# EPLUS INC (PLUS) FY 2023 MD&A

Verbatim Item 7 Management's Discussion and Analysis from EPLUS INC's 10-K for fiscal year 2023.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1022408/000114036123026454/brhc20053157_10k.htm
Accession: 0001140361-23-026454
Filing date: 2023-05-25
Report date: 2023-03-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/PLUS/
All MD&A years: /company/PLUS/mda/
Previous year: /company/PLUS/mda/fy2022/ (FY 2022)
Next year: /company/PLUS/mda/fy2024/ (FY 2024)

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of the financial condition and results of operations (the “financial review”) of ePlus is intended to help investors understand
our company and our operations. The financial review is provided as a supplement to, and should be read in conjunction with, the Consolidated Financial Statements and the related notes included elsewhere in this report.

EXECUTIVE OVERVIEW

BUSINESS DESCRIPTION

We provide leading IT products and services, flexible leasing and financing solutions, and enterprise supply management to enable our customers to optimize their IT infrastructure and supply chain processes.

We design, implement, and provide IT solutions for customers. We focus primarily on specialized IT segments including data center infrastructure, networking, security, cloud, and collaboration. Our solutions
incorporate hardware and software products from multiple leading IT vendors. As our customers’ IT requirements have grown increasingly complex, we have evolved our offerings by investing in our professional and managed services
capabilities and by expanding our relationships with existing and emerging key vendors.

We are an authorized reseller of over 1,500 vendors, which have enabled us to provide our customers with new and evolving IT solutions. We possess top-level engineering certifications with a broad range of
leading IT vendors that enable us to offer IT solutions that are optimized for each of our customers’ specific requirements. Our proprietary software solutions allow our customers to procure, control and automate their IT solutions
environment.

BUSINESS TRENDS

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

[[GREPCENT_TABLE]]
[["","\u2022","General economic concerns including inflation, rising interest rates, staffing shortages, remote work trends, and global unrest may impact our customers\u2019 willingness to spend on technology and services."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","A worldwide shortage of certain IT products is resulting from, among other things, shortages in semiconductors and other product components. Like others in the industry, we are experiencing ongoing supply constraints that have affected, and could continue to further affect, lead times for delivery of products, our having to carry more inventory for longer periods, the cost of products, vendor return and cancellation policies, and our ability to meet customer demands. We continue to work closely with our suppliers to further mitigate disruptions outside our control. Despite these actions, we believe extended lead times will likely persist for at least the next few quarters."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","We are experiencing increases in prices from our suppliers, as well as rising wages and interest rates. We generally have been able to pass price increases to our customers. Our labor costs related to services we perform will take longer to pass to customers that have service engagements where prices may be set. Our financing quotes are generally indexed to market changes to enable us to change rates from time of quote to funding. Financing transactions funded with our cash flows, not debt, are subject to interest rate risk. If the market interest rate exceeds our internal rate of return, we may not fund the transaction to obtain the proceeds and lock in our profit on the transaction. Accordingly, inflation could have a material impact on our sales, gross profit, or operating costs in the future."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","Customers\u2019 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."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","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."]]
[[/GREPCENT_TABLE]]

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[[GREPCENT_TABLE]]
[["","\u2022","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."]]
[[/GREPCENT_TABLE]]

KEY BUSINESS METRICS

Our management monitors several financial and non-financial measures and ratios on a regular basis to track the progress of our business. We believe that the most important of these measures and ratios include net sales, gross
margin, operating income margin, net earnings, and net earnings per common share, in each case based on information prepared in accordance with US GAAP, as well as the non-GAAP financial measures and ratios, including Adjusted EBITDA,
Adjusted EBITDA margin, Non-GAAP: Net earnings and Non-GAAP: Net earnings per common share. We use a variety of operating and other information to evaluate the operating performance of our business, develop financial forecasts, make
strategic decisions, and prepare and approve annual budgets. We use Gross billings as an operational metric to assess the volume of transactions within our Technology segment as well as to understand changes in our accounts receivable.
We believe Gross billings will aid investors in the same manner.

These key indicators include financial information that is prepared in accordance with US GAAP and presented in our consolidated financial statements, as well as non-GAAP and operational performance measurement tools. Generally, a
non-GAAP financial measure is a numerical measure of a company’s performance or financial position that either excludes or includes amounts that are correspondingly not normally excluded or included in the most directly comparable
measure calculated and presented in accordance with US GAAP. Our use of non-GAAP information as analytical tools has limitations, and you should not consider them in isolation or as substitutes for analysis of our financial results
reported under GAAP, as these measures used by management may differ from similar measures used by other companies, even when similar terms are used to identify such measures.

Set forth in footnotes (1) and (2) of the tables that immediately follow this paragraph, we set forth our reasons for using and presenting Adjusted EBITDA, Adjusted EBITDA margin, Non-GAAP: Net earnings and Non-GAAP: Net earnings per
common share-diluted in the tables and discussion that follow.

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The following table provides our key business metrics (in thousands, except per share amounts):

[[GREPCENT_TABLE]]
[["","","Year Ended March 31,"],["Consolidated","","2023","","","2022","","","2021"],["Financial Metrics"],["Net sales","","$","2,067,718","","","$","1,821,019","","","$","1,568,323"],["Gross profit","","$","517,524","","","$","460,982","","","$","393,554"],["Gross margin","","","25.0","%","","","25.3","%","","","25.1","%"],["Operating income margin","","","8.0","%","","","8.1","%","","","6.8","%"],["Net earnings","","$","119,356","","","$","105,600","","","$","74,397"],["Net earnings margin","","","5.8","%","","","5.8","%","","","4.7","%"],["Net earnings per common share - diluted","","$","4.48","","","$","3.93","","","$","2.77"],["Non-GAAP Financial Metrics"],["Non-GAAP: Net earnings (1)","","$","133,931","","","$","117,964","","","$","85,567"],["Non-GAAP: Net earnings per common share - diluted (1)","","$","5.02","","","$","4.39","","","$","3.19"],["Adjusted EBITDA (2)","","$","190,592","","","$","170,004","","","$","128,245"],["Adjusted EBITDA margin","","","9.2","%","","","9.3","%","","","8.2","%"],["Technology Segment"],["Financial Metrics"],["Net sales","","$","2,015,245","","","$","1,733,036","","","$","1,507,954"],["Gross profit","","$","474,490","","","$","408,153","","","$","346,235"],["Gross margin","","","23.5","%","","","23.6","%","","","23.0","%"],["Operating income","","$","140,110","","","$","109,000","","","$","75,665"],["Non-GAAP Financial Metric"],["Adjusted EBITDA (2)","","$","164,184","","","$","131,353","","","$","97,219"],["Operational Metric"],["Gross billings (3)"],["Data Center / Cloud","","$","892,308","","","$","828,002","","","$","723,971"],["Networking","","","927,319","","","","709,687","","","","590,690"],["Security","","","639,416","","","","476,339","","","","418,499"],["Collaboration","","","127,027","","","","131,941","","","","91,833"],["Other","","","282,748","","","","240,586","","","","236,707"],["Product gross billings","","","2,868,818","","","","2,386,555","","","","2,061,700"],["Service billings","","","277,070","","","","239,194","","","","210,136"],["Total gross billings","","$","3,145,888","","","$","2,625,749","","","$","2,271,836"],["Financing Segment"],["Financial Metrics"],["Net sales","","$","52,473","","","$","87,983","","","$","60,369"],["Gross profit","","$","43,034","","","$","52,829","","","$","47,319"],["Operating income","","$","26,052","","","$","38,316","","","$","30,670"],["Non-GAAP Financial Metric"],["Adjusted EBITDA (2)","","$","26,408","","","$","38,651","","","$","31,026"]]
[[/GREPCENT_TABLE]]

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

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

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The following table provides our calculation of Non-GAAP: Net earnings and Non-GAAP: Net earnings per common share – diluted (in thousands, except per share amounts):

[[GREPCENT_TABLE]]
[["","","Year Ended March 31,"],["","","2023","","","2022","","","2021"],["GAAP: Earnings before tax","","$","162,974","","","$","146,884","","","$","106,906"],["Share based compensation","","","7,824","","","","7,114","","","","7,167"],["Acquisition and integration expense","","","-","","","","-","","","","271"],["Acquisition related amortization expense","","","9,411","","","","10,072","","","","9,116"],["Other (income) expense","","","3,188","","","","432","","","","(571",")"],["Non-GAAP: Earnings before provision for income taxes","","","183,397","","","","164,502","","","","122,889"],["GAAP: Provision for income taxes","","","43,618","","","","41,284","","","","32,509"],["Share based compensation","","","2,104","","","","2,014","","","","2,188"],["Acquisition and integration expense","","","-","","","","-","","","","78"],["Acquisition related amortization expense","","","2,527","","","","2,803","","","","2,730"],["Other (income) expense","","","950","","","","120","","","","(143",")"],["Tax benefit (expense) on restricted stock","","","267","","","","317","","","","(40",")"],["Non-GAAP: Provision for income taxes","","","49,466","","","","46,538","","","","37,322"],["Non-GAAP: Net earnings","","$","133,931","","","$","117,964","","","$","85,567"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","","Year Ended March 31,"],["","","2023","","","2022","","","2021"],["GAAP: Net earnings per common share - diluted","","$","4.48","","","$","3.93","","","$","2.77"],["Share based compensation","","","0.21","","","","0.20","","","","0.19"],["Acquisition and integration expense","","","-","","","","-","","","","0.01"],["Acquisition related amortization expense","","","0.26","","","","0.26","","","","0.24"],["Other (income) expense","","","0.08","","","","0.01","","","","(0.02",")"],["Tax benefit (expense) on restricted stock","","","(0.01",")","","","(0.01",")","","","-"],["Total non-GAAP adjustments - net of tax","","","0.54","","","","0.46","","","","0.42"],["Non-GAAP: Net earnings per common share - diluted","","$","5.02","","","$","4.39","","","$","3.19"]]
[[/GREPCENT_TABLE]]

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

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

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The following table provides our calculations of Adjusted EBITDA (in thousands):

[[GREPCENT_TABLE]]
[["","","Year Ended March 31,"],["Consolidated","","2023","","","2022","","","2021"],["Net earnings","","$","119,356","","","$","105,600","","","$","74,397"],["Provision for income taxes","","","43,618","","","","41,284","","","","32,509"],["Share based compensation","","","7,824","","","","7,114","","","","7,167"],["Interest and financing costs","","","2,897","","","","928","","","","521"],["Acquisition and integration expense","","","-","","","","-","","","","271"],["Depreciation and amortization","","","13,709","","","","14,646","","","","13,951"],["Other (income) expense, net","","","3,188","","","","432","","","","(571",")"],["Adjusted EBITDA","","$","190,592","","","$","170,004","","","$","128,245"],["Technology Segment"],["Operating income","","$","140,110","","","$","109,000","","","$","75,665"],["Depreciation and amortization","","","13,598","","","","14,535","","","","13,839"],["Share based compensation","","","7,579","","","","6,890","","","","6,923"],["Interest and financing costs","","","2,897","","","","928","","","","521"],["Acquisition and integration expense","","","-","","","","-","","","","271"],["Adjusted EBITDA","","$","164,184","","","$","131,353","","","$","97,219"],["Financing Segment"],["Operating income","","$","26,052","","","$","38,316","","","$","30,670"],["Depreciation and amortization","","","111","","","","111","","","","112"],["Share based compensation","","","245","","","","224","","","","244"],["Adjusted EBITDA","","$","26,408","","","$","38,651","","","$","31,026"]]
[[/GREPCENT_TABLE]]

(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.

FINANCIAL SUMMARY

Net sales: Net sales for the year ended March 31, 2023, increased 13.5% to $2,067.7 million, or an increase of $246.7 million compared to $1,821.0 million in the prior fiscal year. The increase in net
sales was driven by higher revenues from our technology segment, offset by lower revenues from our financing segment. The increase in sales from the technology segment was due to increases in both product and services sales as a result
of higher customer demand. The decline in revenues from our financing segment was due to lower proceeds from early lease buyouts and sales of leased equipment.

Gross billings from our technology segment for the year ended March 31, 2023, increased by 19.8%, or $520.1 million, to $3,145.9 million compared to $2,625.7 million in the prior fiscal year. Gross billings
increased year over year at a faster rate than net sales due to a shift in mix to a higher proportion of third-party maintenance, software assurance, subscriptions/SaaS licenses, and services which we recognize revenue on a net basis.

Gross profit: Consolidated gross profit for the year ended March 31, 2023, increased 12.3%, to $517.5 million, compared to $461.0 million in the prior fiscal year due to increased net sales volume.
Overall, gross margins were consistent year over year as higher product margins were offset by lower service margins.

Operating expenses: Operating expenses for the year ended March 31, 2023, increased $37.7 million, or 12.0%, to $351.4 million, as compared to $313.7 million in the prior year. Our
increase in operating expenses was primarily due to an increase of $23.5 million in salaries and benefits and an increase of $12.2 million in general and administrative expenses. Salaries and benefits increased due to an increase in the
number of employees as well as higher variable compensation corresponding to the increase in gross profit. As of March 31, 2023, we had 1,754 employees, an increase of 11.2% from 1,577 as of March 31,
2022.

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General and administrative expenses also increased due to the increase in employees, as we had higher software, subscription and maintenance fees and travel and entertainment costs. Travel and entertainment increased due to the
return of in person business meetings and events. The other categories of expenses increased from the increase in personnel. We had higher professional service fees, which was partially due to post go-live support for a new software
platform within our financing segment.

Provision for credit losses increased $0.8 million primarily due to higher exposure within our financing portfolio. Interest and financing costs increased
$2.2 million due to higher outstanding borrowings. Offsetting these increases, was a decrease of $1.0 million in depreciation and amortization.

Operating income: As a result of the foregoing, operating income for the year ended March 31, 2023, increased $18.9 million, or 12.8%, to $166.2 million and operating margin decreased by 10 basis points
to 8.0%, as compared to $147.3 million for the year ended March 31, 2022. The increase in operating income was due to increases from our technology segment, which was offset by lower operating income from our financing segment.

Provision for income taxes: Our effective income tax rate for the year ended March 31, 2023, was 26.8% compared to 28.1% in the prior year. The decrease in our effective income tax rate year over year is primarily due to lower
than forecasted non-deductible expenses, increased benefits from foreign sales along with favorable state return to provision adjustments.

Net earnings: Consolidated net earnings for the year ended March 31, 2023, increased 13.0% to $119.4 million, as compared to $105.6 million for the year ended March 31, 2022, due to an increase in gross
profit, offset by an increase in operating expenses and foreign exchange losses.

Adjusted EBITDA for the year ended March 31, 2023, was $190.6 million, an increase of $20.6 million, or 12.1%, compared to the prior year. Adjusted EBITDA margin for the year ended March 31, 2023,
decreased 10 basis points to 9.2%, as compared to the prior year period of 9.3%. The increase in Adjusted EBITDA was due
to increases from our technology segment, which was offset by lower Adjusted EBITDA from our financing segment.

Net earnings per common share diluted for the year ended March 31, 2023, increased $0.55, or 14.0%, to $4.48 per share, as compared to $3.93 per share in the
prior year. Non-GAAP: Net earnings per common share diluted for the year ended March 31, 2023, increased $0.63, or 14.4%, to $5.02 per share, as compared to $4.39 per share in the prior year.

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.

Technology segment revenue generally falls into the following three categories:

[[GREPCENT_TABLE]]
[["","\u2022","Product revenue: Revenue generated from the sale of third-party hardware, perpetual and subscription software, maintenance, software assurance, and services."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","Professional services: Revenue generated from our advanced professional services that are performed under time & materials, fixed fee, or milestone contracts. Professional services include cloud consulting, staff augmentation services, and project management services."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","Managed services: Revenue generated from 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 include security solutions, storage-as-a-service, cloud hosted services, cloud managed services, and service desk."]]
[[/GREPCENT_TABLE]]

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, medical equipment and other equipment, and the disposition of that equipment at the end of the lease. The financing segment also derives revenues from the financing of third-party software licenses, software assurance,
maintenance, and other services.

Financing segment revenue generally falls into the following three categories:

[[GREPCENT_TABLE]]
[["","\u2022","Portfolio income: Interest income from financing receivables and rents due under operating leases."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","Transactional gains: Net gains or losses on the sale of financial assets."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u2022","Post-contract earnings: Month-to-month rents; early termination, prepayment, make-whole or buyout fees; and the sale of off-lease (used) equipment."]]
[[/GREPCENT_TABLE]]

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

During the fiscal year 2023, we implemented a new cloud-based lease accounting application to provide us with a platform for scalable growth, eliminate inefficient processes, and allow us to retire several
legacy applications.

RESULTS OF OPERATIONS

The Year Ended March 31, 2023, Compared to the Year Ended March 31, 2022

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TECHNOLOGY SEGMENT

The results of operations for our technology segment for the years ended March 31, 2023, and 2022 were as follows (in thousands):

[[GREPCENT_TABLE]]
[["","","Year Ended March 31,","","","","","","Percent"],["","","2023","","","2022","","","Change","","","Change"],["Financial Metrics"],["Net sales"],["Product","","$","1,750,802","","","$","1,492,411","","","$","258,391","","","","17.3","%"],["Services","","","264,443","","","","240,625","","","","23,818","","","","9.9","%"],["Total","","","2,015,245","","","","1,733,036","","","","282,209","","","","16.3","%"],["Cost of sales"],["Product","","","1,370,061","","","","1,175,789","","","","194,272","","","","16.5","%"],["Services","","","170,694","","","","149,094","","","","21,600","","","","14.5","%"],["Total","","","1,540,755","","","","1,324,883","","","","215,872","","","","16.3","%"],["Gross profit","","","474,490","","","","408,153","","","","66,337","","","","16.3","%"],["Selling, general, and administrative","","","317,885","","","","283,690","","","","34,195","","","","12.1","%"],["Depreciation and amortization","","","13,598","","","","14,535","","","","(937",")","","","(6.4","%)"],["Interest and financing costs","","","2,897","","","","928","","","","1,969","","","","212.2","%"],["Operating expenses","","","334,380","","","","299,153","","","","35,227","","","","11.8","%"],["Operating income","","$","140,110","","","$","109,000","","","$","31,110","","","","28.5","%"],["Key Metrics & Other Information"],["Gross billings","","$","3,145,888","","","$","2,625,749","","","$","520,139","","","","19.8","%"],["Adjusted EBITDA","","$","164,184","","","$","131,353","","","$","32,831","","","","25.0","%"],["Net sales by customer end market:"],["Telecom, Media & Entertainment","","$","532,921","","","$","502,408","","","$","30,513","","","","6.1","%"],["Technology","","","393,594","","","","250,485","","","","143,109","","","","57.1","%"],["SLED","","","290,624","","","","241,769","","","","48,855","","","","20.2","%"],["Healthcare","","","274,936","","","","270,481","","","","4,455","","","","1.6","%"],["Financial Services","","","156,257","","","","155,160","","","","1,097","","","","0.7","%"],["All others","","","366,913","","","","312,733","","","","54,180","","","","17.3","%"],["Total","","$","2,015,245","","","$","1,733,036","","","$","282,209","","","","16.3","%"],["Net sales by type:"],["Data Center / Cloud","","$","587,097","","","$","581,113","","","$","5,984","","","","1.0","%"],["Networking","","","803,678","","","","611,488","","","","192,190","","","","31.4","%"],["Security","","","214,459","","","","158,927","","","","55,532","","","","34.9","%"],["Collaboration","","","57,472","","","","57,244","","","","228","","","","0.4","%"],["Other","","","88,096","","","","83,639","","","","4,457","","","","5.3","%"],["ePlus services","","","264,443","","","","240,625","","","","23,818","","","","9.9","%"],["Total","","$","2,015,245","","","$","1,733,036","","","$","282,209","","","","16.3","%"]]
[[/GREPCENT_TABLE]]

33

Table of Contents

Net sales: Net sales for the year
ended March 31, 2023, increased due to an increase in customer demand, primarily from customers in technology and SLED industries, due to customer specific IT related initiatives. Product sales increased in networking due to our ability to leverage improvements in the global supply chain and an increase in security product sales as our customers’ focus on improving their security posture
in their environments. Contributing to the increase in net sales was higher service revenues, due to increases in sales of our managed services
offerings, as well as higher professional services due, in part, to improvements in the global supply chain. Also contributing to the increase in net sales were increases in the cost of equipment we incurred from our
suppliers due, in part, to inflation, which we typically pass on to our customers.

Our net sales by customer end market have remained consistent with the prior year, with over 80% of our sales being generated from
customers within the five end markets specified in the table above.

Gross billings to our customers increased primarily due to organic customer demand, rather than acquisition or loss of a specific customer or set of customers.

Cost of sales: Cost of sales for the year ended March 31, 2023, increased due to the increase in demand for both product and services. Cost of product increased slightly less than the increase in
product sales due to a change in product sales mix, as a greater portion of our transaction volume consisted of sales of third-party maintenance, software assurance, subscription/SaaS licenses, and services, for which the revenues and
cost of sales are presented on a net basis. Cost of services increased slightly more than the increase in service revenue due to higher third-party costs incurred.

Gross profit: Gross profit for the year ended March 31, 2023, increased consistent with the increase in net sales. Gross margins were consistent year over year as higher product margins were offset by
lower service margins. Gross margin on product sales increased 50 basis points to 21.7% due to a shift in product mix to a greater proportion of sales of third-party maintenance, software assurance, subscription/SaaS licenses, and
services, which are presented on a net basis. Also contributing to the increase in gross margin on product sales was higher vendor incentives which as a percentage of net sales for the year ended March 31, 2023, increased by 10 basis
points.

Gross margin on service sales decreased 250 basis points to 35.5% for the year ended March 31, 2023, primarily due to a decrease in
professional service margins. The decline in professional service margins was due to higher third party costs, as well as a few larger competitively priced contracts with existing customers.

Selling, general, and administrative expenses: Selling, general, and administrative expenses for the year ended March 31, 2023, increased mainly
due to an increase in salaries and benefits.

Salaries and benefits, including variable compensation, increased $24.1 million or 9.8% to $270.0 million, compared to $245.9 million during the prior year, due to an increase in the number of employees and
higher variable compensation as a result of the corresponding increase in gross profit. Our technology segment had 1,718 employees as of March 31, 2023, an increase of 175 from 1,543 as of March 31, 2022, driven by increased demand for
our services and the acquisition of Future Com, Ltd. We added 139 additional customer-facing employees, of which 84 were professional services and technical support personnel.

General and administrative expenses increased $10.2 million, or 27.0%, to $47.8
million, as compared to $37.6 million in the prior year. General and administrative expenses increased in travel and entertainment, advertising
and marketing fees, professional service fees, software license and maintenance fees, and warehouse and logistics costs.

Travel and entertainment increased due to the return of in-person business meetings and events. Warehouse and logistics costs increased due to the increase in inventory. The other categories of expenses increased primarily from

increases in personnel.

Depreciation and amortization expense: Depreciation and amortization expense for the year ended March 31, 2023, decreased as higher amortization expense from our
acquisition of Future Com, Ltd was offset by lower amortization from previous acquisitions.

Interest and financing costs: Interest and financing costs for the year ended March 31, 2023, increased due
to higher average borrowings outstanding and higher interest rates during the year under our WFCDF Credit Facility, offset by paydowns on an installment payment arrangement. Our average month-end borrowing balance on the accounts
receivable component of our WFCDF Credit Facility was $47.0 million over the year ended March 31, 2023, compared to $19.0 million over the prior year. Our weighted average interest rate on the accounts receivable component of our
WFCDF Credit Facility was 5.35% during our year ended March 31, 2023, compared to 2.00% over the prior year.

34

Table of Contents

FINANCING SEGMENT

The results of operations for our financing segment for the years ended March 31, 2023, and 2022 were as follows (in thousands):

[[GREPCENT_TABLE]]
[["","","Year Ended March 31,","","","","","","","Percent"],["","","2023","","","2022","","","Change","","","","Change"],["Financial Metrics"],["Portfolio earnings","","$","11,356","","","$","17,764","","","$","(6,408",")","","","(36.1","%)"],["Transactional gains","","","16,125","","","","18,181","","","","(2,056",")","","","(11.3","%)"],["Post-contract earnings","","","23,581","","","","50,495","","","","(26,914",")","","","(53.3","%)"],["Other","","","1,411","","","","1,543","","","","(132",")","","","(8.6","%)"],["Net sales","","$","52,473","","","$","87,983","","","$","(35,510",")","","","(40.4","%)"],["Cost of sales","","","9,439","","","","35,154","","","","(25,715",")","","","(73.1","%)"],["Gross profit","","","43,034","","","","52,829","","","","(9,795",")","","","(18.5","%)"],["Selling, general, and administrative","","","15,635","","","","13,427","","","","2,208","","","","16.4","%"],["Depreciation and amortization","","","111","","","","111","","","","-","","","","0.0","%"],["Interest and financing costs","","","1,236","","","","975","","","","261","","","","26.8","%"],["Operating expenses","","","16,982","","","","14,513","","","","2,469","","","","17.0","%"],["Operating income","","$","26,052","","","$","38,316","","","$","(12,264",")","","","(32.0","%)"],["Key Metrics & Other Information"],["Adjusted EBITDA","","$","26,408","","","$","38,651","","","$","(12,243",")","","","(31.7","%)"]]
[[/GREPCENT_TABLE]]

Net sales: Net sales for the year ended March 31, 2023, decreased due to lower post-contract and portfolio earnings. Post-contract revenue decreased due
to lower proceeds from early lease buyouts and sales of equipment, as we had a few large, customer-driven transactions in the prior year. Portfolio revenue decreased mostly due to decreases in operating lease revenue as a portion of the early lease buyouts in fiscal year 2022 were from customers with operating lease contracts. Transactional gains decreased compared to the prior year due to a decline in the volume of
financial assets sold during the year. Total proceeds from sales of financing receivables were $706.0 million and $855.1 million for the years ended March 31, 2023, and 2022, respectively.

Cost of sales: Cost of sales for the year ended March 31, 2023, decreased due to a decrease in the cost of equipment from early lease buyouts, and
sales of off-lease equipment of $20.1 million and a decrease in operating lease depreciation of $5.6 million.

Selling, general, and administrative expenses: Selling, general, and administrative expenses for
the year ended March 31, 2023, increased due to the deployment of hosted lease accounting software in August 2022, as we incurred higher
professional fees following the implementation of this software platform, as well as higher software license and maintenance costs including amortization of the costs to implement the hosted software. In addition, we incurred
additional provision for credit losses as a result of changes in our net
credit exposure. These increases are offset by a slight decrease in salaries and benefits, mainly driven by a decrease in variable compensation due to the decline in gross profit.

Our financing segment employed 36 people as of March 31, 2023, compared to 34 people as of March 31, 2022. Certain support functions for the financing segment are shared resources with the technology segment.

Interest and financing costs: Interest and financing costs for the year ended March 31, 2023, increased due to higher borrowings during the year as well as higher interest rates. As of March 31, 2023,
our non-recourse notes payable increased to $34.3 million from $21.2 million in the prior year. Our weighted average interest rate for non-recourse notes payable was 5.01% and 3.59% as of March 31, 2023, and 2022, respectively.

CONSOLIDATED

Other income (expense), net: Other income (expense), net, for the year ended March 31, 2023, was a net expense of $3.2 million, compared to a net expense of $0.4 million in the prior year.
We incurred foreign currency transaction losses of $5.4 million during fiscal year 2023, up from $0.5 million last year. Offsetting this, was a $1.9 million gain recognized in fiscal year 2023 related to our receipt of funds resulting
from our claim in a class action lawsuit.

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Income taxes: Our effective income tax rates for the years ended March 31, 2023, and 2022 were 26.8% and 28.1%, respectively. Our effective tax rate was lower for the year ended March 31,
2023, as compared to the prior year, primarily due to lower than forecasted non-deductible expenses, increased benefits from foreign sales along with favorable state return to provision adjustments.

Net earnings: Net earnings for the year ended March 31, 2023, were $119.4 million, an increase of 13.0% or $13.8 million, as compared to $105.6 million in the prior year. The net earnings increase was
due primarily to the increase in operating profits from our technology segment.

Basic and fully diluted earnings per common share for the year ended March 31, 2023, were $4.49 and $4.48, respectively, an increase of 13.3% and 13.9% over the prior year. Basic and fully diluted earnings per
common share were $3.96 and $3.93, respectively, for the year ended March 31, 2022.

Weighted average common shares outstanding used in the calculation of basic and diluted earnings per common share were 26.6 million and 26.7 million, respectively, for the year ended March 31, 2023. Weighted
average common shares outstanding used in the calculation of basic and diluted earnings per common share were 26.6 million and 26.9 million, respectively, for the year ended and March 31, 2022.

The Year Ended March 31, 2022, Compared to the Year Ended March 31, 2021

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TECHNOLOGY SEGMENT

The results of operations for our technology segment for the years ended March 31, 2022, and 2021 were as follows (in thousands):

[[GREPCENT_TABLE]]
[["","","Year Ended March 31,","","","","","","Percent"],["","","2022","","","2021","","","Change","","","Change"],["Financial Metrics"],["Net sales"],["Product","","$","1,492,411","","","$","1,305,789","","","$","186,622","","","","14.3","%"],["Services","","","240,625","","","","202,165","","","","38,460","","","","19.0","%"],["Total","","","1,733,036","","","","1,507,954","","","","225,082","","","","14.9","%"],["Cost of sales"],["Product","","","1,175,789","","","","1,036,627","","","","139,162","","","","13.4","%"],["Services","","","149,094","","","","125,092","","","","24,002","","","","19.2","%"],["Total","","","1,324,883","","","","1,161,719","","","","163,164","","","","14.0","%"],["Gross profit","","","408,153","","","","346,235","","","","61,918","","","","17.9","%"],["Selling, general, and administrative","","","283,690","","","","256,210","","","","27,480","","","","10.7","%"],["Depreciation and amortization","","","14,535","","","","13,839","","","","696","","","","5.0","%"],["Interest and financing costs","","","928","","","","521","","","","407","","","","78.1","%"],["Operating expenses","","","299,153","","","","270,570","","","","28,583","","","","10.6","%"],["Operating income","","$","109,000","","","$","75,665","","","$","33,335","","","","44.1","%"],["Key Metrics & Other Information"],["Gross billings","","$","2,625,749","","","$","2,271,836","","","$","353,913","","","","15.6","%"],["Adjusted EBITDA","","$","131,353","","","$","97,219","","","$","34,134","","","","35.1","%"],["Net sales by customer end market:"],["Telecom, Media & Entertainment","","$","502,408","","","$","371,912","","","$","130,496","","","","35.1","%"],["Healthcare","","","270,481","","","","200,067","","","","70,414","","","","35.2","%"],["Technology","","","250,485","","","","251,683","","","","(1,198",")","","","(0.5","%)"],["SLED","","","241,769","","","","245,919","","","","(4,150",")","","","(1.7","%)"],["Financial Services","","","155,160","","","","198,761","","","","(43,601",")","","","(21.9","%)"],["All others","","","312,733","","","","239,612","","","","73,121","","","","30.5","%"],["Total","","$","1,733,036","","","$","1,507,954","","","$","225,082","","","","14.9","%"],["Net sales by type:"],["Data Center / Cloud","","$","581,113","","","$","516,930","","","$","64,183","","","","12.4","%"],["Networking","","","611,488","","","","510,205","","","","101,283","","","","19.9","%"],["Security","","","158,927","","","","155,186","","","","3,741","","","","2.4","%"],["Collaboration","","","57,244","","","","47,504","","","","9,740","","","","20.5","%"],["Other","","","83,639","","","","75,964","","","","7,675","","","","10.1","%"],["ePlus services","","","240,625","","","","202,165","","","","38,460","","","","19.0","%"],["Total","","$","1,733,036","","","$","1,507,954","","","$","225,082","","","","14.9","%"]]
[[/GREPCENT_TABLE]]

37

Table of Contents

Net sales: Net sales for the year
ended March 31, 2022, increased due to an increase in customer demand, primarily from customers in telecom, media and entertainment and healthcare industries, partially offset by a decrease in net sales to customers in the financial
services sector. These changes were driven by growth in product sales in collaboration and networking, and peripherals and artificial intelligence included in the other category, which management, based on its industry knowledge,
generally attributed to hybrid work models having become the prominent operating model for most of our customers. Timing of purchases by our existing customers are determined by their buying cycle and the timing of their specific IT
related initiatives throughout the year.

Also contributing to the increase in net sales were increases in the cost of equipment we incurred from our suppliers due, in part, to
inflation, which we typically pass on to our customers. Service revenues increased due to higher demand for both professional and managed services.

Our net sales by customer end market have remained consistent with the prior year, with over 80% of our sales being generated from customers
within the five end markets specified in the table above.

Gross billings to our customers increased due to organic customer demand as well as our acquisition of Systems Management and Planning, Inc.
(“SMP”) in December 2020, rather than the acquisition or loss of a specific customer
or set of customers.

Cost of sales: The increase in cost
of sales for the year ended March 31, 2022, was due to the increase in demand for both product and services. Cost of product increased slightly less than the increase in product sales due to a change in product sales mix, as a greater
portion of our transaction volume consisted of sales of third-party maintenance, software assurance, subscription/SaaS licenses, and services, for which the revenues and cost of sales are presented on a net basis. Overall, cost of
services increased 19.2%, consistent with the 19.0% increase in sales.

Gross profit: Gross profit
increased for the 2022 fiscal year due to the increase in customer demand as well as higher margins. Gross margin in the Technology segment increased 60 basis points to 23.6%. Gross margin on product sales increased 60 basis points to
21.2% due to a shift in product mix to a greater proportion of sales of third-party maintenance, software assurance, subscription/SaaS licenses, and services. Also contributing to the increase in product margins was higher vendor
incentives earned, which increased $9.0 million in fiscal year 2022.

Service margin decreased 10 basis points to 38.0% for the year ended March 31, 2022, due to changes in mix of services provided.
The service margin decline was comprised of a 90 basis points improvement from managed services, due to ongoing growth and scale in this offering, offset by a 100 basis points decline from professional services due to higher third party
costs.

Selling, general, and administrative expenses: Selling, general, and administrative expenses increased for the 2022 fiscal year mainly due to an increase in salaries and benefits.

Salaries and benefits, including variable compensation, increased $24.1 million or 10.9% to $245.9 million, compared to $221.8 million during the prior year, due to $14.2 million of additional variable
compensation resulting from the increase in gross profit and $9.9 million due to higher salary and benefits expense. Our technology segment had 1,543 employees as of March 31, 2022, which is an increase of 17, or 1.1%, from 1,526 on
March 31, 2021.

General and administrative expenses increased $3.8 million, or 11.2%, to $37.6 million during the year ended March 31, 2022, compared to $33.9 million the prior year. Contributing to the year over year
increase in general and administrative expenses were increases in travel and entertainment, and software, subscription, and maintenance expenses of $2.5 million.

Depreciation and amortization expense: Depreciation and amortization expense increased for the year ended March 31, 2022, due to an increase in amortization of customer relationships as a result of the
SMP acquisition in December 2020.

Interest and financing costs: Interest and financing costs increased for the year ended March 31, 2022, due to higher borrowings outstanding during the year under our WFCDF Credit Facility.

38

Table of Contents

FINANCING SEGMENT

The results of operations for our financing segment for the years ended March 31, 2022, and 2021 were as follows (in thousands):

[[GREPCENT_TABLE]]
[["","","Year Ended March 31,","","","","","","","Percent"],["","","2022","","","2021","","","Change","","","","Change"],["Financial Metrics"],["Portfolio earnings","","$","17,764","","","$","16,486","","","$","1,278","","","","7.8","%"],["Transactional gains","","","18,181","","","","14,506","","","","3,675","","","","25.3","%"],["Post-contract earnings","","","50,495","","","","23,771","","","","26,724","","","","112.4","%"],["Other","","","1,543","","","","5,606","","","","(4,063",")","","","(72.5","%)"],["Net sales","","$","87,983","","","$","60,369","","","$","27,614","","","","45.7","%"],["Cost of sales","","","35,154","","","","13,050","","","","22,104","","","","169.4","%"],["Gross profit","","","52,829","","","","47,319","","","","5,510","","","","11.6","%"],["Selling, general, and administrative","","","13,427","","","","15,053","","","","(1,626",")","","","(10.8","%)"],["Depreciation and amortization","","","111","","","","112","","","","(1",")","","","(0.9","%)"],["Interest and financing costs","","","975","","","","1,484","","","","(509",")","","","(34.3","%)"],["Operating expenses","","","14,513","","","","16,649","","","","(2,136",")","","","(12.8","%)"],["Operating income","","$","38,316","","","$","30,670","","","$","7,646","","","","24.9","%"],["Key Metrics & Other Information"],["Adjusted EBITDA","","$","38,651","","","$","31,026","","","$","7,625","","","","24.6","%"]]
[[/GREPCENT_TABLE]]

Net sales: For the year ended March 31, 2022, net sales increased due to higher post contract earnings and transactional gains, offset slightly by a decrease in other financing revenues. Post-contract
revenue increased due to an increase of $22.8 million from proceeds from early lease buyouts and sales of off-lease equipment, as we had a few large customer driven transactions in fiscal year 2022. Portfolio revenue increased due to
increases in operating lease income offset by decreased sales-type lease earnings over the prior fiscal year. Other financing revenues decreased due to lower profit recognized from signing new lease extensions with customers where the
prior lease was classified as an operating lease and the new modified lease was determined to be a sales-type lease. Transactional gains increased due to higher volume of financing receivables sold. Total proceeds from sales of
financing receivables were $855.1 million and $364.0 million for the years ended March 31, 2022, and 2021, respectively.

Cost of sales: Cost of sales for the year ended March 31, 2022, increased due to an increase of $18.2 million in the cost of equipment from early lease buyouts and off-lease equipment and an increase in
operating lease depreciation of $3.7 million.

Selling, general, and administrative expenses: Selling,
general, and administrative expenses decreased in the 2022 fiscal year due to a reduction in our allowance for credit losses by $1.2 million, and salaries and
benefits of $0.6 million. Our financing segment employed 34 people as of March 31, 2022, and 2021. Certain support functions for the financing segment are shared resources with the technology segment.

Interest and financing costs: Interest and financing costs decreased due to lower borrowings during the year. Our total notes payable for the financing segment decreased as of March 31, 2022, to $21.2
million from $56.1 million for the prior year. Our weighted average interest rate for our non-recourse notes payable was 3.59% as of March 31, 2022, compared to 3.35% for March 31, 2021.

CONSOLIDATED

Other income (expense), net: Other income (expense), net during the year ended March 31, 2022, netted to an expense of $0.4 million and included foreign exchange rate loss of $0.5 million. Other income
(expense), net during the year ended March 31, 2021, was income of $0.6 million and included foreign exchange rate gain of $0.5 million and interest income of $0.1 million.

Income taxes: Our effective income tax rates for the years ended March 31, 2022, and 2021 were 28.1% and 30.4%, respectively. The decrease in our effective income tax rate year over year is primarily
due to prior year unfavorable adjustments to the federal benefit from state taxes and non-deductible executive compensation.

Net earnings: Net earnings were $105.6 million for the year ended March 31, 2022, an increase of 41.9% or $31.2 million as compared to $74.4 million in the prior fiscal year. The net earnings increase
was due primarily to the increase in operating profits from our technology segment, and a lower income tax rate in the current year compared to the year ended March 31, 2021.

39

Table of Contents

Basic and fully diluted earnings per common share for the year ended March 31, 2022, were $3.96 and $3.93, respectively, and both increased 41.9% over the prior year. Basic and fully diluted earnings per
common share were $2.79 and $2.77, respectively, for the year ended March 31, 2021.

Weighted average common shares outstanding used in the calculation of basic and diluted earnings per common share were 26.6 million and 26.9 million, respectively, for year ended March 31, 2022. Weighted
average common shares outstanding used in the calculation of basic and diluted earnings per common share were 26.7 million and 26.8 million, respectively, for the year ended March 31, 2021.

LIQUIDITY AND CAPITAL RESOURCES

LIQUIDITY OVERVIEW

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

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

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

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

CASH FLOWS

The following table summarizes our sources and uses of cash for the years ended March 31, 2023, and 2022 (in thousands):

[[GREPCENT_TABLE]]
[["","","Year Ended March 31,"],["","","2023","","","2022"],["Net cash used in operating activities","","$","(15,425",")","","$","(20,571",")"],["Net cash used in investing activities","","","(18,926",")","","","(1,259",")"],["Net cash provided by (used in) financing activities","","","(20,950",")","","","47,176"],["Effect of exchange rate changes on cash","","","3,016","","","","470"],["Net increase in cash and cash equivalents","","$","(52,285",")","","$","25,816"]]
[[/GREPCENT_TABLE]]

40

Table of Contents

Cash flows from operating activities

We used $15.4 million in operating activities during the year ended March 31, 2023, compared to using $20.6 million during the year ended March 31, 2022. The following table provides a breakdown of operating
cash flows by segment for the years ended March 31, 2023, and 2022 (in thousands):

[[GREPCENT_TABLE]]
[["","","Year Ended March 31,"],["","","2023","","","2022"],["Technology segment","","$","17,157","","","$","(20,243",")"],["Financing segment","","","(32,582",")","","","(328",")"],["Net cash used in operating activities","","$","(15,425",")","","$","(20,571",")"]]
[[/GREPCENT_TABLE]]

Technology Segment: During the year ended March 31, 2023, our technology segment provided $17.2 million from operating activities primarily due to net earnings and an
increase in payables, partially offset by increases in accounts receivables and inventories.

During the year ended March 31, 2022, our technology segment used $20.2 million from operating activities primarily due to increases in working capital, inventories, and accounts receivable, offset by net
earnings.

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:

[[GREPCENT_TABLE]]
[["","","As of March 31,"],["","","2023","","","2022"],["(DSO) Days sales outstanding (1)","","","74","","","","71"],["(DIO) Days inventory outstanding (2)","","","38","","","","25"],["(DPO) Days payable outstanding (3)","","","(53",")","","","(46",")"],["Cash conversion cycle","","","59","","","","50"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(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 Gross billings for the same three-month period."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(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 the direct cost of products and services billed to our customers for the same three-month period."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(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 the direct cost of products and services billed to our customers for the same three-month period."]]
[[/GREPCENT_TABLE]]

Our standard payment term for customers is between 30-60 days; however, certain customers or orders may be approved for extended payment terms. Our DSOs for the quarters ended March 31, 2023, and 2022 were greater than our standard
payment terms primarily due to a significant proportion of sales in those quarters to customers with payment terms greater than or equal to net 60 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 cash conversion cycle increased to 59 days for March 31, 2023, compared to 50 days for March 31, 2022, as DIO increased by 13 days, DPO increased by 7 days, and DSO increased by 3 days from March 31, 2022,
to March 2023.

Inventory, which represents equipment ordered by customers but not yet delivered, increased 56.9% to $243.3 million as of March 31, 2023, up from $155.1 million as of March 31, 2022, partially due to ongoing projects with customers.
Accounts receivable—trade, net increased by 17.1% to $504.1 million as of March 31, 2023, up from $430.4 million as of March 31, 2022, primarily due to a 17.6% increase in Gross billings to $733.1 million in the fourth quarter as
compared to $623.6 million in the prior fiscal year. The increase in days payable outstanding is driven by our growth in sales volume.

Financing Segment: During the year ended March 31, 2023, our financing segment used $32.6 million in operating activities, primarily due to changes in financing
receivables and deferred costs, partially offset by net earnings.

During the year ended March 31, 2022, our financing segment used $0.3 million from operating activities, primarily due to the issuance of new financing receivables.

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Cash flows related to investing activities

During the year ended March 31, 2023, we used $18.9 million in investing activities, consisting of $9.4 million for purchases of property, equipment, and operating lease equipment and $13.3 million to acquire
Future Com, Ltd., partially offset by $3.7 million of proceeds from the sale of operating lease equipment.

During the year ended March 31, 2022, we used $1.3 million from investing activities, consisting of $23.2 million for purchases of property, equipment, and operating lease equipment, partially offset by $21.9
million of proceeds from the sale of property, equipment, and operating lease equipment.

Cash flows from financing activities

During the year ended March 31, 2023, we used $21.0 million in financing activities. We had net repayments of notes payable and borrowings on our credit facility in our technology segment of $7.1 million,
offset by net borrowings of non-recourse and recourse notes payable of $4.1 million by our financing segment. Additionally, we had cash inflows of $10.7 million from net borrowings on the floor plan facility and cash outflows of $7.2
million from the repurchase of common stock.

During the year ended March 31, 2022, financing activities provided $47.2 million. We had net repayments of notes payable in our technology segment of $6.7 million, offset by net borrowings of non-recourse and
recourse notes payable of $20.8 million by our financing segment. Additionally, we had cash inflows of $46.7 million from net borrowings on the floor plan facility and cash outflows of $13.6 million from the 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 financing agreements to third-party financial
institutions. When the transfers do not meet the requirements for a sale, the proceeds paid to us represent borrowings of non-recourse and recourse notes payable.

Non-Cash Activities

We transfer contractual payments due to us under lease and financing agreements to third-party financial institutions. In certain assignment agreements, we may direct the third-party financial institution to
pay some of the proceeds from the assignment directly to the vendor or vendors that have supplied the assets being leased or financed. In these situations, the portion of the proceeds paid directly to our vendors are non-cash
transactions.

SECURED BORROWINGS – FINANCING SEGMENT

We may finance all or most of the cost of the assets that we finance for customers by transferring all or part of the contractual payments due to us to third-party financial 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 its only recourse, upon default by the customer, is against the customer and the specific equipment under lease. While we expect that the credit quality of our financing arrangements and our residual
return history will continue to allow us to obtain such financing, such financing may not be available on acceptable terms, or at all. Interest rates have been rising and may continue to rise. To preserve our expected internal rate of
return, we generally quote rates that are indexed. Some of our lenders will not commit to rates for a length of time, resulting in exposure to us if the rates rise and we cannot pass such exposure to the customer.

CREDIT FACILITY – TECHNOLOGY SEGMENT

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

Please refer to Note 9, “Notes Payable and Credit Facility” in the Notes to the Consolidated Financial Statements included in Part
II, Item 8 of this Annual Report on Form 10-K for additional information concerning our WFCDF Credit Facility.

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

Floor plan facility

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

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

As of March 31, 2023, we had a maximum credit limit of $500.0 million, and an outstanding balance on the floor plan of $134.6 million. As of March 31, 2022, we had a maximum credit limit of $375.0 million, and
the outstanding balance on the floor plan facility was $145.3 million. On our balance sheet, our liability under the floor plan facility is presented as part of accounts payable – floor plan.

Revolving credit facility

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

As of March 31, 2023, and March 31, 2022, we did not have any outstanding balance under the revolving credit facility. The maximum credit limit under this facility was $200.0 million as of March 31, 2023, compared to $100.0 million
as of March 31, 2022.

PERFORMANCE GUARANTEES

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

OFF-BALANCE SHEET ARRANGEMENTS

As part of our ongoing business, we do not participate in transactions that generate relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured
finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As of March 31, 2023, and 2022, we were not
involved in any unconsolidated special purpose entity transactions.

ADEQUACY OF CAPITAL RESOURCES

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

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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, major customers, or vendors of
ours.

Our quarterly results of operations are susceptible to fluctuations for a number of reasons, including, but not limited to currency fluctuations, reduction in IT spending, shortages of
product from our vendors due to material shortages, any reduction of expected residual values related to the equipment under our leases, the timing and mix of specific transactions, the reduction of manufacturer incentive programs, and
other factors. Quarterly operating results could also fluctuate as a result of our sale of equipment in our lease portfolio to a lessee or third-party at the expiration of a lease term or prior to such expiration, and the transfer of
financial assets. Sales of equipment and transfers of financial assets may have the effect of increasing revenues and net income during the quarter in which the sale occurs and reducing revenues and net income otherwise expected in
subsequent quarters.

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.

CONTRACTUAL OBLIGATIONS

Our material contractual obligations consist of payments on recourse and non-recourse notes payable and lease liabilities. Please refer to Note 5, “Lessee Accounting” and Note 9, “Notes Payable and Credit Facility” in the Notes to the Consolidated Financial Statements included in Part II, Item 8 of
this Annual Report on Form 10-K for additional information regarding the maturities of these obligations. Additionally, we have contractual obligations of $10.5 million over the next 4 years for
certain hosted software and data center services.

CRITICAL ACCOUNTING ESTIMATES

Our consolidated financial statements have been prepared in accordance with US GAAP. Our significant accounting policies are described in Note 1, “Organization and Summary of Significant Accounting Policies” in the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K. The accounting policies described below
are significantly affected by critical accounting estimates. Such accounting policies require significant judgments, assumptions, and estimates, and actual results could differ materially from the amounts reported based on these
policies.

REVENUE RECOGNITION — When we enter into contracts with customers, we are required to identify the performance obligations in the contract. We recognize most of our revenues from the sales of third-party
products, third-party software, third-party maintenance, software support, and services, ePlus professional and managed services, and hosting ePlus
proprietary software. Our recognition of revenue differs for each of these distinct types of performance obligations and identifying each performance obligation appropriately may require judgment.

When a contract contains multiple distinct performance obligations, we allocate the transaction price to each performance obligation based on its relative standalone selling price. We determine standalone
selling prices using expected cost-plus margin. When we finance sales of third-party software and third-party maintenance, software support, and services, we reduce the transaction price by the financing component.

We recognize revenue from sales of third-party products and third-party software at the point in time that control passes to the customer, which is typically upon delivery of the product to the customer. We
perform an analysis to estimate the amount of sales in-transit at the end of the period and adjust revenue and the related costs to reflect only what has been delivered to the customer. This analysis is based upon an analysis of
current quarter and historical delivery dates.

We recognize revenue from sales of third-party maintenance, software support, and services when our customer and vendor accept the terms and conditions of the arrangement. On occasion, judgment is required
to determine this point in time.

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We provide ePlus professional services under both time and materials and fixed price contracts. When services are provided on a time and materials basis, we
recognize sales at agreed-upon billing rates as services are performed. When services are provided on a fixed fee basis, we recognize sales over time in proportion to our progress toward complete satisfaction of the performance
obligation. Using this method requires a determination of the appropriate input or output method to measure progress. We most often measure progress based on costs incurred in proportion to total estimated costs, commonly referred to
as the “cost-to-cost” method. When using this method, significant judgment may be required to estimate the total costs to complete the performance obligation. We typically recognize sales of ePlus

managed services on a straight-line basis over the period services are provided.

We recognize financing revenues from our investments in leases and notes receivable. We recognize interest income on our notes-receivable using the effective interest method.

We classify our leases as either sales-type leases or operating leases. For sales-type leases, upon lease commencement, we recognize the present value of the lease payments and the residual asset discounted
using the rate implicit in the lease. When we are financing equipment provided by another dealer, we typically do not have any selling profit or loss arising from the lease. When we are the dealer of the equipment being leased, we
typically recognize revenue in the amount of the lease receivable and cost of sales in the amount of the carrying value of the underlying asset minus the unguaranteed residual asset. We may need to use judgment to determine the fair
value of the equipment. After the commencement date, we recognize interest income as part of net sales using the effective interest method. For operating leases, we recognize the underlying asset as an operating lease asset. We
depreciate the asset on a straight-line basis to its estimated residual value over its estimated useful life. We recognize the lease payments over the lease term on a straight-line basis as part of net sales.

We account for the transfer of financial assets as sales or secured borrowings. When a transfer meets all the requirements for sale accounting, we derecognize the financial asset and record a net gain or
loss that is included in net sales. We utilize qualified attorneys to provide a true-sale-at-law opinion to support the conclusion that transferred financial assets have been legally isolated.

RESIDUAL ASSETS — Our estimate for the residual asset in a lease is the amount we expect to derive from the underlying asset following the end of the lease term. Our estimates vary, both in amount and as a
percentage of the original equipment cost, and depend upon several factors, including the equipment type, vendor’s discount, market conditions, lease term, equipment supply and demand, and new product announcements by vendors. We
evaluate residual values for impairment on a quarterly basis. We do not recognize upward adjustments due to changes in estimates of residual values.

GOODWILL — We test goodwill for impairment on an annual basis, as of October 1, 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 amount. Goodwill is tested for impairment at a level of reporting referred to as a reporting unit.

In a qualitative assessment, we assess qualitative factors to determine whether it is more likely than not (that is, a likelihood of more than 50 percent) that the fair value of a reporting unit is less than
its carrying amount, including goodwill. A significant amount of judgment is involved in determining if an event representing an indicator of impairment has occurred between annual test dates. Such indicators may include: a
significant decline in expected future cash flows; a sustained, significant decline in stock price and market capitalization; a significant adverse change in legal factors or in the business climate; unanticipated competition; the
testing for recoverability of a significant asset group within a reporting unit; and reductions in revenue or profitability growth rates.

In the quantitative impairment test, we compare the fair value of a reporting unit with its carrying amount, including goodwill. We estimate the fair value of each reporting unit using a combination of the
income approach and market approaches.

The income approach incorporates the use of a discounted cash flow method in which the estimated future cash flows and terminal values for each reporting unit are discounted to a present value using a
discount rate. Cash flow projections are based on management’s estimates of economic and market conditions which drive key assumptions of revenue growth rates, operating margins, capital expenditures and working capital requirements.
The discount rate in turn is based on the specific risk characteristics of each reporting unit, the weighted average cost of capital and its underlying forecast.

The market approach estimates fair value by applying performance metric multiples to the reporting unit’s prior and expected operating performance. The multiples are derived from comparable publicly traded
companies with similar operating and investment characteristics as the reporting unit.

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The fair values determined by the market approach and income approach, as described above, are weighted to determine the fair value for each reporting unit. Although we have consistently used the same methods
in developing the assumptions and estimates underlying the fair value calculations, such estimates are uncertain and may vary from actual results.

VENDOR CONSIDERATION — We receive payments and credits from vendors and distributors, including consideration pursuant to volume incentive programs, and shared marketing expense programs. Many of these
programs extend over one or more quarters’ sales activities. Different programs have different vendor/program specific goals to achieve. We recognize the rebates pursuant to volume incentive programs, when the rebate is probable and
reasonably estimable, based on a systematic and rational allocation of the cash consideration offered to each of the underlying transactions that results in our progress towards earning the rebate. Should our actual performance be
different from our estimates, we may be required to adjust our receivables.

ALLOWANCE FOR CREDIT LOSSES — We maintain an allowance for credit losses related to our accounts receivable and financing receivables. We record an expense in the amount necessary to adjust the allowance for
credit losses to our current estimate of expected credit losses on financial assets. We estimate expected credit losses based on our internal rating of the customer’s credit quality, our historical credit losses, current economic
conditions, and other relevant factors. Prior to providing credit, we assign an internal rating for each customer’s credit quality based on the customer’s financial status, rating agency reports and other financial information. We
review our internal ratings for each customer at least annually or when there is an indicator of a change in credit quality, such as a delinquency or bankruptcy. We write off financing receivables when we deem them to be
uncollectable. As of March 31, 2023, we estimated lower expected credit loss rates related to both our accounts receivable and financing receivables as compared to March 31, 2022.

INCOME TAXES — We make certain estimates and judgments in determining income tax expense for financial statement reporting purposes. These estimates and judgments occur in the calculation of certain tax
assets and liabilities, which principally arise from differences in the timing of recognition of revenue and expense for tax and financial statement reporting purposes. We also must analyze income tax reserves, as well as determine
the likelihood of recoverability of deferred tax assets and adjust any valuation allowances accordingly.

Considerations with respect to the recoverability of deferred tax assets include the period of expiration of the tax asset, planned use of the tax asset, and historical and projected taxable income as well
as tax liabilities for the tax jurisdiction to which the tax asset relates. Valuation allowances are evaluated periodically and will be subject to change in each future reporting period as a result of changes in one or more of these
factors. The calculation of our tax liabilities also involves considering uncertainties in the application of complex tax regulations. We recognize liabilities for uncertain income tax positions based on our estimate of whether, and
the extent to which, additional taxes will be required.

BUSINESS COMBINATIONS — We account for business combinations using the acquisition method. For each acquisition, we recognize most assets acquired, and liabilities assumed at their fair values at the
acquisition date. Our valuations of certain assets acquired, including customer relationships and trade names, and certain liabilities assumed, involve significant judgment and estimation. Additionally, our determination of the
purchase price may include an estimate for the fair value of contingent consideration. We utilize independent valuation specialists to assist us in determining the fair value of certain assets and liabilities. Our valuations utilize
significant estimates, such as forecasted revenues and profits. Changes in our estimates could significantly impact the value of certain assets and liabilities.

RECENT ACCOUNTING PRONOUNCEMENTS

Please refer to Note 2, “Recent Accounting Pronouncements” in the Notes to the Consolidated Financial Statements included in Part II, Item
8 of this Form 10-K.