QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
|
|
(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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Title of each class
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Trading Symbol(s)
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Name of each exchange on which registered
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|
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Accelerated filer ☐
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Non-accelerated filer ☐
|
Smaller reporting company
|
Emerging growth company
|
Part I. Financial Information:
|
|||
Item 1.
|
Financial Statements
|
||
5
|
|||
6
|
|||
7
|
|||
8
|
|||
10
|
|||
11
|
|||
Item 2.
|
29
|
||
Item 3.
|
48
|
||
Item 4.
|
48
|
||
Part II. Other Information:
|
|||
Item 1.
|
49
|
||
Item 1A.
|
49
|
||
Item 2.
|
49
|
||
Item 3.
|
49
|
||
Item 4.
|
50
|
||
Item 5.
|
50
|
||
Item 6.
|
50
|
||
51
|
• |
significant adverse changes in, reductions in, or loss of one or more of our larger volume customers or vendors;
|
• |
supply chain issues, including a shortage of Information Technology (“IT”) products, may increase our costs or cause a delay in fulfilling customer orders, or increase our need for
working capital, or delay completing professional services, or purchasing IT products or services needed to support our internal infrastructure or operations, resulting in an adverse impact on our financial results;
|
• |
our dependence on key personnel to maintain certain customer relationships, and our ability to hire, train, and retain sufficient qualified personnel;
|
• |
maintaining and increasing advanced professional services by recruiting and retaining highly skilled, competent personnel, and vendor certifications;
|
• |
our ability to secure our own and our customers’ electronic and other confidential information, while maintaining compliance with evolving data privacy and regulatory laws and
regulations;
|
• |
ongoing remote work trends, and the increase in cybersecurity attacks that have occurred while employees work remotely;
|
• |
loss of our credit facility or credit lines with our vendors may restrict our current and future operations;
|
• |
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;
|
• |
rising interest rates or the loss of key lenders or the constricting of credit markets;
|
• |
our ability to manage a diverse product set of solutions in highly competitive markets with a number of key vendors;
|
• |
reliance on third-parties to perform some of our service obligations to our customers, and the reliance on a small number of key vendors in our supply chain with whom we do not
have long-term supply agreements, guaranteed price agreements, or assurance of stock availability;
|
• |
the possibility of a reduction of vendor incentives provided to us;
|
• |
our dependency on continued innovations in hardware, software, and service offerings by our vendors and our ability to partner with them;
|
• |
our ability to remain secure during a cybersecurity attack, including both disruptions in our or our vendors’ IT systems and data and audio communication networks;
|
• |
our ability to identify acquisition candidates, or perform sufficient due diligence prior to completing an acquisition, or failure to integrate a completed acquisition may affect
our earnings;
|
• |
national and international political instability fostering uncertainty and volatility in the global economy including exposure to fluctuation in foreign currency rates, interest
rates, and inflation, including increases in our costs and our ability to increase prices to our customers, which may result in adverse changes in our gross profit;
|
• |
significant and rapid inflation may cause price, wage, and interest rate increases, as well as increases in operating costs that may impact the arrangements that have pricing
commitments over the term of the agreement;
|
• |
a natural disaster or other adverse event at one of our primary configuration centers, data centers, or a third-party provider location could negatively impact our business;
|
• |
a possible decrease in the capital spending budgets of our customers or a decrease in purchases from us;
|
• |
changes in the IT industry and/or rapid changes in product offerings, including the proliferation of the cloud, infrastructure as a service (“IaaS”), software as a service (“SaaS”)
and platform as a service (“PaaS”);
|
• |
our ability to increase the total number of customers using integrated solutions by up-selling within our customer base and gaining new customers;
|
• |
our ability to increase the total number of customers who use our managed services and professional services and continuing to enhance our managed services offerings to remain
competitive in the marketplace;
|
• |
our ability to perform professional and managed services competently;
|
• |
our ability to implement comprehensive plans for the integration of sales forces, cost containment, asset rationalization, systems integration, and other key strategies;
|
• |
exposure to changes in, interpretations of, or enforcement trends in, and customer and vendor actions in anticipation of or response to, legislation and regulatory matters;
|
• |
domestic and international economic regulations uncertainty (e.g., tariffs, sanctions, and
trade agreements);
|
• |
our contracts may not be adequate to protect us, 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 ability to maintain our proprietary software and update our technology infrastructure to remain competitive in the marketplace;
|
• |
fluctuations in foreign currency exchange rates may impact our results of operation and financial position; and
|
• |
our ability to protect our intellectual property rights and successfully defend any challenges to the validity of our patents or allegations that we are infringing upon any
third-party patents, and the costs associated with those actions, and, when appropriate, the costs associated with licensing required technology.
|
Item 1. |
Financial Statements
|
September 30, 2023
|
March 31, 2023
|
|||||||
ASSETS
|
||||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$
|
|
$
|
|
||||
Accounts receivable—trade, net
|
|
|
||||||
Accounts receivable—other, net
|
|
|
||||||
Inventories
|
|
|
||||||
Financing receivables—net, current
|
|
|
||||||
Deferred costs
|
|
|
||||||
Other current assets
|
|
|
||||||
Total current assets
|
|
|
||||||
Financing receivables and operating leases—net
|
|
|
||||||
Deferred tax asset
|
|
|
||||||
Property, equipment, and other assets
|
|
|
||||||
Goodwill
|
|
|
||||||
Other intangible assets—net
|
|
|
||||||
TOTAL ASSETS
|
$
|
|
$
|
|
||||
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
||||||||
LIABILITIES
|
||||||||
Current liabilities:
|
||||||||
Accounts payable
|
$
|
|
$
|
|
||||
Accounts payable—floor plan
|
|
|
||||||
Salaries and commissions payable
|
|
|
||||||
Deferred revenue
|
|
|
||||||
Recourse notes payable—current
|
|
|
||||||
Non-recourse notes payable—current
|
|
|
||||||
Other current liabilities
|
|
|
||||||
Total current liabilities
|
|
|
||||||
Non-recourse notes payable - long-term
|
|
|
||||||
Deferred tax liability |
||||||||
Other liabilities
|
|
|
||||||
TOTAL LIABILITIES
|
|
|
||||||
COMMITMENTS AND CONTINGENCIES (Note 9)
|
||||||||
STOCKHOLDERS’ EQUITY
|
||||||||
Preferred stock, $
|
|
|
||||||
Common stock, $
|
|
|
||||||
Additional paid-in capital
|
|
|
||||||
Treasury stock, at cost,
|
(
|
)
|
(
|
)
|
||||
Retained earnings
|
|
|
||||||
Accumulated other comprehensive income—foreign currency translation adjustment
|
|
|
||||||
Total Stockholders’ Equity
|
|
|
||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
|
$
|
|
$
|
|
Three Months Ended
September 30,
|
Six Months Ended
September 30,
|
|||||||||||||||
2023
|
2022
|
2023
|
2022
|
|||||||||||||
Net sales
|
||||||||||||||||
Product
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Services
|
|
|
|
|
||||||||||||
Total
|
|
|
|
|
||||||||||||
Cost of sales
|
||||||||||||||||
Product
|
|
|
|
|
||||||||||||
Services
|
|
|
|
|
||||||||||||
Total
|
|
|
|
|
||||||||||||
Gross profit
|
|
|
|
|
||||||||||||
Selling, general, and administrative
|
|
|
|
|
||||||||||||
Depreciation and amortization
|
|
|
|
|
||||||||||||
Interest and financing costs
|
|
|
|
|
||||||||||||
Operating expenses
|
|
|
|
|
||||||||||||
Operating income
|
|
|
|
|
||||||||||||
Other income (expense), net
|
|
(
|
)
|
|
(
|
)
|
||||||||||
Earnings before tax
|
|
|
|
|
||||||||||||
Provision for income taxes
|
|
|
|
|
||||||||||||
Net earnings
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Net earnings per common share—basic
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Net earnings per common share—diluted
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Weighted average common shares outstanding—basic
|
|
|
|
|
||||||||||||
Weighted average common shares outstanding—diluted
|
|
|
|
|
Three Months Ended
September 30,
|
Six Months Ended
September 30,
|
|||||||||||||||
2023
|
2022
|
2023
|
2022
|
|||||||||||||
NET EARNINGS
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
OTHER COMPREHENSIVE INCOME, NET OF TAX:
|
||||||||||||||||
Foreign currency translation adjustments
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||
Other comprehensive loss
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||
TOTAL COMPREHENSIVE INCOME
|
$
|
|
$
|
|
$
|
|
$
|
|
Six Months Ended September 30,
|
||||||||
2023
|
2022
|
|||||||
Cash flows from operating activities:
|
||||||||
Net earnings
|
$
|
|
$
|
|
||||
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:
|
||||||||
Depreciation and amortization
|
|
|
||||||
Provision for credit losses
|
|
|
||||||
Share-based compensation expense
|
|
|
||||||
Gain on disposal of property, equipment, and operating lease equipment
|
(
|
)
|
(
|
)
|
||||
Changes in:
|
||||||||
Accounts receivable
|
(
|
)
|
(
|
)
|
||||
Inventories—net
|
|
(
|
)
|
|||||
Financing receivables—net
|
(
|
)
|
(
|
)
|
||||
Deferred costs and other assets
|
(
|
)
|
(
|
)
|
||||
Accounts payable—trade
|
|
|
||||||
Salaries and commissions payable, deferred revenue, and other liabilities
|
|
|
||||||
Net cash provided by (used in) operating activities
|
|
(
|
)
|
|||||
Cash flows from investing activities:
|
||||||||
Proceeds from sale of property, equipment, and operating lease equipment
|
|
|
||||||
Purchases of property, equipment and operating lease equipment
|
(
|
)
|
(
|
)
|
||||
Cash used in acquisitions, net of cash acquired
|
( |
) | ( |
) | ||||
Net cash used in investing activities
|
(
|
)
|
(
|
)
|
||||
Cash flows from financing activities:
|
||||||||
Borrowings of non-recourse and recourse notes payable
|
|
|
||||||
Repayments of non-recourse and recourse notes payable
|
(
|
)
|
(
|
)
|
||||
Proceeds from issuance of common stock
|
||||||||
Repurchase of common stock
|
(
|
)
|
(
|
)
|
||||
Net borrowings (repayments) on floor plan facility
|
|
(
|
)
|
|||||
Net cash provided by financing activities
|
|
|
||||||
Effect of exchange rate changes on cash
|
|
|
||||||
Net decrease in cash and cash equivalents
|
(
|
)
|
(
|
)
|
||||
Cash and cash equivalents, beginning of period
|
|
|
||||||
Cash and cash equivalents, end of period
|
$
|
|
$
|
|
Six Months Ended September 30,
|
||||||||
2023
|
2022
|
|||||||
Supplemental disclosures of cash flow
information:
|
||||||||
Cash paid for interest
|
$
|
|
$
|
|
||||
Cash paid for income taxes
|
$
|
|
$
|
|
||||
Cash paid for amounts included in the measurement of lease liabilities
|
$
|
|
$
|
|
||||
Schedule of non-cash investing and
financing activities:
|
||||||||
Proceeds from sale of property, equipment, and leased equipment
|
$
|
|
$
|
|
||||
Purchases of property, equipment, and operating lease equipment
|
$
|
(
|
)
|
$
|
(
|
)
|
||
Consideration for acquisitions
|
$ |
$ |
( |
) | ||||
Borrowing of non-recourse and recourse notes payable
|
$
|
|
$
|
|
||||
Vesting of share-based compensation
|
$
|
|
$
|
|
||||
Repurchase of common stock
|
$ | ( |
) | $ | ||||
New operating lease assets obtained in exchange for lease obligations
|
$
|
|
$
|
|
Six Months Ended September 30, 2023
|
||||||||||||||||||||||||||||
Accumulated | ||||||||||||||||||||||||||||
Additional | Other | |||||||||||||||||||||||||||
Common Stock
|
Paid-In
|
Treasury
|
Retained
|
Comprehensive
|
||||||||||||||||||||||||
Shares
|
Par Value
|
Capital
|
Stock
|
Earnings
|
Income
|
Total
|
||||||||||||||||||||||
Balance, March 31, 2023
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
$
|
|
$
|
|
||||||||||||||
Issuance of restricted stock awards
|
|
|
(
|
)
|
|
|
|
|
||||||||||||||||||||
Issuance of common stock |
||||||||||||||||||||||||||||
Share-based compensation
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Repurchase of common stock
|
(
|
)
|
|
|
(
|
)
|
|
|
(
|
)
|
||||||||||||||||||
Net earnings
|
-
|
|
|
|
|
|
|
|||||||||||||||||||||
Foreign currency translation adjustment
|
-
|
|
|
|
|
|
|
|||||||||||||||||||||
Balance, June 30, 2023
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
$
|
|
$
|
|
||||||||||||||
Issuance of restricted stock awards
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Share-based compensation
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Repurchase of common stock |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||
Net earnings
|
-
|
|
|
|
|
|
|
|||||||||||||||||||||
Foreign currency translation adjustment
|
-
|
|
|
|
|
(
|
)
|
(
|
)
|
|||||||||||||||||||
Balance, September 30, 2023
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
$
|
|
$
|
|
|
Six Months Ended September 30, 2022
|
|||||||||||||||||||||||||||
Accumulated | ||||||||||||||||||||||||||||
Additional | Other | |||||||||||||||||||||||||||
Common Stock
|
Paid-In
|
Treasury
|
Retained
|
Comprehensive
|
||||||||||||||||||||||||
|
Shares
|
Par Value
|
Capital
|
Stock
|
Earnings
|
Income
|
Total
|
|||||||||||||||||||||
Balance, March 31, 2022
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||||||||||
Issuance of restricted stock awards
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Share-based compensation
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Repurchase of common stock
|
(
|
)
|
|
|
(
|
)
|
|
|
(
|
)
|
||||||||||||||||||
Net earnings
|
-
|
|
|
|
|
|
|
|||||||||||||||||||||
Foreign currency translation adjustment
|
-
|
|
|
|
|
(
|
)
|
(
|
)
|
|||||||||||||||||||
|
||||||||||||||||||||||||||||
Balance, June 30, 2022
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||||||||||
Issuance of restricted stock awards
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Share-based compensation
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Net earnings
|
-
|
|
|
|
|
|
|
|||||||||||||||||||||
Foreign currency translation adjustment
|
-
|
|
|
|
|
(
|
)
|
(
|
)
|
|||||||||||||||||||
Balance, September 30, 2022
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
$
|
(
|
)
|
$
|
|
1.
|
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
2.
|
RECENT ACCOUNTING PRONOUNCEMENTS
|
3. |
REVENUES
|
September 30, 2023
|
March 31, 2023
|
|||||||
Current (included in deferred revenue)
|
$
|
|
$
|
|
||||
Non-current (included in other liabilities)
|
$
|
|
$
|
|
|
$
|
|
||
|
|
|||
|
|
|||
|
|
|||
|
|
|||
Total remaining performance obligations
|
$
|
|
4. |
FINANCING RECEIVABLES AND OPERATING LEASES
|
Three months Ended September 30,
|
Six months Ended September 30,
|
|||||||||||||||
2023
|
2022
|
2023
|
2022
|
|||||||||||||
Net sales
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Cost of sales
|
|
|
|
|
||||||||||||
Gross profit
|
$
|
|
$
|
|
$
|
|
$
|
|
Three months Ended September 30,
|
Six months Ended September 30,
|
|||||||||||||||
2023
|
2022
|
2023
|
2022
|
|||||||||||||
Interest income on sales-type leases
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Lease income on operating leases
|
$
|
|
$
|
|
$
|
|
$
|
|
Notes | Lease | Financing | ||||||||||
September 30,
2023
|
Receivable
|
Receivables
|
Receivables
|
|||||||||
Gross receivables
|
$
|
|
$
|
|
$
|
|
||||||
Unguaranteed residual value (1)
|
|
|
|
|||||||||
Unearned income
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
Allowance for credit losses (2)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
Total, net
|
$
|
|
$
|
|
$
|
|
||||||
Reported as:
|
||||||||||||
Current
|
$
|
|
$
|
|
$
|
|
||||||
Long-term
|
|
|
|
|||||||||
Total, net
|
$
|
|
$
|
|
$
|
|
(1) |
|
(2) |
|
Notes | Lease | Financing | ||||||||||
March 31, 2023
|
Receivable
|
Receivables
|
Receivables
|
|||||||||
Gross receivables
|
$
|
|
$
|
|
$
|
|
||||||
Unguaranteed residual value (1)
|
|
|
|
|||||||||
Unearned income
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
Allowance for credit losses (2)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
Total, net
|
$
|
|
$
|
|
$
|
|
||||||
Reported as:
|
||||||||||||
Current
|
$
|
|
$
|
|
$
|
|
||||||
Long-term
|
|
|
|
|||||||||
Total, net
|
$
|
|
$
|
|
$
|
|
(1) |
|
(2) |
Refer to Note 7, “Allowance for Credit
Losses” for details.
|
September 30, | March 31, | |||||||
2023
|
2023
|
|||||||
Cost of equipment under operating leases
|
$
|
|
$
|
|
||||
Accumulated depreciation
|
(
|
)
|
(
|
)
|
||||
Investment in operating lease
equipment—net (1)
|
$
|
|
$
|
|
(1) |
|
5. |
LESSEE ACCOUNTING
|
6. |
GOODWILL AND OTHER INTANGIBLE ASSETS
|
Professional
|
Managed
|
|||||||||||||||
Product
|
Services
|
Services
|
Total
|
|||||||||||||
Balance March 31, 2023 (1)
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Acquisitions
|
|
|
|
|
||||||||||||
Foreign currency translations
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||
Balance September 30, 2023 (1)
|
$
|
|
$
|
|
$
|
|
$
|
|
(1)
|
|
|
September 30, 2023
|
March 31, 2023
|
||||||||||||||||||||||
|
Gross
|
Gross
|
||||||||||||||||||||||
|
Carrying
|
Accumulated
|
Net Carrying
|
Carrying
|
Accumulated
|
Net Carrying
|
||||||||||||||||||
|
Amount
|
Amortization
|
Amount
|
Amount
|
Amortization
|
Amount
|
||||||||||||||||||
Purchased intangibles
|
$
|
|
$
|
(
|
)
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
||||||||||
Capitalized software development
|
|
(
|
)
|
|
|
(
|
)
|
|
||||||||||||||||
Total
|
$
|
|
$
|
(
|
)
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
7. |
ALLOWANCE FOR CREDIT LOSSES
|
Accounts Receivable
|
Notes
Receivable
|
Lease
Receivables
|
Total
|
|||||||||||||
Balance April 1, 2023
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Provision for credit losses
|
|
|
|
|
||||||||||||
Write-offs and other
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||
Balance September 30,
2023
|
$
|
|
$
|
|
$
|
|
$
|
|
Accounts
Receivable
|
Notes
Receivable
|
Lease
Receivables
|
Total
|
|||||||||||||
Balance April 1, 2022
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Provision for credit losses
|
|
|
|
|
||||||||||||
Write-offs and other
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||
Balance September 30,
2022
|
$
|
|
$
|
|
$
|
|
$
|
|
•
|
High CQR: This rating includes accounts with excellent to good business credit, asset quality and
capacity to meet financial obligations. Loss rates in this category are generally less than
|
•
|
Average CQR: This rating includes accounts with average credit risk that are more susceptible to
loss in the event of adverse business or economic conditions. Loss rates in this category are in the range of
|
•
|
Low CQR: This rating includes accounts that have marginal credit risk such that the customer’s
ability to make repayment is impaired or may likely become impaired. The loss rates in this category in the normal course are greater than
|
Amortized cost basis by origination year ending March 31,
|
||||||||||||||||||||||||||||||||||||
2024
|
2023
|
2022
|
2021
|
2020
|
2019 and
prior
|
Total
|
Transfers
(2)
|
Net credit
exposure
|
||||||||||||||||||||||||||||
Notes receivable:
|
||||||||||||||||||||||||||||||||||||
High CQR
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||||||||||||||
Average CQR
|
|
|
|
|
|
|
|
(
|
)
|
|
||||||||||||||||||||||||||
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||||||||||||||
Lease receivables:
|
||||||||||||||||||||||||||||||||||||
High CQR
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||||||||||||||
Average CQR
|
|
|
|
|
|
|
|
(
|
)
|
|
||||||||||||||||||||||||||
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||||||||||||||
Total amortized cost (1)
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
(1) |
|
(2)
|
|
Amortized cost basis by origination year ending March 31,
|
||||||||||||||||||||||||||||||||||||
2023
|
2022
|
2021
|
2020
|
2019
|
2018 and
prior
|
Total
|
Transfers
(2)
|
Net credit
exposure
|
||||||||||||||||||||||||||||
Notes receivable:
|
||||||||||||||||||||||||||||||||||||
High CQR
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$ |
||||||||||||||||||
Average CQR
|
|
|
|
|
|
|
|
(
|
)
|
|||||||||||||||||||||||||||
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$ |
||||||||||||||||||
Lease receivables:
|
||||||||||||||||||||||||||||||||||||
High CQR
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$ |
||||||||||||||||||
Average CQR
|
|
|
|
|
|
|
|
(
|
)
|
|||||||||||||||||||||||||||
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$ |
||||||||||||||||||
Total amortized cost (1)
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$ |
(1) |
|
(2)
|
|
31-60
Days Past
Due |
61-90
Days Past
Due |
> 90
Days Past
Due
|
Total
Past Due
|
Current
|
Total
Billed
|
Unbilled
|
Amortized
Cost |
|||||||||||||||||||||||||
Notes receivable
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
Lease receivables
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
31-60
Days Past
Due |
61-90
Days Past
Due |
> 90
Days Past
Due
|
Total
Past Due
|
Current
|
Total
Billed
|
Unbilled
|
Amortized
Cost
|
|||||||||||||||||||||||||
Notes receivable
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
Lease receivables
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
8. |
NOTES PAYABLE AND CREDIT FACILITY
|
9. |
COMMITMENTS AND CONTINGENCIES
|
10. |
EARNINGS PER SHARE
|
Three Months Ended
September 30,
|
Six Months Ended
September 30,
|
|||||||||||||||
2023
|
2022
|
2023
|
2022
|
|||||||||||||
Net earnings attributable to common shareholders - basic and diluted
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Basic and diluted common shares outstanding:
|
||||||||||||||||
Weighted average common shares outstanding — basic
|
|
|
|
|
||||||||||||
Effect of dilutive shares
|
|
|
|
|
||||||||||||
Weighted average shares common outstanding — diluted
|
|
|
|
|
||||||||||||
Earnings per common share - basic
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Earnings per common share - diluted
|
$
|
|
$
|
|
$
|
|
$
|
|
11. |
STOCKHOLDERS’ EQUITY
|
12. |
SHARE-BASED COMPENSATION
|
Number of
Shares
|
Weighted Average
Grant-date Fair Value
|
|||||||
Nonvested April 1, 2023
|
|
$
|
|
|||||
Granted
|
|
$
|
|
|||||
Vested
|
(
|
)
|
$
|
|
||||
Forfeited
|
( |
) | $ | |||||
Nonvested September 30,
2023
|
|
$
|
|
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
September 30,
|
September 30,
|
|||||||||||||||
2023
|
2022
|
2023
|
2022
|
|||||||||||||
Equity-based compensation expense
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Income tax benefit
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
13. |
INCOME TAXES
|
14. |
FAIR VALUE OF FINANCIAL INSTRUMENTS
|
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, 2023
|
||||||||||||||||
Assets:
|
||||||||||||||||
Money market funds
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
March 31, 2023
|
||||||||||||||||
Assets:
|
||||||||||||||||
Money market funds
|
$
|
|
$
|
|
$
|
|
$
|
|
15.
|
BUSINESS COMBINATIONS
|
Acquisition Date
Amount
|
||||
Accounts receivable
|
$
|
|
||
Other assets
|
|
|||
Identified intangible assets
|
|
|||
Accounts payable and other liabilities
|
(
|
)
|
||
Contract liabilities
|
(
|
)
|
||
Total identifiable net assets
|
|
|||
Goodwill
|
|
|||
Total purchase consideration
|
$
|
|
Acquisition Date
Amount
|
||||
Accounts receivable
|
$
|
|
||
Other assets
|
|
|||
Identified intangible assets
|
|
|||
Accounts payable and other liabilities
|
(
|
)
|
||
Contract liabilities
|
(
|
)
|
||
Total identifiable net assets
|
|
|||
Goodwill
|
|
|||
Total purchase consideration
|
$
|
|
16. |
SEGMENT REPORTING
|
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
September 30, | September 30, |
|||||||||||||||
2023
|
2022
|
2023 |
2022 |
|||||||||||||
Net sales
|
||||||||||||||||
Product
|
$
|
|
$
|
|
$ | $ | ||||||||||
Professional services
|
|
|
||||||||||||||
Managed services
|
|
|
||||||||||||||
Financing
|
|
|
||||||||||||||
Total
|
|
|
||||||||||||||
Gross profit
|
||||||||||||||||
Product
|
|
|
||||||||||||||
Professional services
|
|
|
||||||||||||||
Managed services
|
|
|
||||||||||||||
Financing
|
|
|
||||||||||||||
Total
|
|
|
||||||||||||||
Operating expenses
|
||||||||||||||||
Technology business
|
|
|
||||||||||||||
Financing
|
|
|
||||||||||||||
Total
|
|
|
||||||||||||||
Operating income | ||||||||||||||||
Technology business
|
||||||||||||||||
Financing
|
||||||||||||||||
Total
|
||||||||||||||||
Other income (expense), net
|
|
(
|
)
|
( |
) | |||||||||||
Earnings before tax
|
$
|
|
$
|
|
$ | $ | ||||||||||
Depreciation and amortization
|
||||||||||||||||
Technology business
|
$
|
|
$
|
|
$ |
$ | ||||||||||
Financing
|
|
|
||||||||||||||
Total
|
$
|
|
$
|
|
$ |
$ | ||||||||||
Interest and financing costs
|
||||||||||||||||
Technology business
|
$
|
|
$
|
|
$ | $ | ||||||||||
Financing
|
|
|
||||||||||||||
Total
|
$
|
|
$
|
|
$ | $ | ||||||||||
Selected Financial Data - Statement of Cash Flow
|
||||||||||||||||
Purchases of property, equipment, and operating lease equipment | ||||||||||||||||
Technology business
|
$
|
|
$
|
|
$ | $ | ||||||||||
Financing
|
|
|
||||||||||||||
Total
|
$
|
|
$
|
|
$ | $ |
Three months ended September 30, 2023
|
||||||||||||||||||||
Product
|
Professional
Services |
Managed Services
|
Financing
|
Total
|
||||||||||||||||
Net Sales
|
||||||||||||||||||||
Contracts with customers
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||
Financing and other
|
|
|
|
|
|
|||||||||||||||
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||
Timing and position as principal
or agent
|
||||||||||||||||||||
Transferred at a point in time
as principal
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||
Transferred at a point in time
as agent
|
|
|
|
|
|
|||||||||||||||
Transferred over time as
principal
|
|
|
|
|
|
|||||||||||||||
Total revenue from contracts
with customers
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
Six months ended September 30, 2023
|
||||||||||||||||||||
Product
|
Professional
Services |
Managed Services
|
Financing
|
Total
|
||||||||||||||||
Net Sales
|
||||||||||||||||||||
Contracts with customers
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||
Financing and other
|
|
|
|
|
|
|||||||||||||||
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||
Timing and position as principal
or agent
|
||||||||||||||||||||
Transferred at a point in time
as principal
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||
Transferred at a point in time
as agent
|
|
|
|
|
|
|||||||||||||||
Transferred over time as
principal
|
|
|
|
|
|
|||||||||||||||
Total revenue from contracts
with customers
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
Three months ended September 30, 2022
|
||||||||||||||||||||
Product
|
Professional
Services |
Managed Services
|
Financing
|
Total
|
||||||||||||||||
Net Sales
|
||||||||||||||||||||
Contracts with customers
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||
Financing and other
|
|
|
|
|
|
|||||||||||||||
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||
Timing and position as
principal or agent
|
||||||||||||||||||||
Transferred at a point in time
as principal
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||
Transferred at a point in time
as agent
|
|
|
|
|
|
|||||||||||||||
Transferred over time as
principal
|
|
|
|
|
|
|||||||||||||||
Total revenue from contracts
with customers
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
Six months ended September 30, 2022
|
||||||||||||||||||||
Product
|
Professional
Services |
Managed Services
|
Financing
|
Total
|
||||||||||||||||
Net Sales
|
||||||||||||||||||||
Contracts with customers
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||
Financing and other
|
|
|
|
|
|
|||||||||||||||
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||
Timing and position as principal
or agent
|
||||||||||||||||||||
Transferred at a point in time
as principal
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||
Transferred at a point in time
as agent
|
|
|
|
|
|
|||||||||||||||
Transferred over time as
principal
|
|
|
|
|
|
|||||||||||||||
Total revenue from contracts
with customers
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
Three Months Ended September 30,
|
Six Months Ended September 30
|
|||||||||||||||
2023
|
2022
|
2023
|
2022
|
|||||||||||||
Customer end market:
|
||||||||||||||||
Telecom, Media & Entertainment
|
$
|
|
$
|
|
$ | $ | ||||||||||
Technology
|
|
|
||||||||||||||
State and local government and educational institutions
|
|
|
||||||||||||||
Healthcare
|
|
|
||||||||||||||
Financial Services
|
|
|
||||||||||||||
All others
|
|
|
||||||||||||||
Net sales
|
|
|
||||||||||||||
Less: Revenue from financing and other
|
(
|
)
|
(
|
)
|
( |
) | ( |
) | ||||||||
Revenue from contracts with customers
|
$
|
|
$
|
|
$ |
$ |
||||||||||
Type:
|
||||||||||||||||
Product
|
||||||||||||||||
Networking
|
$
|
|
$
|
|
$ |
$ |
||||||||||
Cloud
|
|
|
||||||||||||||
Security
|
|
|
||||||||||||||
Collaboration
|
|
|
||||||||||||||
Other
|
|
|
||||||||||||||
Total product
|
|
|
||||||||||||||
Professional services
|
|
|
||||||||||||||
Managed services
|
|
|
||||||||||||||
Net sales
|
|
|
||||||||||||||
Less: Revenue from financing and other
|
(
|
)
|
(
|
)
|
( |
) | ( |
) | ||||||||
Revenue from contracts with customers
|
$
|
|
$
|
|
$ |
$ |
Item 2. |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
• |
General economic concerns including inflation, rising interest rates, staffing shortages, remote work trends, and global unrest may impact our customers’ willingness to spend on technology and services.
|
• |
Like others in the industry, we are experiencing ongoing supply constraints that have affected, and could continue to further affect, lead times for delivery of products, our having to carry more inventory
for longer periods, the cost of products, vendor return and cancellation policies, and our ability to meet customer demands. We continue to work closely with our suppliers to further mitigate disruptions outside our control. Despite these
actions, we believe extended lead times will likely persist for at least the next few quarters.
|
• |
We are experiencing increases in prices from our suppliers, as well as rising wages and interest rates. We generally have been able to pass price increases to our customers. Our labor costs related to
services we perform will take longer to pass to customers that have service engagements where prices may be set. Accordingly, inflation could have a material impact on our sales, gross profit, or operating costs in the future. Our
financing quotes are generally indexed to market changes to enable us to change rates from time of quote to funding. Financing transactions funded with our cash flows, not debt, are subject to interest rate risk. If the market interest
rate exceeds our internal rate of return, we may not fund the transaction to obtain the proceeds and lock in our profit on the transaction. Also, we are experiencing constriction of funds available and more stringent assessment for our
financing arrangements from our lender partners.
|
• |
Customers’ top focus areas include security, cloud solutions, hybrid work environments (work from home, work from anywhere, and return to office), as well as digital transformation and modernization. We
have developed advisory services, solutions, and professional and managed services to meet these priorities and help our customers attain and maintain their desired outcome.
|
• |
Modernizing legacy applications, data modernization, reducing operational complexity, securing workloads, the cost and performance of IT operations, and agility are changing the way companies are purchasing
and consuming technology. These are fueling deployments of solutions on cloud, managed services and hybrid platforms and licensing models, which may include invoicing over the term of the agreement.
|
• |
Rapid cloud adoption has led to customer challenges around increasing costs, security concerns, and skillset gaps. These challenges are consistent across all industries and sizes. We have developed a Cloud
Managed Services portfolio to address these needs, allowing our clients to focus on driving business outcomes via optimized and secure cloud platforms.
|
Three Months Ended
September 30,
|
Six Months Ended
September 30,
|
|||||||||||||||
Consolidated
|
2023
|
2022
|
2023
|
2022
|
||||||||||||
Financial metrics
|
||||||||||||||||
Net sales
|
$
|
587,611
|
$
|
493,706
|
$
|
1,161,786
|
$
|
952,065
|
||||||||
Gross profit
|
$
|
144,365
|
$
|
133,304
|
$
|
286,638
|
$
|
246,827
|
||||||||
Gross margin
|
24.6
|
%
|
27.0
|
%
|
24.7
|
%
|
25.9
|
%
|
||||||||
Operating income margin
|
7.6
|
%
|
8.9
|
%
|
7.8
|
%
|
8.1
|
%
|
||||||||
|
||||||||||||||||
Net earnings
|
$
|
32,664
|
$
|
28,469
|
$
|
66,511
|
$
|
50,808
|
||||||||
Net earnings margin
|
5.6
|
%
|
5.8
|
%
|
5.7
|
%
|
5.3
|
%
|
||||||||
Net earnings per common share - diluted
|
$
|
1.22
|
$
|
1.07
|
$
|
2.49
|
$
|
1.91
|
||||||||
|
||||||||||||||||
Non-GAAP financial metrics
|
||||||||||||||||
Non-GAAP: Net earnings (1)
|
$
|
37,166
|
$
|
34,396
|
$
|
74,853
|
$
|
60,909
|
||||||||
Non-GAAP: Net earnings per common share - diluted (1)
|
$
|
1.40
|
$
|
1.29
|
$
|
2.81
|
$
|
2.28
|
||||||||
|
||||||||||||||||
Adjusted EBITDA (2)
|
$
|
53,568
|
$
|
50,304
|
$
|
107,447
|
$
|
88,608
|
||||||||
Adjusted EBITDA margin
|
9.1
|
%
|
10.2
|
%
|
9.2
|
%
|
9.3
|
%
|
||||||||
Technology business segments
|
||||||||||||||||
Financial Metrics
|
||||||||||||||||
Net sales
|
||||||||||||||||
Product
|
$
|
500,937
|
$
|
406,317
|
$
|
999,103
|
$
|
791,993
|
||||||||
Professional services
|
38,270
|
38,050
|
73,826
|
75,218
|
||||||||||||
Managed services
|
32,732
|
27,111
|
64,695
|
53,052
|
||||||||||||
Total
|
$
|
571,939
|
$
|
471,478
|
$
|
1,137,624
|
$
|
920,263
|
||||||||
|
||||||||||||||||
Gross profit
|
||||||||||||||||
Product
|
$
|
104,749
|
$
|
94,389
|
$
|
216,140
|
$
|
177,557
|
||||||||
Professional services
|
15,796
|
14,697
|
30,520
|
29,752
|
||||||||||||
Managed services
|
10,194
|
7,189
|
19,991
|
14,617
|
||||||||||||
Total
|
$
|
130,739
|
$
|
116,275
|
$
|
266,651
|
$
|
221,926
|
||||||||
|
||||||||||||||||
Gross margin
|
||||||||||||||||
Product
|
20.9
|
%
|
23.2
|
%
|
21.6
|
%
|
22.4
|
%
|
||||||||
Professional services
|
41.3
|
%
|
38.6
|
%
|
41.3
|
%
|
39.6
|
%
|
||||||||
Managed services
|
31.1
|
%
|
26.5
|
%
|
30.9
|
%
|
27.6
|
%
|
||||||||
Total
|
22.9
|
%
|
24.7
|
%
|
23.4
|
%
|
24.1
|
%
|
||||||||
|
||||||||||||||||
Operating income
|
$
|
35,883
|
$
|
31,903
|
$
|
79,381
|
$
|
61,122
|
||||||||
|
||||||||||||||||
Non-GAAP financial metric
|
||||||||||||||||
Adjusted EBITDA (2)
|
$
|
44,496
|
$
|
38,012
|
$
|
95,445
|
$
|
72,266
|
||||||||
|
||||||||||||||||
Operational metric
|
||||||||||||||||
Gross billings (3)
|
||||||||||||||||
Networking
|
$
|
311,671
|
$
|
196,426
|
$
|
588,316
|
$
|
362,052
|
||||||||
Cloud
|
200,637
|
220,279
|
459,561
|
473,616
|
||||||||||||
Security
|
143,340
|
170,026
|
290,683
|
315,375
|
||||||||||||
Collaboration
|
51,770
|
38,099
|
73,931
|
72,874
|
||||||||||||
Other
|
78,571
|
95,791
|
148,332
|
144,800
|
||||||||||||
Product gross billings
|
785,989
|
720,621
|
1,560,823
|
1,368,717
|
||||||||||||
Service gross billings
|
70,506
|
77,076
|
137,642
|
145,243
|
||||||||||||
Total gross billings
|
$
|
856,495
|
$
|
797,697
|
$
|
1,698,465
|
$
|
1,513,960
|
||||||||
Financing business segment
|
||||||||||||||||
Financial metrics
|
||||||||||||||||
Net sales
|
$
|
15,672
|
$
|
22,228
|
$
|
24,162
|
$
|
31,802
|
||||||||
Gross profit
|
$
|
13,626
|
$
|
17,029
|
$
|
19,987
|
$
|
24,901
|
||||||||
Operating income
|
$
|
8,980
|
$
|
12,204
|
$
|
11,814
|
$
|
16,168
|
||||||||
Non-GAAP financial metric
|
||||||||||||||||
Adjusted EBITDA (2)
|
$
|
9,072
|
$
|
12,292
|
$
|
12,002
|
$
|
16,342
|
(1) |
Non-GAAP: Net earnings and Non-GAAP: Net earnings per common share – diluted are based on net earnings calculated in accordance with US GAAP, adjusted to exclude other (income) expense, share-based compensation, and acquisition and
integration expenses, and the related tax effects.
|
Three Months Ended
September 30,
|
Six Months Ended
September 30,
|
|||||||||||||||
2023
|
2022
|
2023
|
2022
|
|||||||||||||
GAAP: Earnings before tax
|
$
|
44,980
|
$
|
40,241
|
$
|
91,502
|
$
|
71,271
|
||||||||
Share-based compensation
|
2,414
|
1,958
|
4,619
|
3,731
|
||||||||||||
Acquisition related amortization expense
|
4,023
|
2,494
|
7,492
|
4,677
|
||||||||||||
Other (income) expense
|
(117
|
)
|
3,866
|
(307
|
)
|
6,019
|
||||||||||
Non-GAAP: Earnings before provision for income taxes
|
51,300
|
48,559
|
103,306
|
85,698
|
||||||||||||
GAAP: Provision for income taxes
|
12,316
|
11,772
|
24,991
|
20,463
|
||||||||||||
Share-based compensation
|
665
|
572
|
1,272
|
1,080
|
||||||||||||
Acquisition related amortization expense
|
1,106
|
720
|
2,058
|
1,337
|
||||||||||||
Other (income) expense
|
(32
|
)
|
1,128
|
(84
|
)
|
1,744
|
||||||||||
Tax benefit (expense) on restricted stock
|
79
|
(29
|
)
|
216
|
165
|
|||||||||||
Non-GAAP: Provision for income taxes
|
14,134
|
14,163
|
28,453
|
24,789
|
||||||||||||
Non-GAAP: Net earnings
|
$
|
37,166
|
$
|
34,396
|
$
|
74,853
|
$
|
60,909
|
Three Months Ended
September 30,
|
Six Months Ended
September 30,
|
|||||||||||||||
2023
|
2022
|
2023
|
2022
|
|||||||||||||
GAAP: Net earnings per common share - diluted
|
$
|
1.22
|
$
|
1.07
|
$
|
2.49
|
$
|
1.91
|
||||||||
Share-based compensation
|
0.07
|
0.05
|
0.13
|
0.09
|
||||||||||||
Acquisition related amortization expense
|
0.11
|
0.07
|
0.20
|
0.13
|
||||||||||||
Other (income) expense
|
-
|
0.10
|
-
|
0.16
|
||||||||||||
Tax benefit (expense) on restricted stock
|
-
|
-
|
(0.01
|
)
|
(0.01
|
)
|
||||||||||
Total non-GAAP adjustments - net of tax
|
0.18
|
0.22
|
0.32
|
0.37
|
||||||||||||
Non-GAAP: Net earnings per common share - diluted
|
$
|
1.40
|
$
|
1.29
|
$
|
2.81
|
$
|
2.28
|
(2) |
We define Adjusted EBITDA as net earnings calculated in accordance with US GAAP, adjusted for the following: interest expense, depreciation and amortization, share-based compensation, acquisition and integration expenses, provision for
income taxes, and other income. Adjusted EBITDA presented for the technology business segments and the financing business segment is defined as operating income calculated in accordance with US GAAP, adjusted for interest expense,
share-based compensation, acquisition and integration expenses, and depreciation and amortization. We consider the interest on notes payable from our financing business segment and depreciation expense presented within cost of sales,
which includes depreciation on assets financed as operating leases, to be operating expenses. As such, they are not included in the amounts added back to net earnings in the Adjusted EBITDA calculation. In the table below, we provide a
reconciliation of Adjusted EBITDA to net earnings, which is the most directly comparable financial measure to this non-GAAP financial measure. Adjusted EBITDA margin is our calculation of Adjusted EBITDA divided by net sales.
|
Three Months Ended
September 30,
|
Six Months Ended
September 30,
|
|||||||||||||||
Consolidated
|
2023
|
2022
|
2023
|
2022
|
||||||||||||
Net earnings
|
$
|
32,664
|
$
|
28,469
|
$
|
66,511
|
$
|
50,808
|
||||||||
Provision for income taxes
|
12,316
|
11,772
|
24,991
|
20,463
|
||||||||||||
Share-based compensation
|
2,414
|
1,958
|
4,619
|
3,731
|
||||||||||||
Interest and financing costs
|
661
|
671
|
1,211
|
809
|
||||||||||||
Depreciation and amortization
|
5,630
|
3,568
|
10,422
|
6,778
|
||||||||||||
Other income (expense)
|
(117
|
)
|
3,866
|
(307
|
)
|
6,019
|
||||||||||
Adjusted EBITDA
|
$
|
53,568
|
$
|
50,304
|
$
|
107,447
|
$
|
88,608
|
||||||||
Technology business segments
|
||||||||||||||||
Operating income
|
$
|
35,883
|
$
|
31,903
|
$
|
79,381
|
$
|
61,122
|
||||||||
Depreciation and amortization
|
5,602
|
3,540
|
10,366
|
6,722
|
||||||||||||
Share based compensation
|
2,350
|
1,898
|
4,487
|
3,613
|
||||||||||||
Interest and financing costs
|
661
|
671
|
1,211
|
809
|
||||||||||||
Adjusted EBITDA
|
$
|
44,496
|
$
|
38,012
|
$
|
95,445
|
$
|
72,266
|
||||||||
Financing business segment
|
||||||||||||||||
Operating income
|
$
|
8,980
|
$
|
12,204
|
$
|
11,814
|
$
|
16,168
|
||||||||
Depreciation and amortization
|
28
|
28
|
56
|
56
|
||||||||||||
Share-based compensation
|
64
|
60
|
132
|
118
|
||||||||||||
Adjusted EBITDA
|
$
|
9,072
|
$
|
12,292
|
$
|
12,002
|
$
|
16,342
|
(3) |
Gross billings are the total dollar value of customer purchases of goods and services including shipping charges during the period, net of customer returns and credit memos, sales, or other taxes. Gross
billings includes the transaction values for certain sales transactions that are recognized on a net basis, and, therefore, includes amounts that will not be recognized as revenue.
|
• |
Product segment: Our product segment consists of the sale of third-party hardware, third-party perpetual and subscription software, and third-party maintenance, software assurance, and other third-party
services. The product segment also includes internet-based business-to-business supply chain management solutions for IT products.
|
• |
Professional services segment: Our professional services segment includes our advanced professional services to our customers that are performed under time and materials, fixed fee, or milestone contracts.
Professional services include cloud consulting, staff augmentation services, and project management services.
|
• |
Managed services segment: Our managed services segment includes our advanced managed services that include managing various aspects of our customers’ environments and are billed in regular intervals over a
contract term, usually between three to five years. Managed services also include security solutions, storage-as-a-service, cloud hosted services, cloud managed services, and service desk.
|
• |
Portfolio income: Interest income from financing receivables and rents due under operating leases.
|
• |
Transactional gains: Net gains or losses on the sale of financial assets.
|
• |
Post-contract earnings: Month-to-month rents; early termination, prepayment, make-whole, or buyout fees; and the sale of off-lease (used) equipment.
|
Three Months Ended
September 30, |
Six Months Ended
September 30, |
|||||||||||||||
2023
|
2022
|
2023
|
2022
|
|||||||||||||
Financial Metrics
|
||||||||||||||||
Net sales
|
||||||||||||||||
Product
|
$
|
500,937
|
$
|
406,317
|
$
|
999,103
|
$
|
791,993
|
||||||||
Professional services
|
38,270
|
$
|
38,050
|
73,826
|
75,218
|
|||||||||||
Managed services
|
32,732
|
$
|
27,111
|
64,695
|
53,052
|
|||||||||||
Total
|
$
|
571,939
|
$
|
471,478
|
$
|
1,137,624
|
$
|
920,263
|
||||||||
Gross Profit
|
||||||||||||||||
Product
|
104,749
|
94,389
|
216,140
|
177,557
|
||||||||||||
Professional services
|
15,796
|
14,697
|
30,520
|
29,752
|
||||||||||||
Managed services
|
10,194
|
7,189
|
19,991
|
14,617
|
||||||||||||
Total
|
130,739
|
116,275
|
266,651
|
221,926
|
||||||||||||
Selling, general, and administrative
|
88,593
|
80,161
|
175,693
|
153,273
|
||||||||||||
Depreciation and amortization
|
5,602
|
3,540
|
10,366
|
6,722
|
||||||||||||
Interest and financing costs
|
661
|
671
|
1,211
|
809
|
||||||||||||
Operating expenses
|
94,856
|
84,372
|
187,270
|
160,804
|
||||||||||||
|
||||||||||||||||
Operating income
|
$
|
35,883
|
$
|
31,903
|
$
|
79,381
|
$
|
61,122
|
||||||||
Key Metrics & Other Information
|
||||||||||||||||
Gross billings
|
$
|
856,495
|
$
|
797,697
|
$
|
1,698,465
|
$
|
1,513,960
|
||||||||
Adjusted EBITDA
|
$
|
44,496
|
$
|
38,012
|
$
|
95,445
|
$
|
72,266
|
||||||||
|
||||||||||||||||
Product margin
|
20.9
|
%
|
23.2
|
%
|
21.6
|
%
|
22.4
|
%
|
||||||||
Professional service margin
|
41.3
|
%
|
38.6
|
%
|
41.3
|
%
|
39.6
|
%
|
||||||||
Managed service margin
|
31.1
|
%
|
26.5
|
%
|
30.9
|
%
|
27.6
|
%
|
||||||||
Net sales by customer end market:
|
||||||||||||||||
Telecom, media & entertainment
|
$
|
124,306
|
$
|
118,454
|
$
|
265,641
|
$
|
246,731
|
||||||||
Technology
|
110,948
|
96,160
|
184,351
|
166,021
|
||||||||||||
SLED
|
94,906
|
70,491
|
204,311
|
135,092
|
||||||||||||
Healthcare
|
72,022
|
66,959
|
158,678
|
135,471
|
||||||||||||
Financial services
|
69,885
|
37,611
|
135,575
|
70,910
|
||||||||||||
All others
|
99,872
|
81,803
|
189,068
|
166,038
|
||||||||||||
Total
|
$
|
571,939
|
$
|
471,478
|
$
|
1,137,624
|
$
|
920,263
|
||||||||
Net sales by type:
|
||||||||||||||||
Networking
|
268,636
|
165,896
|
513,824
|
308,537
|
||||||||||||
Cloud
|
135,068
|
148,992
|
307,112
|
313,725
|
||||||||||||
Security
|
51,886
|
48,517
|
97,682
|
96,512
|
||||||||||||
Collaboration
|
27,083
|
19,187
|
40,039
|
32,167
|
||||||||||||
Other
|
18,264
|
23,725
|
40,446
|
41,052
|
||||||||||||
Total products
|
$
|
500,937
|
$
|
406,317
|
$
|
999,103
|
$
|
791,993
|
||||||||
|
||||||||||||||||
Professional services
|
38,270
|
38,050
|
73,826
|
75,218
|
||||||||||||
Managed services
|
32,732
|
27,111
|
64,695
|
53,052
|
||||||||||||
Total
|
$
|
571,939
|
$
|
471,478
|
$
|
1,137,624
|
$
|
920,263
|
Three Months Ended
September 30, |
Six Months Ended
September 30, |
|||||||||||||||
2023
|
2022
|
2023
|
2022
|
|||||||||||||
Financial metrics
|
||||||||||||||||
Portfolio earnings
|
$
|
3,339
|
$
|
2,888
|
$
|
6,412
|
$
|
5,561
|
||||||||
Transactional gains
|
6,949
|
8,109
|
8,228
|
9,944
|
||||||||||||
Post-contract earnings
|
5,038
|
10,519
|
8,672
|
15,245
|
||||||||||||
Other
|
346
|
712
|
850
|
1,052
|
||||||||||||
Net sales
|
$
|
15,672
|
$
|
22,228
|
$
|
24,162
|
$
|
31,802
|
||||||||
Gross profit
|
13,626
|
17,029
|
19,987
|
24,901
|
||||||||||||
Selling, general, and adminstrative
|
4,059
|
4,543
|
7,257
|
8,198
|
||||||||||||
Depreciation and amortization
|
28
|
28
|
56
|
56
|
||||||||||||
Interest and financing costs
|
559
|
254
|
860
|
479
|
||||||||||||
Operating expenses
|
4,646
|
4,825
|
8,173
|
8,733
|
||||||||||||
Operating income
|
$
|
8,980
|
$
|
12,204
|
$
|
11,814
|
$
|
16,168
|
||||||||
Key metrics & other information
|
||||||||||||||||
Adjusted EBITDA
|
$
|
9,072
|
$
|
12,292
|
$
|
12,002
|
$
|
16,342
|
Six Months Ended September 30,
|
||||||||
2023
|
2022
|
|||||||
Net cash provided by (used in) operating activities
|
$
|
10,336
|
$
|
(119,671
|
)
|
|||
Net cash used in investing activities
|
(53,834
|
)
|
(12,294
|
)
|
||||
Net cash provided by financing activities
|
22,614
|
71,342
|
||||||
Effect of exchange rate changes on cash
|
289
|
4,776
|
||||||
Net decrease in cash and cash equivalents
|
$
|
(20,595
|
)
|
$
|
(55,847
|
)
|
Six Months Ended September 30,
|
||||||||
2023
|
2022
|
|||||||
Technology business segments
|
$
|
15,754
|
$
|
(120,746
|
)
|
|||
Financing business segment
|
(5,418
|
)
|
1,075
|
|||||
Net cash provided by (used in) operating activities
|
$
|
10,336
|
$
|
(119,671
|
)
|
As of September 30,
|
||||||||
2023
|
2022
|
|||||||
(DSO) Days sales outstanding (1)
|
69
|
63
|
||||||
(DIO) Days inventory outstanding (2)
|
29
|
36
|
||||||
(DPO) Days payable outstanding (3)
|
(47
|
)
|
(47
|
)
|
||||
Cash conversion cycle
|
51
|
52
|
(1) |
Represents the rolling three-month average of the balance of trade accounts receivable-trade, net for our technology business segments at the end of the period divided by Gross billings for the same three-month period.
|
(2) |
Represents the rolling three-month average of the balance of inventory, net for our technology business segments at the end of the period divided by the direct cost of products and services billed to our customers for the same
three-month period.
|
(3) |
Represents the rolling three-month average of the combined balance of accounts payable-trade and accounts payable-floor plan for our technology business segments at the end of the period divided by the direct cost of products and
services billed to our customers for the same three-month period.
|
Item 1. |
LEGAL PROCEEDINGS
|
Item 1A. |
RISK FACTORS
|
Item 2. |
UNREGISTERED SALES OF EQUITY SECURITIES, USE OF PROCEEDS, AND ISSUER PURCHASES OF EQUITY SECURITIES
|
Period
|
Total
number of shares purchased (1)
|
Average
price paid per share
|
Total number of
shares purchased
as part of publicly
announced plans or
programs
|
Maximum number
of shares that may
yet be purchased
under the plans or
programs (2)
|
||||||||||||
July 1, 2023 through July 31, 2023
|
8,599
|
$
|
57.62
|
8,599
|
985,725
|
|||||||||||
Aug 1, 2023 through Aug 31, 2023
|
2,500
|
$
|
58.05
|
2,500
|
983,225
|
|||||||||||
Sep 1, 2023 through Sep 30, 2023
|
4,482
|
$
|
63.31
|
4,482
|
978,743
|
|||||||||||
Total
|
15,581
|
15,581
|
(1) |
All shares were acquired in open-market purchases.
|
(2) |
The amounts presented in this column are the remaining number of shares that may be repurchased after repurchases during the month. As of May 27, 2023, the authorization under the then-existing share repurchase plan expired. On March
22, 2023, our board of directors authorized the repurchase of up to 1,000,000 shares of our outstanding common stock, over a 12-month period beginning May 28, 2023.
|
Item 3. |
DEFAULTS UPON SENIOR SECURITIES
|
Item 4. |
MINE SAFETY DISCLOSURES
|
Name
|
Title
|
|
Duration (a)
|
Aggregate number of shares to be sold
|
|
|
|
|
|
|
|
|
|
a) |
Subject to compliance with Rule 10b5-1, duration could cease earlier than the final date shown above to the extent that the aggregate number of shares to be sold under the trading arrangement have been
sold and trading may not begin on the first date of the duration.
|
Item 6. |
EXHIBITS
|
Exhibit
Number
|
Exhibit Description
|
|
ePlus inc. Amended and Restated Certificate of Incorporation, as last amended September 18, 2023
|
||
Amended and Restated Bylaws of ePlus inc., as of March 2, 2022. (Incorporated herein by reference to Exhibit 3.2 to our Annual Report on Form 10-K for the fiscal year ended March 31, 2022).
|
||
Certification of the Chief Executive Officer of ePlus inc. pursuant to the Securities Exchange Act Rules 13a-14(a) and 15d-14(a).
|
||
Certification of the Chief Financial Officer of ePlus inc. pursuant to the Securities Exchange Act Rules 13a-14(a) and 15d-14(a).
|
||
Certification of the Chief Executive Officer and Chief Financial Officer of ePlus inc. pursuant to 18 U.S.C. § 1350.
|
||
101.INS
|
Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)
|
|
101.SCH
|
Inline XBRL Taxonomy Extension Schema Document
|
|
101.CAL
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document
|
|
101.DEF
|
Inline XBRL Taxonomy Extension Definition Linkbase Document
|
|
101.LAB
|
Inline XBRL Taxonomy Extension Label Linkbase Document
|
|
101.PRE
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document
|
|
104
|
Cover Page Interactive Data File (embedded within the Exhibit 101 Inline XBRL document)
|
ePlus inc.
|
||
Date: November 7, 2023
|
/s/ MARK P. MARRON
|
|
By: Mark P. Marron
|
||
Chief Executive Officer and President
|
||
(Principal Executive Officer)
|
||
Date: November 7, 2023
|
/s/ ELAINE D. MARION
|
|
By: Elaine D. Marion
|
||
Chief Financial Officer
|
||
(Principal Financial Officer)
|