS	Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).
101.SCH	Inline XBRL Taxonomy Extension Schema Document
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104	Cover Page Interactive Data File (formatted as inline XBRL and contained in  Exhibit 101).

49

Table of Contents

SIGNATURES

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

	ePlus inc.
Date:  February 5, 2020	/s/ MARK P. MARRON
	By: Mark P. Marron,
	Chief Executive Officer and President
	(Principal Executive Officer)
Date:  February 5, 2020	/s/ ELAINE D. MARION
	By: Elaine D. Marion
	Chief Financial Officer
	(Principal Financial Officer)

50

EX-10.1

Exhibit 10.1

AMENDMENT #1 TO AMENDED AND RESTATED EMPLOYMENT AGREEMENT

ePlus inc. (the “Company”), a Delaware corporation, and Elaine D. Marion (the “Executive”) (collectively, the “Parties”) have previously entered into an Amended and Restated Employment Agreement (the “A&R Agreement”), effective September 6, 2017, and executed by Executive on November 20, 2017, and the Company on December 12, 2017. The Parties hereby agree to this Amendment #1 (“Amendment #1”), to be effective November 14, 2019.

1.          The following Paragraph 5(g) will be added to the A&R Agreement:

Provided that the Executive is covered under the Company's group health plan, the Executive shall be entitled to reimbursement by the Company for his participation in the Johns Hopkins Executive Physical Program or an equivalent diagnostic program, one time per company fiscal year during the term of employment on a date(s) of the Executive’s choosing. To be entitled for reimbursement, the Executive must promptly submit a request for reimbursement, with reasonable documentation. The Company will promptly provide reimbursement upon receipt of said promptly submitted documentation.

No other provision of the A&R Agreement is affected by this Amendment #1.

/s/ Barbara Tiano		/s/ Elaine D. Marion
Barbara Tiano		Elaine D. Marion
VP Human Resources		Chief Financial Officer
On behalf of John E. Callies
Chairman, Compensation Committee
Date:	November 18, 2019	Date:	November 15, 2019

EX-10.2

Exhibit 10.2

AMENDMENT #2 TO AMENDED AND RESTATED EMPLOYMENT AGREEMENT

ePlus inc. (the “Company”), a Delaware corporation, and Mark P. Marron (the “Executive”) (collectively, the “Parties”) have previously entered into an Amended and Restated Employment Agreement (the “A&R Agreement”), effective September 6, 2017, and executed by Executive on November 20, 2017, and the Company on December 12, 2017, Amendment #1, effective July 16, 2018. The Employment Agreement and Amendment # 1 and are collectively referred to herein as the “Agreement.”  The Parties hereby agree to this Amendment #2 (“Amendment #2”), to be effective November 14, 2019.

1.          The following Paragraph 5(f) shall be replaced in its entirety with the following:

(f)  Provided that the Executive is covered under the Company's group health plan, the Executive shall be entitled to reimbursement by the Company for his participation in the Johns Hopkins Executive Physical Program or an equivalent diagnostic program, one time per company fiscal year during the term of employment on a date(s) of the Executive’s choosing. To be entitled for reimbursement, the Executive must promptly submit a request for reimbursement, with reasonable documentation. The Company will promptly provide reimbursement upon receipt of said promptly submitted documentation.

No other provision of the A&R Agreement is affected by this Amendment #2.

/s/ Barbara Tiano		/s/ Mark P. Marron
Barbara Tiano		Mark P. Marron
VP Human Resources		President and Chief Executive Officer
On behalf of John E. Callies
Chairman, Compensation Committee
Date:	November 18, 2019	Date:	November 18, 2019

EX-10.3

Exhibit 10.3

AMENDMENT #1 TO EMPLOYMENT AGREEMENT

ePlus inc. (the “Company”), a Delaware corporation, and Darren S. Raiguel (the “Executive”) (collectively, the “Parties”) have previously entered into an Employment Agreement (the “Agreement”), effective May 7, 2018, and executed by Executive and the Company on May 7, 2018. The Parties hereby agree to this Amendment #1 (“Amendment #1”), to be effective November 14, 2019.

1.          The following Paragraph 5(g) will be added to the Agreement:

(g) Provided that the Executive is covered under the Company's group health plan, the Executive shall be entitled to reimbursement by the Company for his participation in the Johns Hopkins Executive Physical Program or an equivalent diagnostic program, one time per company fiscal year during the term of employment on a date(s) of the Executive’s choosing. To be entitled for reimbursement, the Executive must promptly submit a request for reimbursement, with reasonable documentation. The Company will promptly provide reimbursement upon receipt of said promptly submitted documentation.

No other provision of the Agreement is affected by this Amendment #1.

/s/ Barbara Tiano		/s/ Darren S. Raiguel
Barbara Tiano		Darren S. Raiguel
VP Human Resources		Chief Operating Officer
On behalf of John E. Callies
Chairman, Compensation Committee
Date:	November 18, 2019	Date:	November 15, 2019

EX-10.4

Exhibit 10.4

AMENDMENT #8 TO AMENDED AND RESTATED BUSINESS FINANCING AGREEMENT AND AMENDED AND RESTATED AGREEMENT FOR WHOLESALE FINANCING

This Amendment #8 (this “Amendment”) is entered into as of November 12, 2019, by and among ePlus Technology, inc. (“Technology”), ePlus Technology Services, inc. (“Services”) and SLAIT Consulting, LLC (“SLAIT”; and together with Technology and Services, each sometimes referred to as a “Dealer,” and sometimes referred to collectively, jointly and severally, as “Dealer”) and Wells Fargo Commercial Distribution Finance, LLC (“CDF”) and is to (a) that certain Amended and Restated Business Financing Agreement by and between Dealer and CDF dated as of July 23, 2012 (as amended, restated, amended and restated, modified, extended, renewed, substituted, and/or supplemented from time to time, the “BFA”) and (b) that certain Agreement for Wholesale Financing by and between Dealer and CDF dated as of July 23, 2012 (as amended, restated, amended and restated, modified, extended, renewed, substituted, and/or supplemented from time to time, the “AWF” ). All terms which are not defined herein shall have the same meaning in this Amendment as in the BFA or AWF, as applicable.

NOW THEREFORE, in consideration of the premises and of the mutual promises contained herein and in the BFA or AWF, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1.          The definition of “Obligations” in Section 1.1 of the BFA is hereby deleted in its entirety and replaced with the following:

“Obligations”: all liabilities and indebtedness now or hereafter arising, owing, due or payable from Dealer to CDF or any L/C Issuer (solely with respect to any liabilities or indebtedness owing to such L/C Issuer in connection with a Letter of Credit issued pursuant to this Agreement), including any third party claims against Dealer satisfied or acquired by CDF, whether primary or secondary, joint or several, direct, contingent, fixed or otherwise, and, whether or not evidenced by instruments or evidences of indebtedness, and all covenants, agreements, warranties, duties and representations, whether such Obligations arise under this Agreement, the Other Agreements, or any other agreements previously, now or hereafter executed by Dealer and delivered to CDF or by operation of law, including, without limitations, the Letter of Credit Obligations.”

2.          The definition of “Obligations” in Section 30(a) of the AWF is hereby deleted in its entirety and replaced with the following:

“For the purposes of this Agreement, “Obligations” is defined as all liabilities and indebtedness now or hereafter arising, owing, due or payable from Dealer to CDF, including any third party claims against Dealer satisfied or acquired by CDF, whether primary or secondary, joint or several, direct, contingent, fixed or otherwise, and whether or not evidenced by instruments or evidences of indebtedness, and all covenants, agreements, warranties, duties and representations, whether such Obligations arise under this Agreement or any other agreements previously, now or hereafter executed by Dealer and delivered to CDF or by operation of law.”

3.          Section 6.1(d) of the BFA and Section 13(d) of the AWF are hereby deleted in their entirety and replaced with the following:

“(d) Dealer fails to pay any portion of Dealer’s debts to CDF or to any person that at any time directly or indirectly controls, is controlled by, or is in common control with CDF (“CDF Affiliate”) when due and payable hereunder or under any other agreement between CDF or any CDF Affiliate and Dealer and, with respect to this Agreement, such failure is not cured within two (2) days of receipt of notice thereof;”

4.        CDF hereby notifies Dealer, and Dealer hereby acknowledges, that many dealers who use CDF’s Customer Online Management System (“COMS”) will receive a notification regarding a Modification of Financing Agreement in December 2019. Such notification will automatically be generated by COMS, and therefore, Dealer may receive such notification from COMS. Such notification will address the same subject matter addressed under the BFA or AWF, and Dealer agrees to ignore such notification. The parties agree that notwithstanding any Dealer’s receipt of such notification from COMS, such notification shall have no binding effect. All amendments to the BFA or AWF shall only be effective if completed in accordance with the BFA or AWF.

5.        Each Dealer hereby ratifies and confirms the BFA or AWF, as amended hereby, and each Other Agreement executed by such Dealer in all respects.

6.       Each Dealer hereby unconditionally releases, acquits, waives, and forever discharges CDF and its successors, assigns, directors, officers, agents, employees, representatives and attorneys from any and all liabilities, claims, causes of action or defenses, if any, and for any action taken or failure to take action, existing at any time prior to the execution of this Amendment.

7.          This Amendment shall be binding upon, inure to the benefit of and be enforceable by the parties hereto and their participants, successors and assigns.

8.          This Amendment may be executed in any number of counterparts, each of which counterparts, once they are executed and delivered, shall be deemed to be an original and all of which counterparts, taken together, shall constitute but one and the same agreement. This Amendment may be executed by any party to this Amendment by original signature, facsimile and/or electronic signature.

IN WITNESS WHEREOF, Dealer and CDF have executed this Amendment as of the date first set forth hereinabove.

“DEALER”
ePLUS TECHNOLOGY, INC.
By:	/s/ Elaine D. Marion
Name:	Elaine D. Marion
Title:	CFO

ePLUS TECHNOLOGY SERVICES, INC.
By:	/s/ Elaine D. Marion
Name:	Elaine D. Marion
Title:	CFO

SLAIT CONSULTING, LLC
By:	/s/ Elaine D. Marion
Name:	Elaine D. Marion
Title:	CFO

“CDF”
WELLS FARGO COMMERCIAL DISTRIBUTION FINANCE, LLC
By:	/s/ Fahad Haroon
Name:	Fahad Haroon
Title:	Duly Authorized Signatory

EX-31.1

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:  February 5, 2020

/s/ MARK P. MARRON

Mark P. Marron

Chief Executive Officer and President

(Principal Executive Officer)

EX-31.2

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:  February 5, 2020

/s/ ELAINE D. MARION

Elaine D. Marion

Chief Financial Officer

(Principal Financial Officer)

EX-32.1

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 three months ended December 31, 2019, 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:  February 5, 2020

/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.

XML

RESERVES FOR CREDIT LOSSES, CQR (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Mar. 31, 2019
Investment in Direct Financing and Sales-type Leases that are Past Due [Member]
Age of the Recorded Notes Receivable Balance Disaggregated Based on Internally Assigned CQR [Abstract]
Total past due	$ 1,676	$ 467
Current	1,106	668
Unbilled minimum lease payments	78,668	63,066
Total minimum lease payments	81,450	64,201
Unearned income	(7,001)	(5,307)
Non-recourse notes payable	(45,170)	(31,892)
Net credit exposure	29,279	27,002
Notes Receivable [Member]
Age of the Recorded Notes Receivable Balance Disaggregated Based on Internally Assigned CQR [Abstract]
Total past due	1,258	1,268
Current	2,020	3,950
Unbilled minimum lease payments	56,956	35,345
Total minimum lease payments	60,234	40,563
Non-recourse notes payable	(26,630)	(19,752)
Net credit exposure	$ 33,604	20,811
High CQR [Member] | Minimum [Member]
Age of the Recorded Notes Receivable Balance Disaggregated Based on Internally Assigned CQR [Abstract]
Losses on net credit exposure	0.00%
High CQR [Member] | Maximum [Member]
Age of the Recorded Notes Receivable Balance Disaggregated Based on Internally Assigned CQR [Abstract]
Losses on net credit exposure	5.00%
High CQR [Member] | Investment in Direct Financing and Sales-type Leases that are Past Due [Member]
Age of the Recorded Notes Receivable Balance Disaggregated Based on Internally Assigned CQR [Abstract]
Total past due	$ 1,269	376
Current	390	543
Unbilled minimum lease payments	49,887	29,503
Total minimum lease payments	51,546	30,422
Unearned income	(4,890)	(2,799)
Non-recourse notes payable	(31,698)	(11,044)
Net credit exposure	14,958	16,579
High CQR [Member] | Notes Receivable [Member]
Age of the Recorded Notes Receivable Balance Disaggregated Based on Internally Assigned CQR [Abstract]
Total past due	867	1,060
Current	1,422	3,813
Unbilled minimum lease payments	42,648	28,113
Total minimum lease payments	44,937	32,986
Non-recourse notes payable	(20,323)	(18,245)
Net credit exposure	$ 24,614	14,741
Average CQR [Member] | Minimum [Member]
Age of the Recorded Notes Receivable Balance Disaggregated Based on Internally Assigned CQR [Abstract]
Losses on net credit exposure	2.00%
Average CQR [Member] | Maximum [Member]
Age of the Recorded Notes Receivable Balance Disaggregated Based on Internally Assigned CQR [Abstract]
Losses on net credit exposure	15.00%
Average CQR [Member] | Investment in Direct Financing and Sales-type Leases that are Past Due [Member]
Age of the Recorded Notes Receivable Balance Disaggregated Based on Internally Assigned CQR [Abstract]
Total past due	$ 407	91
Current	716	125
Unbilled minimum lease payments	28,781	33,563
Total minimum lease payments	29,904	33,779
Unearned income	(2,111)	(2,508)
Non-recourse notes payable	(13,472)	(20,848)
Net credit exposure	14,321	10,423
Average CQR [Member] | Notes Receivable [Member]
Age of the Recorded Notes Receivable Balance Disaggregated Based on Internally Assigned CQR [Abstract]
Total past due	272	146
Current	246	137
Unbilled minimum lease payments	14,690	7,232
Total minimum lease payments	15,208	7,515
Non-recourse notes payable	(6,307)	(1,507)
Net credit exposure	$ 8,901	6,008
Low CQR [Member] | Minimum [Member]
Age of the Recorded Notes Receivable Balance Disaggregated Based on Internally Assigned CQR [Abstract]
Losses on net credit exposure	15.00%
Low CQR [Member] | Maximum [Member]
Age of the Recorded Notes Receivable Balance Disaggregated Based on Internally Assigned CQR [Abstract]
Losses on net credit exposure	100.00%
Low CQR [Member] | Investment in Direct Financing and Sales-type Leases that are Past Due [Member]
Age of the Recorded Notes Receivable Balance Disaggregated Based on Internally Assigned CQR [Abstract]
Total past due	$ 0	0
Current	0	0
Unbilled minimum lease payments	0	0
Total minimum lease payments	0	0
Unearned income	0	0
Non-recourse notes payable	0	0
Net credit exposure	0	0
Low CQR [Member] | Notes Receivable [Member]
Age of the Recorded Notes Receivable Balance Disaggregated Based on Internally Assigned CQR [Abstract]
Total past due	119	62
Current	352	0
Unbilled minimum lease payments	(382)	0
Total minimum lease payments	89	62
Non-recourse notes payable	0	0
Net credit exposure	89	62
31 to 60 Days Past Due [Member] | Investment in Direct Financing and Sales-type Leases that are Past Due [Member]
Age of the Recorded Notes Receivable Balance Disaggregated Based on Internally Assigned CQR [Abstract]
Total past due	1,010	347
31 to 60 Days Past Due [Member] | Notes Receivable [Member]
Age of the Recorded Notes Receivable Balance Disaggregated Based on Internally Assigned CQR [Abstract]
Total past due	786	1,095
31 to 60 Days Past Due [Member] | High CQR [Member] | Investment in Direct Financing and Sales-type Leases that are Past Due [Member]
Age of the Recorded Notes Receivable Balance Disaggregated Based on Internally Assigned CQR [Abstract]
Total past due	695	325
31 to 60 Days Past Due [Member] | High CQR [Member] | Notes Receivable [Member]
Age of the Recorded Notes Receivable Balance Disaggregated Based on Internally Assigned CQR [Abstract]
Total past due	578	990
31 to 60 Days Past Due [Member] | Average CQR [Member] | Investment in Direct Financing and Sales-type Leases that are Past Due [Member]
Age of the Recorded Notes Receivable Balance Disaggregated Based on Internally Assigned CQR [Abstract]
Total past due	315	22
31 to 60 Days Past Due [Member] | Average CQR [Member] | Notes Receivable [Member]
Age of the Recorded Notes Receivable Balance Disaggregated Based on Internally Assigned CQR [Abstract]
Total past due	118	105
31 to 60 Days Past Due [Member] | Low CQR [Member] | Investment in Direct Financing and Sales-type Leases that are Past Due [Member]
Age of the Recorded Notes Receivable Balance Disaggregated Based on Internally Assigned CQR [Abstract]
Total past due	0	0
31 to 60 Days Past Due [Member] | Low CQR [Member] | Notes Receivable [Member]
Age of the Recorded Notes Receivable Balance Disaggregated Based on Internally Assigned CQR [Abstract]
Total past due	90	0
61 to 90 Days Past Due [Member] | Investment in Direct Financing and Sales-type Leases that are Past Due [Member]
Age of the Recorded Notes Receivable Balance Disaggregated Based on Internally Assigned CQR [Abstract]
Total past due	340	95
61 to 90 Days Past Due [Member] | Notes Receivable [Member]
Age of the Recorded Notes Receivable Balance Disaggregated Based on Internally Assigned CQR [Abstract]
Total past due	78	74
61 to 90 Days Past Due [Member] | High CQR [Member] | Investment in Direct Financing and Sales-type Leases that are Past Due [Member]
Age of the Recorded Notes Receivable Balance Disaggregated Based on Internally Assigned CQR [Abstract]
Total past due	322	41
61 to 90 Days Past Due [Member] | High CQR [Member] | Notes Receivable [Member]
Age of the Recorded Notes Receivable Balance Disaggregated Based on Internally Assigned CQR [Abstract]
Total past due	49	40
61 to 90 Days Past Due [Member] | Average CQR [Member] | Investment in Direct Financing and Sales-type Leases that are Past Due [Member]
Age of the Recorded Notes Receivable Balance Disaggregated Based on Internally Assigned CQR [Abstract]
Total past due	18	54
61 to 90 Days Past Due [Member] | Average CQR [Member] | Notes Receivable [Member]
Age of the Recorded Notes Receivable Balance Disaggregated Based on Internally Assigned CQR [Abstract]
Total past due	29	34
61 to 90 Days Past Due [Member] | Low CQR [Member] | Investment in Direct Financing and Sales-type Leases that are Past Due [Member]
Age of the Recorded Notes Receivable Balance Disaggregated Based on Internally Assigned CQR [Abstract]
Total past due	0	0
61 to 90 Days Past Due [Member] | Low CQR [Member] | Notes Receivable [Member]
Age of the Recorded Notes Receivable Balance Disaggregated Based on Internally Assigned CQR [Abstract]
Total past due	0	0
Greater than 90 Days Past Due [Member] | Investment in Direct Financing and Sales-type Leases that are Past Due [Member]
Age of the Recorded Notes Receivable Balance Disaggregated Based on Internally Assigned CQR [Abstract]
Total past due	326	25
Greater than 90 Days Past Due [Member] | Notes Receivable [Member]
Age of the Recorded Notes Receivable Balance Disaggregated Based on Internally Assigned CQR [Abstract]
Total past due	394	99
Greater than 90 Days Past Due [Member] | High CQR [Member] | Investment in Direct Financing and Sales-type Leases that are Past Due [Member]
Age of the Recorded Notes Receivable Balance Disaggregated Based on Internally Assigned CQR [Abstract]
Total past due	252	10
Greater than 90 Days Past Due [Member] | High CQR [Member] | Notes Receivable [Member]
Age of the Recorded Notes Receivable Balance Disaggregated Based on Internally Assigned CQR [Abstract]
Total past due	240	30
Greater than 90 Days Past Due [Member] | Average CQR [Member] | Investment in Direct Financing and Sales-type Leases that are Past Due [Member]
Age of the Recorded Notes Receivable Balance Disaggregated Based on Internally Assigned CQR [Abstract]
Total past due	74	15
Greater than 90 Days Past Due [Member] | Average CQR [Member] | Notes Receivable [Member]
Age of the Recorded Notes Receivable Balance Disaggregated Based on Internally Assigned CQR [Abstract]
Total past due	125	7
Greater than 90 Days Past Due [Member] | Low CQR [Member] | Investment in Direct Financing and Sales-type Leases that are Past Due [Member]
Age of the Recorded Notes Receivable Balance Disaggregated Based on Internally Assigned CQR [Abstract]
Total past due	0	0
Greater than 90 Days Past Due [Member] | Low CQR [Member] | Notes Receivable [Member]
Age of the Recorded Notes Receivable Balance Disaggregated Based on Internally Assigned CQR [Abstract]
Total past due	$ 29	$ 62

XML

GOODWILL AND OTHER INTANGIBLE ASSETS, Goodwill (Details) $ in Thousands	9 Months Ended
	Dec. 31, 2019 USD ($) Unit
Goodwill [Roll Forward]
Goodwill, Beginning Balance	$ 119,480
Goodwill, Impairment Loss, Beginning Balance	(8,673)
Goodwill, Net Carrying Amount, Beginning Balance	110,807
Acquisitions	7,410
Foreign currency translations	8
Goodwill, Ending Balance	126,898
Goodwill, Impairment Loss, Ending Balance	(8,673)
Goodwill, Net Carrying Amount, Ending Balance	$ 118,225
Number of reporting units | Unit	1
Percentage change in the fair value	10.00%

XML

RECENT ACCOUNTING PRONOUNCEMENTS (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Mar. 31, 2019
Revenue, Initial Application Period Cumulative Effect Transition [Abstract]
Right-of-use assets	$ 14,577	$ 0
Lease liabilities	14,616
Prepaid assets	$ 6,324	6,425
ASU 2016-02 [Member]
Revenue, Initial Application Period Cumulative Effect Transition [Abstract]
Right-of-use assets		12,700
Lease liabilities		12,300
Prepaid assets		$ (400)

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INCOME TAXES

9 Months Ended

Dec. 31, 2019

INCOME TAXES [Abstract]

INCOME TAXES

14. INCOME TAXES

We account for our tax positions in accordance with Codification Topic 740, Income Taxes. Under the guidance, we evaluate uncertain tax positions based on the two-step approach. The first step is to evaluate each uncertain tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained in an audit, including resolution of related appeals or litigation processes, if any. For tax positions that are not likely to be sustained upon audit, the second step requires us to estimate and measure the tax benefit as the largest amount that is more than 50 percent likely of being realized upon ultimate settlement.

Our total gross unrecognized tax benefits recorded for uncertain income tax, and interest and penalties thereon, were negligible as of December 31, 2019 and 2018. We had no additions or reductions to our gross unrecognized tax benefits during the three and nine months ended December 31, 2019. We recognize accrued interest and penalties related to unrecognized tax benefits in income tax expense.

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ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

9 Months Ended

Dec. 31, 2019

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract]

BASIS OF PRESENTATION

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

INTERIM FINANCIAL STATEMENTS

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

USE OF ESTIMATES

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

CONCENTRATIONS OF RISK — A substantial portion of our sales are products from Cisco Systems, which were 41% of our technology segment’s net sales for the three months ended December 31, 2019, and 40% for the three months ended December 31, 2018, and 41% and 42% of our technology segment’s net sales for the nine months ended December 31, 2019, and 2018, respectively.

FINANCING REVENUE

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

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

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

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

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

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

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

LESSEE ACCOUNTING

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

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LESSEE ACCOUNTING (Tables)

9 Months Ended

Dec. 31, 2019

LESSEE ACCOUNTING [Abstract]

Supplemental Information of Remaining Lease Terms and Discount Rates

Supplemental information about the remaining lease terms and discount rates applied as of December 31, 2019:

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

Future Lease Payments Under Operating Leases

Future lease payments under our operating leases as of December 31, 2019 (in thousands):

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

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UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018
Net sales
Total	$ 428,991	$ 345,664	$ 1,221,928	$ 1,047,239
Cost of sales
Total	325,295	262,751	922,562	798,123
Gross profit	103,696	82,913	299,366	249,116
Selling, general, and administrative	73,090	59,728	209,400	174,399
Depreciation and amortization	3,647	2,719	10,667	8,250
Interest and financing costs	694	443	1,898	1,403
Operating expenses	77,431	62,890	221,965	184,052
Operating income	26,265	20,023	77,401	65,064
Other income	997	721	912	1,140
Earnings before tax	27,262	20,744	78,313	66,204
Provision for income taxes	7,712	5,880	22,477	18,064
Net earnings	$ 19,550	$ 14,864	$ 55,836	$ 48,140
Net earnings per common share-basic (in dollars per share)	$ 1.47	$ 1.10	$ 4.19	$ 3.57
Net earnings per common share-diluted (in dollars per share)	$ 1.46	$ 1.10	$ 4.16	$ 3.54
Weighted average common shares outstanding-basic (in shares)	13,320	13,471	13,329	13,467
Weighted average common shares outstanding-diluted (in shares)	13,378	13,544	13,410	13,592
Product [Member]
Net sales
Total	$ 378,569	$ 310,443	$ 1,077,667	$ 942,735
Cost of sales
Total	293,209	241,856	832,135	735,802
Services [Member]
Net sales
Total	50,422	35,221	144,261	104,504
Cost of sales
Total	$ 32,086	$ 20,895	$ 90,427	$ 62,321

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ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

9 Months Ended

Dec. 31, 2019

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract]

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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, staffing, professional and managed services and lifecycle management services, including flexible financing solutions. We focus on state and local governments, education, and middle market and large enterprises in North America and the United Kingdom (“UK”).

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

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

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

CONCENTRATIONS OF RISK — A substantial portion of our sales are products from Cisco Systems, which were 41% of our technology segment’s net sales for the three months ended December 31, 2019, and 40% for the three months ended December 31, 2018, and 41% and 42% of our technology segment’s net sales for the nine months ended December 31, 2019, and 2018, respectively.

SIGNIFICANT ACCOUNTING POLICIES — The significant accounting policies used in preparing these Consolidated Financial Statements were applied on a basis consistent with those reflected in our Consolidated Financial Statements for the year ended March 31, 2019, except for changes from the adoption of Accounting Standards Update ("ASU") 2016-02, Leases (Topic 842), as amended (“ASU 2016-02”). This update establishes Codification Topic 842, Leases (“Codification Topic 842”) within the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“Codification”). The updates to our accounting policies from adopting ASU 2016-02 are provided below.

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

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

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

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

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

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

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

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

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GOODWILL AND OTHER INTANGIBLE ASSETS

9 Months Ended

Dec. 31, 2019

GOODWILL AND OTHER INTANGIBLE ASSETS [Abstract]

GOODWILL AND OTHER INTANGIBLE ASSETS

6. GOODWILL AND OTHER INTANGIBLE ASSETS

GOODWILL

The following table summarizes the changes in the carrying amount of goodwill for the nine months ended December 31, 2019 (in thousands):

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

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

We test goodwill for impairment on an annual basis, as of the first day of our third fiscal quarter, and between annual tests if an event occurs, or circumstances change, that would more likely than not reduce the fair value of a reporting unit below its carrying value. In our annual test as of October 1, 2019, we performed a qualitative assessment of goodwill and concluded that, more likely than not, the fair value of our technology reporting unit exceeded its carrying value. In our annual test as of October 1, 2018, we elected to bypass the qualitative assessment of goodwill and perform a quantitative goodwill impairment test. We concluded that the fair value of our technology reporting unit substantially exceeded its carrying value. 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 at December 31, 2019 and March 31, 2019 (in thousands): 

	December 31, 2019							March 31, 2019
	Gross Carrying Amount		Accumulated Amortization / Impairment Loss			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization / Impairment Loss			Net Carrying Amount
Customer relationships & other intangibles	$	63,141	$	(30,836	)	$	32,305	$	57,407	$	(23,865	)	$	33,542
Capitalized software development		10,193		(5,628	)		4,565		10,188		(4,802	)		5,386
Total	$	73,334	$	(36,464	)	$	36,870	$	67,595	$	(28,667	)	$	38,928

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

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

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COMMITMENTS AND CONTINGENCIES

9 Months Ended

Dec. 31, 2019

COMMITMENTS AND CONTINGENCIES [Abstract]

COMMITMENTS AND CONTINGENCIES

10. COMMITMENTS AND CONTINGENCIES

Legal Proceedings

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

During the three and nine months ended December 31, 2019, we recognized distributions totaling $0.8 million and $1.0 million, respectively, from various claims, which were recognized within other income in our consolidated statement of operations.

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SEGMENT REPORTING (Tables)

9 Months Ended

Dec. 31, 2019

SEGMENT REPORTING [Abstract]

Segment Reporting Information, by Reportable Segment

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

	Three Months Ended
	December 31, 2019						December 31, 2018
	Technology		Financing		Total		Technology		Financing		Total
Sales
Product	$	360,206	$	18,363	$	378,569	$	299,490	$	10,953	$	310,443
Service		50,422		-		50,422		35,221		-		35,221
Net sales	$	410,628	$	18,363	$	428,991	$	334,711	$	10,953	$	345,664
Cost of Sales
Product		290,980		2,229		293,209		239,843		2,013		241,856
Service		32,086		-		32,086		20,895		-		20,895
Total cost of sales		323,066		2,229		325,295		260,738		2,013		262,751
Gross Profit		87,562		16,134		103,696		73,973		8,940		82,913
Selling, general, and administrative		67,759		5,331		73,090		56,607		3,121		59,728
Depreciation and amortization		3,619		28		3,647		2,714		5		2,719
Interest and financing costs		-		694		694		-		443		443
Operating expenses		71,378		6,053		77,431		59,321		3,569		62,890
Operating income		16,184		10,081		26,265		14,652		5,371		20,023
Other income						997						721
Earnings before tax					$	27,262					$	20,744
Net Sales
Contracts with customers	$	404,918	$	1,689	$	406,607	$	329,635	$	813	$	330,448
Financing and other		5,710		16,674		22,384		5,076		10,140		15,216
Net Sales	$	410,628	$	18,363	$	428,991	$	334,711	$	10,953	$	345,664
Selected Financial Data - Statement of Cash Flow
Depreciation and amortization	$	3,691	$	1,449	$	5,140	$	2,910	$	1,564	$	4,474
Purchases of property, equipment and operating lease equipment	$	786	$	1,535	$	2,321	$	1,496	$	545	$	2,041
Selected Financial Data - Balance Sheet
Total assets	$	733,174	$	219,434	$	952,608	$	613,494	$	184,695	$	798,189

	Nine Months Ended
	December 31, 2019						December 31, 2018
	Technology		Financing		Total		Technology		Financing		Total
Sales
Product	$	1,032,620	$	45,047	$	1,077,667	$	911,839	$	30,896	$	942,735
Service		144,261		-		144,261		104,504		-		104,504
Net sales		1,176,881		45,047		1,221,928		1,016,343		30,896		1,047,239
Cost of Sales
Product		825,509		6,626		832,135		730,311		5,491		735,802
Service		90,427		-		90,427		62,321		-		62,321
Cost of sales		915,936		6,626		922,562		792,632		5,491		798,123
Gross Profit		260,945		38,421		299,366		223,711		25,405		249,116
Selling, general, and administrative		197,615		11,785		209,400		166,199		8,200		174,399
Depreciation and amortization		10,555		112		10,667		8,243		7		8,250
Interest and financing costs		-		1,898		1,898		-		1,403		1,403
Operating expenses		208,170		13,795		221,965		174,442		9,610		184,052
Operating income		52,775		24,626		77,401		49,269		15,795		65,064
Other income						912						1,140
Earnings before tax					$	78,313					$	66,204
Net Sales
Contracts with customers	$	1,163,184	$	3,889	$	1,167,073	$	1,000,776	$	2,469	$	1,003,245
Financing and other		13,697		41,158		54,855		15,567		28,427		43,994
Net sales	$	1,176,881	$	45,047	$	1,221,928	$	1,016,343	$	30,896	$	1,047,239
Selected Financial Data - Statement of Cash Flow
Depreciation and amortization	$	10,974	$	4,243	$	15,217	$	8,895	$	4,446	$	13,341
Purchases of property, equipment and operating lease equipment	$	3,461	$	3,748	$	7,209	$	4,472	$	4,020	$	8,492
Selected Financial Data - Balance Sheet
Total assets	$	733,174	$	219,434	$	952,608	$	613,494	$	184,695	$	798,189

Technology Segment Disaggregation of Revenue

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

	Three Months Ended December 31,						Nine Months Ended December 31,
	2019			2018			2019			2018
Customer end market:
Technology	$	77,841		$	61,549		$	251,523		$	219,783
Telecom, Media & Entertainment		84,707			58,377			218,217			144,657
Financial Services		56,395			54,411			149,241			147,048
SLED		55,908			43,846			198,964			173,442
Healthcare		60,275			48,121			176,202			145,652
All others		75,502			68,407			182,734			185,761
Net sales		410,628			334,711			1,176,881			1,016,343
Financing and other		(5,710	)		(5,076	)		(13,697	)		(15,567	)
Revenue from contracts with customers	$	404,918		$	329,635		$	1,163,184		$	1,000,776

	Three Months Ended December 31,						Nine Months Ended December 31,
	2019			2018			2019			2018
Vendor
Cisco Systems	$	169,265		$	131,949		$	488,051		$	423,249
NetApp		15,799			12,408			38,997			37,447
HP Inc. & HPE		15,853			22,042			57,952			59,020
Dell EMC		12,025			17,201			38,300			49,599
Arista Networks		12,862			13,668			60,578			44,139
Juniper Networks		27,419			18,681			58,843			40,341
All others		157,405			118,762			434,160			362,548
Net sales		410,628			334,711			1,176,881			1,016,343
Financing and other		(5,710	)		(5,076	)		(13,697	)		(15,567	)
Revenue from contracts with customers	$	404,918		$	329,635		$	1,163,184		$	1,000,776

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EARNINGS PER SHARE (Tables)

9 Months Ended

Dec. 31, 2019

EARNINGS PER SHARE [Abstract]

Reconciliation of Numerators and Denominators Used to Calculate Basic and Diluted Earnings per Common Share

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

	Three Months Ended December 31,				Nine Months Ended December 31,
	2019		2018		2019		2018
Net earnings attributable to common shareholders - basic and diluted	$	19,550	$	14,864	$	55,836	$	48,140
Basic and diluted common shares outstanding:
Weighted average common shares outstanding — basic		13,320		13,471		13,329		13,467
Effect of dilutive shares		58		73		81		125
Weighted average shares common outstanding — diluted		13,378		13,544		13,410		13,592
Earnings per common share - basic	$	1.47	$	1.10	$	4.19	$	3.57
Earnings per common share - diluted	$	1.46	$	1.10	$	4.16	$	3.54

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GOODWILL AND OTHER INTANGIBLE ASSETS (Tables)

9 Months Ended

Dec. 31, 2019

GOODWILL AND OTHER INTANGIBLE ASSETS [Abstract]

Changes in Goodwill

The following table summarizes the changes in the carrying amount of goodwill for the nine months ended December 31, 2019 (in thousands):

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

Other Intangible Assets

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

	December 31, 2019							March 31, 2019
	Gross Carrying Amount		Accumulated Amortization / Impairment Loss			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization / Impairment Loss			Net Carrying Amount
Customer relationships & other intangibles	$	63,141	$	(30,836	)	$	32,305	$	57,407	$	(23,865	)	$	33,542
Capitalized software development		10,193		(5,628	)		4,565		10,188		(4,802	)		5,386
Total	$	73,334	$	(36,464	)	$	36,870	$	67,595	$	(28,667	)	$	38,928

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COMMITMENTS AND CONTINGENCIES (Details) - USD ($) $ in Millions	3 Months Ended	9 Months Ended
	Dec. 31, 2019	Dec. 31, 2019
Legal Proceedings [Abstract]
Claim settlement received	$ 0.8	$ 1.0

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INCOME TAXES (Details) - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
	Dec. 31, 2019	Dec. 31, 2019
INCOME TAXES [Abstract]
Additions or reductions to gross unrecognized tax benefits	$ 0	$ 0

XML

SEGMENT REPORTING, Technology Segment Disaggregation of Revenue (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018
Disaggregation of Revenue [Abstract]
Net sales	$ 428,991	$ 345,664	$ 1,221,928	$ 1,047,239
Financing and other	(5,710)	(5,076)	(13,697)	(15,567)
Revenue from contracts with customers	404,918	329,635	1,163,184	1,000,776
Technology Segment [Member]
Disaggregation of Revenue [Abstract]
Net sales	410,628	334,711	1,176,881	1,016,343
Financing and other	(5,710)	(5,076)	(13,697)	(15,567)
Revenue from contracts with customers	404,918	329,635	1,163,184	1,000,776
Technology Segment [Member] | Technology [Member]
Disaggregation of Revenue [Abstract]
Net sales	77,841	61,549	251,523	219,783
Technology Segment [Member] | Telecom, Media & Entertainment [Member]
Disaggregation of Revenue [Abstract]
Net sales	84,707	58,377	218,217	144,657
Technology Segment [Member] | Financial Services [Member]
Disaggregation of Revenue [Abstract]
Net sales	56,395	54,411	149,241	147,048
Technology Segment [Member] | SLED [Member]
Disaggregation of Revenue [Abstract]
Net sales	55,908	43,846	198,964	173,442
Technology Segment [Member] | Health Care [Member]
Disaggregation of Revenue [Abstract]
Net sales	60,275	48,121	176,202	145,652
Technology Segment [Member] | All others [Member]
Disaggregation of Revenue [Abstract]
Net sales	75,502	68,407	182,734	185,761
Technology Segment [Member] | Cisco Systems [Member]
Disaggregation of Revenue [Abstract]
Net sales	169,265	131,949	488,051	423,249
Technology Segment [Member] | NetApp [Member]
Disaggregation of Revenue [Abstract]
Net sales	15,799	12,408	38,997	37,447
Technology Segment [Member] | HP Inc. & HPE [Member]
Disaggregation of Revenue [Abstract]
Net sales	15,853	22,042	57,952	59,020
Technology Segment [Member] | Dell / EMC [Member]
Disaggregation of Revenue [Abstract]
Net sales	12,025	17,201	38,300	49,599
Technology Segment [Member] | Arista Networks [Member]
Disaggregation of Revenue [Abstract]
Net sales	12,862	13,668	60,578	44,139
Technology Segment [Member] | Juniper Networks [Member]
Disaggregation of Revenue [Abstract]
Net sales	27,419	18,681	58,843	40,341
Technology Segment [Member] | All others [Member]
Disaggregation of Revenue [Abstract]
Net sales	$ 157,405	$ 118,762	$ 434,160	$ 362,548

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RECENT ACCOUNTING PRONOUNCEMENTS

9 Months Ended

Dec. 31, 2019

RECENT ACCOUNTING PRONOUNCEMENTS [Abstract]

RECENT ACCOUNTING PRONOUNCEMENTS

2. RECENT ACCOUNTING PRONOUNCEMENTS

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

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

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED — In June 2016, the FASB issued ASU 2016-13, Financial Instruments- Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The amendments in this update replace the incurred loss impairment methodology in current US GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. This update requires adoption under a modified retrospective approach and will become effective for us in the quarter ending June 30, 2020. We are currently evaluating the impact of this update on our financial statements.

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LESSEE ACCOUNTING

9 Months Ended

Dec. 31, 2019

LESSEE ACCOUNTING [Abstract]

LESSEE ACCOUNTING

5. LESSEE ACCOUNTING

We lease office space for periods up to six years. We recognize our right-of-use assets as part of property, equipment and other assets. We recognize the current and long-term portions of our lease liability as part of other current liabilities and other liabilities, respectively. We recognized rent expense of $1.6 million and $4.7 million as part of selling, general, and administrative expenses during the three and nine months ended December 31, 2019.

Supplemental information about the remaining lease terms and discount rates applied as of December 31, 2019:

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

Future lease payments under our operating leases as of December 31, 2019 (in thousands):

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

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

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NOTES PAYABLE AND CREDIT FACILITY

9 Months Ended

Dec. 31, 2019

NOTES PAYABLE AND CREDIT FACILITY [Abstract]

NOTES PAYABLE AND CREDIT FACILITY

9. NOTES PAYABLE AND CREDIT FACILITY

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

	December 31, 2019		March 31, 2019
Recourse notes payable with interest rates at 2.55% as of  December 31, 2019 and 4.00% as of March 31, 2019
Current	$	2,239	$	28
Non-recourse notes payable secured by certain financing receivables and investments in operating leases with interest rates ranging from 2.90% to 8.45% as of December 31, 2019 and 3.23% to 8.45% as of March 31, 2019.
Current	$	59,015	$	38,117
Long-term		7,120		10,502
Total non-recourse notes payable	$	66,135	$	48,619

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

Our technology segment, primarily through our subsidiary ePlus Technology, inc., finances its operations with funds generated from operations, and with a credit facility with Wells Fargo Commercial Distribution Finance, LLC or (“WFCDF”). This facility provides short-term capital for our technology segment. There are two components of the WFCDF credit facility: (1) a floor plan component, and (2) an accounts receivable component. Under the floor plan component, we had outstanding balances of $144.5 million and $116.1 million as of December 31, 2019 and March 31, 2019, respectively. Under the accounts receivable component, we had no outstanding balances as of December 31, 2019 and March 31, 2019.

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

The credit facility has full recourse to ePlus Technology, inc. and certain subsidiaries and is secured by a blanket lien against all its assets, such as receivables and inventory. Availability under the facility may be limited by the asset value of equipment we purchase or accounts receivable and may be further limited by certain covenants and terms and conditions of the facility. These covenants include but are not limited to, a minimum excess availability of the facility and minimum earnings before interest, taxes, depreciation and amortization (“EBITDA”) of ePlus Technology, inc. and certain subsidiaries. We were in compliance with these covenants as of December 31, 2019. In addition, the facility restricts the ability of ePlus Technology, inc. and certain subsidiaries to transfer funds to its affiliates in the form of dividends, loans or advances with certain exceptions for dividends to ePlus inc. The facility also requires that financial statements of ePlus Technology, inc. and certain subsidiaries be provided within 45 days at the end of each quarter and 90 days of each fiscal year end, and that other operational reports be provided on a regular basis. Either party may terminate the credit facility with 90 days’ advance written notice. We are not, and do not believe that we are reasonably likely to be, in breach of the WFCDF credit facility. In addition, we do not believe that the covenants of the WFCDF credit facility materially limit our ability to undertake financing. In this regard, the covenants apply only to our subsidiary, ePlus Technology, inc. and certain subsidiaries. This credit facility is secured by the assets of only ePlus Technology, inc., and certain subsidiaries, and the guaranty as described below.

The WFCDF facility requires a guaranty of $10.5 million by ePlus inc. The guaranty requires ePlus inc. to deliver its annual audited financial statements by certain dates. We have delivered the annual audited financial statements for the year ended March 31, 2019, as required. The loss of the WFCDF credit facility could have a material adverse effect on our future results as we currently rely on this facility and its components for daily working capital and liquidity for our technology segment, and as an operational function of our accounts payable process.

Fair Value

As of December 31, 2019, and March 31, 2019, the fair value of our long-term recourse and non-recourse notes payable approximated their carrying value.

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UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME [Abstract]
NET EARNINGS	$ 19,550	$ 14,864	$ 55,836	$ 48,140
OTHER COMPREHENSIVE INCOME, NET OF TAX:
Foreign currency translation adjustments	682	(302)	69	(1,102)
Other comprehensive income (loss)	682	(302)	69	(1,102)
TOTAL COMPREHENSIVE INCOME	$ 20,232	$ 14,562	$ 55,905	$ 47,038

XML

Document and Entity Information - shares	9 Months Ended
	Dec. 31, 2019	Feb. 03, 2020
Cover [Abstract]
Entity Registrant Name	EPLUS INC
Entity Central Index Key	0001022408
Current Fiscal Year End Date	--03-31
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Shell Company	false
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Common Stock, Shares Outstanding		13,512,815
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Dec. 31, 2019
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q3
Document Quarterly Report	true
Document Transition Report	false
Entity File Number	001-34167
Entity Tax Identification Number	54-1817218
Entity Incorporation, State or Country Code	DE
Entity Address, Address Line One	13595 Dulles Technology Drive
Entity Address, City or Town	Herndon
Entity Address, State or Province	VA
Entity Address, Postal Zip Code	20171-3413
City Area Code	703
Local Phone Number	984-8400
Title of 12(b) Security	Common Stock, $.01 par value
Trading Symbol	PLUS
Security Exchange Name	NASDAQ

XML

SHARE-BASED COMPENSATION (Tables)

9 Months Ended

Dec. 31, 2019

SHARE-BASED COMPENSATION [Abstract]

Summary of Non-vested Restricted Shares

For the nine months ended December 31, 2019, we granted 8,646 restricted shares under the 2017 Director LTIP, and 85,132 restricted shares under the 2012 Employee LTIP. For the nine months ended December 31, 2018, we granted 8,531 restricted shares under the 2017 Director LTIP, and 69,847 restricted shares under the 2012 Employee LTIP. A summary of the restricted shares is as follows:

	Number of Shares			Weighted Average Grant- date Fair Value
Nonvested April 1, 2019		224,000		$	67.70
Granted		93,778		$	72.90
Vested		(123,250	)	$	62.07
Forfeited		(1,189	)	$	81.84
Nonvested December 31, 2019		193,339		$	73.73

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RESERVES FOR CREDIT LOSSES (Tables)

9 Months Ended

Dec. 31, 2019

RESERVES FOR CREDIT LOSSES [Abstract]

Activity in Reserves for Credit Losses

Activity in our reserves for credit losses for the nine months ended December 31, 2019 and 2018 were as follows (in thousands):

	Accounts Receivable			Notes Receivable		Lease- Related Receivables			Total
Balance April 1, 2019	$	1,579		$	505	$	530		$	2,614
Provision for credit losses		107			283		114			504
Write-offs and other		(304	)		-		(2	)		(306	)
Balance December 31, 2019	$	1,382		$	788	$	642		$	2,812

	Accounts Receivable			Notes Receivable		Lease- Related Receivables			Total
Balance April 1, 2018	$	1,538		$	486	$	640		$	2,664
Provision for credit losses		275			50		(131	)		194
Write-offs and other		(246	)		-		-			(246	)
Balance December 31, 2018	$	1,567		$	536	$	509		$	2,612

Reserve for Credit Losses and Minimum Lease Payments Associated with Notes Receivable and Investment in Direct Financing and Sales-type Lease Balances Disaggregated Based on Our Impairment Method

Our reserves for credit losses and minimum payments associated with our notes receivables and lease-related receivables disaggregated based on our impairment method were as follows (in thousands):

	December 31, 2019				March 31, 2019
	Notes Receivable		Lease- Related Receivables		Notes Receivable		Lease- Related Receivables
Reserves for credit losses:
Ending balance: collectively evaluated for impairment	$	726	$	642	$	443	$	530
Ending balance: individually evaluated for impairment		62		-		62		-
Ending balance	$	788	$	642	$	505	$	530
Minimum payments:
Ending balance: collectively evaluated for impairment	$	60,145	$	81,450	$	40,501	$	64,201
Ending balance: individually evaluated for impairment		89		-		62		-
Ending balance	$	60,234	$	81,450	$	40,563	$	64,201

Balance Disaggregated Based on Internally Assigned CQR

The age of the recorded minimum lease payments and net credit exposure associated with our investment in direct financing and sales-type leases that are past due disaggregated based on our internally assigned credit quality rating (“CQR”) were as follows as of December 31, 2019 and March 31, 2019 (in thousands):

	31-60 Days Past Due		61-90 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Current		Unbilled Minimum Lease Payments		Total Minimum Lease Payments		Unearned Income			Non- Recourse Notes Payable			Net Credit Exposure
December 31, 2019
High CQR	$	695	$	322	$	252	$	1,269	$	390	$	49,887	$	51,546	$	(4,890	)	$	(31,698	)	$	14,958
Average CQR		315		18		74		407		716		28,781		29,904		(2,111	)		(13,472	)		14,321
Low CQR		-		-		-		-		-		-		-		-			-			-
Total	$	1,010	$	340	$	326	$	1,676	$	1,106	$	78,668	$	81,450	$	(7,001	)	$	(45,170	)	$	29,279
March 31, 2019
High CQR	$	325	$	41	$	10	$	376	$	543	$	29,503	$	30,422	$	(2,799	)	$	(11,044	)	$	16,579
Average CQR		22		54		15		91		125		33,563		33,779		(2,508	)		(20,848	)		10,423
Low CQR		-		-		-		-		-		-		-		-			-			-
Total	$	347	$	95	$	25	$	467	$	668	$	63,066	$	64,201	$	(5,307	)	$	(31,892	)	$	27,002

Age of the Recorded Notes Receivable Balance Disaggregated Based on Internally Assigned CQR

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

	31-60 Days Past Due		61-90 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Current		Unbilled Notes Receivable			Total Notes Receivable		Non- Recourse Notes Payable			Net Credit Exposure
December 31, 2019
High CQR	$	578	$	49	$	240	$	867	$	1,422	$	42,648		$	44,937	$	(20,323	)	$	24,614
Average CQR		118		29		125		272		246		14,690			15,208		(6,307	)		8,901
Low CQR		90		-		29		119		352		(382	)		89		-			89
Total	$	786	$	78	$	394	$	1,258	$	2,020	$	56,956		$	60,234	$	(26,630	)	$	33,604
March 31, 2019
High CQR	$	990	$	40	$	30	$	1,060	$	3,813	$	28,113		$	32,986	$	(18,245	)	$	14,741
Average CQR		105		34		7		146		137		7,232			7,515		(1,507	)		6,008
Low CQR		-		-		62		62		-		-			62		-			62
Total	$	1,095	$	74	$	99	$	1,268	$	3,950	$	35,345		$	40,563	$	(19,752	)	$	20,811

XML

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details)	3 Months Ended		9 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018
Minimum [Member]
Lessee Accounting [Abstract]
Operating lease term	3 years		3 years
Maximum [Member]
Lessee Accounting [Abstract]
Operating lease term	6 years		6 years
Net Sales [Member] | Cisco Systems [Member] | Technology Segment [Member]
Concentration of risk [Abstract]
Percentage of concentration risk	41.00%	40.00%	41.00%	42.00%

XML

SEGMENT REPORTING, Reportable Segment Information (Details) $ in Thousands	3 Months Ended		9 Months Ended
	Dec. 31, 2019 USD ($)	Dec. 31, 2018 USD ($)	Dec. 31, 2019 USD ($) Segment	Dec. 31, 2018 USD ($)	Mar. 31, 2019 USD ($)
SEGMENT REPORTING [Abstract]
Number of business segments | Segment			2
Reportable Segment Information [Abstract]
Net sales	$ 428,991	$ 345,664	$ 1,221,928	$ 1,047,239
Cost of Sales [Abstract]
Cost of sales	325,295	262,751	922,562	798,123
Gross profit	103,696	82,913	299,366	249,116
Selling, general, and administrative	73,090	59,728	209,400	174,399
Depreciation and amortization	3,647	2,719	10,667	8,250
Interest and financing costs	694	443	1,898	1,403
Operating expenses	77,431	62,890	221,965	184,052
Operating income	26,265	20,023	77,401	65,064
Other income	997	721	912	1,140
Earnings before tax	27,262	20,744	78,313	66,204
Net Sales [Abstract]
Contracts with customers	404,918	329,635	1,163,184	1,000,776
Financing and other	5,710	5,076	13,697	15,567
Net sales	428,991	345,664	1,221,928	1,047,239
Selected Financial Data - Statement of Cash Flow [Abstract]
Depreciation and amortization	5,140	4,474	15,217	13,341
Purchases of property, equipment and operating lease equipment	2,321	2,041	7,209	8,492
Selected Financial Data - Balance Sheet [Abstract]
Total assets	952,608	798,189	952,608	798,189	$ 786,198
Product [Member]
Reportable Segment Information [Abstract]
Net sales	378,569	310,443	1,077,667	942,735
Cost of Sales [Abstract]
Cost of sales	293,209	241,856	832,135	735,802
Net Sales [Abstract]
Net sales	378,569	310,443	1,077,667	942,735
Service [Member]
Reportable Segment Information [Abstract]
Net sales	50,422	35,221	144,261	104,504
Cost of Sales [Abstract]
Cost of sales	32,086	20,895	90,427	62,321
Net Sales [Abstract]
Net sales	50,422	35,221	144,261	104,504
Technology Segment [Member]
Reportable Segment Information [Abstract]
Net sales	410,628	334,711	1,176,881	1,016,343
Net Sales [Abstract]
Contracts with customers	404,918	329,635	1,163,184	1,000,776
Financing and other	5,710	5,076	13,697	15,567
Net sales	410,628	334,711	1,176,881	1,016,343
Operating Segments [Member]
Reportable Segment Information [Abstract]
Net sales	428,991	345,664	1,221,928	1,047,239
Net Sales [Abstract]
Contracts with customers	406,607	330,448	1,167,073	1,003,245
Financing and other	22,384	15,216	54,855	43,994
Net sales	428,991	345,664	1,221,928	1,047,239
Operating Segments [Member] | Technology Segment [Member]
Reportable Segment Information [Abstract]
Net sales	410,628	334,711	1,176,881	1,016,343
Cost of Sales [Abstract]
Cost of sales	323,066	260,738	915,936	792,632
Gross profit	87,562	73,973	260,945	223,711
Selling, general, and administrative	67,759	56,607	197,615	166,199
Depreciation and amortization	3,619	2,714	10,555	8,243
Interest and financing costs	0	0	0	0
Operating expenses	71,378	59,321	208,170	174,442
Operating income	16,184	14,652	52,775	49,269
Net Sales [Abstract]
Contracts with customers	404,918	329,635	1,163,184	1,000,776
Financing and other	5,710	5,076	13,697	15,567
Net sales	410,628	334,711	1,176,881	1,016,343
Selected Financial Data - Statement of Cash Flow [Abstract]
Depreciation and amortization	3,691	2,910	10,974	8,895
Purchases of property, equipment and operating lease equipment	786	1,496	3,461	4,472
Selected Financial Data - Balance Sheet [Abstract]
Total assets	733,174	613,494	733,174	613,494
Operating Segments [Member] | Technology Segment [Member] | Product [Member]
Reportable Segment Information [Abstract]
Net sales	360,206	299,490	1,032,620	911,839
Cost of Sales [Abstract]
Cost of sales	290,980	239,843	825,509	730,311
Net Sales [Abstract]
Net sales	360,206	299,490	1,032,620	911,839
Operating Segments [Member] | Technology Segment [Member] | Service [Member]
Reportable Segment Information [Abstract]
Net sales	50,422	35,221	144,261	104,504
Cost of Sales [Abstract]
Cost of sales	32,086	20,895	90,427	62,321
Net Sales [Abstract]
Net sales	50,422	35,221	144,261	104,504
Operating Segments [Member] | Financing Segment [Member]
Reportable Segment Information [Abstract]
Net sales	18,363	10,953	45,047	30,896
Cost of Sales [Abstract]
Cost of sales	2,229	2,013	6,626	5,491
Gross profit	16,134	8,940	38,421	25,405
Selling, general, and administrative	5,331	3,121	11,785	8,200
Depreciation and amortization	28	5	112	7
Interest and financing costs	694	443	1,898	1,403
Operating expenses	6,053	3,569	13,795	9,610
Operating income	10,081	5,371	24,626	15,795
Net Sales [Abstract]
Contracts with customers	1,689	813	3,889	2,469
Financing and other	16,674	10,140	41,158	28,427
Net sales	18,363	10,953	45,047	30,896
Selected Financial Data - Statement of Cash Flow [Abstract]
Depreciation and amortization	1,449	1,564	4,243	4,446
Purchases of property, equipment and operating lease equipment	1,535	545	3,748	4,020
Selected Financial Data - Balance Sheet [Abstract]
Total assets	219,434	184,695	219,434	184,695
Operating Segments [Member] | Financing Segment [Member] | Product [Member]
Reportable Segment Information [Abstract]
Net sales	18,363	10,953	45,047	30,896
Cost of Sales [Abstract]
Cost of sales	2,229	2,013	6,626	5,491
Net Sales [Abstract]
Net sales	18,363	10,953	45,047	30,896
Operating Segments [Member] | Financing Segment [Member] | Service [Member]
Reportable Segment Information [Abstract]
Net sales	0	0	0	0
Cost of Sales [Abstract]
Cost of sales	0	0	0	0
Net Sales [Abstract]
Net sales	$ 0	$ 0	$ 0	$ 0

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NOTES PAYABLE AND CREDIT FACILITY (Details) $ in Thousands	9 Months Ended
	Dec. 31, 2019 USD ($) Component	Jul. 31, 2019 USD ($)	Jul. 30, 2019 USD ($)	Mar. 31, 2019 USD ($)
Recourse Notes Payable [Abstract]
Current	$ 2,239			$ 28
Non-recourse Notes Payable Secured by Certain Financing Receivables and Investment in Operating Leases [Abstract]
Current	59,015			38,117
Long-term	7,120			10,502
Guarantor obligations for credit facility, maximum	300
Recourse Note Payable [Member]
Recourse Notes Payable [Abstract]
Current	$ 2,239			$ 28
Non-recourse Notes Payable Secured by Certain Financing Receivables and Investment in Operating Leases [Abstract]
Interest rates of notes	2.55%			4.00%
Weighted average interest rate of notes	2.55%			4.00%
Non-Recourse Note Payable [Member]
Non-recourse Notes Payable Secured by Certain Financing Receivables and Investment in Operating Leases [Abstract]
Current	$ 59,015			$ 38,117
Long-term	7,120			10,502
Total non-recourse notes payable	$ 66,135			$ 48,619
Weighted average interest rate of notes	3.69%			4.68%
Non-Recourse Note Payable [Member] | Minimum [Member]
Non-recourse Notes Payable Secured by Certain Financing Receivables and Investment in Operating Leases [Abstract]
Interest rates of notes	2.90%			3.23%
Non-Recourse Note Payable [Member] | Maximum [Member]
Non-recourse Notes Payable Secured by Certain Financing Receivables and Investment in Operating Leases [Abstract]
Interest rates of notes	8.45%			8.45%
WFCDF [Member]
Non-recourse Notes Payable Secured by Certain Financing Receivables and Investment in Operating Leases [Abstract]
Number of components under credit facility | Component	2
Maximum borrowing capacity under credit facility	$ 250,000	$ 325,000	$ 250,000
Period of notice required to terminate credit facility at quarter end	45 days
Period of notice required to terminate credit facility at year end	90 days
Guarantor obligations for credit facility, maximum	$ 10,500
WFCDF [Member] | Floor Plan Component [Member]
Non-recourse Notes Payable Secured by Certain Financing Receivables and Investment in Operating Leases [Abstract]
Amount outstanding under credit facility	144,500			$ 116,100
WFCDF [Member] | Account Receivable Component [Member]
Non-recourse Notes Payable Secured by Certain Financing Receivables and Investment in Operating Leases [Abstract]
Amount outstanding under credit facility	0			$ 0
Maximum borrowing capacity under credit facility	$ 50,000
WFCDF [Member] | Account Receivable Component [Member] | LIBOR [Member]
Non-recourse Notes Payable Secured by Certain Financing Receivables and Investment in Operating Leases [Abstract]
Debt instrument term of variable rate	1 month
Basis spread on reference rate	2.50%

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SHARE-BASED COMPENSATION (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018
Additional Disclosures [Abstract]
Vested share-based awards withheld to satisfy income tax obligations (in shares)			41,817	40,092
Vested share-based awards withheld to satisfy income tax obligations			$ 3,000	$ 3,900
Compensation Expense [Abstract]
Share-based compensation expense	$ 2,000	$ 1,900	6,019	5,418
401(k) Profit Sharing Plan [Abstract]
Contribution to profit sharing plan	$ 800	$ 700	$ 2,200	$ 1,800
Restricted Stock [Member]
Number of Shares [Roll Forward]
Nonvested at beginning of period (in shares)			224,000
Granted (in shares)			93,778
Vested (in shares)			(123,250)
Forfeited (in shares)			(1,189)
Nonvested at end of period (in shares)	193,339		193,339
Weighted Average Grant-date Fair Value [Roll Forward]
Nonvested at beginning of period (in dollars per share)			$ 67.70
Granted (in dollars per share)			72.90
Vested (in dollars per share)			62.07
Forfeited (in dollars per share)			81.84
Nonvested at end of period (in dollars per share)	$ 73.73		$ 73.73
Compensation Expense [Abstract]
Unrecognized compensation expense	$ 10,100		$ 10,100
Unrecognized compensation expense, period for recognition			30 months
2017 Director LTIP [Member] | Restricted Stock [Member]
Number of Shares [Roll Forward]
Granted (in shares)			8,646	8,531
2012 Employee LTIP [Member] | Restricted Stock [Member]
Number of Shares [Roll Forward]
Granted (in shares)			85,132	69,847
Additional Disclosures [Abstract]
Vested share-based awards withheld to satisfy income tax obligations (in shares)			41,817
Vested share-based awards withheld to satisfy income tax obligations			$ 3,000

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GOODWILL AND OTHER INTANGIBLE ASSETS, Other Intangible Assets (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018	Mar. 31, 2019
Other Intangible Assets [Abstract]
Intangibles assets, Gross carrying amount	$ 73,334		$ 73,334		$ 67,595
Intangibles Assets, Accumulated amortization / Impairment Loss	(36,464)		(36,464)		(28,667)
Intangible assets, Net Carrying Amount	36,870		36,870		38,928
Total amortization expense for other intangible assets	2,600	$ 1,700	7,500	$ 5,300
ABS Technology [Member]
Other Intangible Assets [Abstract]
Intangible assets acquired			5,700
Customer Relationships and Other Intangibles [Member]
Other Intangible Assets [Abstract]
Intangibles assets, Gross carrying amount	63,141		63,141		57,407
Intangibles Assets, Accumulated amortization / Impairment Loss	(30,836)		(30,836)		(23,865)
Intangible assets, Net Carrying Amount	32,305		$ 32,305		33,542
Customer Relationships and Other Intangibles [Member] | Minimum [Member]
Other Intangible Assets [Abstract]
Estimated useful life			5 years
Customer Relationships and Other Intangibles [Member] | Maximum [Member]
Other Intangible Assets [Abstract]
Estimated useful life			10 years
Capitalized Software Development [Member]
Other Intangible Assets [Abstract]
Intangibles assets, Gross carrying amount	10,193		$ 10,193		10,188
Intangibles Assets, Accumulated amortization / Impairment Loss	(5,628)		(5,628)		(4,802)
Intangible assets, Net Carrying Amount	$ 4,565		$ 4,565		$ 5,386
Estimated useful life			5 years

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REVENUES (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018	Mar. 31, 2019
Contract with Customer, Asset and Liability [Abstract]
Accounts receivable - trade	$ 18,500		$ 18,500		$ 16,200
Current (included in deferred revenue)	54,482		54,482		46,356
Non-current (included in other liabilities)	16,874		16,874		$ 13,593
Revenue recognized from the beginning contract liability	15,900	$ 7,300	45,300	$ 28,200
Revenue, Performance Obligation Satisfied over Time [Abstract]
Remaining performance obligation	42,973		42,973
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-01-01
Revenue, Performance Obligation Satisfied over Time [Abstract]
Remaining performance obligation	$ 9,439		$ 9,439
Expected timing of satisfaction, period	3 months		3 months
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-04-01
Revenue, Performance Obligation Satisfied over Time [Abstract]
Remaining performance obligation	$ 20,100		$ 20,100
Expected timing of satisfaction, period	1 year		1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-04-01
Revenue, Performance Obligation Satisfied over Time [Abstract]
Remaining performance obligation	$ 9,589		$ 9,589
Expected timing of satisfaction, period	1 year		1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-04-01
Revenue, Performance Obligation Satisfied over Time [Abstract]
Remaining performance obligation	$ 2,935		$ 2,935
Expected timing of satisfaction, period	1 year		1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2024-04-01
Revenue, Performance Obligation Satisfied over Time [Abstract]
Remaining performance obligation	$ 467		$ 467
Expected timing of satisfaction, period	1 year		1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2025-04-01
Revenue, Performance Obligation Satisfied over Time [Abstract]
Remaining performance obligation	$ 443		$ 443
Expected timing of satisfaction, period	1 year		1 year

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PROPERTY, EQUIPMENT, OTHER ASSETS AND LIABILITIES (Details) - USD ($) $ in Thousands	1 Months Ended		3 Months Ended	9 Months Ended
	Oct. 31, 2019	Sep. 30, 2019	Dec. 31, 2018	Dec. 31, 2018	Dec. 31, 2019	Mar. 31, 2019
Other current assets [Abstract]
Deposits & funds held in escrow					$ 2,438	$ 438
Prepaid assets					6,324	6,425
Other					47	636
Total other current assets					8,809	7,499
Property, equipment and other assets [Abstract]
Property and equipment, net					7,078	7,314
Deferred costs - non-current					11,338	8,856
Right-of-use assets					14,577	0
Other					1,007	1,158
Total other assets - long term					34,000	17,328
Other current liabilities [Abstract]
Accrued expenses					9,639	7,813
Accrued income taxes payable					1,424	181
Contingent consideration - current					283	5,162
Short-term lease liability					5,231	0
Other					8,418	6,129
Total other current liabilities					24,995	19,285
Other liabilities [Abstract]
Deferred revenue					17,076	13,789
Contingent consideration long-term					0	3,780
Long-term lease liability					9,385	0
Other					2,127	108
Total other liabilities - long term					$ 28,588	$ 17,677
Contingent Consideration Arrangements [Abstract]
Payments of contingent consideration	$ 9,600	$ 500	$ 5,000	$ 6,100

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FINANCING RECEIVABLES AND OPERATING LEASES (Tables)

9 Months Ended

Dec. 31, 2019

FINANCING RECEIVABLES AND OPERATING LEASES [Abstract]

Sales-type Leases

The following table provides the profit recognized for sales-type leases at their commencement date for the three and nine months ended December 31, 2019 (in thousands):

	Three months ended December 31, 2019		Nine months ended December 31, 2019
Net sales	$	5,710	$	13,697
Cost of sales		4,807		11,459
Gross Profit	$	903	$	2,238

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

	Three months ended December 31, 2019		Nine months ended December 31, 2019
Interest Income on sales-type leases	$	1,272	$	4,862
Lease income on operating leases	$	4,489	$	14,908

Notes Receivable Net and Investments in Leases

Our financing receivables - net consist of the following (in thousands):

December 31, 2019	Notes Receivables			Lease-Related Receivables			Total Financing Receivables
Minimum payments	$	60,234		$	81,450		$	141,684
Estimated unguaranteed residual value (1)		-			21,073			21,073
Initial direct costs, net of amortization (2)		297			319			616
Unearned income		-			(11,937	)		(11,937	)
Reserve for credit losses (3)		(788	)		(642	)		(1,430	)
Total, net	$	59,743		$	90,263		$	150,006
Reported as:
Current	$	41,350		$	47,879		$	89,229
Long-term		18,393			42,384			60,777
Total, net	$	59,743		$	90,263		$	150,006

(1) Includes estimated unguaranteed residual values of $15,883 thousand for sales type leases, which have been sold and accounted for as sales.

(2) Initial direct costs are shown net of amortization of $299 thousand.

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

March 31, 2019	Notes Receivables			Lease-Related Receivables			Total Financing Receivables
Minimum payments	$	40,563		$	64,201		$	104,764
Estimated unguaranteed residual value (1)		-			14,639			14,639
Initial direct costs, net of amortization (2)		377			332			709
Unearned income		-			(7,671	)		(7,671	)
Reserve for credit losses (3)		(505	)		(530	)		(1,035	)
Total, net	$	40,435		$	70,971		$	111,406
Reported as:
Current	$	30,852		$	32,914		$	63,766
Long-term		9,583			38,057			47,640
Total, net	$	40,435		$	70,971		$	111,406

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

(2) Initial direct costs are shown net of amortization of $275 thousand.

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

Future Scheduled Minimum Lease Payments

Future scheduled minimum lease payments for investments in sales-type leases as of December 31, 2019 are as follows (in thousands):

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

Investment in Operating Lease Equipment - 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):

	December 31, 2019			March 31, 2019
Cost of equipment under operating leases	$	24,692		$	21,532
Accumulated depreciation		(11,963	)		(10,139	)
Investment in operating lease equipment—net (1)	$	12,729		$	11,393

(1) These totals include estimated unguaranteed residual values of $3.2 million and $2.9 million as of December 31, 2019 and March 31, 2019, respectively.

Future Minimum Rental Payments for Operating Leases

Future scheduled minimum lease rental payments as of December 31, 2019 are as follows (in thousands):

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

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SHARE-BASED COMPENSATION

9 Months Ended

Dec. 31, 2019

SHARE-BASED COMPENSATION [Abstract]

SHARE-BASED COMPENSATION

13. SHARE-BASED COMPENSATION

Share-Based Plans

As of December 31, 2019, we had share-based awards outstanding under the following plans: (1) the 2017 Non-Employee Director Long-Term Incentive Plan (“2017 Director LTIP”), and (2) the 2012 Employee Long-Term Incentive Plan ("2012 Employee LTIP"). These share-based plans define fair market value as the previous trading day's closing price when the grant date falls on a date the stock was not traded.

Restricted Stock Activity

For the nine months ended December 31, 2019, we granted 8,646 restricted shares under the 2017 Director LTIP, and 85,132 restricted shares under the 2012 Employee LTIP. For the nine months ended December 31, 2018, we granted 8,531 restricted shares under the 2017 Director LTIP, and 69,847 restricted shares under the 2012 Employee LTIP. A summary of the restricted shares is as follows:

	Number of Shares			Weighted Average Grant- date Fair Value
Nonvested April 1, 2019		224,000		$	67.70
Granted		93,778		$	72.90
Vested		(123,250	)	$	62.07
Forfeited		(1,189	)	$	81.84
Nonvested December 31, 2019		193,339		$	73.73

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

Compensation Expense

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

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

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SEGMENT REPORTING

9 Months Ended

Dec. 31, 2019

SEGMENT REPORTING [Abstract]

SEGMENT REPORTING

17. SEGMENT REPORTING

Our operations are conducted through two operating segments that are also both reportable segments. Our technology segment includes sales of IT products, third-party software, third-party maintenance, advanced professional and managed services, and our proprietary software to commercial enterprises, state and local governments, and government contractors. Our financing segment consists of the financing of IT equipment, software, and related services to commercial enterprises, state and local governments, and government contractors. We measure the performance of the segments based on operating income.

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

	Three Months Ended
	December 31, 2019						December 31, 2018
	Technology		Financing		Total		Technology		Financing		Total
Sales
Product	$	360,206	$	18,363	$	378,569	$	299,490	$	10,953	$	310,443
Service		50,422		-		50,422		35,221		-		35,221
Net sales	$	410,628	$	18,363	$	428,991	$	334,711	$	10,953	$	345,664
Cost of Sales
Product		290,980		2,229		293,209		239,843		2,013		241,856
Service		32,086		-		32,086		20,895		-		20,895
Total cost of sales		323,066		2,229		325,295		260,738		2,013		262,751
Gross Profit		87,562		16,134		103,696		73,973		8,940		82,913
Selling, general, and administrative		67,759		5,331		73,090		56,607		3,121		59,728
Depreciation and amortization		3,619		28		3,647		2,714		5		2,719
Interest and financing costs		-		694		694		-		443		443
Operating expenses		71,378		6,053		77,431		59,321		3,569		62,890
Operating income		16,184		10,081		26,265		14,652		5,371		20,023
Other income						997						721
Earnings before tax					$	27,262					$	20,744
Net Sales
Contracts with customers	$	404,918	$	1,689	$	406,607	$	329,635	$	813	$	330,448
Financing and other		5,710		16,674		22,384		5,076		10,140		15,216
Net Sales	$	410,628	$	18,363	$	428,991	$	334,711	$	10,953	$	345,664
Selected Financial Data - Statement of Cash Flow
Depreciation and amortization	$	3,691	$	1,449	$	5,140	$	2,910	$	1,564	$	4,474
Purchases of property, equipment and operating lease equipment	$	786	$	1,535	$	2,321	$	1,496	$	545	$	2,041
Selected Financial Data - Balance Sheet
Total assets	$	733,174	$	219,434	$	952,608	$	613,494	$	184,695	$	798,189

	Nine Months Ended
	December 31, 2019						December 31, 2018
	Technology		Financing		Total		Technology		Financing		Total
Sales
Product	$	1,032,620	$	45,047	$	1,077,667	$	911,839	$	30,896	$	942,735
Service		144,261		-		144,261		104,504		-		104,504
Net sales		1,176,881		45,047		1,221,928		1,016,343		30,896		1,047,239
Cost of Sales
Product		825,509		6,626		832,135		730,311		5,491		735,802
Service		90,427		-		90,427		62,321		-		62,321
Cost of sales		915,936		6,626		922,562		792,632		5,491		798,123
Gross Profit		260,945		38,421		299,366		223,711		25,405		249,116
Selling, general, and administrative		197,615		11,785		209,400		166,199		8,200		174,399
Depreciation and amortization		10,555		112		10,667		8,243		7		8,250
Interest and financing costs		-		1,898		1,898		-		1,403		1,403
Operating expenses		208,170		13,795		221,965		174,442		9,610		184,052
Operating income		52,775		24,626		77,401		49,269		15,795		65,064
Other income						912						1,140
Earnings before tax					$	78,313					$	66,204
Net Sales
Contracts with customers	$	1,163,184	$	3,889	$	1,167,073	$	1,000,776	$	2,469	$	1,003,245
Financing and other		13,697		41,158		54,855		15,567		28,427		43,994
Net sales	$	1,176,881	$	45,047	$	1,221,928	$	1,016,343	$	30,896	$	1,047,239
Selected Financial Data - Statement of Cash Flow
Depreciation and amortization	$	10,974	$	4,243	$	15,217	$	8,895	$	4,446	$	13,341
Purchases of property, equipment and operating lease equipment	$	3,461	$	3,748	$	7,209	$	4,472	$	4,020	$	8,492
Selected Financial Data - Balance Sheet
Total assets	$	733,174	$	219,434	$	952,608	$	613,494	$	184,695	$	798,189

Technology Segment Disaggregation of Revenue

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

	Three Months Ended December 31,						Nine Months Ended December 31,
	2019			2018			2019			2018
Customer end market:
Technology	$	77,841		$	61,549		$	251,523		$	219,783
Telecom, Media & Entertainment		84,707			58,377			218,217			144,657
Financial Services		56,395			54,411			149,241			147,048
SLED		55,908			43,846			198,964			173,442
Healthcare		60,275			48,121			176,202			145,652
All others		75,502			68,407			182,734			185,761
Net sales		410,628			334,711			1,176,881			1,016,343
Financing and other		(5,710	)		(5,076	)		(13,697	)		(15,567	)
Revenue from contracts with customers	$	404,918		$	329,635		$	1,163,184		$	1,000,776

	Three Months Ended December 31,						Nine Months Ended December 31,
	2019			2018			2019			2018
Vendor
Cisco Systems	$	169,265		$	131,949		$	488,051		$	423,249
NetApp		15,799			12,408			38,997			37,447
HP Inc. & HPE		15,853			22,042			57,952			59,020
Dell EMC		12,025			17,201			38,300			49,599
Arista Networks		12,862			13,668			60,578			44,139
Juniper Networks		27,419			18,681			58,843			40,341
All others		157,405			118,762			434,160			362,548
Net sales		410,628			334,711			1,176,881			1,016,343
Financing and other		(5,710	)		(5,076	)		(13,697	)		(15,567	)
Revenue from contracts with customers	$	404,918		$	329,635		$	1,163,184		$	1,000,776

Financing Segment Disaggregation of Revenue

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

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BUSINESS COMBINATIONS (Tables)

9 Months Ended

Dec. 31, 2019

ABS Technology [Member]

Business Acquisition [Line Items]

Allocation of Purchase Price Consideration to Assets Acquired and Liabilities Assumed

Our preliminary sum of consideration transferred is $15.3 million consisting of $13.8 million paid in cash at closing plus $1.7 million that is being paid primarily upon the collection of certain accounts receivable, of which $0.6 million was paid by December 31, 2019, and less $0.2 million that was repaid to us in December 2019 due to a working capital adjustment. Our preliminary allocation of the purchase consideration to the assets acquired and liabilities assumed is presented below (in thousands):

	Acquisition Date Amount
Accounts receivable	$	9,208
Other assets		743
Identified intangible assets		5,720
Accounts payable and other current liabilities		(6,715	)
Performance obligation		(1,140	)
Total identifiable net assets		7,816
Goodwill		7,461
Total purchase consideration	$	15,277

SLAIT Consulting, LLC [Member]

Business Acquisition [Line Items]

Allocation of Purchase Price Consideration to Assets Acquired and Liabilities Assumed

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

	Acquisition Date Amount
Accounts receivable	$	10,209
Other assets		1,050
Identified intangible assets		18,190
Accounts payable and other current liabilities		(8,611	)
Performance obligation		(5,110	)
Total identifiable net assets		15,728
Goodwill		34,301
Total purchase consideration	$	50,029

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NOTES PAYABLE AND CREDIT FACILITY (Tables)

9 Months Ended

Dec. 31, 2019

NOTES PAYABLE AND CREDIT FACILITY [Abstract]

Non-recourse and Recourse Obligations

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

	December 31, 2019		March 31, 2019
Recourse notes payable with interest rates at 2.55% as of  December 31, 2019 and 4.00% as of March 31, 2019
Current	$	2,239	$	28
Non-recourse notes payable secured by certain financing receivables and investments in operating leases with interest rates ranging from 2.90% to 8.45% as of December 31, 2019 and 3.23% to 8.45% as of March 31, 2019.
Current	$	59,015	$	38,117
Long-term		7,120		10,502
Total non-recourse notes payable	$	66,135	$	48,619

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REVENUES

9 Months Ended

Dec. 31, 2019

REVENUES [Abstract]

REVENUES

3. REVENUES

Contract balances

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

Contract liabilities	December 31, 2019		March 31, 2019
Current (included in deferred revenue)	$	54,482	$	46,356
Non-current (included in other liabilities)	$	16,874	$	13,593

Revenue recognized from the beginning contract liability balance was $15.9 million and $45.3 million for the three and nine months ended December 31, 2019, respectively, and $7.3 million and $28.2 million for the three and nine months ended December 31, 2018, 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. The table does not include the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts where we recognize revenue at the amount that we have the right to invoice for services performed.

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

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RESERVES FOR CREDIT LOSSES

9 Months Ended

Dec. 31, 2019

RESERVES FOR CREDIT LOSSES [Abstract]

RESERVES FOR CREDIT LOSSES

7. RESERVES FOR CREDIT LOSSES

Activity in our reserves for credit losses for the nine months ended December 31, 2019 and 2018 were as follows (in thousands):

	Accounts Receivable			Notes Receivable		Lease- Related Receivables			Total
Balance April 1, 2019	$	1,579		$	505	$	530		$	2,614
Provision for credit losses		107			283		114			504
Write-offs and other		(304	)		-		(2	)		(306	)
Balance December 31, 2019	$	1,382		$	788	$	642		$	2,812

	Accounts Receivable			Notes Receivable		Lease- Related Receivables			Total
Balance April 1, 2018	$	1,538		$	486	$	640		$	2,664
Provision for credit losses		275			50		(131	)		194
Write-offs and other		(246	)		-		-			(246	)
Balance December 31, 2018	$	1,567		$	536	$	509		$	2,612

Our reserves for credit losses and minimum payments associated with our notes receivables and lease-related receivables disaggregated based on our impairment method were as follows (in thousands):

	December 31, 2019				March 31, 2019
	Notes Receivable		Lease- Related Receivables		Notes Receivable		Lease- Related Receivables
Reserves for credit losses:
Ending balance: collectively evaluated for impairment	$	726	$	642	$	443	$	530
Ending balance: individually evaluated for impairment		62		-		62		-
Ending balance	$	788	$	642	$	505	$	530
Minimum payments:
Ending balance: collectively evaluated for impairment	$	60,145	$	81,450	$	40,501	$	64,201
Ending balance: individually evaluated for impairment		89		-		62		-
Ending balance	$	60,234	$	81,450	$	40,563	$	64,201

We place receivables on non-accrual status when events occur that indicate a receivable will not be collectable (such as a customer bankruptcy). We charge off uncollectable financing receivables when we stop pursuing collection.

The age of the recorded minimum lease payments and net credit exposure associated with our investment in direct financing and sales-type leases that are past due disaggregated based on our internally assigned credit quality rating (“CQR”) were as follows as of December 31, 2019 and March 31, 2019 (in thousands):

	31-60 Days Past Due		61-90 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Current		Unbilled Minimum Lease Payments		Total Minimum Lease Payments		Unearned Income			Non- Recourse Notes Payable			Net Credit Exposure
December 31, 2019
High CQR	$	695	$	322	$	252	$	1,269	$	390	$	49,887	$	51,546	$	(4,890	)	$	(31,698	)	$	14,958
Average CQR		315		18		74		407		716		28,781		29,904		(2,111	)		(13,472	)		14,321
Low CQR		-		-		-		-		-		-		-		-			-			-
Total	$	1,010	$	340	$	326	$	1,676	$	1,106	$	78,668	$	81,450	$	(7,001	)	$	(45,170	)	$	29,279
March 31, 2019
High CQR	$	325	$	41	$	10	$	376	$	543	$	29,503	$	30,422	$	(2,799	)	$	(11,044	)	$	16,579
Average CQR		22		54		15		91		125		33,563		33,779		(2,508	)		(20,848	)		10,423
Low CQR		-		-		-		-		-		-		-		-			-			-
Total	$	347	$	95	$	25	$	467	$	668	$	63,066	$	64,201	$	(5,307	)	$	(31,892	)	$	27,002

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

	31-60 Days Past Due		61-90 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Current		Unbilled Notes Receivable			Total Notes Receivable		Non- Recourse Notes Payable			Net Credit Exposure
December 31, 2019
High CQR	$	578	$	49	$	240	$	867	$	1,422	$	42,648		$	44,937	$	(20,323	)	$	24,614
Average CQR		118		29		125		272		246		14,690			15,208		(6,307	)		8,901
Low CQR		90		-		29		119		352		(382	)		89		-			89
Total	$	786	$	78	$	394	$	1,258	$	2,020	$	56,956		$	60,234	$	(26,630	)	$	33,604
March 31, 2019
High CQR	$	990	$	40	$	30	$	1,060	$	3,813	$	28,113		$	32,986	$	(18,245	)	$	14,741
Average CQR		105		34		7		146		137		7,232			7,515		(1,507	)		6,008
Low CQR		-		-		62		62		-		-			62		-			62
Total	$	1,095	$	74	$	99	$	1,268	$	3,950	$	35,345		$	40,563	$	(19,752	)	$	20,811

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

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UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) shares in Thousands, $ in Thousands	Common Stock [Member]	Additional Paid-in Capital [Member]	Treasury Stock [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Income [Member]	Total
Balance at Mar. 31, 2018	$ 142	$ 130,000	$ (36,016)	$ 277,945	$ 532	$ 372,603
Balance (in shares) at Mar. 31, 2018	13,761
Issuance of restricted stock awards	$ 1	0	0	0	0	1
Issuance of restricted stock awards (in shares)	70
Share-based compensation	$ 0	1,693	0	0	0	1,693
Repurchase of common stock	0	0	$ (9,059)	0	0	(9,059)
Repurchase of common stock (in shares)			(108)
Net earnings	0	0	$ 0	15,273	0	15,273
Foreign currency translation adjustment	0	0	0	0	(657)	(657)
Balance at Jun. 30, 2018	$ 143	131,693	(45,075)	293,218	(125)	379,854
Balance (in shares) at Jun. 30, 2018	13,723
Balance at Mar. 31, 2018	$ 142	130,000	(36,016)	277,945	532	372,603
Balance (in shares) at Mar. 31, 2018	13,761
Net earnings						48,140
Balance at Dec. 31, 2018	$ 143	135,418	(51,899)	326,085	(570)	409,177
Balance (in shares) at Dec. 31, 2018	13,640
Balance at Jun. 30, 2018	$ 143	131,693	(45,075)	293,218	(125)	379,854
Balance (in shares) at Jun. 30, 2018	13,723
Issuance of restricted stock awards	$ 0	0	0	0	0	0
Issuance of restricted stock awards (in shares)	7
Share-based compensation	$ 0	1,868	0	0	0	1,868
Repurchase of common stock	0	0	$ (305)	0	0	(305)
Repurchase of common stock (in shares)			(3)
Net earnings	0	0	$ 0	18,003	0	18,003
Foreign currency translation adjustment	0	0	0	0	(143)	(143)
Balance at Sep. 30, 2018	$ 143	133,561	(45,380)	311,221	(268)	399,277
Balance (in shares) at Sep. 30, 2018	13,727
Issuance of restricted stock awards	$ 0	0	0	0	0	0
Issuance of restricted stock awards (in shares)	(2)
Share-based compensation	$ 0	1,857	0	0	0	1,857
Repurchase of common stock	0	0	$ (6,519)	0	0	(6,519)
Repurchase of common stock (in shares)			(85)
Net earnings	0	0	$ 0	14,864	0	14,864
Foreign currency translation adjustment	0	0	0	0	(302)	(302)
Balance at Dec. 31, 2018	$ 143	135,418	(51,899)	326,085	(570)	409,177
Balance (in shares) at Dec. 31, 2018	13,640
Balance at Mar. 31, 2019	$ 143	137,243	(53,999)	341,137	(271)	$ 424,253
Balance (in shares) at Mar. 31, 2019	13,611					13,611
Issuance of restricted stock awards	$ 1	0	0	0	0	$ 1
Issuance of restricted stock awards (in shares)	86
Share-based compensation	$ 0	1,919	0	0	0	1,919
Repurchase of common stock	0	0	$ (13,455)	0	0	(13,455)
Repurchase of common stock (in shares)			(188)
Net earnings	0	0	$ 0	16,188	0	16,188
Foreign currency translation adjustment	0	0	0	0	(263)	(263)
Balance at Jun. 30, 2019	$ 144	139,162	(67,454)	357,325	(534)	428,643
Balance (in shares) at Jun. 30, 2019	13,509
Balance at Mar. 31, 2019	$ 143	137,243	(53,999)	341,137	(271)	$ 424,253
Balance (in shares) at Mar. 31, 2019	13,611					13,611
Net earnings						$ 55,836
Balance at Dec. 31, 2019	$ 144	143,262	(67,691)	396,973	(202)	$ 472,486
Balance (in shares) at Dec. 31, 2019	13,513					13,513
Balance at Jun. 30, 2019	$ 144	139,162	(67,454)	357,325	(534)	$ 428,643
Balance (in shares) at Jun. 30, 2019	13,509
Issuance of restricted stock awards	$ 0	0	0	0	0	0
Issuance of restricted stock awards (in shares)	7
Share-based compensation	$ 0	2,135	0	0	0	2,135
Share-based compensation (in shares)	0
Repurchase of common stock	$ 0	0	$ (237)	0	0	(237)
Repurchase of common stock (in shares)			(3)
Net earnings	0	0	$ 0	20,098	0	20,098
Foreign currency translation adjustment	0	0	0	0	(350)	(350)
Balance at Sep. 30, 2019	$ 144	141,297	(67,691)	377,423	(884)	450,289
Balance (in shares) at Sep. 30, 2019	13,513
Issuance of restricted stock awards	$ 0	0	0	0	0	0
Issuance of restricted stock awards (in shares)	0
Share-based compensation	$ 0	1,965	0	0	0	1,965
Share-based compensation (in shares)	0
Repurchase of common stock	$ 0	0	$ 0	0	0	0
Repurchase of common stock (in shares)			0
Net earnings	0	0	$ 0	19,550	0	19,550
Foreign currency translation adjustment	0	0	0	0	682	682
Balance at Dec. 31, 2019	$ 144	$ 143,262	$ (67,691)	$ 396,973	$ (202)	$ 472,486
Balance (in shares) at Dec. 31, 2019	13,513					13,513

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UNAUDITED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares shares in Thousands	Dec. 31, 2019	Mar. 31, 2019
STOCKHOLDERS' EQUITY
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized (in shares)	2,000	2,000
Preferred stock, shares outstanding (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	25,000	25,000
Common stock, shares outstanding (in shares)	13,513	13,611
Treasury stock, shares (in shares)	884	693

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EARNINGS PER SHARE

9 Months Ended

Dec. 31, 2019

EARNINGS PER SHARE [Abstract]

EARNINGS PER SHARE

11. EARNINGS PER SHARE

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

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

	Three Months Ended December 31,				Nine Months Ended December 31,
	2019		2018		2019		2018
Net earnings attributable to common shareholders - basic and diluted	$	19,550	$	14,864	$	55,836	$	48,140
Basic and diluted common shares outstanding:
Weighted average common shares outstanding — basic		13,320		13,471		13,329		13,467
Effect of dilutive shares		58		73		81		125
Weighted average shares common outstanding — diluted		13,378		13,544		13,410		13,592
Earnings per common share - basic	$	1.47	$	1.10	$	4.19	$	3.57
Earnings per common share - diluted	$	1.46	$	1.10	$	4.16	$	3.54

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EARNINGS PER SHARE (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended						9 Months Ended
	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Dec. 31, 2019	Dec. 31, 2018
Earnings Per Share, Basic and Diluted [Abstract]
Net earnings attributable to common shareholders - basic and diluted	$ 19,550	$ 20,098	$ 16,188	$ 14,864	$ 18,003	$ 15,273	$ 55,836	$ 48,140
Basic and diluted common shares outstanding [Abstract]
Weighted average common shares outstanding - basic (in shares)	13,320			13,471			13,329	13,467
Effect of dilutive shares (in shares)	58			73			81	125
Weighted average shares common outstanding - diluted (in shares)	13,378			13,544			13,410	13,592
Earnings per common share - basic (in dollars per share)	$ 1.47			$ 1.10			$ 4.19	$ 3.57
Earnings per common share - diluted (in dollars per share)	$ 1.46			$ 1.10			$ 4.16	$ 3.54

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FAIR VALUE OF FINANCIAL INSTRUMENTS (Details) - USD ($) $ in Thousands	1 Months Ended		3 Months Ended		9 Months Ended
	Oct. 31, 2019	Sep. 30, 2019	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018	Mar. 31, 2019
Assets [Abstract]
Money market funds			$ 127		$ 127		$ 50
Liabilities [Abstract]
Contingent consideration			283		283		8,942
Adjustment to fair value of contingent consideration			0	$ 700	1,500	$ 1,900
Payments of contingent consideration	$ 9,600	$ 500		$ 5,000		$ 6,100
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Assets [Abstract]
Money market funds			127		127		50
Liabilities [Abstract]
Contingent consideration			0		0		0
Significant Other Observable Inputs (Level 2) [Member]
Assets [Abstract]
Money market funds			0		0		0
Liabilities [Abstract]
Contingent consideration			0		0		0
Significant Unobservable Inputs (Level 3) [Member]
Assets [Abstract]
Money market funds			0		0		0
Liabilities [Abstract]
Contingent consideration			$ 283		$ 283		$ 8,942

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RESERVES FOR CREDIT LOSSES, Disaggregated Based on Impairment (Details) - USD ($) $ in Thousands	Dec. 31, 2019		Mar. 31, 2019		Dec. 31, 2018	Mar. 31, 2018
Reserve for credit losses [Abstract]
Ending balance	$ 2,812		$ 2,614		$ 2,612	$ 2,664
Accounts Receivable [Member]
Reserve for credit losses [Abstract]
Ending balance	1,382		1,579		1,567	1,538
Notes Receivable [Member]
Reserve for credit losses [Abstract]
Ending balance: collectively evaluated for impairment	726		443
Ending balance: individually evaluated for impairment	62		62
Ending balance	788	[1]	505	[1]	536	486
Minimum payments [Abstract]
Ending balance: collectively evaluated for impairment	60,145		40,501
Ending balance: individually evaluated for impairment	89		62
Ending balance	60,234		40,563
Lease-Related Receivables [Member]
Reserve for credit losses [Abstract]
Ending balance: collectively evaluated for impairment	642		530
Ending balance: individually evaluated for impairment	0		0
Ending balance	642	[1]	530	[1]	$ 509	$ 640
Minimum payments [Abstract]
Ending balance: collectively evaluated for impairment	81,450		64,201
Ending balance: individually evaluated for impairment	0		0
Ending balance	$ 81,450		$ 64,201

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

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LESSEE ACCOUNTING (Details) $ in Thousands	3 Months Ended	9 Months Ended
	Dec. 31, 2019 USD ($) Office	Dec. 31, 2019 USD ($) Office
Lessee, Operating Lease [Abstract]
Rent expense	$ 1,600	$ 4,700
Lease Term and Discount Rate [Abstract]
Weighted average remaining lease term (months)	40 months	40 months
Weighted average discount rate	4.00%	4.00%
Future Lease Payments under Operating Leases [Abstract]
Remainder of year ending March 31, 2020	$ 1,084	$ 1,084
Year ending March 31, 2021	5,460	5,460
Year ending March 31, 2022	4,020	4,020
Year ending March 31, 2023	3,049	3,049
Year ending March 31, 2024	1,206	1,206
Thereafter	762	762
Total lease payments	15,581	15,581
Less: Interest	(965)	(965)
Present value of lease liabilities	$ 14,616	$ 14,616
Maximum [Member]
Lessee, Operating Lease [Abstract]
Operating lease term	6 years	6 years
Additional Office Space [Member]
Future Lease Payments under Operating Leases [Abstract]
Number of committed office leases | Office	1	1
Total lease commitment	$ 200	$ 200

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FAIR VALUE OF FINANCIAL INSTRUMENTS

9 Months Ended

Dec. 31, 2019

FAIR VALUE OF FINANCIAL INSTRUMENTS [Abstract]

FAIR VALUE OF FINANCIAL INSTRUMENTS

15. FAIR VALUE OF FINANCIAL INSTRUMENTS

We account for the fair values of our assets and liabilities in accordance with Codification Topic 820, Fair Value Measurement and Disclosure. The following table summarizes the fair value hierarchy of our financial instruments as of December 31, 2019 and March 31, 2019 (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)
December 31, 2019
Assets:
Money market funds	$	127	$	127	$	-	$	-
Liabilities:
Contingent consideration	$	283	$	-	$	-	$	283
March 31, 2019
Assets:
Money market funds	$	50	$	50	$	-	$	-
Liabilities:
Contingent consideration	$	8,942	$	-	$	-	$	8,942

For the nine months ended December 31, 2019, we recorded adjustments to operating expenses that increased the fair value of our liability for contingent consideration by $1.5 million. There were no adjustments to operating expenses for the three months ended December 31, 2019. In September 2019, we reached a settlement in full of one of our contingent consideration arrangements in the amount of $9.6 million, which was paid in October 2019. Additionally, in September 2019, we paid $0.5 million to satisfy certain current obligations in another of these arrangements.

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

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RECENT ACCOUNTING PRONOUNCEMENTS (Policies)

9 Months Ended

Dec. 31, 2019

RECENT ACCOUNTING PRONOUNCEMENTS [Abstract]

RECENT ACCOUNTING PRONOUNCEMENTS

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

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

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED — In June 2016, the FASB issued ASU 2016-13, Financial Instruments- Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The amendments in this update replace the incurred loss impairment methodology in current US GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. This update requires adoption under a modified retrospective approach and will become effective for us in the quarter ending June 30, 2020. We are currently evaluating the impact of this update on our financial statements.

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RESERVES FOR CREDIT LOSSES, Activity (Details) - USD ($) $ in Thousands	9 Months Ended
	Dec. 31, 2019		Dec. 31, 2018
Activity in reserves for credit losses [Roll Forward]
Balance	$ 2,614		$ 2,664
Provision for credit losses	504		194
Write-offs and other	(306)		(246)
Balance	2,812		2,612
Accounts Receivable [Member]
Activity in reserves for credit losses [Roll Forward]
Balance	1,579		1,538
Provision for credit losses	107		275
Write-offs and other	(304)		(246)
Balance	1,382		1,567
Notes Receivable [Member]
Activity in reserves for credit losses [Roll Forward]
Balance	505	[1]	486
Provision for credit losses	283		50
Write-offs and other	0		0
Balance	788	[1]	536
Lease-Related Receivables [Member]
Activity in reserves for credit losses [Roll Forward]
Balance	530	[1]	640
Provision for credit losses	114		(131)
Write-offs and other	(2)		0
Balance	$ 642	[1]	$ 509

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

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FINANCING RECEIVABLES AND OPERATING LEASES (Details) - USD ($) $ in Thousands		3 Months Ended			9 Months Ended
		Dec. 31, 2019		Dec. 31, 2018	Dec. 31, 2019		Dec. 31, 2018	Mar. 31, 2019		Mar. 31, 2018
Profit Recognized for Sales-type Leases [Abstract]
Net sales		$ 5,710			$ 13,697
Cost of sales		4,807			11,459
Gross Profit		903			2,238
Interest Income on Sales-type Leases [Abstract]
Interest Income on sales-type leases		1,272			4,862
Lease income on operating leases		4,489			14,908
Financing Receivables [Abstract]
Reserve for credit losses		(2,812)		$ (2,612)	(2,812)		$ (2,612)	$ (2,614)		$ (2,664)
Reported as [Abstract]
Current		89,229			89,229			63,767
Future scheduled minimum lease payments [Abstract]
Remainder of year ending March 31, 2020		36,224			36,224
Year ending March 31, 2021		23,059			23,059
Year ending March 31, 2022		13,728			13,728
Year ending March 31, 2023		5,946			5,946
Year ending March 31, 2024 and thereafter		2,492			2,492
Total		81,449			81,449
Estimated unguaranteed residual values for direct financing lease		15,883			15,883			8,996
Accumulated amortization of initial direct cost		299			299			275
Investment in operating lease equipment - net [Abstract]
Cost of equipment under operating leases		24,692			24,692			21,532
Accumulated depreciation		(11,963)			(11,963)			(10,139)
Investment in operating lease equipment - net	[1]	12,729			12,729			11,393
Unguaranteed residual value of operating lease equipment net		3,200			3,200			2,900
Future scheduled minimum lease rental payments [Abstract]
Remainder of year ending March 31, 2020		1,476			1,476
Year ending March 31, 2021		4,380			4,380
Year ending March 31, 2022		2,961			2,961
Year ending March 31, 2023		1,626			1,626
Year ending March 31, 2024 and thereafter		443			443
Total		10,886			10,886
Collateral for non-recourse notes payable - Finance receivables		62,500			62,500			50,200
Collateral for non-recourse notes payable - Operating leases		8,500			8,500			7,800
Gain on sale of financing receivables		9,500		2,400	17,000		5,000
Proceeds from sale of financing receivables		246,000		95,200	414,600		189,200
Contract liabilities - servicing of financial assets		400			400			400
Maximum potential future payments related guarantees		300			300
Notes Receivables [Member]
Financing Receivables [Abstract]
Minimum payments		60,234			60,234			40,563
Estimated unguaranteed residual value		0	[2]		0	[2]		0	[3]
Initial direct costs, net of amortization		297	[4]		297	[4]		377	[5]
Unearned income		0			0			0
Reserve for credit losses		(788)	[6]	(536)	(788)	[6]	(536)	(505)	[6]	(486)
Total, net		59,743			59,743			40,435
Reported as [Abstract]
Current		41,350			41,350			30,852
Long-term		18,393			18,393			9,583
Total, net		59,743			59,743			40,435
Lease-Related Receivables [Member]
Financing Receivables [Abstract]
Minimum payments		81,450			81,450			64,201
Estimated unguaranteed residual value		21,073	[2]		21,073	[2]		14,639	[3]
Initial direct costs, net of amortization		319	[4]		319	[4]		332	[5]
Unearned income		(11,937)			(11,937)			(7,671)
Reserve for credit losses		(642)	[6]	$ (509)	(642)	[6]	$ (509)	(530)	[6]	$ (640)
Total, net		90,263			90,263			70,971
Reported as [Abstract]
Current		47,879			47,879			32,914
Long-term		42,384			42,384			38,057
Total, net		90,263			90,263			70,971
Financing Receivables [Member]
Financing Receivables [Abstract]
Minimum payments		141,684			141,684			104,764
Estimated unguaranteed residual value		21,073	[2]		21,073	[2]		14,639	[3]
Initial direct costs, net of amortization		616	[4]		616	[4]		709	[5]
Unearned income		(11,937)			(11,937)			(7,671)
Reserve for credit losses	[6]	(1,430)			(1,430)			(1,035)
Total, net		150,006			150,006			111,406
Reported as [Abstract]
Current		89,229			89,229			63,766
Long-term		60,777			60,777			47,640
Total, net		$ 150,006			$ 150,006			$ 111,406

[1] These totals include estimated unguaranteed residual values of $3.2 million and $2.9 million as of December 31, 2019 and March 31, 2019, respectively.

[2] Includes estimated unguaranteed residual values of $15,883 thousand for sales type leases, which have been sold and accounted for as sales.

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

[4] Initial direct costs are shown net of amortization of $299 thousand.

[5] Initial direct costs are shown net of amortization of $275 thousand.

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

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BUSINESS COMBINATIONS

9 Months Ended

Dec. 31, 2019

BUSINESS COMBINATIONS [Abstract]

BUSINESS COMBINATIONS

16. BUSINESS COMBINATIONS

ABS Technology

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

Our preliminary sum of consideration transferred is $15.3 million consisting of $13.8 million paid in cash at closing plus $1.7 million that is being paid primarily upon the collection of certain accounts receivable, of which $0.6 million was paid by December 31, 2019, and less $0.2 million that was repaid to us in December 2019 due to a working capital adjustment. Our preliminary allocation of the purchase consideration to the assets acquired and liabilities assumed is presented below (in thousands):

	Acquisition Date Amount
Accounts receivable	$	9,208
Other assets		743
Identified intangible assets		5,720
Accounts payable and other current liabilities		(6,715	)
Performance obligation		(1,140	)
Total identifiable net assets		7,816
Goodwill		7,461
Total purchase consideration	$	15,277

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

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

We recognized goodwill related to this transaction of $7.5 million, which was assigned to our technology reporting unit. The goodwill recognized in the acquisition is attributable to the acquired assembled workforce and expected synergies, none of which qualify for recognition as a separate intangible asset. The total amount of goodwill is expected to be deductible for tax purposes. The amount of revenues and earnings of the acquiree since the acquisition date are not material. Likewise, the impact to the revenue and earnings of the combined entity for the current reporting period as though the acquisition date had been April 1, 2019, is not material.

SLAIT Consulting, LLC

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

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

	Acquisition Date Amount
Accounts receivable	$	10,209
Other assets		1,050
Identified intangible assets		18,190
Accounts payable and other current liabilities		(8,611	)
Performance obligation		(5,110	)
Total identifiable net assets		15,728
Goodwill		34,301
Total purchase consideration	$	50,029

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

We recognized goodwill related to this transaction of $34.3 million, which was assigned to our technology reporting unit. The goodwill recognized in the acquisition is attributable to the acquired assembled workforce and expected synergies, none of which qualify for recognition as a separate intangible asset. The total amount of goodwill is expected to be deductible for tax purposes. The amount of revenues and earnings of the acquiree since the acquisition date are not material. Likewise, the impact to the revenue and earnings of the combined entity for the reporting period ending March 31, 2019 as though the acquisition date had been April 1, 2018, is not material.

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

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REVENUES (Tables)

9 Months Ended

Dec. 31, 2019

REVENUES [Abstract]

Balance of Receivables, Contract Assets, and Contract Liabilities

The following table provides the balance of contract liabilities from contracts with customers (in thousands):

Contract liabilities	December 31, 2019		March 31, 2019
Current (included in deferred revenue)	$	54,482	$	46,356
Non-current (included in other liabilities)	$	16,874	$	13,593

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

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

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FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables)

9 Months Ended

Dec. 31, 2019

FAIR VALUE OF FINANCIAL INSTRUMENTS [Abstract]

Fair Value Hierarchy of Financial Instruments

The following table summarizes the fair value hierarchy of our financial instruments as of December 31, 2019 and March 31, 2019 (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)
December 31, 2019
Assets:
Money market funds	$	127	$	127	$	-	$	-
Liabilities:
Contingent consideration	$	283	$	-	$	-	$	283
March 31, 2019
Assets:
Money market funds	$	50	$	50	$	-	$	-
Liabilities:
Contingent consideration	$	8,942	$	-	$	-	$	8,942

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PROPERTY, EQUIPMENT, OTHER ASSETS AND LIABILITIES (Tables)

9 Months Ended

Dec. 31, 2019

PROPERTY, EQUIPMENT, OTHER ASSETS AND LIABILITIES [Abstract]

Property, Equipment, Other Assets and Liabilities

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

	December 31, 2019		March 31, 2019
Other current assets:
Deposits & funds held in escrow	$	2,438	$	438
Prepaid assets		6,324		6,425
Other		47		636
Total other current assets	$	8,809	$	7,499
Property, equipment and other assets
Property and equipment, net	$	7,078	$	7,314
Deferred costs - non-current		11,338		8,856
Right-of-use assets		14,577		-
Other		1,007		1,158
Total other assets - long term	$	34,000	$	17,328
Other current liabilities:
Accrued expenses	$	9,639	$	7,813
Accrued income taxes payable		1,424		181
Contingent consideration - current		283		5,162
Short-term lease liability		5,231		-
Other		8,418		6,129
Total other current liabilities	$	24,995	$	19,285
Other liabilities:
Deferred revenue	$	17,076	$	13,789
Contingent consideration - long-term		-		3,780
Long-term lease liability		9,385		-
Other		2,127		108
Total other liabilities - long term	$	28,588	$	17,677

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UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	9 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Cash Flows From Operating Activities:
Net earnings	$ 55,836	$ 48,140
Adjustments to reconcile net earnings to net cash used in operating activities:
Depreciation and amortization	15,217	13,341
Reserve for credit losses	504	269
Share-based compensation expense	6,019	5,418
Deferred taxes	(3)	(215)
Payments from lessees directly to lenders-operating leases	(44)	(118)
Gain on disposal of property, equipment, and leased equipment	(614)	(1,307)
Gain on sale of financing receivables	0	(5,030)
Changes in:
Accounts receivable	(102,093)	(56,769)
Inventories-net	(10,429)	(11,674)
Financing receivables-net	(87,633)	(1,070)
Deferred costs and other assets	(18,424)	3,971
Accounts payable-trade	33,574	16,062
Salaries and commissions payable, deferred revenue, and other liabilities	33,362	(8,846)
Net cash used in / provided by operating activities	(74,728)	2,172
Cash Flows From Investing Activities:
Proceeds from sale of property, equipment and leased equipment	1,404	2,550
Purchases of property, equipment, and operating lease equipment	(7,209)	(8,492)
Purchases of assets to be leased or financed	0	(13,941)
Issuance of financing receivables	0	(140,307)
Repayments of financing receivables	0	55,198
Proceeds from sale of financing receivables	0	56,983
Cash used in acquisitions, net of cash acquired	(14,239)	0
Net cash used in investing activities	(20,044)	(48,009)
Cash Flows From Financing Activities:
Borrowings of non-recourse and recourse notes payable	75,557	40,693
Repayments of non-recourse and recourse notes payable	(9,854)	(17,447)
Repurchase of common stock	(13,692)	(16,261)
Repayments of financing of acquisitions	(5,763)	(7,634)
Net borrowings (repayments) on floor plan facility	28,400	12,450
Net cash provided by financing activities	74,648	11,801
Effect of exchange rate changes on cash	(137)	172
Net Decrease in Cash and Cash Equivalents	(20,261)	(33,864)
Cash and Cash Equivalents, Beginning of Period	79,816	118,198
Cash and Cash Equivalents, End of Period	59,555	84,334
Supplemental Disclosures of Cash Flow Information:
Cash paid for interest	1,721	1,364
Cash paid for income taxes	19,519	18,269
Cash paid for amounts included in the measurement of lease liabilities	4,113	0
Schedule of Non-Cash Investing and Financing Activities:
Proceeds from sale of property, equipment, and leased equipment	0	483
Purchases of property, equipment, and operating lease equipment	(425)	(2,704)
Purchases of assets to be leased or financed	0	2,437
Issuance of financing receivables	0	(96,406)
Proceeds from sale of financing receivables	0	88,119
Consideration for acquisitions	(1,037)	0
Borrowing of non-recourse and recourse notes payable	111,234	65,042
Repayments of non-recourse and recourse notes payable	(44)	(118)
Vesting of share-based compensation	8,990	12,795
Repurchase of common stock	0	(393)
New operating lease assets obtained in exchange for lease obligations	$ 6,035	$ 0

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UNAUDITED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Dec. 31, 2019	Mar. 31, 2019
Current assets:
Cash and cash equivalents	$ 59,555	$ 79,816
Accounts receivable-trade, net	413,741	299,899
Accounts receivable-other, net	37,187	41,328
Inventories	61,065	50,493
Financing receivables-net, current	89,229	63,767
Deferred costs	20,421	17,301
Other current assets	8,809	7,499
Total current assets	690,007	560,103
Financing receivables and operating leases-net	73,506	59,032
Property, equipment and other assets	34,000	17,328
Goodwill	118,225	110,807
Other intangible assets-net	36,870	38,928
TOTAL ASSETS	952,608	786,198
Current liabilities:
Accounts payable	126,154	86,801
Accounts payable-floor plan	144,483	116,083
Salaries and commissions payable	27,476	21,286
Deferred revenue	55,128	47,251
Recourse notes payable-current	2,239	28
Non-recourse notes payable-current	59,015	38,117
Other current liabilities	24,995	19,285
Total current liabilities	439,490	328,851
Non-recourse notes payable-long term	7,120	10,502
Deferred tax liability-net	4,924	4,915
Other liabilities	28,588	17,677
TOTAL LIABILITIES	480,122	361,945
COMMITMENTS AND CONTINGENCIES (Note 10)
STOCKHOLDERS' EQUITY
Preferred stock, $.01 per share par value; 2,000 shares authorized; none outstanding	0	0
Common stock, $.01 per share par value; 25,000 shares authorized; 13,513 outstanding at December 31, 2019 and 13,611 outstanding at March 31, 2019	144	143
Additional paid-in capital	143,262	137,243
Treasury stock, at cost, 884 shares at December 31, 2019 and 693 shares at March 31, 2019	(67,691)	(53,999)
Retained earnings	396,973	341,137
Accumulated other comprehensive income-foreign currency translation adjustment	(202)	(271)
Total Stockholders' Equity	472,486	424,253
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 952,608	$ 786,198

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STOCKHOLDERS' EQUITY

9 Months Ended

Dec. 31, 2019

STOCKHOLDERS' EQUITY [Abstract]

STOCKHOLDERS' EQUITY

12. STOCKHOLDERS’ EQUITY

Share Repurchase Plan

On April 26, 2018, our board of directors authorized the repurchase up to 500,000 shares of our outstanding common stock over a 12-month period beginning on May 28, 2018 through May 27, 2019. The plan authorized purchases to be made from time to time in the open market, or in privately negotiated transactions, subject to availability. Any repurchased shares will have the status of treasury shares and may be used, when needed, for general corporate purposes.

On May 24, 2019, our board of directors authorized the repurchase up to 500,000 shares of our outstanding common stock over a 12-month period beginning on May 28, 2019 through May 27, 2020. The plan authorized purchases to be made from time to time in the open market, or in privately negotiated transactions, subject to availability. Any repurchased shares will have the status of treasury shares and may be used, when needed, for general corporate purposes.

During the nine months ended December 31, 2019, we purchased 149,044 shares of our outstanding common stock at a value of $10.7 million under the share repurchase plan; we also purchased 41,817 shares of common stock at a value of $3.0 million to satisfy tax withholding obligations relating to the vesting of employees’ restricted stock.

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

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FINANCING RECEIVABLES AND OPERATING LEASES

9 Months Ended

Dec. 31, 2019

FINANCING RECEIVABLES AND OPERATING LEASES [Abstract]

FINANCING RECEIVABLES AND OPERATING LEASES

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

The following table provides the profit recognized for sales-type leases at their commencement date for the three and nine months ended December 31, 2019 (in thousands):

	Three months ended December 31, 2019		Nine months ended December 31, 2019
Net sales	$	5,710	$	13,697
Cost of sales		4,807		11,459
Gross Profit	$	903	$	2,238

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

	Three months ended December 31, 2019		Nine months ended December 31, 2019
Interest Income on sales-type leases	$	1,272	$	4,862
Lease income on operating leases	$	4,489	$	14,908

FINANCING RECEIVABLES—NET

Our financing receivables - net consist of the following (in thousands):

December 31, 2019	Notes Receivables			Lease-Related Receivables			Total Financing Receivables
Minimum payments	$	60,234		$	81,450		$	141,684
Estimated unguaranteed residual value (1)		-			21,073			21,073
Initial direct costs, net of amortization (2)		297			319			616
Unearned income		-			(11,937	)		(11,937	)
Reserve for credit losses (3)		(788	)		(642	)		(1,430	)
Total, net	$	59,743		$	90,263		$	150,006
Reported as:
Current	$	41,350		$	47,879		$	89,229
Long-term		18,393			42,384			60,777
Total, net	$	59,743		$	90,263		$	150,006

(1) Includes estimated unguaranteed residual values of $15,883 thousand for sales type leases, which have been sold and accounted for as sales.

(2) Initial direct costs are shown net of amortization of $299 thousand.

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

March 31, 2019	Notes Receivables			Lease-Related Receivables			Total Financing Receivables
Minimum payments	$	40,563		$	64,201		$	104,764
Estimated unguaranteed residual value (1)		-			14,639			14,639
Initial direct costs, net of amortization (2)		377			332			709
Unearned income		-			(7,671	)		(7,671	)
Reserve for credit losses (3)		(505	)		(530	)		(1,035	)
Total, net	$	40,435		$	70,971		$	111,406
Reported as:
Current	$	30,852		$	32,914		$	63,766
Long-term		9,583			38,057			47,640
Total, net	$	40,435		$	70,971		$	111,406

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

(2) Initial direct costs are shown net of amortization of $275 thousand.

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

Future scheduled minimum lease payments for investments in sales-type leases as of December 31, 2019 are as follows (in thousands):

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

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):

	December 31, 2019			March 31, 2019
Cost of equipment under operating leases	$	24,692		$	21,532
Accumulated depreciation		(11,963	)		(10,139	)
Investment in operating lease equipment—net (1)	$	12,729		$	11,393

(1) These totals include estimated unguaranteed residual values of $3.2 million and $2.9 million as of December 31, 2019 and March 31, 2019, respectively.

Future scheduled minimum lease rental payments as of December 31, 2019 are as follows (in thousands):

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

TRANSFERS OF FINANCIAL ASSETS

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

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

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

When we retain servicing obligations in transfers accounted for as sales, we allocate a portion of the proceeds to deferred revenues, which is recognized as we perform the services.  As of both December 31, 2019 and March 31, 2019, we had deferred revenue of $0.4 million for servicing obligations.

In a limited number of transfers accounted for as sales, we indemnified the assignee in the event that the lessee elected to early terminate the lease.  As of December 31, 2019, our maximum potential future payments related to such guarantees is $0.3 million. We believe the likelihood of making any such payments to be remote.

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PROPERTY, EQUIPMENT, OTHER ASSETS AND LIABILITIES

9 Months Ended

Dec. 31, 2019

PROPERTY, EQUIPMENT, OTHER ASSETS AND LIABILITIES [Abstract]

PROPERTY, EQUIPMENT, OTHER ASSETS AND LIABILITIES

8. PROPERTY, EQUIPMENT, OTHER ASSETS AND LIABILITIES

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

	December 31, 2019		March 31, 2019
Other current assets:
Deposits & funds held in escrow	$	2,438	$	438
Prepaid assets		6,324		6,425
Other		47		636
Total other current assets	$	8,809	$	7,499
Property, equipment and other assets
Property and equipment, net	$	7,078	$	7,314
Deferred costs - non-current		11,338		8,856
Right-of-use assets		14,577		-
Other		1,007		1,158
Total other assets - long term	$	34,000	$	17,328
Other current liabilities:
Accrued expenses	$	9,639	$	7,813
Accrued income taxes payable		1,424		181
Contingent consideration - current		283		5,162
Short-term lease liability		5,231		-
Other		8,418		6,129
Total other current liabilities	$	24,995	$	19,285
Other liabilities:
Deferred revenue	$	17,076	$	13,789
Contingent consideration - long-term		-		3,780
Long-term lease liability		9,385		-
Other		2,127		108
Total other liabilities - long term	$	28,588	$	17,677

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

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

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STOCKHOLDERS' EQUITY (Details) - USD ($) $ in Millions	9 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	May 24, 2019	Apr. 26, 2018
STOCKHOLDERS' EQUITY [Abstract]
Authorized number of shares under stock repurchase program (in shares)			500,000	500,000
Common stock repurchased during the period (in shares)	149,044	156,087
Common stock repurchased during the period	$ 10.7	$ 12.0
Shares repurchased to satisfy tax withholding obligation (in shares)	41,817	40,092
Value of shares repurchased to satisfy tax withholding obligation	$ 3.0	$ 3.9

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BUSINESS COMBINATIONS (Details) - USD ($) $ in Thousands			1 Months Ended	9 Months Ended
	Aug. 23, 2019	Jan. 18, 2019	Dec. 31, 2019	Dec. 31, 2019	Mar. 31, 2019
Allocation of Purchase Price Consideration to Assets Acquired and Liabilities Assumed [Abstract]
Goodwill			$ 118,225	$ 118,225	$ 110,807
ABS Technology [Member]
Business Combination [Abstract]
Cash portion of the acquisition	$ 13,800
Contingent consideration payable	1,700
Payment for accounts receivable			600
Repayment from acquiree			200
Allocation of Purchase Price Consideration to Assets Acquired and Liabilities Assumed [Abstract]
Accounts receivable	9,208
Other assets	743
Identified intangible assets	5,720
Accounts payable and other current liabilities	(6,715)
Performance obligation	(1,140)
Total identifiable net assets	7,816
Goodwill	7,461
Total purchase consideration	$ 15,277
ABS Technology [Member] | Customer Relationships [Member]
Allocation of Purchase Price Consideration to Assets Acquired and Liabilities Assumed [Abstract]
Estimated useful lives				7 years
SLAIT Consulting, LLC [Member]
Business Combination [Abstract]
Percentage of stock acquired		100.00%
Cash portion of the acquisition		$ 50,700
Cash acquired from acquisition		1,000
Liability from working capital adjustment		300	8	$ 8
Allocation of Purchase Price Consideration to Assets Acquired and Liabilities Assumed [Abstract]
Accounts receivable		10,209
Other assets		1,050
Identified intangible assets		18,190	59	59
Accounts payable and other current liabilities		(8,611)
Performance obligation		(5,110)
Total identifiable net assets		15,728
Goodwill		34,301	$ (51)	$ (51)
Total purchase consideration		$ 50,029
SLAIT Consulting, LLC [Member] | Customer Relationships [Member]
Allocation of Purchase Price Consideration to Assets Acquired and Liabilities Assumed [Abstract]
Estimated useful lives				10 years