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 September 30, 2021

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 November 5, 2021, was 13,508,469.

TABLE OF CONTENTS

ePlus inc. AND SUBSIDIARIES

Part I. Financial Information:
Item 1.	Financial Statements
	Unaudited Consolidated Balance Sheets as of September 30, 2021, and March 31, 2021	5
	Unaudited Consolidated Statements of Operations for the Three and Six Months Ended September 30, 2021, and 2020	6
	Unaudited Consolidated Statements of Comprehensive Income for the Three and Six Months Ended September 30, 2021, and 2020	7
	Unaudited Consolidated Statements of Cash Flows for the Three and Six Months Ended September 30, 2021, and 2020	8
	Unaudited Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended September 30, 2021, and 2020	10
	Notes to Unaudited Consolidated Financial Statements	11
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	41
Item 4.	Controls and Procedures	42
Part II. Other Information:
Item 1.	Legal Proceedings	43
Item 1A.	Risk Factors	43
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	43
Item 3.	Defaults Upon Senior Securities	43
Item 4.	Mine Safety Disclosures	43
Item 5.	Other Information	43
Item 6.	Exhibits	44
Signatures		45

2

CAUTIONARY LANGUAGE ABOUT FORWARD-LOOKING STATEMENTS

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

• the duration and ongoing impact of the novel coronavirus (“COVID-19”) pandemic, which could materially adversely affect our financial condition and results of operations and has resulted in governmental authorities imposing numerous unprecedented measures to try to contain the virus that has impacted and may further impact our workforce and operations, the operations of our customers, and those of our respective vendors, suppliers, and partners;

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

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

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

• loss of our credit facility or credit lines with our vendors may restrict our current and future operations;

• uncertainty regarding the phase out of LIBOR may negatively affect our operating results;

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

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

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

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

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

• availability of products from our vendors;

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

• future growth rates in our core businesses;

• reduction of vendor incentives provided to us;

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

• the possibility of goodwill impairment charges in the future;

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

• adapting to meet changes in markets and competitive developments;

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

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

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

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

• performing professional and managed services competently;

3

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

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

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

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

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

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

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

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

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

• our ability to realize our investment in leased equipment;

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

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

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

4

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

ePlus inc. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

	September 30, 2021			March 31, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	56,950		$	129,562
Accounts receivable—trade, net		457,308			391,567
Accounts receivable—other, net		57,346			41,053
Inventories		134,514			69,963
Financing receivables—net, current		80,082			106,272
Deferred costs		30,691			28,201
Other current assets		12,675			10,976
Total current assets		829,566			777,594
Financing receivables and operating leases—net		105,855			90,165
Deferred tax asset—net		1,469			1,468
Property, equipment and other assets		43,895			42,289
Goodwill		126,596			126,645
Other intangible assets—net		32,564			38,614
TOTAL ASSETS	$	1,139,945		$	1,076,775
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES
Current liabilities:
Accounts payable	$	121,263		$	165,162
Accounts payable—floor plan		145,880			98,653
Salaries and commissions payable		36,382			36,839
Deferred revenue		82,937			72,802
Recourse notes payable—current		35,548			5,450
Non-recourse notes payable—current		21,083			50,397
Other current liabilities		32,532			30,061
Total current liabilities		475,625			459,364
Recourse notes payable - long-term		9,360			12,658
Non-recourse notes payable - long-term		4,315			5,664
Other liabilities		37,042			36,679
TOTAL LIABILITIES		526,342			514,365
COMMITMENTS AND CONTINGENCIES (Note 9)
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; 13,510 outstanding at September 30, 2021 and 13,503 outstanding at March 31, 2021		146			145
Additional paid-in capital		155,941			152,366
Treasury stock, at cost, 1,070 shares at September 30, 2021 and 993 shares at March 31, 2021		(82,246	)		(75,372	)
Retained earnings		539,547			484,616
Accumulated other comprehensive income—foreign currency translation adjustment		215			655
Total Stockholders’ Equity		613,603			562,410
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	1,139,945		$	1,076,775

See Notes to Unaudited Consolidated Financial Statements.

5

ePlus inc. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

	Three Months Ended September 30,								Six Months Ended September 30,
	2021			2020		2021			2020
Net sales
Product	$	397,160		$	383,656	$	758,217		$	690,896
Services		60,857			49,425		116,449			97,216
Total		458,017			433,081		874,666			788,112
Cost of sales
Product		297,629			302,963		574,856			529,597
Services		37,386			31,156		71,296			60,996
Total		335,015			334,119		646,152			590,593
Gross profit		123,002			98,962		228,514			197,519
Selling, general, and administrative		74,504			66,889		143,279			136,356
Depreciation and amortization		3,853			3,341		7,779			6,857
Interest and financing costs		342			247		701			824
Operating expenses		78,699			70,477		151,759			144,037
Operating income		44,303			28,485		76,755			53,482
Other income (expense)		(325	)		184		(202	)		282
Earnings before tax		43,978			28,669		76,553			53,764
Provision for income taxes		12,565			8,823		21,622			16,558
Net earnings	$	31,413		$	19,846	$	54,931		$	37,206
Net earnings per common share—basic	$	2.36		$	1.48	$	4.12		$	2.79
Net earnings per common share—diluted	$	2.34		$	1.48	$	4.09		$	2.78
Weighted average common shares outstanding—basic		13,332			13,372		13,333			13,347
Weighted average common shares outstanding—diluted		13,432			13,391		13,431			13,394

See Notes to Unaudited Consolidated Financial Statements.

6

ePlus inc. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

	Three Months Ended September 30,					Six Months Ended September 30,
	2021			2020		2021			2020
NET EARNINGS	$	31,413		$	19,846	$	54,931		$	37,206
OTHER COMPREHENSIVE INCOME, NET OF TAX:
Foreign currency translation adjustments		(506	)		520		(440	)		557
Other comprehensive income		(506	)		520		(440	)		557
TOTAL COMPREHENSIVE INCOME	$	30,907		$	20,366	$	54,491		$	37,763

See Notes to Unaudited Consolidated Financial Statements.

7

ePlus inc. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Six Months Ended September 30,
	2021			2020
Cash flows from operating activities:
Net earnings	$	54,931		$	37,206
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:
Depreciation and amortization		12,044			9,460
Provision for credit losses		98			1,766
Share-based compensation expense		3,575			3,648
Deferred taxes		(1	)		1,032
Payments from lessees directly to lenders—operating leases		(32	)		(13	)
Gain on disposal of property, equipment, and operaing lease equipment		(525	)		(278	)
Changes in:
Accounts receivable		(85,463	)		1,755
Inventories-net		(64,661	)		(23,381	)
Financing receivables—net		(18,019	)		(54,386	)
Deferred costs and other assets		(6,115	)		(1,052	)
Accounts payable-trade		(43,375	)		21,717
Salaries and commissions payable, deferred revenue, and other liabilities		12,539			10,934
Net cash provided by (used in) operating activities		(135,004	)		8,408
Cash flows from investing activities:
Proceeds from sale of property, equipment, and operating lease equipment		2,553			456
Purchases of property, equipment and operating lease equipment		(16,243	)		(3,267	)
Net cash used in investing activities		(13,690	)		(2,811	)
Cash flows from financing activities:
Borrowings of non-recourse and recourse notes payable		64,815			23,613
Repayments of non-recourse and recourse notes payable		(29,386	)		(40,529	)
Repurchase of common stock		(6,874	)		(4,487	)
Repayments of financing of acquisitions		-			(421	)
Net borrowings (repayments) on floor plan facility		47,227			91,554
Net cash provided by financing activities		75,782			69,730
Effect of exchange rate changes on cash		300			(477	)
Net increase (decrease) in cash and cash equivalents		(72,612	)		74,850
Cash and cash equivalents, beginning of period		129,562			86,231
Cash and cash equivalents, end of period	$	56,950		$	161,081

8

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS - continued

(in thousands)

	Six Months Ended September 30,
	2021			2020
Supplemental disclosures of cash flow information:
Cash paid for interest	$	683		$	739
Cash paid for income taxes	$	24,511		$	12,348
Cash paid for amounts included in the measurement of lease liabilities	$	2,280		$	2,975
Schedule of non-cash investing and financing activities:
Proceeds from sale of property, equipment, and leased equipment	$	100		$	-
Purchases of property, equipment, and operating lease equipment	$	(2,386	)	$	(393	)
Borrowing of non-recourse and recourse notes payable	$	41,195		$	35,780
Repayments of non-recourse and recourse notes payable	$	(32	)	$	(13	)
Vesting of share-based compensation	$	8,398		$	7,916
New operating lease assets obtained in exchange for lease obligations	$	1,070		$	774

See Notes to Unaudited Consolidated Financial Statements.

9

ePlus inc. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)

	Six Months Ended September 30, 2021
	Common Stock					Additional Paid-In		Treasury			Retained		Accumulated Other Comprehensive
	Shares			Par Value		Capital		Stock			Earnings		Income			Total
Balance, March 31, 2021		13,503		$	145	$	152,366	$	(75,372	)	$	484,616	$	655		$	562,410
Issuance of restricted stock awards		78			1		-		-			-		-			1
Share-based compensation		-			-		1,735		-			-		-			1,735
Repurchase of common stock		(45	)		-		-		(4,111	)		-		-			(4,111	)
Net earnings		-			-		-		-			23,518		-			23,518
Foreign currency translation adjustment		-			-		-		-			-		66			66
Balance, June 30, 2021		13,536		$	146	$	154,101	$	(79,483	)	$	508,134	$	721		$	583,619
Issuance of restricted stock awards		6			-		-		-			-		-			-
Share-based compensation		-			-		1,840		-			-		-			1,840
Repurchase of common stock		(32	)		-		-		(2,763	)		-		-			(2,763	)
Net earnings		-			-		-		-			31,413		-			31,413
Foreign currency translation adjustment		-			-		-		-			-		(506	)		(506	)
Balance, September 30, 2021		13,510		$	146	$	155,941	$	(82,246	)	$	539,547	$	215		$	613,603

	Six Months Ended September 30, 2020
	Common Stock					Additional Paid-In		Treasury			Retained		Accumulated Other Comprehensive
	Shares			Par Value		Capital		Stock			Earnings		Income			Total
Balance, March 31, 2020		13,500		$	144	$	145,197	$	(68,424	)	$	410,219	$	(991	)	$	486,145
Issuance of restricted stock awards		91			1		-		-			-		-			1
Share-based compensation		-			-		1,885		-			-		-			1,885
Repurchase of common stock		(38	)		-		-		(2,703	)		-		-			(2,703	)
Net earnings		-			-		-		-			17,360		-			17,360
Foreign currency translation adjustment		-			-		-		-			-		37			37
Balance, June 30, 2020		13,553		$	145	$	147,082	$	(71,127	)	$	427,579	$	(954	)	$	502,725
Issuance of restricted stock awards		8			-		-		-			-		-			-
Share-based compensation		-			-		1,763		-			-		-			1,763
Repurchase of common stock		(24	)		-		-		(1,784	)		-		-			(1,784	)
Net earnings		-			-		-		-			19,846		-			19,846
Foreign currency translation adjustment		-			-		-		-			-		520			520
Balance, September 30, 2020		13,537		$	145	$	148,845	$	(72,911	)	$	447,425	$	(434	)	$	523,070

See Notes to Unaudited Consolidated Financial Statements.

10

ePlus inc. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

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

INTERIM FINANCIAL STATEMENTS — The unaudited consolidated financial statements for the six months ended September 30, 2021, and 2020, were prepared by us and include all normal and recurring adjustments that, in the opinion of management, are necessary for a fair presentation of our financial position, results of operations, changes in comprehensive income, and cash flows for such periods. Operating results for the six months ended September 30, 2021, and 2020 are not necessarily indicative of results that may be expected for any other interim period or for the full fiscal year ending March 31, 2022, or any other future period. These unaudited consolidated financial statements do not include all disclosures required by the accounting principles generally accepted in the United States (“US GAAP”) for annual financial statements. Our audited consolidated financial statements are contained in our annual report on Form 10-K for the year ended March 31, 2021 (“2021 Annual Report”), which should be read in conjunction with these interim consolidated financial statements.

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

CONCENTRATIONS OF RISK — A substantial portion of our sales are products from Cisco Systems, which were 40% and 41% of our technology segment’s net sales for the three months ended September 30, 2021, and 2020, respectively, and 41% and 40% of our technology segment’s net sales for the six months ended September 30, 2021, and 2020, 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, 2021.

2. REVENUES

CONTRACT BALANCES

Accounts receivable – trade consists entirely of amounts due from contracts with customers. In addition, we had $53.8 million and $54.6 million of receivables from contracts with customers included within financing receivables as of September 30, 2021, and March 31, 2021, respectively. The following table provides the balance of contract liabilities from contracts with customers (in thousands):

	September 30, 2021		March 31, 2021
Current (included in deferred revenue)	$	82,184	$	72,299
Non-current (included in other liabilities)	$	27,813	$	26,042

11

Revenue recognized from the beginning contract liability balance was $14.6 million and $36.1 million for the three and six months ended September 30, 2021, respectively, and $11.3 million and $26.9 million for the three and six months ended September 30, 2020, respectively.

PERFORMANCE OBLIGATIONS

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

Remainder of the year ending March 31, 2022	$	26,309
Year ending March 31, 2023		24,656
Year ending March 31, 2024		12,595
Year ending March 31, 2025		2,920
Year ending March 31, 2026 and thereafter		1,467
Total remaining performance obligations	$	67,947

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

3. FINANCING RECEIVABLES AND OPERATING LEASES

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

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

	Three months ended September 30,				Six months ended September 30,
	2021		2020		2021		2020
Net sales	$	5,962	$	7,655	$	9,779	$	17,818
Cost of sales		4,926		5,402		8,291		10,729
Gross profit	$	1,036	$	2,253	$	1,488	$	7,089

The following table provides interest income in aggregate on our sales-type leases and lease income on our operating leases for the three and six months ended September 30, 2021, and 2020 (in thousands):

	Three months ended September 30,				Six months ended September 30,
	2021		2020		2021		2020
Interest income on sales-type leases	$	1,000	$	1,884	$	2,290	$	4,103
Lease income on operating leases	$	6,634	$	3,900	$	11,844	$	7,738

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FINANCING RECEIVABLES—NET

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

September 30, 2021	Notes Receivable			Lease Receivables			Financing Receivables
Gross receivables	$	104,066		$	54,261		$	158,327
Unguaranteed residual value (1)		-			13,411			13,411
Initial direct costs, net of amortization		271			-			271
Unearned income		-			(7,095	)		(7,095	)
Allowance for credit losses (2)		(1,687	)		(672	)		(2,359	)
Total, net	$	102,650		$	59,905		$	162,555
Reported as:
Current	$	55,928		$	24,154		$	80,082
Long-term		46,722			35,751			82,473
Total, net	$	102,650		$	59,905		$	162,555

(1) Includes unguaranteed residual values of $8,081 thousand that we retained after selling the related lease receivable.

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

March 31, 2021	Notes Receivable			Lease Receivables			Financing Receivables
Gross receivables	$	112,641		$	68,393		$	181,034
Unguaranteed residual value (1)		-			14,876			14,876
Initial direct costs, net of amortization		425			-			425
Unearned income		-			(8,393	)		(8,393	)
Allowance for credit losses (2)		(1,212	)		(1,171	)		(2,383	)
Total, net	$	111,854		$	73,705		$	185,559
Reported as:
Current	$	73,175		$	33,097		$	106,272
Long-term		38,679			40,608			79,287
Total, net	$	111,854		$	73,705		$	185,559

(1) Includes unguaranteed residual values of $9,453 thousand that we retained after selling the related lease receivable.

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

OPERATING LEASES—NET

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

	September 30, 2021			March 31, 2021
Cost of equipment under operating leases	$	34,082		$	18,748
Accumulated depreciation		(10,700	)		(7,870	)
Investment in operating lease equipment—net (1)	$	23,382		$	10,878

(1) Amounts include estimated unguaranteed residual values of $4.6 million and $2.5 million as of September 30, 2021, and March 31, 2021, respectively.

TRANSFERS OF FINANCIAL ASSETS

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

For transfers accounted for as a secured borrowing, the corresponding investments serve as collateral for non-recourse notes payable. As of  September 30, 2021, and March 31, 2021, we had financing receivables of $22.6 million and $60.5 million, respectively, and operating leases of $8.1 million and $3.3 million, respectively, which were collateral for non-recourse notes payable. See Note 8, ‘'Credit Facility and Notes Payable.'’

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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 September 30, 2021, and 2020, we recognized net gains of $10.1 million and $4.5 million, respectively, and total proceeds from these sales were $615.0 million and $118.5 million, respectively. For the year to date periods ended September 30, 2021, and 2020, we recognized net gains of $13.3 million and $7.0 million, respectively, and total proceeds from these sales were $690.3 million and $191.7 million, respectively.

When we retain servicing obligations in transfers accounted for as sales, we allocate a portion of the proceeds to deferred revenue, which is recognized as we perform the services. As of September 30, 2021, and March 31, 2021, we had deferred revenue of $0.5 million and $0.3 million, respectively, for servicing obligations.

In a limited number of transfers accounted for as sales, we indemnified the assignee if the lessee elects to early terminate the lease. As of September 30, 2021, the total potential payments that could result from these indemnities is immaterial.

4. LESSEE ACCOUNTING

We lease office space for periods up to six years. We recognize our right-of-use assets as part of property, equipment, and other assets. We recognize the current and long-term portions of our lease liability as part of other current liabilities and other liabilities, respectively. We recognized rent expense of $1.3 million as part of selling, general and administrative expenses for the three months ended September 30, 2021, and $1.5 million for the three months ending September 30, 2020, and $2.6 million and $3.1 million for the six months ended September 30, 2021, and 2020, respectively.

5. GOODWILL AND OTHER INTANGIBLE ASSETS

GOODWILL

The following table summarizes the changes in the carrying amount of goodwill for the six months ended September 30, 2021 (in thousands):

	Six months ended September 30, 2021
	Goodwill			Accumulated Impairment Loss			Net Carrying Amount
Beginning balance	$	135,318		$	(8,673	)	$	126,645
Foreign currency translations		(49	)		-			(49	)
Ending balance	$	135,269		$	(8,673	)	$	126,596

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 September 30, 2021, relates to our technology segment, which we also determined to be one reporting unit. The change in our goodwill balance during the six months ended September 30, 2021, is due solely to foreign currency translation.

We test goodwill for impairment on an annual basis, as of the first day of our third fiscal quarter, and between annual tests if an event occurs, or circumstances change, that would more likely than not reduce the fair value of a reporting unit below its carrying value. In our annual test as of October 1, 2020, we performed a qualitative assessment of goodwill and concluded that, more likely than not, the fair value of our technology reporting unit continued to substantially exceed its carrying value.

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OTHER INTANGIBLE ASSETS

Our other intangible assets consist of the following on September 30, 2021, and March 31, 2021 (in thousands):

	September 30, 2021							March 31, 2021
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Customer relationships & other intangibles	$	77,281	$	(47,424	)	$	29,857	$	77,335	$	(42,115	)	$	35,220
Capitalized software development		10,491		(7,784	)		2,707		10,553		(7,159	)		3,394
Total	$	87,772	$	(55,208	)	$	32,564	$	87,888	$	(49,274	)	$	38,614

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

Total amortization expense for customer relationships and other intangible assets was $3.0 million and $2.5 million for the three months ended September 30, 2021, and September 30, 2020, respectively, and $6.0 million and $5.0 million for the six months ended September 30, 2021, and 2020, respectively.

6. ALLOWANCE FOR CREDIT LOSSES

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

	Accounts Receivable			Notes Receivable			Lease Receivables			Total
Balance April 1, 2021	$	2,064		$	1,212		$	1,171		$	4,447
Provision for credit losses		116			479			(497	)		98
Write-offs and other		(64	)		(4	)		(2	)		(70	)
Balance September 30, 2021	$	2,116		$	1,687		$	672		$	4,475

	Accounts Receivable			Notes Receivable			Lease Receivables			Total
Balance April 1, 2020	$	1,781		$	798		$	610		$	3,189
Provision for credit losses		576			566			624			1,766
Write-offs and other		(27	)		(27	)		(7	)		(61	)
Balance September 30, 2020	$	2,330		$	1,337		$	1,227		$	4,894

The following table provides the amortized cost basis of our financing receivables by credit quality rating “CQR” and by credit origination year as of September 30, 2021 (in thousands):

	Amortized cost basis by origination year ending March 31,
	2022		2021		2020		2019		2018		2017		Total		Transfers (2)			Net credit exposure
Notes receivable:
High CQR	$	38,015	$	42,542	$	2,256	$	517	$	226	$	10	$	83,566	$	(35,004	)	$	48,562
Average CQR		12,933		4,794		2,104		342		3		-		20,176		(2,655	)		17,521
Low CQR		-		-		-		324		-		-		324		-			324
Total	$	50,948	$	47,336	$	4,360	$	1,183	$	229	$	10	$	104,066	$	(37,659	)	$	66,407
Lease receivables:
High CQR	$	12,716	$	10,504	$	4,253	$	1,424	$	168	$	48	$	29,113	$	(6,911	)	$	22,202
Average CQR		8,906		9,261		2,266		233		141		22		20,829		(5,641	)		15,188
Low CQR		1,497		1,057		-		-		-		-		2,554		-			2,554
Total	$	23,119	$	20,822	$	6,519	$	1,657	$	309	$	70	$	52,496	$	(12,552	)	$	39,944
Total amortized cost (1)	$	74,067	$	68,158	$	10,879	$	2,840	$	538	$	80	$	156,562	$	(50,211	)	$	106,351

(1) Unguaranteed residual values of $8,081 thousand that we retained after selling the related lease receivable and initial direct costs of notes receivable of $271 thousand are excluded from amortized cost.

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

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We evaluate our customers using an internally assigned CQR:

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

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

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

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

	Amortized cost basis by origination year ending March 31,
	2021		2020		2019		2018		2017		Total		Transfers (2)			Net credit exposure
Notes receivable:
High CQR	$	93,793	$	6,250	$	769	$	771	$	19	$	101,602	$	(63,471	)	$	38,131
Average CQR		7,689		2,468		550		8		-		10,715		(2,896	)		7,819
Low CQR		-		-		324		-		-		324		-			324
Total	$	101,482	$	8,718	$	1,643	$	779	$	19	$	112,641	$	(66,367	)	$	46,274
Lease receivables:
High CQR	$	28,898	$	5,885	$	1,798	$	463	$	125	$	37,169	$	(7,468	)	$	29,701
Average CQR		23,445		3,482		1,017		270		40		28,254		(4,592	)		23,662
Low CQR		-		-		-		-		-		-		-			-
Total	$	52,343	$	9,367	$	2,815	$	733	$	165	$	65,423	$	(12,060	)	$	53,363
Total amortized cost (1)	$	153,825	$	18,085	$	4,458	$	1,512	$	184	$	178,064	$	(78,427	)	$	99,637

(1) Unguaranteed residual values of $9,453 thousand that we retained after selling the related lease receivable and initial direct costs of notes receivable of $425 thousand are excluded from amortized cost.

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

The following table provides an aging analysis of our financing receivables as of September 30, 2021 (in thousands):

	31-60 Days Past Due		61-90 Days Past Due		> 90 Days Past Due		Total Past Due		Current		Total Billed		Unbilled		Amortized Cost
Notes receivable	$	653	$	1,658	$	713	$	3,024	$	6,737	$	9,761	$	94,305	$	104,066
Lease receivables		323		493		726		1,542		2,480		4,022		48,474		52,496
Total	$	976	$	2,151	$	1,439	$	4,566	$	9,217	$	13,783	$	142,779	$	156,562

The following table provides an aging analysis of our financing receivables as of March 31, 2021 (in thousands):

	31-60 Days Past Due		61-90 Days Past Due		> 90 Days Past Due		Total Past Due		Current		Total Billed		Unbilled		Amortized Cost
Notes receivable	$	648	$	910	$	673	$	2,231	$	3,240	$	5,471	$	107,170	$	112,641
Lease receivables		804		132		643		1,579		2,566		4,145		61,278		65,423
Total	$	1,452	$	1,042	$	1,316	$	3,810	$	5,806	$	9,616	$	168,448	$	178,064

Our financial assets on nonaccrual status were not significant as of September 30, 2021, and March 31, 2021.

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7. PROPERTY, EQUIPMENT, OTHER ASSETS AND LIABILITIES

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

	September 30, 2021		March 31, 2021
Other current assets:
Deposits & funds held in escrow	$	453	$	759
Prepaid assets		11,703		9,939
Other		519		278
Total	$	12,675	$	10,976
Property, equipment and other assets
Property and equipment, net	$	7,368	$	7,388
Deferred costs - non-current		19,770		19,063
Right-of-use assets		7,562		8,763
Other		9,195		7,075
Total	$	43,895	$	42,289
Other current liabilities:
Accrued expenses	$	13,856	$	13,598
Accrued income taxes payable		2,146		4,439
Short-term lease liability		3,835		3,934
Other		12,695		8,090
Total	$	32,532	$	30,061
Other liabilities:
Deferred revenue -  non-current	$	28,174	$	26,309
Long-term lease liability		3,816		5,040
Other		5,052		5,330
Total	$	37,042	$	36,679

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

8. CREDIT FACILITY AND NOTES PAYABLE

CREDIT FACILITY

Throughout the current fiscal year and until October 12, 2021, ePlus Technology, inc. and certain of its subsidiaries (the “Borrowers”), which are part of our technology segment, financed their operations, in addition to funds generated from operations, with a credit facility with Wells Fargo Commercial Distribution Finance, LLC (“WFCDF”). This facility provided short-term capital for our technology segment. There were two components of the WFCDF credit facility: (1) a floor plan component, and (2) an accounts receivable component.

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

As of September 30, 2021, the limit of the two components of the credit facility was $350 million as result of our election to temporarily uplift the aggregate limit.

Our borrowing availability under the credit facility varied, based upon the value of the receivables and inventory of the Borrowers. We had outstanding balances of $145.9 million and $98.7 million under the floor plan component as of September 30, 2021, and March 31, 2021, respectively. This component is presented as part of as accounts payable – floorplan. Under the accounts receivable component, we had $29 million as of September 30, 2021 and no outstanding balance as of March 31, 2021. This component is presented as part of recourse notes payable – current. The fair value of the outstanding balances under the WFCDF credit facility were approximately equal to their carrying value as of September 30, 2021, and March 31, 2021.

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The WFCDF credit facility was secured by the assets of the Borrowers. Additionally, the credit facility required a guaranty of $10.5 million by ePlus inc.

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

The credit facility required that financial statements of the Borrowers be provided within 45 days of each quarter and 90 days of each fiscal year end and required that other operational reports be provided on a regular basis. Either party could terminate with 90 days’ written notice.

On October 13, 2021, we entered into a First Amended and Restated Credit Agreement by and among the Borrowers, WFCDF, as administrative agent thereunder, various banks and other financial institutions (including WFCDF) who are parties thereto as lenders (collectively, the “Lenders”) and others, pursuant to which, among other things, the Lenders established for the benefit of the Borrowers a discretionary senior secured floorplan facility in the aggregate principal amount of up to $375 million, together with a sublimit for a revolving credit facility for up to $100 million (collectively, the “2021 Credit Facility”).

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

RECOURSE NOTES PAYABLE

Recourse notes payable consist of borrowings that, in the event of default, the lender has recourse against us. As of September 30, 2021, we had $44.9 million in recourse borrowings which includes $29.0 million outstanding under our revolving credit facility with WFCDF, and $15.9 million arising from one installment payment arrangement. Our payments under this installment agreement are due quarterly in amounts that are correlated to the payments due to us from a customer under a related notes receivable. We discounted our payments to calculate our payable balance using an interest rate of 3.50% as of both September 30, 2021, and March 31, 2021.

NON-RECOURSE NOTES PAYABLE

Non-recourse notes payable consists of borrowings that, in the event of a default by a customer, the lender generally only has recourse against the customer, and the assets serving as collateral, but not against us. As of September 30, 2021, and March 31, 2021, we had $25.4 million and $56.1 million, respectively, of non-recourse borrowings that were collateralized by investments in notes and leases. Principal and interest payments are generally due monthly in amounts that are approximately equal to the total payments due from the customer under the leases or notes receivable that collateralize the notes payable. The weighted average interest rate for our non-recourse notes payable was 3.59% and 3.35%, as of September 30, 2021, and March 31, 2021, respectively.

9. COMMITMENTS AND CONTINGENCIES

LEGAL PROCEEDINGS

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

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10. EARNINGS PER SHARE

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

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

	Three Months Ended September 30,				Six Months Ended September 30,
	2021		2020		2021		2020
Net earnings attributable to common shareholders - basic and diluted	$	31,413	$	19,846	$	54,931	$	37,206
Basic and diluted common shares outstanding:
Weighted average common shares outstanding — basic		13,332		13,372		13,333		13,347
Effect of dilutive shares		100		19		98		47
Weighted average shares common outstanding — diluted		13,432		13,391		13,431		13,394
Earnings per common share - basic	$	2.36	$	1.48	$	4.12	$	2.79
Earnings per common share - diluted	$	2.34	$	1.48	$	4.09	$	2.78

STOCK SPLIT

On November 9, 2021, our Board of Directors declared a two-for-one stock split effected in the form of a stock dividend. The stock split will be in the form of a 100 percent stock dividend payable on December 13, 2021, to shareholders of record at the close of business on November 29, 2021. We expect that our common stock will begin trading at the split-adjusted price on December 14, 2021.

All references made to share or per share amounts in the accompanying unaudited consolidated financial statements and applicable disclosures herein, other than the table immediately below, are presented on a pre-split basis. The following table provides pro forma earnings per share, giving retroactive effect to the stock split (in thousands, except per share data):

	Three Months Ended September 30,				Six Months Ended September 30,
	2021		2020		2021		2020
Earnings per common share:
Basic - pro forma		1.18		0.74		2.06		1.39
Diluted - pro forma		1.17		0.74		2.04		1.39
Weighted average common shares outstanding:
Basic - pro forma		26,664		26,744		26,666		26,694
Diluted - pro forma		26,864		26,782		26,862		26,788

As a result of the stock split, all historical per share data and number of shares outstanding presented in future financial statements will be retroactively adjusted.

11. STOCKHOLDERS’ EQUITY

SHARE REPURCHASE PLAN

On March 18, 2021, our board of directors authorized the repurchase of up to 500,000 shares of our outstanding common stock over a 12-month period beginning May 28, 2021, and ending on May 27, 2022. The plan authorized purchases to be made from time to time in the open market, or in privately negotiated transactions, subject to availability. Any repurchased shares will have the status of treasury shares and may be used, when needed, for general corporate purposes.

On May 20, 2020, our board of directors authorized the repurchase of up to 500,000 shares of our outstanding common stock over a 12-month period beginning May 28, 2020, and ending on May 27, 2021. The plan authorized purchases to be made from time to time in the open market, or in privately negotiated transactions, subject to availability. Any repurchased shares will have the status of treasury shares and may be used, when needed, for general corporate purposes.

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During the six months ended September 30, 2021, we purchased 49,028 shares of our outstanding common stock at a value of $4.3 million under the share repurchase plan; we also purchased 27,715 shares of common stock at a value of $2.6 million to satisfy tax withholding obligations relating to the vesting of employees’ restricted stock.

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

12. SHARE-BASED COMPENSATION

SHARE-BASED PLANS

ePlus’ 2021 Employee Long-Term Incentive Plan (“2021 Employee LTIP”) was approved by our shareholders on September 16, 2021. The 2021 Employee LTIP is effective October 1, 2021 and replaces the ePlus inc. 2012 Employee Long-Term Incentive Plan (“2012 Employee LTIP”), as approved by our stockholders on September 13, 2012. Beginning October 1, 2021, no further shares will be granted under the 2012 Employee LTIP.

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

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

RESTRICTED STOCK ACTIVITY

For the six months ended September 30, 2021, we granted 6,393 shares under the 2017 Director LTIP, and 77,861 restricted shares under the 2012 Employee LTIP. For the six months ended September 30, 2020, we granted 9,309 shares under the 2017 Director LTIP, and 89,873 restricted shares under the 2012 Employee LTIP. A summary of the grants is as follows:

	Number of Shares			Weighted Average Grant-date Fair Value
Nonvested April 1, 2021		183,378		$	74.97
Granted		84,254		$	92.99
Vested		(92,093	)	$	78.12
Nonvested September 30, 2021		175,539		$	82.00

Upon each vesting period of the restricted stock awards, employees are subject to minimum tax withholding obligations. Under the 2012 Employee LTIP, we purchased enough shares due to participants to satisfy the minimum tax withholding requirements on employee stock awards. For the six months ended September 30, 2021, we withheld 27,715 shares of common stock at a value of $2.6 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. Share-based compensation expense for both the three and six months ended September 30, 2021, and 2020, were $1.8 million and $3.6 million, respectively. Unrecognized compensation expense related to non-vested restricted stock was $12.4 million as of September 30, 2021, which will be fully recognized over the next 33 months.

We also provide our employees with a contributory 401(k) profit sharing plan, to which we may contribute from time to time at our sole discretion. Employer contributions to the plan are always fully vested. Our estimated contribution expense for the plan for the three months ended September 30, 2021, and 2020, was $1.0 million and $0.7 million, respectively. For the six months ended September 30, 2021, and 2020, our estimated contribution expense for the plan was $1.8 million and $1.4 million, respectively.

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13. INCOME TAXES

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

Our total gross unrecognized tax benefits recorded for uncertain income tax, and interest and penalties thereon, were negligible as of September 30, 2021, and September 30, 2020. We had no additions or reductions to our gross unrecognized tax benefits during the six months ended September 30, 2021. We recognize accrued interest and penalties related to unrecognized tax benefits in income tax expense.

14. FAIR VALUE OF FINANCIAL INSTRUMENTS

We account for the fair values of our assets and liabilities in accordance with Codification Topic 820, Fair Value Measurement and Disclosure. The following table summarizes the fair value hierarchy of our financial instruments as of September 30, 2021, and March 31, 2021 (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)
September 30, 2021
Assets:
Money market funds	$	136	$	136	$	-	$	-
March 31, 2021
Assets:
Money market funds	$	45,134	$	45,134	$	-	$	-

15. BUSINESS COMBINATIONS

SYSTEMS MANAGEMENT PLANNING, INC. (SMP)

On December 31, 2020, our subsidiary, ePlus Technology, inc., acquired certain assets and liabilities of SMP, an established provider of technology solutions and services in upstate New York and the Northeast. The acquisition enhances ePlus’ footprint across the region, broadens our technology solution offerings especially in the areas of collaboration and supporting virtual employees, and adds to ePlus’ set of commercial, enterprise and state, local, and education customers.

Our sum of consideration transferred was $27.0 million consisting of $29.0 million paid in cash at closing less $2.0 million that was paid back to us in our quarter ended March 31, 2021, related to a working capital adjustment. Our allocation of the purchase consideration to the assets acquired and liabilities assumed is presented below (in thousands):

	Acquisition Date Amount
Accounts receivable	$	14,526
Other assets		3,344
Identified intangible assets		14,280
Accounts payable and other current liabilities		(11,424	)
Performance obligations		(2,020	)
Total identifiable net assets		18,706
Goodwill		8,328
Total purchase consideration	$	27,034

The identified intangible assets of $14.3 million consists of customer relationships with an estimated useful life of seven years. The fair value of acquired receivables equals the gross contractual amounts receivable. We expect to collect all acquired receivables.

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We recognized goodwill related to this transaction of $8.3 million, which was assigned to our technology reporting unit. The goodwill recognized in the acquisition is attributable to the acquired assembled workforce and expected synergies, none of which qualify for recognition as a separate intangible asset. The total amount of goodwill is expected to be deductible for tax purposes. The amount of revenues and earnings of the acquiree since the acquisition date are not material. Likewise, the impact to the revenue and earnings of the combined entity for the current reporting period as though the acquisition date had been April 1, 2020, is not material.

16. 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 for the three-and six-month periods ended September 30, 2021, and 2020 are summarized in the following table (in thousands):

	Three Months Ended
	September 30, 2021							September 30, 2020
	Technology		Financing		Total			Technology		Financing		Total
Sales
Product	$	375,444	$	21,716	$	397,160		$	369,934	$	13,722	$	383,656
Service		60,857		-		60,857			49,425		-		49,425
Net sales		436,301		21,716		458,017			419,359		13,722		433,081
Cost of Sales
Product		293,837		3,792		297,629			301,006		1,957		302,963
Service		37,386		-		37,386			31,156		-		31,156
Total cost of sales		331,223		3,792		335,015			332,162		1,957		334,119
Gross Profit		105,078		17,924		123,002			87,197		11,765		98,962
Selling, general, and administrative		70,803		3,701		74,504			62,586		4,303		66,889
Depreciation and amortization		3,825		28		3,853			3,313		28		3,341
Interest and financing costs		199		143		342			1		246		247
Operating expenses		74,827		3,872		78,699			65,900		4,577		70,477
Operating income		30,251		14,052		44,303			21,297		7,188		28,485
Other income (expense)						(325	)						184
Earnings before tax					$	43,978						$	28,669
Net Sales
Contracts with customers	$	430,339	$	1,776	$	432,115		$	412,357	$	1,028	$	413,385
Financing and other		5,962		19,940		25,902			7,002		12,694		19,696
Net Sales	$	436,301	$	21,716	$	458,017		$	419,359	$	13,722	$	433,081
Selected Financial Data - Statement of Cash Flow
Depreciation and amortization	$	4,074	$	1,888	$	5,962		$	3,499	$	1,182	$	4,681
Purchases of property, equipment and operating lease equipment	$	948	$	8,301	$	9,249		$	990	$	-	$	990
Selected Financial Data - Balance Sheet
Total assets	$	902,070	$	237,875	$	1,139,945		$	812,633	$	226,078	$	1,038,711

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	Six Months Ended
	September 30, 2021							September 30, 2020
	Technology		Financing		Total			Technology		Financing		Total
Sales
Product	$	720,210	$	38,007	$	758,217		$	663,367	$	27,529	$	690,896
Service		116,449		-		116,449			97,216		-		97,216
Net sales		836,659		38,007		874,666			760,583		27,529		788,112
Cost of Sales
Product		564,852		10,004		574,856			525,549		4,048		529,597
Service		71,296		-		71,296			60,996		-		60,996
Total cost of sales		636,148		10,004		646,152			586,545		4,048		590,593
Gross Profit		200,511		28,003		228,514			174,038		23,481		197,519
Selling, general, and administrative		136,956		6,323		143,279			128,142		8,214		136,356
Depreciation and amortization		7,723		56		7,779			6,801		56		6,857
Interest and financing costs		358		343		701			266		558		824
Operating expenses		145,037		6,722		151,759			135,209		8,828		144,037
Operating income		55,474		21,281		76,755			38,829		14,653		53,482
Other income (expense)						(202	)						282
Earnings before tax					$	76,553						$	53,764
Net Sales
Contracts with customers	$	826,880	$	7,194	$	834,074		$	746,344	$	1,988	$	748,332
Financing and other		9,779		30,813		40,592			14,239		25,541		39,780
Net Sales	$	836,659	$	38,007	$	874,666		$	760,583	$	27,529	$	788,112
Selected Financial Data - Statement of Cash Flow
Depreciation and amortization	$	8,177	$	3,867	$	12,044		$	7,133	$	2,327	$	9,460
Purchases of property, equipment and operating lease equipment	$	2,255	$	13,988	$	16,243		$	3,101	$	166	$	3,267
Selected Financial Data - Balance Sheet
Total assets	$	902,070	$	237,875	$	1,139,945		$	812,633	$	226,078	$	1,038,711

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TECHNOLOGY SEGMENT DISAGGREGATION OF REVENUE

We analyze net sales for our technology segment by customer end market and by vendor, as opposed to discrete product and service categories, which are summarized for the three and six month periods ended September 30, 2021, and 2020 in the tables below (in thousands):

	Three Months Ended September 30,						Six Months Ended September 30,
	2021			2020			2021			2020
Customer end market:
Telecom, Media & Entertainment	$	115,784		$	96,927		$	227,976		$	153,579
Technology		53,752			76,321			122,892			146,288
State and local government and educational institutions		68,662			76,492			134,077			147,055
Healthcare		88,237			59,252			142,925			105,788
Financial Services		37,036			46,732			67,047			94,153
All others		72,830			63,635			141,742			113,720
Net sales		436,301			419,359			836,659			760,583
Less: Revenue from financing and other		(5,962	)		(7,002	)		(9,779	)		(14,239	)
Revenue from contracts with customers	$	430,339		$	412,357		$	826,880		$	746,344

	Three Months Ended September 30,						Six Months Ended September 30,
	2021			2020			2021			2020
Vendor
Cisco Systems	$	174,072		$	173,166		$	340,974		$	301,098
Dell / EMC		43,498			15,349			69,838			46,430
Juniper Networks		18,438			24,716			43,152			38,295
HP Inc. & HPE		14,038			16,395			31,240			33,433
Arista Networks		8,047			13,443			19,545			20,263
NetApp		29,536			9,914			39,993			25,335
All others		148,672			166,376			291,917			295,729
Net sales		436,301			419,359			836,659			760,583
Less: Revenue from financing and other		(5,962	)		(7,002	)		(9,779	)		(14,239	)
Revenue from contracts with customers	$	430,339		$	412,357		$	826,880		$	746,344

FINANCING SEGMENT DISAGGREGATION OF REVENUE

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

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT OF OPERATIONS

This discussion is intended to further the reader’s understanding of our consolidated financial condition and results of operations. It should be read in conjunction with the financial statements included in this quarterly report on Form 10-Q and our 2021 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 2021 Annual Report, as supplemented in subsequently filed reports, and in Part II, Item 1A. “Risk Factors” in this Report.

EXECUTIVE OVERVIEW

BUSINESS DESCRIPTION

We are a leading solutions provider 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 us to craft optimized solutions that take advantage of the cost, scale and efficiency of private, public and hybrid cloud in an evolving market. We also provide consulting, staffing, professional, managed, IT staff augmentation, and complete lifecycle management services including flexible financing and solutions in the areas of security, cloud, networking, data center, collaboration and emerging technologies. We have been in the business of selling, leasing, financing, and managing IT and other assets for more than 30 years.

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

Our scale and financial resources have enabled us to continue investing in engineering and technology resources to stay on the forefront of technology trends. Our expertise in core and emerging technologies, buttressed by our robust portfolio of consulting, professional, and managed services, has enabled ePlus to remain a trusted advisor for our customers. In addition, we offer a wide range of consumption options including leasing and financing for technology and other capital assets. We believe our lifecycle approach offering of integrated solutions, services and financing, asset management and our proprietary supply chain software, is unique in the industry. This broad portfolio enables us to deliver a 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 sophisticated solutions enabling our customers’ business outcomes.

Our go-to-market strategy focuses primarily on diverse end-markets for middle market to large enterprises. We serve customers in markets including telecom, media and entertainment, technology, state and local government and educational institutions (“SLED”), healthcare, and financial services. We sell to customers in the United States (“US”), which accounts for most of our sales, and to customers in select international markets including the United Kingdom (“UK”), the European Union (“EU”), India, and Singapore. Our technology segment accounts for 96% of our net sales, and 72% of our operating income, while our financing segment accounts for 4% of our net sales, and 28% of our operating income, for the six months ended September 30, 2021.

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BUSINESS TRENDS

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

As COVID-19 impacts continue across the country and globe, we have been adjusting our business activities for the safety of our employees and to best serve our customers in this rapidly evolving environment. Most of our offices are open, with required health and safety protocols in place. However, we have implemented a flexible work from home strategy applicable to all offices and operational continuity plans to provide sufficient resources to continue supporting our customers, and we will continue to evaluate returning to the office on an ongoing basis. Our configuration centers have remained open with our employees working in them following required health and safety protocols. In addition, we also have a procedure to review our employees’ business-related travel in accordance with health regulations and guidance. Our managed service teams are distributed across the US with the ability to leverage technology to provide coverage while working from home. While we and many of our customers and vendor partners have restricted travel, we are leveraging video and other collaborative tools to continue to be responsive.

Our account relationship teams are actively engaging with our customers, to ensure they have the support needed in adjusting to changes in the business environment and government directives. Also, we are working closely with our vendor partners to address varying impacts on their supply chains, which have been impacted by materials shortages.

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

The extent to which the COVID-19 pandemic impacts our business going forward will depend on numerous evolving factors we cannot reliably predict, including the duration and scope of the pandemic including the impact of variants; governmental, business, and individuals’ actions in response to the pandemic; the efficacy of vaccines and boosters, the duration of the vaccination distribution, the willingness of people to be inoculated, and potential vaccine mandates; and the impact on economic activity including the possibility of recession, inflation, or financial market instability. These factors may adversely impact business and government spending on technology as well as our customers’ ability to pay for our products and services on an ongoing basis. This uncertainty also affects management’s accounting estimates and assumptions, which could result in greater variability in a variety of areas that depend on these estimates and assumptions. Refer to Part I, Item 1A, “Risk Factors,” in our 2021 Annual Report, as supplemented in subsequently filed reports, and in Part II, Item 1A. “Risk Factors” in this Report.

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

KEY BUSINESS METRICS

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

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

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Our key business metrics for the three- and six-month periods ended September 30, 2021, and 2020 are summarized in the following tables (dollars in thousands):

	Three Months Ended September 30,						Six Months Ended September 30,
Consolidated	2021			2020			2021			2020
Net sales	$	458,017		$	433,081		$	874,666		$	788,112
Gross profit	$	123,002		$	98,962		$	228,514		$	197,519
Gross margin		26.9	%		22.9	%		26.1	%		25.1	%
Operating income margin		9.7	%		6.6	%		8.8	%		6.8	%
Net earnings	$	31,413		$	19,846		$	54,931		$	37,206
Net earnings margin		6.9	%		4.6	%		6.3	%		4.7	%
Net earnings per common share - diluted	$	2.34		$	1.48		$	4.09		$	2.78
Non-GAAP: Net earnings (1)	$	34,806		$	22,470		$	61,159		$	42,677
Non-GAAP: Net earnings per common share - diluted (1)	$	2.59		$	1.68		$	4.55		$	3.19
Adjusted EBITDA (2)	$	50,195		$	33,561		$	88,467		$	64,275
Adjusted EBITDA margin		11.0	%		7.7	%		10.1	%		8.2	%
Purchases of property and equipment used internally	$	948		$	990		$	2,255		$	3,101
Purchases of equipment under operating leases		8,301			-			13,988			166
Total capital expenditures	$	9,249		$	990		$	16,243		$	3,267
Technology Segment
Net sales	$	436,301		$	419,359		$	836,659		$	760,583
Adjusted gross billings (3)	$	664,124		$	601,064		$	1,297,131		$	1,147,458
Gross profit	$	105,078		$	87,197		$	200,511		$	174,038
Gross margin		24.1	%		20.8	%		24.0	%		22.9	%
Operating income	$	30,251		$	21,297		$	55,474		$	38,829
Adjusted EBITDA (2)	$	36,059		$	26,275		$	67,017		$	49,436
Financing Segment
Net sales	$	21,716		$	13,722		$	38,007		$	27,529
Gross profit	$	17,924		$	11,765		$	28,003		$	23,481
Operating income	$	14,052		$	7,188		$	21,281		$	14,653
Adjusted EBITDA (2)	$	14,136		$	7,286		$	21,450		$	14,839

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

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

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	Three Months Ended September 30,					Six Months Ended September 30,
	2021		2020			2021		2020
GAAP: Earnings before tax	$	43,978	$	28,669		$	76,553	$	53,764
Share based compensation		1,840		1,764			3,575		3,671
Acquisition and integration expense		-		(30	)		-		(1	)
Acquisition related amortization expense		2,661		2,172			5,357		4,400
Other (income) expense		325		(184	)		202		(282	)
Non-GAAP: Earnings before provision for income taxes		48,804		32,391			85,687		61,552
GAAP: Provision for income taxes		12,565		8,823			21,622		16,558
Share based compensation		528		541			1,024		1,128
Acquisition and integration expense		-		(9	)		-		-
Acquisition related amortization expense		750		648			1,507		1,315
Other (income) expense		93		(56	)		58		(86	)
Tax benefit (expense) on restricted stock		62		(26	)		317		(40	)
Non-GAAP: Provision for income taxes		13,998		9,921			24,528		18,875
Non-GAAP: Net earnings	$	34,806	$	22,470		$	61,159	$	42,677
GAAP: Net earnings per common share - diluted	$	2.34	$	1.48		$	4.09	$	2.78
Non-GAAP: Net earnings per common share - diluted	$	2.59	$	1.68		$	4.55	$	3.19

	Three Months Ended September 30,				Six Months Ended September 30,
	2021		2020		2021			2020
GAAP: Net earnings per common share - diluted	$	2.34	$	1.48	$	4.09		$	2.78
Share based compensation		0.09		0.09		0.18			0.19
Acquisition related amortization expense		0.14		0.11		0.29			0.23
Other (income) expense		0.02		-		0.01			(0.01	)
Tax benefit (expense) on restricted stock		-		-		(0.02	)		-
Total non-GAAP adjustments - net of tax		0.25		0.20		0.46			0.41
Non-GAAP: Net earnings per common share - diluted	$	2.59	$	1.68	$	4.55		$	3.19

(2) We define Adjusted EBITDA as net earnings calculated in accordance with GAAP, adjusted for the following: interest expense, depreciation and amortization, share-based compensation, acquisition and integration expenses, provision for income taxes, and other income. Segment Adjusted EBITDA is defined as operating income calculated in accordance with GAAP, adjusted for interest expense, share-based compensation, acquisition and integration expenses, and depreciation and amortization. We consider the interest on notes payable from our financing segment and depreciation expense presented within cost of sales, which includes depreciation on assets financed as operating leases, to be operating expenses. As such, they are not included in the amounts added back to net earnings in the Adjusted EBITDA calculation. We provide below a reconciliation of Adjusted EBITDA to net earnings, which is the most directly comparable financial measure to this Non-GAAP financial measure. Adjusted EBITDA margin is our calculation of Adjusted EBITDA divided by net sales. The presentation of Adjusted EBITDA has been changed from prior period presentations to include adjustments for expenses related to acquisitions such as legal, accounting, tax, and adjustments to the fair value of contingent purchase price consideration as well as stock compensation.

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

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	Three Months Ended September 30,					Six Months Ended September 30,
Consolidated	2021		2020			2021		2020
Net earnings	$	31,413	$	19,846		$	54,931	$	37,206
Provision for income taxes		12,565		8,823			21,622		16,558
Share based compensation		1,840		1,764			3,575		3,671
Interest and financing costs		199		1			358		266
Acquisition and integration expense		-		(30	)		-		(1	)
Depreciation and amortization		3,853		3,341			7,779		6,857
Other income (expense)		325		(184	)		202		(282	)
Adjusted EBITDA	$	50,195	$	33,561		$	88,467	$	64,275
Technology Segment
Operating income	$	30,251	$	21,297		$	55,474	$	38,829
Depreciation and amortization		3,825		3,313			7,723		6,801
Share based compensation		1,784		1,694			3,462		3,541
Interest and financing costs		199		1			358		266
Acquisition and integration expense		-		(30	)		-		(1	)
Adjusted EBITDA	$	36,059	$	26,275		$	67,017	$	49,436
Financing Segment
Operating income	$	14,052	$	7,188		$	21,281	$	14,653
Depreciation and amortization		28		28			56		56
Share based compensation		56		70			113		130
Adjusted EBITDA	$	14,136	$	7,286		$	21,450	$	14,839

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

	Three Months Ended September 30,				Six Months Ended September 30,
	2021		2020		2021		2020
Technology segment net sales	$	436,301	$	419,359	$	836,659	$	760,583
Costs incurred related to sales of third party maintenance, software assurance and subscription/Saas licenses, and services		227,823		181,705		460,472	$	386,875
Adjusted gross billings	$	664,124	$	601,064	$	1,297,131	$	1,147,458

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.

CONSOLIDATED RESULTS OF OPERATIONS

During the three months ended September 30, 2021, net sales increased 5.8%, or $24.9 million, to $458.0 million, as compared to $433.1 million for the same period in the prior year. Product sales for the three months ended September 30, 2021, increased 3.5% to $397.2 million, an increase of $13.5 million from $383.7 million for the same period in the prior year, due to increased demand from our technology segment customers as well as higher financing revenue. Service sales during the three months ended September 30, 2021, increased 23.1% to $60.9 million, an increase of $11.4 million over prior year services sales of $49.4 million due to increases in both managed services and professional services. In the technology segment, we saw increases in net sales from customers in the healthcare, telecom, media and entertainment, and smaller other categories of customers, which was partially offset by decreases in net sales from customers in technology, financial services and SLED, during the three months ended September 30, 2021, compared to the same period in the prior year.

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For the six months ended September 30, 2021, net sales increased 11.0%, or $86.6 million, to $874.7 million, compared to $788.1 million in the same period in the prior year. Product sales for the six months ended September 30, 2021, increased 9.7%, or $67.3 million, to $758.2 million, compared to $690.9 million in the same period in the prior year. Services sales during the six months ended September 30, 2021, increased 19.8%, or $19.2 million, to $116.4 million compared to prior year services sales of $97.2 million. The increase in net sales was due to increased demand from our customers in telecom, media and entertainment, healthcare and manufacturing markets, which were partially offset by decreases in demand from our customers in technology, financial services, SLED, and all other category of customers, during the six months ended September 30, 2021, compared to the prior year.

Adjusted gross billings increased 10.5%, or $63.1 million, to $664.1 million for the three months ended September 30, 2021, from $601.1 million for the same period in the prior year. There was an increase in adjusted gross billings from our customers in telecom, media and entertainment, healthcare, and financial services industries, which was partially offset by decreases in demand from our customers in SLED and technology. For the six months ended September 30, 2021, adjusted gross billings increased 13.0%, or $149.7 million, to $1,297.1 million, from $1,147.5 million for the same period in the prior year. The increase in adjusted gross billings is due, in part, to the Systems Management Planning, Inc. (“SMP”) acquisition as well as higher demand from our customers in telecom, media and entertainment, and healthcare, which was partially offset by decreases in demand from our customers in technology and SLED.

Consolidated gross profit for the three months ended September 30, 2021, increased $24.0 million, or 24.3%, to $123.0 million, compared with $99.0 million for the same period in the prior year. Consolidated gross margins were 26.9% for the three months ended September 30, 2021, which is an increase of 400 basis points compared to 22.9% for the same period in the prior year. The increase in margins was primarily due to a shift in product mix, as we sold a higher proportion of third-party maintenance, software assurance and subscription/SaaS licenses, which was recognized on a net basis, as well as higher service revenue and service margin, and higher gross profit from our financing segment.

For the six months ended September 30, 2021, consolidated gross profit increased $31.0 million, or 15.7%, to $228.5 million, compared with $197.5 million for the same period in the prior year. Consolidated gross margins were 26.1% for the six months ended September 30, 2021, an increase of 100 basis points compared to 25.1% for the same period in the prior year. The increase in gross margin for the six-month period was due to a shift in product mix, as we sold a higher proportion of third-party maintenance, software assurance and subscription/SaaS licenses, which is recognized on a net basis, as well as higher service revenue and service margins, and higher gross profit from our financing segment.

Our operating expenses for the three months ended September 30, 2021, increased $8.2 million, or 11.7%, to $78.7 million, as compared to $70.5 million for the prior year period. This increase is primarily due to an increase in variable compensation, salaries and benefits driven by increased headcount and higher general and administrative expense due to higher professional fees, software license and maintenance, and travel and entertainment expenses, as travel restrictions from COVID-19 have started to ease. As of September 30, 2021, we had 1,554 employees, an increase of 57 from 1,497 as of September 30, 2020. Our headcount is higher primarily due to the addition of 102 employees joining ePlus from our December 31, 2020, acquisition of SMP.

For the six months ended September 30, 2021, operating expenses increased $7.7 million, or 5.4%, to $151.8 million, as compared to $144.0 million in the same period in the prior year. The increase in operating expenses for the six months ended September 30, 2021, is due to an increase in variable compensation, salaries and benefits driven by increased headcount and higher general and administrative expense due to higher professional fees, software license and maintenance, and travel and entertainment expenses, as travel restrictions from COVID-19 have started to ease. These increases are partially offset by a decrease in our provision for credit losses.

Depreciation and amortization expense increased $0.5 million and $0.9 million for three and six months ended September 30, 2021, respectively, primarily due to our December 31, 2020, acquisition of SMP. Interest and financing costs increased $0.1 million for the three months ended September 30, 2021 and decreased $0.1 million for the six months ended September 30, 2021, primarily driven by the timing of borrowings from our credit facility with Wells Fargo Commercial Distribution Finance, LLC (“WFCDF”) offset by a decrease in interest and financing costs in our financing segment.

As a result, operating income for the three months ended September 30, 2021, increased $15.8 million, or 55.5%, to $44.3 million as compared to $28.5 million for the same period in the prior year. For the six months ended September 30, 2021, operating income increased $23.3 million, or 43.5%, to $76.8 million, as compared to $53.5 million for the same period in the prior year.

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Consolidated net earnings for the three months ended September 30, 2021, were $31.4 million, an increase of 58.3%, or $11.6 million, over the prior year’s results, due to the increase in gross profit and offset by increased operating expenses and the provision for income taxes. For the six months ended September 30, 2021, the consolidated net earnings were $54.9 million, an increase of 47.6%, or $17.7 million, compared to the prior year’s results, due to the increase in revenues and gross profit mostly offset by an increase in operating expenses and the provision for income taxes.

Our effective tax rate for the three and six months ended September 30, 2021, was 28.6% and 28.2% respectively, compared with 30.8% for the same periods in the prior year. The change in our effective income tax rate was primarily due to an adjustment to the federal benefit from state taxes in the prior year period.

Adjusted EBITDA increased $16.6 million, or 49.6%, to $50.2 million and Adjusted EBITDA margin increased 330 basis points to 11.0% for the three months ended September 30, 2021, as compared to the prior year period of 7.7%. For the six months ended September 30, 2021, adjusted EBITDA increased $24.2 million, or 37.6%, to $88.5 million and the adjusted EBITDA margin increased 190 basis points to 10.1% as compared to the prior year period of 8.2%.

Diluted earnings per share increased 58.1%, or $0.86, to $2.34 per share for the three months ended September 30, 2021, as compared to $1.48 per share for the three months ended September 30, 2020. Non-GAAP diluted earnings per share increased 54.2%, or $0.91, to $2.59 for the three months ended September 30, 2021, as compared to $1.68 for the three months ended September 30, 2020. For the six months ended September 30, 2021, diluted earnings per share increased 47.1%, or $1.31, to $4.09 per share, as compared to $2.78 per share in the prior year period. Non-GAAP diluted earnings per share increased 42.6%, or $1.36, to $4.55 for the six months ended September 30, 2021, as compared to $3.19 for the six months ended September 30, 2020.

Cash and cash equivalents decreased by 56.0% to $57.0 million as of September 30, 2021, as compared to $129.6 million as of March 31, 2021, primarily due to increases in our accounts receivable and inventory and a decrease in accounts payable—trade, partially offset by net borrowings on the floor plan component of our credit facility. Additional uses of cash during the three months ended September 30, 2021, included cash paid of $6.9 million to repurchase outstanding shares of our common stock. Our cash on hand, funds generated from operations, amounts available under our credit facility, and the ability to monetize 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 derives revenue from sales of product, project-related advanced professional services, managed services and staff augmentation. The technology segment sells primarily to corporate customers, state and local governments, and higher education institutions on a nationwide basis, with geographic concentrations relating to our physical locations. The technology segment also provides Internet-based business-to-business supply chain management solutions for information technology products.

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

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

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FINANCING SEGMENT

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

Financing revenue generally falls into the following three categories:

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

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

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

We also recognize revenue from events that occur after the initial sale of a financial asset and remarketing fees from certain residual value investments.

FLUCTUATIONS IN OPERATING RESULTS

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

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

CRITICAL ACCOUNTING ESTIMATES

Our critical accounting estimates have not changed from those reported in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2021 Annual Report.

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SEGMENT RESULTS OF OPERATIONS

The three and six months ended September 30, 2021, compared to the three and six months ended September 30, 2020

TECHNOLOGY SEGMENT

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

	Three Months Ended September 30,				Six Months Ended September 30,
	2021		2020		2021		2020
Net sales
Product	$	375,444	$	369,934	$	720,210	$	663,367
Services		60,857		49,425		116,449		97,216
Total		436,301		419,359		836,659		760,583
Cost of sales
Product		293,837		301,006		564,852		525,549
Services		37,386		31,156		71,296		60,996
Total		331,223		332,162		636,148		586,545
Gross profit		105,078		87,197		200,511		174,038
Selling, general, and administrative		70,803		62,586		136,956		128,142
Depreciation and amortization		3,825		3,313		7,723		6,801
Interest and financing costs		199		1		358		266
Operating expenses		74,827		65,900		145,037		135,209
Operating income	$	30,251	$	21,297	$	55,474	$	38,829
Adjusted gross billings	$	664,124	$	601,064	$	1,297,131	$	1,147,458
Adjusted EBITDA	$	36,059	$	26,275	$	67,017	$	49,436

Net sales: Net sales for the three months ended September 30, 2021, were $436.3 million compared to $419.4 million for the same period in the prior year, an increase of 4.0% or $16.9 million, due to increases in net sales from customers in the healthcare, telecom, media and entertainment, and smaller other categories of customers, which was partially offset by decreases in net sales from customers in technology, financial services and SLED. Product sales increased 1.5%, or $5.5 million, to $375.4 million. Services revenues increased 23.1%, or $11.4 million compared to the same period in the prior year to $60.9 million due to increase in managed and professional services for the three months ended September 30, 2021.

For the six months ended September 30, 2021, net sales increased 10.0%, or $76.1 million to $836.7 million compared to $760.6 million during the same period in the prior year. Product sales for the six months ended September 30, 2021, increased 8.6%, or $56.8 million to $720.2 million, and service revenue increased by 19.8%, or $19.2 million, to $116.4 million compared to $97.2 million during the same period in the prior year.

Adjusted gross billings increased 10.5%, or $63.1 million, to $664.1 million for the three months ended September 30, 2021, from $601.1 million for the same period in the prior year. The increase in adjusted gross billings was due, in part, to the SMP acquisition as well as higher demand from our current customers. For the six months ended September 30, 2021, adjusted gross billings increased 13.0%, or $149.7 million, to $1,297.1 million, from $1,147.5 million for the same period in the prior 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.

We rely on our vendors to fulfill a large majority of shipments to our customers. As of September 30, 2021, we had open orders of $707.1 million and deferred revenue of $110.0 million. As of September 30, 2020, we had open orders of $389.7 million and deferred revenue of $77.1 million.

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

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	Twelve Months Ended September 30,
	2021			2020			Change
Revenue by customer end market:
Telecom, Media & Entertainment		28	%		20	%		8	%
SLED		15	%		16	%		(1	%)
Healthcare		15	%		15	%		0	%
Technology		14	%		19	%		(5	%)
Financial Services		11	%		13	%		(2	%)
All others		17	%		17	%		0	%
Total		100	%		100	%

	Twelve Months Ended September 30,
	2021			2020			Change
Revenue by vendor:
Cisco Systems		36	%		39	%		(3	%)
Dell / EMC		8	%		7	%		1	%
Juniper Networks		6	%		5	%		1	%
NetApp		5	%		4	%		1	%
HP Inc. & HPE		4	%		4	%		0	%
Arista Networks		3	%		3	%		0	%
All others		38	%		38	%		0	%
Total		100	%		100	%

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

Most of our revenues by vendor are derived from our top six suppliers, which, when combined, accounted for over 60% of total revenues for the twelve-month periods ended September 30, 2021, and 2020. None of the vendors included within the “other” category exceeded 5% of total revenues.

Cost of sales: Cost of sales for the three months ended September 30, 2021, decreased 0.3% or $1.0 million to $331.2 million compared to $332.2 million for the same period in the prior year. Our gross margin increased 330 basis points to 24.1% for the three months ended September 30, 2021, compared to 20.8% for the same period in the prior year. The increase in gross margin was driven by higher product margin, where a higher proportion of sales of third-party maintenance, software assurance, subscription/SaaS licenses, and services are recognized on a net basis, and higher service margin. Cost of sales for the six months ended September 30, 2021, increased 8.5% or $49.6 million which is in-line with the increase in net sales. For the six months ended September 30, 2021, gross margin increased by 110 basis points to 24.0%, as compared to 22.9% for the prior year period, primarily due to higher service margin, and a higher proportion of sales of third-party maintenance, software assurance, subscription/SaaS licenses, and services, which are recognized on a net basis.

Selling, general, and administrative: Selling, general, and administrative expenses of $70.8 million for the three months ended September 30, 2021, increased by $8.2 million, or 13.1% from $62.6 million for the same period in the prior year. Salaries and benefits increased $7.1 million, or 13.1% to $60.8 million, compared to $53.8 million during the prior year mainly due to an increase in the number of employees. Our technology segment had 1,522 employees as of September 30, 2021, an increase of 62 from 1,460 as of September 30, 2020. Our headcount as of September 30, 2021 incorporates the addition of 102 employees from the December 31, 2020, acquisition of SMP. For the six months ended September 30, 2021, selling, general, and administrative expenses increased by $8.8 million, or 6.9%, to $137.0 million compared to $128.1 million for the same period in the prior year. Salaries and benefits increased $7.9 million, or 7.2% to $119.0 million, compared to $110.8 million during the same period in the prior year.

General and administrative expenses increased $1.3 million, or 14.6%, to $9.9 million during the three months ended September 30, 2021, compared to the same period in the prior year, due to higher professional fees, software license and maintenance, and travel and entertainment expenses, as travel restrictions from COVID-19 have started to ease. For the six months ended September 30, 2021, general and administrative expenses increased $1.4 million, or 8.2%, to $18.1 million. The increase in selling, general and administrative expenses was primarily due to an increase in travel and entertainment expenses, legal and professional fees and software license and maintenance. The provision for credit losses was $0.5 million lower than for the same period in the prior year.

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Depreciation and amortization: Depreciation and amortization increased $0.5 million, or 15.5%, to $3.8 million during the three months ended September 30, 2021, as compared to $3.3 million in the prior year period primarily due to the amortization of the intangible assets acquired in our acquisition of SMP. For the six months ended September 30, 2021, depreciation and amortization increased $0.9 million, or 13.6%, to $7.7 million as compared to $6.8 million for the same period in the prior year.

Interest and financing costs: Interest and financing costs were $0.2 million, and $0.4 million for the three and six months ended September 30, 2021, an increase of $0.2 million and $0.1 million, respectively, as compared to the same periods in the prior year. The increase is primarily due to timing of our borrowings from our WFCDF credit facility and borrowings on an installment payment arrangement, for which there were no comparable borrowing as of September 30, 2020.

Segment operating income: As a result of the foregoing, operating income was $30.3 million, an increase of $9.0 million, or 42.0%, for the three months ended September 30, 2021, as compared to $21.3 million for the same period in the prior year. For the six months ended September 30, 2021, operating income was $55.5 million, compared to $38.8 million for the same period in the prior year, an increase of $16.6 million, or 42.9%.

For the three months ended September 30, 2021, Adjusted EBITDA was $36.1 million, an increase of $9.8 million, or 37.2%, compared to $26.3 million for the same period in the prior year. Adjusted EBITDA was $67.0 million, an increase of $17.6 million, or 35.6%, for the six months ended September 30, 2021, compared to $49.4 million for the same period in the prior year.

FINANCING SEGEMENT

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

	Three Months Ended September 30,				Six Months Ended September 30,
	2021		2020		2021		2020
Net sales	$	21,716	$	13,722	$	38,007	$	27,529
Cost of sales		3,792		1,957		10,004		4,048
Gross profit		17,924		11,765		28,003		23,481
Selling, general, and administrative		3,701		4,303		6,323		8,214
Depreciation and amortization		28		28		56		56
Interest and financing costs		143		246		343		558
Operating expenses		3,872		4,577		6,722		8,828
Operating income	$	14,052	$	7,188	$	21,281	$	14,653
Adjusted EBITDA	$	14,136	$	7,286	$	21,450	$	14,839

Net sales: Net sales increased by $8.0 million, or 58.3%, to $21.7 million for the three months ended September 30, 2021, as compared to prior year results due to higher post contract earnings and higher transactional gains. During the quarter ended September 30, 2021, we recognized net gains on sales of financial assets of $10.1 million, which included several large transactions that closed in July 2021, and the proceeds received from these sales were $615.0 million. Net gains on the sale of financial assets for the quarter ended September 30, 2020, was $4.5 million and the proceeds from these sales were $118.5 million.

For the six months ended September 30, 2021, net sales increased to $38.0 million, an increase of $10.5 million, or 38.1% as compared to the same period in the prior year of $27.5 million due to higher post contract earnings and higher transactional gains, which were partially offset by lower other financing revenues. During the six months ended September 30, 2021, we recognized net gains on sales of financial assets of $13.3 million, which included several large transactions that closed in July 2021, and the proceeds received from these sales were $690.3 million. For the six months ended September 30, 2020, we recognized net gains on sales of financial assets of $7.0 million, and the proceeds from these sales were $191.7 million.

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At September 30, 2021, we had $166.9 million in financing receivables and operating leases, compared to $180.7 million as of September 30, 2020, a decrease of $13.8 million, or 7.6%.

Cost of sales: Cost of sales increased $1.8 million and $6.0 million for the three and six months ended September 30, 2021, respectively, compared to the prior year results due to higher cost of sales on off-lease equipment and higher depreciation expense from operating leases. Gross profit increased by 52.4% to $17.9 million for the three months ended September 30, 2021, and increased by 19.3% to $28.0 million, for the six months ended September 30, 2021, as compared to the prior year periods.

Selling, general and administrative: For the three and six months ended September 30, 2021, selling, general and administrative expenses decreased $0.6 million and $1.9 million, respectively, compared to the prior year periods, primarily due to decrease in the provision for credit losses and decrease in variable compensation.

Interest and financing costs: Interest and financing costs decreased by 41.9% to $0.1 million for the three months ended September 30, 2021, and decreased by 38.5% to $0.3 million for the six months ended September 30, 2021, compared to the prior year, due to a decrease in the average balance on total notes payable outstanding. Total notes payable for the financing segment was $25.4 million as of September 30, 2021, a decrease of $14.9 million, or 37.0%, as compared to $40.3 million as of September 30, 2020. Our weighted average interest rate for non-recourse notes payable was 3.59% and 3.15%, as of September 30, 2021, and 2020, respectively. Our weighted average interest rate for recourse notes payable was 2.55% as of September 30, 2020. We did not have any recourse debt as of September 30, 2021.

Segment operating income: As a result of the foregoing, both operating income and Adjusted EBITDA increased $6.9 million to $14.1 million, for the three months ended September 30, 2021, as compared to the prior year period. For the six months ended September 30, 2021, both operating income and Adjusted EBITDA increased by $6.6 million to $21.3 million and $21.5 million, respectively, as compared to the same period in the prior year.

CONSOLIDATED

Other income: Other income and expense for both the three and six months ended September 30, 2021, was an expense of $0.3 million and $0.2 million, respectively, due to unfavorable foreign exchange rates, compared to an income of $0.2 million and $0.3 million in the three and six month periods in the prior year, respectively.

Income taxes: Our provision for income tax expense was $12.6 million and $21.6 million for the three and six months ended September 30, 2021, as compared to $8.8 million and $16.6 million for the same periods in the prior year. Our effective income tax rates for the three and six months ended September 30, 2021, were 28.6% and 28.2%, compared to 30.8% for the three and six months ended September 30, 2020, respectively. The change in our effective income tax rate was primarily due to an adjustment to the federal benefit from state taxes in the prior year period.

Net earnings: The foregoing resulted in net earnings of $31.4 million for the three months ended September 30, 2021, an increase of $11.6 million, or 58.3%, as compared to $19.8 million during the three months ended September 30, 2020. For the six months ended September 30, 2021, net earnings were $54.9 million, an increase of $17.7 million, or 47.6%, as compared to $37.2 million for the same period in the prior year.

Basic and fully diluted earnings per common share was $2.36 and $2.34, respectively, for the three months ended September 30, 2021, an increase of 59.5% and 58.1% as compared to $1.48 for both basic and fully diluted earnings per common share, for the three months ended September 30, 2020. For the six months ended September 30, 2021, basic and fully diluted earnings per common share were $4.12 and $4.09, an increase of 47.7% and 47.1%, as compared to $2.79 and $2.78, respectively, for the same period in the prior year.

Non-GAAP diluted earnings per share increased 54.2% to $2.59 for the three months ended September 30, 2021, as compared to $1.68 for the three months ended September 30, 2020. Non-GAAP diluted earnings per share increased 42.6% to $4.55 for the six months ended September 30, 2021, as compared to $3.19 for the six months ended September 30, 2020.

Weighted average common shares outstanding was 13.3 million in the calculation of basic earnings per common share for both the three- and six-months ending September 30, 2021 and 13.4 million in the calculation of diluted earnings per common share for both the three- and six-months ending September 30, 2021. Weighted average common shares outstanding was 13.4 million and 13.3 in the calculation of basic earnings per common share for the three- and six-months ending September 30, 2020, respectively, and 13.4 million in the calculation of diluted earnings per common share for both the three- and six-months ending September 30, 2020.

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LIQUIDITY AND CAPITAL RESOURCES

LIQUIDITY OVERVIEW

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

Throughout the current fiscal year and until October 12, 2021, ePlus Technology, inc. and certain of its subsidiaries (the “Borrowers”), which are part of our technology segment, financed their operations, in addition to funds generated from operations, with a credit facility with WFCDF. This facility provided short-term capital for our technology segment. There were two components of the WFCDF credit facility: (1) a floor plan component, and (2) an accounts receivable component.

On October 13, 2021, we entered into a First Amended and Restated Credit Agreement by and among the Borrowers, WFCDF, as administrative agent thereunder, various banks and other financial institutions (including WFCDF) who are parties thereto as lenders (collectively, the “Lenders”) and others, pursuant to which, among other things, the Lenders established for the benefit of the Borrowers a discretionary senior secured floorplan facility in the aggregate principal amount of up to $375 million, together with a sublimit for a revolving credit facility for up to $100 million (collectively, the “2021 Credit Facility”).

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

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

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

CASH FLOWS

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

	Six Months Ended September 30,
	2021			2020
Net cash provided by (used in) operating activities	$	(135,004	)	$	8,408
Net cash used in investing activities		(13,690	)		(2,811	)
Net cash provided by financing activities		75,782			69,730
Effect of exchange rate changes on cash		300			(477	)
Net increase (decrease) in cash and cash equivalents	$	(72,612	)	$	74,850

Cash flows from operating activities: We used $135.0 million in operating activities during the six months ended September 30, 2021, compared to $8.4 million provided by operating activities for the six months ended September 30, 2020. See below for a breakdown of operating cash flows by segment (in thousands):

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	Six Months Ended September 30,
	2021			2020
Technology segment	$	(127,361	)	$	44,367
Financing segment		(7,643	)		(35,959	)
Net cash provided by (used in) operating activities	$	(135,004	)	$	8,408

Technology segment: In the six months ended September 30, 2021, our technology segment used $127.4 million from operating activities primarily due to increases in our accounts receivable and inventories and a decrease in accounts payable-trade. Offsetting this, we had net borrowing on the floor plan component of our credit facility of $47.2 million. We use this facility to manage working capital needs. We present changes in this balance as financing activity in our consolidated statement of cash flows.

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

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 September 30,
	2021			2020
(DSO) Days sales outstanding (1)		64			61
(DIO) Days inventory outstanding (2)		18			14
(DPO) Days payable outstanding (3)		(47	)		(54	)
Cash conversion cycle		35			21

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

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

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

Our cash conversion cycle increased to 35 days at September 30, 2021, compared to 21 days at September 30, 2020. Our standard payment term for customers is between 30-60 days; however, certain customer orders may be approved for extended payment terms. Our DPO decreased 7 days. Invoices processed through our credit facility, or the A/P-floor plan balance, are typically paid within 45-60 days from the invoice date, while A/P trade invoices are typically paid within 30 days from the invoice date. Our DSO increased to 64 days, which reflects higher sales to customers with terms greater than or equal to net 60 days for the period ended September 30, 2021, including sales to one of our larger customers related to ongoing projects, as compared to the same period in the prior year. Our DIO increased to 18 days due to higher inventory balance. Inventory, which represents equipment ordered by customers but not yet delivered, increased 92.3% to $134.5 million as of September 30, 2021, from $70.0 million as of March 31, 2021, partially due to ongoing projects with the same large customer.

Financing segment: In the six months ended September 30, 2021, our financing segment used $7.6 million from operating activities, primarily due to increases in accounts receivable of $9.8 million and financing receivables-net of $19.3 million, offset by net earnings. In the six months ended September 30, 2020, our financing segment used $36.0 million from operating activities, primarily due to changes in financing receivables- net of $54.4 million, partially offset by earnings and an increase in accounts payable trade of $13.0 million.

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Cash flows related to investing activities: In the six months ended September 30, 2021, we used $13.7 million from investing activities, consisting of $16.2 million for purchases of property, equipment and operating lease equipment offset by $2.6 million of proceeds from the sale of property, equipment, and operating lease equipment. In the six months ended September 30, 2020, we used $2.8 million from investing activities, consisting of $3.3 million for purchases of property, equipment and operating lease equipment offset by $0.5 million of proceeds from the sale of property, equipment, and operating lease equipment.

Cash flows from financing activities: In the six months ended September 30, 2021, cash provided by financing activities was $75.8 million, consisting of net borrowings on the floor plan component of our credit facility of $47.2 million and net repayments of non-recourse and recourse notes payable of $35.4 million, partially offset by $6.9 million in cash used to repurchase outstanding shares of our common stock. In the six months ended September 30, 2020, cash provided by financing activities was $69.7 million consisting of net borrowings on floor plan facility of $91.6 million, net borrowings of non-recourse and recourse notes payable of $18.1 million, which was partially offset by repayment of $35.0 million in borrowings under the accounts receivable component of our Technology segment credit facility and $4.5 million in repurchase of common stock.

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

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

SECURED BORROWINGS – FINANCING SEGMENT

We may finance all or most of the cost of the assets that we finance for customers by transferring all or part of the contractual payments due to us to third-party financing institutions. When we account for the transfer as a secured borrowing, we recognize the proceeds as either recourse or non-recourse notes payable. Our customers are responsible for repaying the debt from a secured borrowing. The lender typically secures a lien on the financed assets at the time the financial assets are transferred and releases it upon collecting all the transferred payments. We are not liable for the repayment of non-recourse loans unless we breach our representations and warranties in the loan agreements. The lender assumes the credit risk and their only recourse, upon default by the customer, is against the customer and the specific equipment under lease. While we expect that the credit quality of our financing arrangements and our residual return history will continue to allow us to obtain such financing, such financing may not be available on acceptable terms, or at all.

CREDIT FACILITY – TECHNOLOGY SEGMENT

Throughout the current fiscal year and until October 12, 2021, our technology segment financed its operations, in addition to funds generated from operations, with a credit facility with WFCDF. This facility provided short-term capital for our technology segment. There were two components of the WFCDF credit facility: (1) a floor plan component and (2) an accounts receivable component.

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

As of September 30, 2021, the limit of the two components of the credit facility was $350 million as result of our election to temporarily uplift the aggregate limit.

The WFCDF credit facility was secured by the assets of the Borrowers. Additionally, the credit facility required a guaranty of $10.5 million by ePlus inc.

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

The credit facility required that financial statements of the Borrowers be provided within 45 days of each quarter and 90 days of each fiscal year end and required that other operational reports be provided on a regular basis. Either party could terminate with 90 days’ advance written notice.

On October 13, 2021, we entered the 2021 Credit Facility by and among the Borrowers, WFCDF, as administrative agent thereunder, and the Lenders. The Lenders under this facility established for the benefit of the Borrowers a discretionary senior secured floorplan facility in the aggregate principal amount of up to $375 million, together with a sublimit for a revolving credit facility for up to $100 million. Loans under this credit agreement will accrue interest at a rate per annum equal to LIBOR plus 1.75%. This new credit agreement replaced the existing credit facility effective October 13, 2021.

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

Floor plan component: After a customer places a purchase order with us and after we have completed our credit review of the customer, we place an order for the equipment with one of our vendors. Generally, most purchase orders from us to our vendors are first financed under the floor plan component and reflected in “accounts payable—floor plan” in our consolidated balance sheets. Payments on the floor plan component are due on three specified dates each month, generally 30-60 days from the invoice date. Most customer payments in our technology segment are remitted to our lockboxes. Once payments are cleared, the monies in the lockbox accounts are automatically and daily transferred to our operating account. On the due dates of the floor plan component, we make cash payments to WFCDF. Our borrowings and repayments under the floor plan component are included in “net borrowings (repayments) on floor plan facility” within cash flows from the financing activities in our consolidated statements of cash flows.

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

Maximum Credit Limit at September 30, 2021		Balance as of September 30, 2021		Maximum Credit Limit at March 31, 2021		Balance as of March 31, 2021
$	350,000	$	145,880	$	275,000	$	98,653

Accounts receivable component: We have an accounts receivable component included within the WFCDF credit facility, which has a revolving line of credit. The outstanding balance under the accounts receivable component is presented as part of as recourse notes payable- current on our consolidated balance sheets. Our borrowings and repayments under the accounts receivable component are included in “borrowings of non-recourse and recourse notes payable” and “repayments of non-recourse and recourse notes payable,” respectively, within cash flows from the financing activities in our consolidated statements of cash flows.

As of September 30, 2021, there was an outstanding balance for the accounts receivable component of $29.0 million. We did not have any outstanding balance under the accounts receivable component of the WFCDF credit facility as of either the period ended March 31, 2021, or September 30, 2020. The maximum credit limit under this facility was $100.0 million.

PERFORMANCE GUARANTEES

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

OFF-BALANCE SHEET ARRANGEMENTS

As part of our ongoing business, we do not participate in transactions that generate relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K, or other contractually narrow or limited purposes. As of September 30, 2021, we were not involved in any unconsolidated special purpose entity transactions.

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ADEQUACY OF CAPITAL RESOURCES

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

INFLATION

For the periods presented herein, inflation has not had a material effect on our results of operations. In the most recent quarter, we have experienced some increases in prices from our suppliers as well as rising wages. We generally have been able to pass along these price increases to our customers. There can be no assurances, however, that inflation would not have a material impact on our sales or operating costs in the future.

POTENTIAL FLUCTUATIONS IN QUARTERLY OPERATING RESULTS

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

Our quarterly results of operations are susceptible to fluctuations for a number of reasons, including, but not limited to the worldwide impacts from COVID-19, currency fluctuations, reduction in IT spending, shortages of product from our vendors due to material shortages, any reduction of expected residual values related to the equipment under our leases, the timing and mix of specific transactions, the reduction of manufacturer incentive programs, and other factors. Quarterly operating results could also fluctuate as a result of our sale of equipment in our lease portfolio to a lessee or third-party at the expiration of a lease term or prior to such expiration, and the transfer of financial assets. Sales of equipment and transfers of financial assets may have the effect of increasing revenues and net income during the quarter in which the sale occurs and reducing revenues and net income otherwise expected in subsequent quarters. See Part I, Item 1A, “Risk Factors,” in our 2021 Annual Report, as supplemented in subsequently filed reports, and in Part II, Item 1A. “Risk Factors” in this Report.

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

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

Although a substantial portion of our liabilities are non-recourse, fixed-interest-rate instruments, we utilize lines of credit and other financing facilities that are subject to fluctuations in short-term interest rates. Our non-recourse instruments, which are denominated in US dollars, were entered for other than trading purposes and bear interest at a fixed rate. Because the interest rate on these instruments is fixed, changes in interest rates will not directly impact our cash flows. Financing transactions funded with our cash flows, not debt, and may be subject to interest rate risk. If the market interest rate exceeds our internal rate of return, we may not fund the transaction to obtain the proceeds. Borrowings under the WFCDF credit facility bear interest at a market-based variable rate. As of September 30, 2021, the aggregate fair value of our recourse and non-recourse borrowings approximated their carrying value.

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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.

We evaluate developments related to the UK leaving the European Union on a regular basis to determine if such developments will have a material impact on our results on operations and financial position. Our assessment is that 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 economic and operational risks will not have a material effect on our results of operations and financial position.

We lease assets in foreign countries, including Canada, the UK and several other European countries. As a lessor, we lease assets for amounts denominated in British Pounds, Euros, and Canadian dollars. As our foreign operations have been smaller compared to our domestic operations, we believe that potential fluctuations in currency exchange rates will not have a material effect on our financial position.

Item 4.  CONTROLS AND PROCEDURES

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 September 30, 2021.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

There have not been any changes in our internal control over financial reporting during the quarter ended September 30, 2021, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

LIMITATIONS AND EFFECTIVENESS OF CONTROLS

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

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PART II. OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

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

Item 1A.  RISK FACTORS

There has not been any material change in the risk factors disclosed in “Part I, Item 1A. Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended March 31, 2021, as supplemented in Part II, Item 1A of our Quarterly Report for the period ended June 30, 2021.

Item 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table provides information regarding our total purchases of 76,743 shares of ePlus inc. common stock during the six months ended September 30, 2021, including a total of 49,028 shares purchased as part of the publicly announced share repurchase plans or programs.

Period	Total number of shares purchased (1)		Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs		Maximum number (or approximate dollar value) of shares that may yet be purchased under the plans or programs
April 1, 2021 through April 30, 2021		-	$	-		-		440,899	(2	)
May 1, 2021 through May 27, 2021		999	$	100.80		-		440,899	(3	)
May 28, 2021 through May 31, 2021		-	$	-		-		500,000	(4	)
June 1, 2021 through June 30, 2021		44,345	$	90.42		17,629		482,371	(5	)
July 1, 2021 through July 31, 2021		31,399	$	87.99		31,399		450,972	(6	)
August 1, 2021 through August 31, 2021		-	$	-		-		450,972	(7	)
September 1, 2021 through September 30, 2021		-	$	-		-		450,972	(8	)

(1) All shares acquired were in open-market purchases, except for 27,715 shares, out of which 999 were repurchased in May 2021 and 26,716 in June 2021 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, 2021, had purchase limitations on the number of shares of up to 500,000 shares. As of April 30, 2021, the remaining authorized shares to be purchased were 440,899.

(3) As of May 27, 2021, the authorization under the then-existing share repurchase plan expired.

(4) On March 18, 2021, the board of directors authorized the company to repurchase up to 500,000 shares of our outstanding common stock commencing on May 28, 2021, and continuing to May 27, 2022. As of May 31, 2021, the remaining authorized shares to be purchased were 500,000.

(5) The share purchase authorization in place for the month ended June 30, 2021, had purchase limitations on the number of shares of up to 500,000 shares. As of June 30, 2021, the remaining authorized shares to be purchased were 482,371.

(6) The share purchase authorization in place for the month ended July 31, 2021, had purchase limitations on the number of shares of up to 500,000 shares. As of July 31, 2021, the remaining authorized shares to be purchased were 450,972.

(7) The share purchase authorization in place for the month ended August 31, 2021, had purchase limitations on the number of shares of up to 500,000 shares. As of August 31, 2021, the remaining authorized shares to be purchased were 450,972.

(8) The share purchase authorization in place for the month ended September 30, 2021, had purchase limitations on the number of shares of up to 500,000 shares. As of September 30, 2021, the remaining authorized shares to be purchased were 450,972.

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

Item 3.  DEFAULTS UPON SENIOR SECURITIES

Not Applicable.

Item 4.  MINE SAFETY DISCLOSURES

Not Applicable.

Item 5.  OTHER INFORMATION

None.

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Item 6. EXHIBITS

Exhibit Number	Exhibit Description
3.1	ePlus inc. Amended and Restated Certificate of Incorporation as amended September 15, 2008 (Incorporated herein by reference as Exhibit 3.1 to our Current Report on Form 8-K filed on September 19, 2008).
3.2	Amended and Restated Bylaws of ePlus inc., as of September 1, 2021.
10.1	ePlus 2021 Employee Long-Term Incentive Plan (Incorporated herein by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on September 23, 2021).
10.2	First Amended and Restated Credit Agreement, dated as of October 13, 2021, by and among ePlus Technology, inc., ePlus Technology Services, inc., SLAIT Consulting, LLC, certain of ePlus inc. subsidiaries as guarantors, Wells Fargo Commercial Distribution Finance, LLC as administrative agent and the Lenders party thereto (Incorporated herein by reference to Exhibit 10.1 to our Current Report in Form 8-K filed on October 19, 2021).
10.3	Guaranty and Security Agreement, dated as of October 13, 2021, by and among ePlus Technology, inc., ePlus Technology Services, inc., SLAIT Consulting, LLC, certain future subsidiaries of ePlus inc., as guarantors, Wells Fargo Commercial Distribution Finance, LLC as administrative agent for the benefit of Secured Parties (Incorporated herein by reference to Exhibit 10.2 to our Current Report on Form 8-K filed on October 19, 2021).
10.4	First Amended and Restated Collateralized Guaranty, dated as of October 13, 2021, by and among ePlus Group, inc. and Wells Fargo Commercial Distribution Finance, LLC as agent for the benefit of Secured Parties (Incorporated herein by reference to Exhibit 10.3 to our Current Report on Form 8-K filed on October 19, 2021).
10.5	First Amended and Restated Limited Guaranty, dated as of October 13, 2021, by and between ePlus inc. and Wells Fargo Commercial Distribution Finance, LLC as agent for the benefit of Secured Parties (Incorporated herein by reference to Exhibit 10.4 to our Current Report on Form 8-K filed on October 19, 2021).
31.1	Certification of the Chief Executive Officer of ePlus inc. pursuant to the Securities Exchange Act Rules 13a-14(a) and 15d-14(a).
31.2	Certification of the Chief Financial Officer of ePlus inc. pursuant to the Securities Exchange Act Rules 13a-14(a) and 15d-14(a).
32	Certification of the Chief Executive Officer and Chief Financial Officer of ePlus inc. pursuant to 18 U.S.C. § 1350.
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document
104	Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).

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SIGNATURES

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

	ePlus inc.
Date:  November 9, 2021	/s/ MARK P. MARRON
	By: Mark P. Marron
	Chief Executive Officer and President
	(Principal Executive Officer)
Date:  November 9, 2021	/s/ ELAINE D. MARION
	By: Elaine D. Marion
	Chief Financial Officer
	(Principal Financial Officer)

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