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

the efficacy of the manufacture and distribution of vaccines for the COVID-19 virus:

national and international political instability fostering uncertainty and volatility in the global economy including an economic downturn, an increase in tariffs or adverse changes to trade agreements, exposure to fluctuation in foreign currency rates, interest rates, and downward pressure on prices;

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

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

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

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

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

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

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

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

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

future growth rates in our core businesses;

reduction of vendor incentives provided to us;

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

the possibility of goodwill impairment charges in the future;

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

adapting to meet changes in markets and competitive developments;

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

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

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

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

performing professional and managed services competently;

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

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

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

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

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

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

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

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

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

our ability to realize our investment in leased equipment;

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

significant changes in accounting standards ~~including changes to the financial reporting of leases,~~ which could impact the demand for our leasing services, or misclassification of products and services we sell resulting in the misapplication of revenue recognition policies or inaccurate costs and completion dates for our services, which could affect our estimates; 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~~our ability to protect our intellectual property rights and successfully defend any challenges to the validity of our patents or allegations that we are infringing upon any third-party patents, and the costs associated with those actions, and, when appropriate, license required technology.

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

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PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements

ePlus inc. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

	September 30, 2020			March 31, 2020			December 31, 2020			March 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	161,081		$	86,231		$	86,463		$	86,231
Accounts receivable—trade, net		369,037			374,998			460,385			374,998
Accounts receivable—other, net		40,832			36,570			34,355			36,570
Inventories		73,751			50,268			81,304			50,268
Financing receivables—net, current		92,766			70,169			126,692			70,169
Deferred costs		22,329			22,306			28,939			22,306
Other current assets		8,233			9,256			8,514			9,256
Total current assets		768,029			649,798			826,652			649,798

Financing receivables and operating leases—net		87,926			74,158			87,342			74,158
Property, equipment and other assets		34,314			32,596			43,387			32,596
Goodwill		118,177			118,097			126,945			118,097
Other intangible assets—net		30,265			34,464			41,628			34,464
TOTAL ASSETS	$	1,038,711		$	909,113		$	1,125,954		$	909,113

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES

Current liabilities:
Accounts payable	$	104,893		$	82,919		$	159,175		$	82,919
Accounts payable—floor plan		218,970			127,416			177,084			127,416
Salaries and commissions payable		30,284			30,952			33,197			30,952
Deferred revenue		59,078			55,480			68,466			55,480
Recourse notes payable—current		2,286			37,256			0			37,256
Non-recourse notes payable—current		35,610			29,630			62,021			29,630
Other current liabilities		25,372			22,986			31,095			22,986
Total current liabilities		476,493			386,639			531,038			386,639

Non-recourse notes payable—long term		2,444			5,872			6,312			5,872
Deferred tax liability—net		3,762			2,730			3,763			2,730
Other liabilities		32,942			27,727			39,832			27,727
TOTAL LIABILITIES		515,641			422,968			580,945			422,968

COMMITMENTS AND CONTINGENCIES (Note 10)								0			0

STOCKHOLDERS' EQUITY

Preferred stock, $0.01 per share par value; 2,000 shares authorized; NaN outstanding		0			0			0			0
Common stock, $0.01 per share par value; 25,000 shares authorized; 13,537 outstanding at September 30, 2020 and 13,500 outstanding at March 31, 2020		145			144
Common stock, $0.01 per share par value; 25,000 shares authorized; 13,503 outstanding at December 31, 2020 and 13,500 outstanding at March 31, 2020								145			144
Additional paid-in capital		148,845			145,197			150,624			145,197
Treasury stock, at cost, 958 shares at September 30, 2020 and 896 shares at March 31, 2020		(72,911	)		(68,424	)
Treasury stock, at cost, 993 shares at December 31, 2020 and 896 shares at March 31, 2020								(75,372	)		(68,424	)
Retained earnings		447,425			410,219			469,063			410,219
Accumulated other comprehensive income—foreign currency translation adjustment		(434	)		(991	)		549			(991	)
Total Stockholders' Equity		523,070			486,145			545,009			486,145
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	1,038,711		$	909,113		$	1,125,954		$	909,113

See Notes to Unaudited Consolidated Financial Statements.

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ePlus inc. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

	Three Months Ended September 30,					Six Months Ended September 30,					Three Months Ended December 31,				Nine Months Ended December 31,
	2020		2019			2020		2019			2020		2019		2020		2019

Net sales
Product	$	383,656	$	363,497		$	690,896	$	699,098		$	375,512	$	378,569	$	1,066,408	$	1,077,667
Services		49,425		48,068			97,216		93,839			52,092		50,422		149,308		144,261
Total		433,081		411,565			788,112		792,937			427,604		428,991		1,215,716		1,221,928
Cost of sales
Product		302,963		278,863			529,597		538,926			297,514		293,209		827,111		832,135
Services		31,156		29,671			60,996		58,341			31,939		32,086		92,935		90,427
Total		334,119		308,534			590,593		597,267			329,453		325,295		920,046		922,562

Gross profit		98,962		103,031			197,519		195,670			98,151		103,696		295,670		299,366

Selling, general, and administrative		66,889		70,523			136,356		136,310			65,390		73,090		201,746		209,400
Depreciation and amortization		3,341		3,557			6,857		7,020			3,143		3,647		10,000		10,667
Interest and financing costs		247		576			824		1,204			355		694		1,179		1,898
Operating expenses		70,477		74,656			144,037		144,534			68,888		77,431		212,925		221,965

Operating income		28,485		28,375			53,482		51,136			29,263		26,265		82,745		77,401

Other income (expense)		184		(40	)		282		(85	)		813		997		1,095		912

Earnings before tax		28,669		28,335			53,764		51,051			30,076		27,262		83,840		78,313

Provision for income taxes		8,823		8,237			16,558		14,765			8,438		7,712		24,996		22,477

Net earnings	$	19,846	$	20,098		$	37,206	$	36,286		$	21,638	$	19,550	$	58,844	$	55,836

Net earnings per common share—basic	$	1.48	$	1.51		$	2.79	$	2.72		$	1.62	$	1.47	$	4.41	$	4.19
Net earnings per common share—diluted	$	1.48	$	1.51		$	2.78	$	2.71		$	1.62	$	1.46	$	4.39	$	4.16

Weighted average common shares outstanding—basic		13,372		13,312			13,347		13,334			13,332		13,320		13,342		13,329
Weighted average common shares outstanding—diluted		13,391		13,350			13,394		13,408			13,378		13,378		13,402		13,410

See Notes to Unaudited Consolidated Financial Statements.

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ePlus inc. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

	Three Months Ended September 30,					Six Months Ended September 30,					Three Months Ended December 31,				Nine Months Ended December 31,
	2020		2019			2020		2019			2020		2019		2020		2019

NET EARNINGS	$	19,846	$	20,098		$	37,206	$	36,286		$	21,638	$	19,550	$	58,844	$	55,836

OTHER COMPREHENSIVE INCOME, NET OF TAX:

Foreign currency translation adjustments		520		(350	)		557		(613	)		983		682		1,540		69

Other comprehensive income (loss)		520		(350	)		557		(613	)		983		682		1,540		69

TOTAL COMPREHENSIVE INCOME	$	20,366	$	19,748		$	37,763	$	35,673		$	22,621	$	20,232	$	60,384	$	55,905

See Notes to Unaudited Consolidated Financial Statements.

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ePlus inc. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Six Months Ended September 30,
	2020			2019			Nine Months Ended December 31,
							2020			2019
Cash flows from operating activities:
Net earnings	$	37,206		$	36,286		$	58,844		$	55,836

Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:
Depreciation and amortization		9,460			10,077			13,762			15,217
Reserve for credit losses		1,766			631			1,920			504
Share-based compensation expense		3,648			4,054			5,427			6,019
Deferred taxes		1,032			(3	)		1,033			(3	)
Payments from lessees directly to lenders—operating leases		(13	)		(34	)		(25	)		(44	)
Gain on disposal of property, equipment, and operaing lease equipment		(278	)		(436	)		(408	)		(614	)
Changes in:
Accounts receivable		1,755			(46,100	)		(67,989	)		(102,093	)
Inventories-net		(23,381	)		(5,301	)		(28,340	)		(10,429	)
Financing receivables—net		(54,386	)		(76,423	)		(67,112	)		(87,633	)
Deferred costs and other assets		(1,052	)		(18,826	)		(15,865	)		(18,424	)
Accounts payable-trade		21,717			15,585			70,726			33,574
Salaries and commissions payable, deferred revenue, and other liabilities		10,934			26,086			33,271			33,362
Net cash provided by (used in) operating activities		8,408			(54,404	)		5,244			(74,728	)

Cash flows from investing activities:
Proceeds from sale of property, equipment, and operating lease equipment		456			653			670			1,404
Purchases of property, equipment and operating lease equipment		(3,267	)		(4,888	)		(4,227	)		(7,209	)
Cash used in acquisitions, net of cash acquired		0			(13,815	)		(27,102	)		(14,239	)
Net cash used in investing activities		(2,811	)		(18,050	)		(30,659	)		(20,044	)

Cash flows from financing activities:
Borrowings of non-recourse and recourse notes payable		23,613			54,877			31,698			75,557
Repayments of non-recourse and recourse notes payable		(40,529	)		(5,629	)		(41,870	)		(9,854	)
Repurchase of common stock		(4,487	)		(13,692	)		(6,948	)		(13,692	)
Repayments of financing of acquisitions		(421	)		(785	)		(556	)		(5,763	)
Net borrowings on floor plan facility		91,554			13,585			44,058			28,400
Net cash provided by financing activities		69,730			48,356			26,382			74,648

Effect of exchange rate changes on cash		(477	)		114			(735	)		(137	)

Net increase (decrease) in cash and cash equivalents		74,850			(23,984	)		232			(20,261	)

Cash and cash equivalents, beginning of period		86,231			79,816			86,231			79,816

Cash and cash equivalents, end of period	$	161,081		$	55,832		$	86,463		$	59,555

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UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS - continued

(in thousands)

	Six Months Ended September 30,						Nine Months Ended December 31,
	2020			2019			2020			2019
Supplemental disclosures of cash flow information:
Cash paid for interest	$	739		$	1,115		$	929		$	1,721
Cash paid for income taxes	$	12,348		$	12,471		$	21,257		$	19,519
Cash paid for amounts included in the measurement of lease liabilities	$	2,975		$	2,566		$	4,460		$	4,113

Schedule of non-cash investing and financing activities:
Purchases of property, equipment, and operating lease equipment	$	(393	)	$	(396	)	$	(221	)	$	(425	)
Financing of acquisitions	$	0		$	(1,464	)
Consideration for acquisitions							$	0		$	(1,037	)
Borrowing of non-recourse and recourse notes payable	$	35,780		$	82,462		$	77,289		$	111,234
Repayments of non-recourse and recourse notes payable	$	(13	)	$	(34	)	$	(25	)	$	(44	)
Vesting of share-based compensation	$	7,916		$	8,972		$	7,926		$	8,990
New operating lease assets obtained in exchange for lease obligations	$	774		$	5,225		$	1,097		$	6,035

See Notes to Unaudited Consolidated Financial Statements.

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ePlus inc. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)

	Six Months Ended September 30, 2020																		Nine Months Ended December 31, 2020
	Common Stock					Additional Paid-In		Treasury			Retained		Accumulated Other Comprehensive						Common Stock					Additional Paid-In		Treasury			Retained		Accumulated Other Comprehensive
	Shares			Par Value		Capital		Stock			Earnings		Income			Total			Shares			Par Value		Capital		Stock			Earnings		Income			Total
Balance, March 31, 2020		13,500		$	144	$	145,197	$	(68,424	)	$	410,219	$	(991	)	$	486,145			13,500		$	144	$	145,197	$	(68,424	)	$	410,219	$	(991	)	$	486,145
Issuance of restricted stock awards		91			1		0		0			0		0			1			91			1		0		0			0		0			1
Share-based compensation		0			0		1,885		0			0		0			1,885			0			0		1,885		0			0		0			1,885
Repurchase of common stock		(38	)		0		0		(2,703	)		0		0			(2,703	)		(38	)		0		0		(2,703	)		0		0			(2,703	)
Net earnings		-			0		0		0			17,360		0			17,360			-			0		0		0			17,360		0			17,360
Foreign currency translation adjustment		-			0		0		0			0		37			37			-			0		0		0			0		37			37

Balance, June 30, 2020		13,553		$	145	$	147,082	$	(71,127	)	$	427,579	$	(954	)	$	502,725			13,553		$	145	$	147,082	$	(71,127	)	$	427,579	$	(954	)	$	502,725
Issuance of restricted stock awards		8			0		0		0			0		0			0			8			0		0		0			0		0			0
Share-based compensation		0			0		1,763		0			0		0			1,763			0			0		1,763		0			0		0			1,763
Repurchase of common stock		(24	)		0		0		(1,784	)		0		0			(1,784	)		(24	)		0		0		(1,784	)		0		0			(1,784	)
Net earnings		-			0		0		0			19,846		0			19,846			-			0		0		0			19,846		0			19,846
Foreign currency translation adjustment		-			0		0		0			0		520			520			-			0		0		0			0		520			520

Balance, September 30, 2020		13,537		$	145	$	148,845	$	(72,911	)	$	447,425	$	(434	)	$	523,070			13,537		$	145	$	148,845	$	(72,911	)	$	447,425	$	(434	)	$	523,070
Issuance of restricted stock awards																				1			0		0		0			0		0			0
Share-based compensation																				0			0		1,779		0			0		0			1,779
Repurchase of common stock																				(35	)		0		0		(2,461	)		0		0			(2,461	)
Net earnings																				-			0		0		0			21,638		0			21,638
Foreign currency translation adjustment																				-			0		0		0			0		983			983

Balance, December 31, 2020																				13,503		$	145	$	150,624	$	(75,372	)	$	469,063	$	549		$	545,009

	Six Months Ended September 30, 2019																		Nine Months Ended December 31, 2019
	Common Stock					Additional Paid-In		Treasury			Retained		Accumulated Other Comprehensive						Common Stock					Additional Paid-In		Treasury			Retained		Accumulated Other Comprehensive
	Common Stock					Additional Paid-In		Treasury			Retained		Accumulated Other Comprehensive						Common Stock					Additional Paid-In		Treasury			Retained		Accumulated Other Comprehensive
	Shares			Par Value		Capital		Stock			Earnings		Income			Total			Shares			Par Value		Capital		Stock			Earnings		Income			Total
Balance, March 31, 2019		13,611		$	143	$	137,243	$	(53,999	)	$	341,137	$	(271	)	$	424,253			13,611		$	143	$	137,243	$	(53,999	)	$	341,137	$	(271	)	$	424,253
Issuance of restricted stock awards		86			1		0		0			0		0			1			86			1		0		0			0		0			1
Share-based compensation		0			0		1,919		0			0		0			1,919			0			0		1,919		0			0		0			1,919
Repurchase of common stock		(188	)		0		0		(13,455	)		0		0			(13,455	)		(188	)		0		0		(13,455	)		0		0			(13,455	)
Net earnings		-			0		0		0			16,188		0			16,188			-			0		0		0			16,188		0			16,188
Foreign currency translation adjustment		-			0		0		0			0		(263	)		(263	)		-			0		0		0			0		(263	)		(263	)

Balance, June 30, 2019		13,509		$	144	$	139,162	$	(67,454	)	$	357,325	$	(534	)	$	428,643			13,509		$	144	$	139,162	$	(67,454	)	$	357,325	$	(534	)	$	428,643
Issuance of restricted stock awards		7			0		0		0			0		0			0			7			0		0		0			0		0			0
Share-based compensation		(3	)		0		2,135		0			0		0			2,135			(3	)		0		2,135		0			0		0			2,135
Repurchase of common stock		0			0		0		(237	)		0		0			(237	)		0			0		0		(237	)		0		0			(237	)
Net earnings		-			0		0		0			20,098		0			20,098			-			0		0		0			20,098		0			20,098
Foreign currency translation adjustment		-			0		0		0			0		(350	)		(350	)		-			0		0		0			0		(350	)		(350	)

Balance, September 30, 2019		13,513		$	144	$	141,297	$	(67,691	)	$	377,423	$	(884	)	$	450,289			13,513		$	144	$	141,297	$	(67,691	)	$	377,423	$	(884	)	$	450,289
Issuance of restricted stock awards																				0			0		0		0			0		0			0
Share-based compensation																				0			0		1,965		0			0		0			1,965
Repurchase of common stock																				0			0		0		0			0		0			0
Net earnings																				-			0		0		0			19,550		0			19,550
Foreign currency translation adjustment																				-			0		0		0			0		682			682

Balance, December 31, 2019																				13,513		$	144	$	143,262	$	(67,691	)	$	396,973	$	(202	)	$	472,486

See Notes to Unaudited Consolidated Financial Statements.

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ePlus inc. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1.	ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

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

INTERIM FINANCIAL STATEMENTS — The unaudited consolidated financial statements for the ~~six~~nine months ended ~~September 30,~~December 31, 2020, and 2019, were prepared by us and include all normal and recurring adjustments that, in the opinion of management, are necessary for a fair presentation of our financial position, results of operations, changes in comprehensive income, and cash flows for such periods. Operating results for the ~~six~~nine months ended ~~September 30,~~December 31, 2020, and 2019 are not necessarily indicative of results that may be expected for any other interim period or for the full fiscal year ending March 31, 2021, or any other future period. These unaudited consolidated financial statements do not include all disclosures required by the accounting principles generally accepted in the United States (“US GAAP”) for annual financial statements. Our audited consolidated financial statements are contained in our annual report on Form 10-K for the year ended March 31, 2020 (“2020 Annual Report”), which should be read in conjunction with these interim consolidated financial statements.

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

CONCENTRATIONS OF RISK — A substantial portion of our sales are products from Cisco Systems, which were ~~41%~~32% and ~~43%~~41% of our technology segment’s net sales for the three months ended ~~September 30,~~December 31, 2020, and 2019, respectively, and ~~40%~~37% and ~~42%~~41% of our technology segment’s net sales for the ~~six~~nine months ended ~~September 30,~~December 31, 2020, and 2019, respectively.

SIGNIFICANT ACCOUNTING POLICIES — The significant accounting policies used in preparing these Consolidated Financial Statements were applied on a basis consistent with those reflected in our Consolidated Financial Statements for the year ended March 31, 2020, except for changes from the adoption of Financial Accounting Standards Board (“FASB”) Accounting Standards Update ("ASU") 2016-13, Financial Instruments- Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, as amended (“ASU 2016-13”). The updates to our accounting policies from adopting ASU 2016-13 are provided below.

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 charge off uncollectable financing receivables when we stop pursuing collection.

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2.	RECENT ACCOUNTING PRONOUNCEMENTS

CREDIT LOSSES — We adopted ASU 2016-13 on April 1, 2020. The amendments in this update replace the incurred loss impairment methodology in current US GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. Our adoption of this update, including the cumulative-effect adjustment to retained earnings, is not significant to our financial statements. Refer to Note 7, “Allowance for Credit Losses” for additional information.

REVENUES

Contract balances

Accounts receivable – trade consists entirely of amounts due from contracts with customers. In addition, we had $~~41.3~~24.4 million and $33.1 million of receivables from contracts with customers included within financing receivables as of ~~September~~ December 31~~30,~~, 2020, and March 31, 2020, respectively. The following table provides the balance of contract liabilities from contracts with customers (in thousands):

Contract liabilities	September 30, 2020		March 31, 2020
					December 31, 2020		March 31, 2020
Current (included in deferred revenue)	$	58,267	$	54,486	$	67,845	$	54,486
Non-current (included in other liabilities)	$	18,794	$	16,395	$	28,441	$	16,395

Revenue recognized from the beginning contract liability balance was ~~$11.3~~$9.6 million and ~~$26.9~~$36.5 million for the three and ~~six~~nine months ended ~~September 30,~~December 31, 2020, respectively, and ~~$13.6~~$15.9 million and ~~$29.4~~$45.3 million for the three and ~~six~~nine months ended ~~September 30,~~December 31, 2019, respectively.

Performance obligations

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

Remainder of Year ending March 31, 2021	$	20,527	$	13,381
Year Ending March 31, 2022		18,889		30,971
Year Ending March 31, 2023		8,385		15,062
Year Ending March 31, 2024		2,026		6,821
Year Ending March 31, 2025		516		700
Year Ending March 31, 2026 and thereafter		111		184
Total remaining performance obligations	$	50,454	$	67,119

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

4.	FINANCING RECEIVABLES AND OPERATING LEASES

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

The following table provides the profit recognized for sales-type leases at their commencement date, including modifications that are recognized on a net basis, for the three and ~~six~~nine months ended ~~September 30,~~December 31, 2020, and 2019 (in thousands):

									Three months ended December 31,				Nine months ended December 31,
	Three months ended September 30, 2020		Three months ended September 30, 2019		Six months ended September 30, 2020		Six months ended September 30, 2019		2020		2019		2020		2019
Net sales	$	7,655	$	3,133	$	17,818	$	7,987	$	4,182	$	5,710	$	22,000	$	13,697
Cost of sales		5,402		2,702		10,729		6,652		3,362		4,807		14,091		11,459
Gross profit	$	2,253	$	431	$	7,089	$	1,335	$	820	$	903	$	7,909	$	2,238

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The following table provides interest income in aggregate on our sales-type leases and lease income on our operating leases for the three and ~~six~~nine months ended ~~September 30,~~December 31, 2020, and 2019 (in thousands):

									Three months ended December 31,				Nine months ended December 31,
	Three months ended September 30 2020		Three months ended September 30, 2019		Six months ended September 30, 2020		Six months ended September 30, 2019		2020		2019		2020		2019
Interest income on sales-type leases	$	1,884	$	1,495	$	4,103	$	3,590	$	1,956	$	1,272	$	6,059	$	4,862
Lease income on operating leases	$	3,900	$	5,059	$	7,738	$	10,418	$	3,623	$	4,489	$	11,361	$	14,908

FINANCING RECEIVABLES—NET

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

September 30, 2020	Notes Receivable			Lease Receivables			Financing Receivables
December 31, 2020										Notes Receivable			Lease Receivables			Financing Receivables

Gross receivables	$	90,002		$	76,700		$	166,702		$	111,321		$	89,629		$	200,950
Unguaranteed residual value (1)		0			20,213			20,213			0			20,388			20,388
Initial direct costs, net of amortization		364			0			364			464			0			464
Unearned income		0			(11,329	)		(11,329	)		0			(12,133	)		(12,133	)
Reserve for credit losses (2)		(1,337	)		(1,227	)		(2,564	)		(1,280	)		(1,088	)		(2,368	)
Total, net	$	89,029		$	84,357		$	173,386		$	110,505		$	96,796		$	207,301
Reported as:
Current	$	52,397		$	40,369		$	92,766		$	74,585		$	52,107		$	126,692
Long-term		36,632			43,988			80,620			35,920			44,689			80,609
Total, net	$	89,029		$	84,357		$	173,386		$	110,505		$	96,796		$	207,301

(1)

Includes unguaranteed residual values of ~~$12,644~~$12,314 thousand that we retained after selling the related lease receivable.

(2)

Refer to Note 7, “Allowance for Credit Losses” for details.

March 31, 2020	Notes Receivable			Lease Receivables			Financing Receivables

Minimum payments	$	55,417		$	69,492		$	124,909
Estimated unguaranteed residual value (1)		0			21,862			21,862
Initial direct costs, net of amortization		212			247			459
Unearned income		0			(11,612	)		(11,612	)
Reserve for credit losses (2)		(798	)		(610	)		(1,408	)
Total, net	$	54,831		$	79,379		$	134,210
Reported as:
Current	$	31,181		$	38,988		$	70,169
Long-term		23,650			40,391			64,041
Total, net	$	54,831		$	79,379		$	134,210

(1)

Includes unguaranteed residual values of $14,972 thousand for sales type leases, which have been sold and accounted for as sales.

(2)

Refer to Note 7, “Allowance for Credit Losses” for details.

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The following table provides the future scheduled minimum lease payments for investments in sales-type leases as of ~~September~~December ~~30,~~31, 2020 (in thousands):

Remainder of the Year ending March 31, 2021	$	46,006	$	40,211
Year Ending March 31, 2022		19,376		24,111
Year Ending March 31, 2023		8,196		16,337
Year Ending March 31, 2024		2,205		5,992
Year Ending March 31, 2025 and thereafter		917		2,978
Total	$	76,700	$	89,629

OPERATING LEASES—NET

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

	September 30, 2020			March 31, 2020			December 31, 2020			March 31, 2020

Cost of equipment under operating leases	$	19,578		$	21,276		$	18,182		$	21,276
Accumulated depreciation		(12,272	)		(11,159	)		(11,449	)		(11,159	)
Investment in operating lease equipment—net (1)	$	7,306		$	10,117		$	6,733		$	10,117

(1)

Amounts include estimated unguaranteed residual values of ~~$2.5~~$2.6 million and $3.1 million as of ~~September 30,~~December 31, 2020, and March 31, 2020, respectively.

The following table provides the future scheduled minimum lease rental payments for operating leases as of ~~September~~ December 31~~30,~~, 2020 (in thousands):

Remainder of the Year ending March 31, 2021	$	1,534	$	625
Year Ending March 31, 2022		1,927		2,007
Year Ending March 31, 2023		1,436		1,456
Year Ending March 31, 2024		477		479
Year Ending March 31, 2025 and thereafter		35		37
Total	$	5,409	$	4,604

TRANSFERS OF FINANCIAL ASSETS

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

For transfers accounted for as a secured borrowing, the corresponding investments serve as collateral for non-recourse notes payable. As of ~~September 30,~~December 31, 2020, and March 31, 2020, we had financing receivables of $~~33.7~~69.4 million and $34.6 million, respectively, and operating leases of $~~4.9~~4.4 million and $6.7 million, respectively, which were collateral for non-recourse notes payable. See Note 9, “Notes Payable and Credit Facility.”

For transfers accounted for as sales, we derecognize the carrying value of the asset transferred plus any liability and recognize a net gain or loss on the sale, which are presented within net sales in the consolidated statement of operations. During the three months ended ~~September 30,~~December 31, 2020, and 2019, we recognized net gains of ~~$4.5~~$3.0 million and ~~$4.1~~$9.5 million, respectively, and total proceeds from these sales were ~~$118.5~~$67.5 million and ~~$95.1~~$246.0 million, respectively. For the year to date periods ended ~~September 30,~~December 31, 2020, and 2019, we recognized net gains of ~~$7.0~~$10.1 million and ~~$7.5~~$17.0 million, respectively, and total proceeds from these sales were ~~$191.7~~$259.2 million and ~~$172.0~~$414.6 million, respectively.

When we retain servicing obligations in transfers accounted for as sales, we allocate a portion of the proceeds to deferred revenues, which is recognized as we perform the services. As of both ~~September 30,~~December 31, 2020, and March 31, 2020, we had deferred revenue of $0.4 million for servicing obligations.

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In a limited number of transfers accounted for as sales, we indemnified the assignee in the event that the lessee elected to early terminate the lease. As of ~~September 30,~~December 31, 2020, our ~~maximum~~total potential ~~future payments related to such guarantees~~liability that could result from these indemnities is immaterial. We believe the likelihood of making any such payments to be remote.

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5.	LESSEE ACCOUNTING

We lease office space for periods up to 6 years. We recognize our right-of-use assets as part of property, equipment, and other assets. We recognize the current and long-term portions of our lease liability as part of other current liabilities and other liabilities, respectively. We recognized rent expense of $1.5 million and $1.6 million for the three months ending December 31, 2020, and December 31, 2019, respectively, and $4.6 million and $4.7 million for the nine months ending December 31, 2020, and December 31, 2019, respectively, as part of selling, general, and administrative ~~expenses for both the three months ended September 30, 2020, and September 30, 2019, and $3.1 million for both the six months ending September 30, 2020, and September 30, 2019.~~expenses.

The following table provides supplemental information about the remaining lease terms and discount rates applied as of ~~September~~ December 31~~30,~~, 2020, and March 31, 2020:

Lease term and Discount Rate	September 30, 2020			March 31, 2020			December 31, 2020			March 31, 2020
Weighted average remaining lease term (months)		34			38			33			38
Weighted average discount rate		3.8	%		3.9	%		3.8	%		3.9	%

The following table provides our future lease payments under our operating leases as of ~~September~~ December 31,~~30,~~ 2020 (in thousands):

September 30, 2020
Remainder of the year ending March 31, 2021 $ 2,432
Year ending March 31, 2022 4,319
Year ending March 31, 2023 3,093
Year ending March 31, 2024 1,249
Year ending March 31, 2025 and thereafter 813
Total lease payments $ 11,906
Less: interest (617 )
Present value of lease liabilities $ 11,289

	December 31, 2020
Remainder of the year ending March 31, 2021	$	967
Year ending March 31, 2022		4,390
Year ending March 31, 2023		3,166
Year ending March 31, 2024		1,323
Year ending March 31, 2025 and thereafter		917
Total lease payments	$	10,763
Less: interest		(530	)
Present value of lease liabilities	$	10,233

6.	GOODWILL AND OTHER INTANGIBLE ASSETS

GOODWILL

The following table summarizes the changes in the carrying ~~value~~amount of goodwill ~~was $118.2 and $118.1 million as of September 30, 2020, and March~~for the nine months ended December 31, 2020 ~~respectively. There was no significant activity in the balance during the six months ended September 30, 2020, other than change in foreign currency translation of $0.1 million.~~(in thousands):

	Nine months ended December 31, 2020
	Goodwill		Accumulated Impairment Loss			Net Carrying Amount

Beginning balance	$	126,770	$	(8,673	)	$	118,097
Acquisitions		8,643		-			8,643
Foreign currency translations		205		-			205
Ending balance	$	135,618	$	(8,673	)	$	126,945

Goodwill represents the premium paid over the fair value of the net tangible and intangible assets that are individually identified and separately recognized in business combinations. Our entire balance as of ~~September 30,~~December 31, 2020, and March 31, 2020, relates to our technology reportable segment, which we also determined to be 1 reporting unit.The carrying value of goodwill was $126.9 and $118.1 million as of December 31, 2020, and March 31, 2020, respectively. The increase in the balance during the nine months ended December 31, 2020, is due to our acquisition of certain assets and liabilities of Systems Management and Planning, Inc. (“SMP”), and changes in foreign currency translation of $0.2 million. Refer to Note 16, “Business Combinations” for details.

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We test goodwill for impairment on an annual basis, as of the first day of our third fiscal quarter, and between annual tests if an event occurs, or circumstances change, that would more likely than not reduce the fair value of a reporting unit below its carrying value.

In our annual test as of October 1, ~~2019,~~2020, we performed a qualitative assessment of goodwill and concluded that, more likely than not, the fair value of our technology reporting unit continued to substantially exceed its carrying ~~value.~~value.

During the fourth quarter of fiscal year 2020, we determined that the uncertainty associated with the economic environment stemming from the COVID-19 pandemic was a triggering event and we elected to perform a quantitative goodwill impairment test. We concluded that the fair value of our technology reporting unit substantially exceeded its carrying value as of March 31, 2020. Our conclusions would not be impacted by a 10percent change in our estimate of the fair value of the reporting unit.

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OTHER INTANGIBLE ASSETS

~~Our~~Our other intangible assets consist of the following on ~~September 30,~~December 31, 2020, and March 31, 2020 (in thousands):

	September 30, 2020							March 31, 2020							December 31, 2020							March 31, 2020
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount

Customer relationships & other intangibles	$	63,093	$	(37,467	)	$	25,626	$	63,006	$	(33,000	)	$	30,006	$	77,307	$	(39,371	)	$	37,936	$	63,006	$	(33,000	)	$	30,006
Capitalized software development		11,176		(6,537	)		4,639		10,385		(5,927	)		4,458		10,537		(6,845	)		3,692		10,385		(5,927	)		4,458
Total	$	74,269	$	(44,004	)	$	30,265	$	73,391	$	(38,927	)	$	34,464	$	87,844	$	(46,216	)	$	41,628	$	73,391	$	(38,927	)	$	34,464

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

Total amortization expense for other intangible assets was ~~$2.5~~$2.3 million for ~~both~~ the three months ended ~~September 30,~~December 31, 2020 and ~~2019, respectively, and $5.0~~$2.6 million ~~and $4.9 million~~ for the ~~six~~three months ended ~~September 30,~~December 31, 2019, and $7.3 million and $7.5 million for the nine months ended December 31, 2020, and 2019, respectively. The change in the gross carrying amount of other intangible asset is due to the addition of a customer relationship intangible asset of $14.3 million from our acquisition of SMP. Refer to Note 16, “Business Combinations” for details.

7.	ALLOWANCE FOR CREDIT LOSSES

The following table provides the activity in our allowance for credit losses for the ~~six~~nine months ended ~~September 30,~~December 31, 2020, and 2019 (in thousands):

	Accounts Receivable			Notes Receivable			Lease Receivables			Total			Accounts Receivable			Notes Receivable			Lease Receivables			Total
Balance April 1, 2020	$	1,781		$	798		$	610		$	3,189		$	1,781		$	798		$	610		$	3,189
Provision for credit losses		576			566			624			1,766			866			570			484			1,920
Write-offs and other		(27	)		(27	)		(7	)		(61	)		(46	)		(88	)		(6	)		(140	)
Balance September 30, 2020	$	2,330		$	1,337		$	1,227		$	4,894
Balance December 31, 2020													$	2,601		$	1,280		$	1,088		$	4,969

	Accounts Receivable			Notes Receivable		Lease Receivables			Total			Accounts Receivable			Notes Receivable		Lease Receivables			Total
Balance April 1, 2019	$	1,579		$	505	$	530		$	2,614		$	1,579		$	505	$	530		$	2,614
Provision for credit losses		311			15		(27	)		299			107			283		114			504
Write-offs and other		(42	)		0		(3	)		(45	)		(304	)		0		(2	)		(306	)
Balance September 30, 2019	$	1,848		$	520	$	500		$	2,868
Balance December 31, 2019												$	1,382		$	788	$	642		$	2,812

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The following table provides our allowance for credit losses and minimum payments associated with our notes receivables and lease-related receivables disaggregated based on our impairment method as of March 31, 2020 (in thousands):

	March 31, 2020
	Notes Receivable		Lease Receivables
Allowance for credit losses:
Ending balance: collectively evaluated for impairment	$	736	$	610
Ending balance: individually evaluated for impairment		62		0
Ending balance	$	798	$	610

Minimum payments:
Ending balance: collectively evaluated for impairment	$	55,005	$	69,492
Ending balance: individually evaluated for impairment		412		0
Ending balance	$	55,417	$	69,492

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We evaluate our customers using an internally assigned credit quality rating (“CQR”):

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

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

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

The following table provides the amortized cost basis of our financing receivables by CQR and by credit origination year as of ~~September 30,~~December 31, 2020 (in thousands):

	Amortized cost basis by origination year ending March 31,																			Amortized cost basis by origination year ending March 31,
	2021		2020		2019		2018		2017		2016 and prior		Total		Transfers (2)			Net credit exposure		2021		2020		2019		2018		2017		Total		Transfers (2)			Net credit exposure

Notes receivable:

High CQR	$	64,678	$	9,744	$	2,434	$	947	$	38	$	0	$	77,841	$	(35,867	)	$	41,974	$	82,424	$	6,952	$	1,259	$	856	$	27	$	91,518	$	(60,295	)	$	31,223
Average CQR		6,189		4,697		837		52		0		0		11,775		(3,651	)		8,124		14,922		3,945		576		36		0		19,479		(6,999	)		12,480
Low CQR		0		0		324		0		0		62		386		0			386		0		0		324		0		0		324		0			324
Total	$	70,867	$	14,441	$	3,595	$	999	$	38	$	62	$	90,002	$	(39,518	)	$	50,484	$	97,346	$	10,897	$	2,159	$	892	$	27	$	111,321	$	(67,294	)	$	44,027

Lease receivables:

High CQR	$	21,650	$	11,826	$	3,609	$	998	$	314	$	8	$	38,405	$	(9,518	)	$	28,887	$	39,177	$	8,137	$	2,273	$	713	$	299	$	50,599	$	(18,555	)	$	32,044
Average CQR		22,447		9,415		1,921		646		106		0		34,535		(11,409	)		23,126		25,059		7,709		1,751		403		49		34,971		(4,792	)		30,179
Low CQR		0		0		0		0		0		0		0		0			0		0		0		0		0		0		0		0			0
Total	$	44,097	$	21,241	$	5,530	$	1,644	$	420	$	8	$	72,940	$	(20,927	)	$	52,013	$	64,236	$	15,846	$	4,024	$	1,116	$	348	$	85,570	$	(23,347	)	$	62,223
Total amortized cost (1)	$	114,964	$	35,682	$	9,125	$	2,643	$	458	$	70	$	162,942	$	(60,445	)	$	102,497	$	161,582	$	26,743	$	6,183	$	2,008	$	375	$	196,891	$	(90,641	)	$	106,250

(1)	Unguaranteed residual values of $~~12,644~~12,314 thousand that we retained after selling the related lease receivable and initial direct costs of notes receivable of $~~364~~464 thousand are excluded from amortized cost.

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

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The following table provides an aging analysis of our financing receivables as of ~~September 30~~December 31, 2020 (in thousands):

	31-60 Days Past Due		61-90 Days Past Due		> 90 Days Past Due		Total Past Due		Current		Total Billed		Unbilled		Amortized Cost		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	$	925	$	270	$	823	$	2,018	$	10,105	$	12,123	$	77,879	$	90,002	$	406	$	2,264	$	967	$	3,637	$	8,839	$	12,476	$	98,845	$	111,321
Lease receivables		660		2,049		1,771		4,480		1,754		6,234		66,706		72,940		4,272		1,832		1,295		7,399		3,584		10,983		74,587		85,570
Total	$	1,585	$	2,319	$	2,594	$	6,498	$	11,859	$	18,357	$	144,585	$	162,942	$	4,678	$	4,096	$	2,262	$	11,036	$	12,423	$	23,459	$	173,432	$	196,891

The following table provides an aging analysis of our lease receivables by CQR as of March 31, 2020 (in thousands):

	31-60 Days Past Due		61-90 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Current		Unbilled Minimum Lease Payments		Total Minimum Lease Payments		Unearned Income			Non- Recourse Notes Payable			Net Credit Exposure

High CQR	$	951	$	105	$	922	$	1,978	$	1,181	$	33,581	$	36,740	$	(4,766	)	$	(19,823	)	$	12,151
Average CQR		46		107		112		265		1,106		31,381		32,752		(3,646	)		(18,693	)		10,413
Low CQR		0		0		0		0		0		0		0		0			0			0
Total	$	997	$	212	$	1,034	$	2,243	$	2,287	$	64,962	$	69,492	$	(8,412	)	$	(38,516	)	$	22,564

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The following table provides an aging analysis of our notes receivable by CQR as of March 31, 2020 (in thousands):

	31-60 Days Past Due		61-90 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Current		Unbilled Notes Receivable		Total Notes Receivable		Non- Recourse Notes Payable			Net Credit Exposure

High CQR	$	1,332	$	2	$	280	$	1,614	$	2,878	$	29,057	$	33,549	$	(18,341	)	$	15,208
Average CQR		140		44		142		326		1,135		19,995		21,456		(16,636	)		4,820
Low CQR		63		0		152		215		0		197		412		0			412
Total	$	1,535	$	46	$	574	$	2,155	$	4,013	$	49,249	$	55,417	$	(34,977	)	$	20,440

Our financial assets on nonaccrual status were not significant as of ~~September 30,~~December 31, 2020, and March 31, 2020.

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8.	PROPERTY, EQUIPMENT, OTHER ASSETS AND LIABILITIES

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

September 30,
2020

March 31,
2020

Other current assets:
Deposits & funds held in escrow $ 339 $ 926
Prepaid assets 7,640 7,946
Other 254 384
Total $ 8,233 $ 9,256

Property, equipment and other assets

Property and equipment, net $ 7,258 $ 7,153
Deferred costs - non-current 12,568 10,957
Right-of-use assets 11,069 13,066
Other 3,419 1,420
Total $ 34,314 $ 32,596

Other current liabilities:

Accrued expenses $ 10,639 $ 10,024
Accrued income taxes payable 3,021 406
Contingent consideration - current 0 220
Short-term lease liability 4,698 4,815
Other 7,014 7,521
Total $ 25,372 $ 22,986

Other liabilities:

Deferred revenue $ 19,074 $ 16,693
Long-term lease liability 6,590 8,326
Other 7,278 2,708
Total $ 32,942 $ 27,727

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

	December 31, 2020		March 31, 2020
Other current assets:
Deposits & funds held in escrow	$	376	$	926
Prepaid assets		7,626		7,946
Other		512		384
Total	$	8,514	$	9,256

Property, equipment and other assets
Property and equipment, net	$	7,921	$	7,153
Deferred costs - non-current		20,650		10,957
Right-of-use assets		9,986		13,066
Other		4,830		1,420
Total	$	43,387	$	32,596

Other current liabilities:
Accrued expenses	$	13,054	$	10,024
Accrued income taxes payable		2,249		406
Contingent consideration - current		0		220
Short-term lease liability		4,292		4,815
Other		11,500		7,521
Total	$	31,095	$	22,986

Other liabilities:
Deferred revenue	$	28,708	$	16,693
Long-term lease liability		5,941		8,326
Other		5,183		2,708
Total	$	39,832	$	27,727

9.	CREDIT FACILITY AND NOTES PAYABLE

Credit Facility

Within our technology segment, ePlus Technology, inc. and certain of its subsidiaries finance their operations with funds generated from operations, and with a credit facility with Wells Fargo Commercial Distribution Finance, LLC (“WFCDF”). This facility provides short-term capital for our technology segment. There are 2 components of the WFCDF credit facility: (1) a floor plan component and (2) an accounts receivable component.

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Under the floor plan component, we had outstanding balances of ~~$219.0~~$177.1 million and $127.4 million as of ~~September 30,~~December 31, 2020, and March 31, 2020, respectively, and are presented as accounts payable – floorplan. The fair value of the outstanding balance under the credit facility was equal to its carrying value as of ~~September 30,~~December 31, 2020, and March 31, 2020.

On May 15, 2020, we executed an amendment to the WFCDF credit facility that increased the aggregate limit of the ~~two~~2 components, except during a temporary uplift, to ~~$275.0~~$275 million. Additionally, we have an election to temporarily increase the aggregate limit to ~~$350.0~~$350 million for a period of not less than 30 days, provided that all such periods shall not exceed 150 days in the aggregate in any calendar year. Further, the amendment increased the limit on the accounts receivable component of the WFCDF credit facility to ~~$100.0~~$100 million, changed the interest rate to two percent (2.00%) plus the greater of one month LIBOR or seventy-five hundredths of one percent (0.75%), and modified certain restrictions on ePlus Technology, inc.’s ability to pay dividends to ePlus inc.

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As of ~~September 30,~~December 31, 2020, the limit of the 2 components of the credit facility was $275 million, and the accounts receivable component had a sub-limit of $100 million. Our borrowing availability under the credit facility varies based upon the value of the receivables and inventory of ePlus Technology, inc., and certain of its subsidiaries. Under the accounts receivable component, we had 0 outstanding balance as of ~~September 30,~~December 31, 2020 and $35 million outstanding as of March 31, 2020. The accounts receivable component is presented as recourse notes payable – current.

The WFCDF credit facility is secured by the assets of ePlus Technology, inc. and certain of its ~~subsidiaries, and varies available borrowing based upon the value of their receivables and inventory.~~subsidiaries. Additionally, the credit facility requires a guaranty of $10.5 million by ePlus inc.

The credit facility restricts the ability of ePlus Technology, inc. and certain of its subsidiaries to pay dividends to ePlus inc. unless their available borrowing meets certain thresholds. As of ~~September 30,~~December 31, 2020, their available borrowing met the threshold such that there were no restricted net assets of ePlus Technology, inc.

The credit facility requires that financial statements of ePlus Technology, inc. and certain of its subsidiaries be provided within 45 days of each quarter and 90 days of each fiscal year end and requires that other operational reports be provided on a regular basis. Either party may terminate with 90 days’ advance notice.

The loss of the WFCDF credit facility ~~including during circumstances related to COVID-19,~~ 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.

~~On October 1, 2020, we elected to exercise the temporary increase in the aggregate limit of the WFCDF credit facility to $350.0 million for a period of 30 days.~~

Recourse Notes Payable

Recourse notes payable consist of borrowings that, in the event of default, the lender has recourse against us in addition to the assets serving as collateral.

As of ~~September 30, 2020, and~~ March 31, 2020, we had $2.3 million of recourse borrowings that were collateralized by investments in notes receivable and leases. We had 0 recourse borrowings as of December 31, 2020. Our principal and interest payments are generally due monthly in amounts that equal to the total payments due from the customer under the leases or notes receivable that collateralize the notes payable. The weighted average interest rate for these borrowings was 2.55% as of ~~both September 30, 2020, and~~ March 31, 2020.

Non-recourse Notes Payable

Non-recourse notes payable consists of borrowings that, in the event of a default by a customer, the lender generally only has recourse against the customer, and the assets serving as collateral, but not against us. As of ~~September 30,~~December 31, 2020, and March 31, 2020, we had ~~$38.1~~$68.3 million and $35.5 million, respectively, of non-recourse borrowings that were collateralized by investments in notes and leases. Principal and interest payments are generally due monthly in amounts that are approximately equal to the total payments due from the customer under the leases or notes receivable that collateralize the notes payable. The weighted average interest rate for our non-recourse notes payable was ~~3.15%~~3.57% and 3.84%, as of ~~September 30,~~December 31, 2020, and March 31, 2020, respectively.

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10.	COMMITMENTS AND CONTINGENCIES

Legal Proceedings

From time to time, ~~the Company~~we may be involved in routine legal proceedings, as well as demands, claims and threatened litigation that arise in the normal course of our ~~business.~~business and that have not been fully resolved. The ultimate amount of liability, if any, for any claims of any type (either alone or in the aggregate) may materially and adversely affect ~~the Company’s~~our financial condition, results of operations and liquidity. In addition, the ultimate outcome of any litigation is inherently uncertain. Any outcome, whether favorable or unfavorable, may materially and adversely affect ~~the Company~~us due to legal costs and expenses, diversion of management attention and other factors. ~~The Company expenses~~We expense legal costs in the period incurred. ~~The Company~~We cannot assure that additional contingencies of a legal nature or contingencies having legal aspects will not be asserted against ~~the Company~~us in the future, and these matters could relate to prior, current or future transactions or events.

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11.	EARNINGS PER SHARE

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

The following table provides a reconciliation of the numerators and denominators used to calculate basic and diluted net income per common share as disclosed on our unaudited consolidated statements of operations for the three and ~~six~~nine months ended ~~September 30,~~December 31, 2020, and 2019, respectively (in thousands, except per share data).

	Three Months Ended September 30,				Six Months Ended September 30,				Three Months Ended December 31,				Nine Months Ended December 31,
	2020		2019		2020		2019		2020		2019		2020		2019

Net earnings attributable to common shareholders - basic and diluted	$	19,846	$	20,098	$	37,206	$	36,286	$	21,638	$	19,550	$	58,844	$	55,836

Basic and diluted common shares outstanding:
Weighted average common shares outstanding — basic		13,372		13,312		13,347		13,334		13,332		13,320		13,342		13,329
Effect of dilutive shares		19		38		47		74		46		58		60		81
Weighted average shares common outstanding — diluted		13,391		13,350		13,394		13,408		13,378		13,378		13,402		13,410

Earnings per common share - basic	$	1.48	$	1.51	$	2.79	$	2.72	$	1.62	$	1.47	$	4.41	$	4.19

Earnings per common share - diluted	$	1.48	$	1.51	$	2.78	$	2.71	$	1.62	$	1.46	$	4.39	$	4.16

12.	STOCKHOLDERS’ EQUITY

Share Repurchase Plan

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

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

During the ~~six~~nine months ended ~~September 30,~~December 31, 2020, we purchased ~~24,318~~59,101 shares of our outstanding common stock at a value of ~~$1.8~~$4.2 million under the share repurchase plan; we also purchased 37,640 shares of common stock at a value of $2.7 million to satisfy tax withholding obligations relating to the vesting of employees’ restricted stock.

During the ~~six~~nine months ended ~~September 30,~~December 31, 2019, we purchased 149,044 shares of our outstanding common stock at a value of $10.7 million under the share repurchase plan; we also purchased 41,817 shares of common stock at a value of $3.0 million to satisfy tax withholding obligations relating to the vesting of employees’ restricted stock.

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13.	SHARE-BASED COMPENSATION

Share-Based Plans

As of ~~September 30,~~December 31, 2020, we had share-based awards outstanding under the following plans: (1) the 2017 Non-Employee Director Long-Term Incentive Plan (“2017 Director LTIP”), and (2) the 2012 Employee Long-Term Incentive Plan ("2012 Employee LTIP"). These share-based plans define fair market value as the previous trading day's closing price when the grant date falls on a date the stock was not traded.

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Restricted Stock Activity

For the ~~six~~nine months ended ~~September 30,~~December 31, 2020, we granted ~~9,309~~9,871 restricted shares under the 2017 Director LTIP, and 89,873 restricted shares under the 2012 Employee LTIP. For the ~~six~~nine months ended ~~September 30,~~December 31, 2019, we granted ~~8,132~~8,646 restricted shares under the 2017 Director LTIP, and 85,132 restricted shares under the 2012 Employee LTIP. A summary of the restricted shares is as follows:

	Number of Shares			Weighted Average Grant- date Fair Value		Number of Shares			Weighted Average Grant- date Fair Value

Nonvested April 1, 2020		193,580		$	73.74		193,580		$	73.74
Granted		99,182		$	71.81		99,744		$	71.82
Vested		(110,155	)	$	70.00		(110,292	)	$	70.01
Forfeited		0		$	0		0		$	0
Nonvested September 30, 2020		182,607		$	74.95
Nonvested December 31, 2020							183,032		$	74.94

Upon each vesting period of the restricted stock awards, employees are subject to minimum tax withholding obligations. Under the 2012 Employee LTIP, we may purchase a sufficient number of shares due to the participant to satisfy their minimum tax withholding on employee stock awards. For the ~~six~~nine months ended ~~September 30,~~December 31, 2020, ~~the Company~~we withheld 37,640 shares of common stock at a value of $2.7 million, which was included in treasury stock.

Compensation Expense

We recognize compensation cost for awards of restricted stock with graded vesting on a straight-line basis over the requisite service period. There are no additional conditions for vesting other than service conditions. During the three months ended ~~September 30,~~December 31, 2020, and 2019, we recognized $1.8 million and ~~$2.1~~$2.0 million of total share-based compensation expense, respectively. During the ~~six~~nine months ended ~~September 30,~~December 31, 2020, and 2019, we recognized ~~$3.6~~$5.4 million and ~~$4.1~~$6.0 million of total share-based compensation expense, respectively. Unrecognized compensation expense related to non-vested restricted stock was ~~$11.6~~$9.9 million as of ~~September 30,~~December 31, 2020, which will be fully recognized over the next 3330 months.

We also provide our employees with a contributory 401(k) profit sharing plan, to which we may contribute from time to time at our sole discretion. Employer contributions to the plan are fully vested at all times. ~~Our~~For the three months ended December 31, 2020 and 2019, our estimated contribution expense for the plan ~~for both~~was $0.9 million and $0.8 million, respectively. For the ~~three~~nine months ended ~~September 30,~~December 31, 2020 and 2019, our estimated contribution expense for the plan was ~~$0.7~~$2.2 million and ~~$1.4~~$2.2 million, ~~for both the six months ended September 30, 2020, and 2019.~~respectively.

14.	INCOME TAXES

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

Our total gross unrecognized tax benefits recorded for uncertain income tax, and interest and penalties thereon, were negligible as of ~~September 30,~~December 31, 2020, and ~~September 30,~~December 31, 2019. We had 0 additions or reductions to our gross unrecognized tax benefits during the ~~six~~nine months ended ~~September 30,~~December 31, 2020. We recognize accrued interest and penalties related to unrecognized tax benefits in income tax expense.

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15.	FAIR VALUE OF FINANCIAL INSTRUMENTS

We account for the fair values of our assets and liabilities in accordance with Codification Topic 820, Fair Value Measurement and Disclosure. The following table summarizes the fair value hierarchy of our financial instruments as of ~~September 30,~~December 31, 2020 and March 31, 2020 (in thousands):

			Fair Value Measurement Using								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)		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, 2020
December 31, 2020
Assets:
Money market funds	$	45,132	$	45,132	$	0	$	0	$	5,134	$	5,134	$	0	$	0

March 31, 2020
Assets:
Money market funds	$	128	$	128	$	0	$	0	$	128	$	128	$	0	$	0

Liabilities:
Contingent consideration	$	220	$	0	$	0	$	220	$	220	$	0	$	0	$	220

For the three and ~~six~~nine months ended ~~September 30,~~December 31, 2020, we did 0t record significant adjustments to our liability for contingent consideration arising from a past business combination. In August 2020, we paid $219 thousand to fully satisfy the obligations of our contingent consideration arrangement.

For the ~~three and six~~nine months ended ~~September 30,~~December 31, 2019, we recorded adjustments to operating expenses ~~of $1.1 million and $1.5 million, respectively,~~ that increased the fair value of our liability for contingent consideration ~~arising from our past business combinations.~~by $1.5 million. There were 0 adjustments to operating expenses for the three months ended December 31, 2019. In September 2019, we reached a settlement in full of one of our contingent consideration arrangements in the amount of $9.6 million, ~~that~~which was paid in October 2019. Additionally, in September 2019, we paid $0.5 million to satisfy certain current obligations in another of these arrangements.

16.	BUSINESS COMBINATIONS

Systems Management Planning (SMP)

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

Our preliminary sum of consideration transferred was $27.1 million consisting of $29.3 million paid in cash at closing less $2.2 million that is due back to us related to a working capital adjustment. Our preliminary allocation of the purchase consideration to the assets acquired and liabilities assumed is presented below (in thousands):

	Acquisition Date Amount
Accounts receivable	$	14,329
Other assets		3,290
Identified intangible assets		14,270
Accounts payable and other current liabilities		(11,250	)
Performance obligations		(2,180	)

Total identifiable net assets		18,459
Goodwill		8,643

Total purchase consideration	$	27,102

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

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We recognized goodwill related to this transaction of $8.6 million, which was assigned to our technology reporting unit. The goodwill recognized in the acquisition is attributable to the acquired assembled workforce and expected synergies, none of which qualify for recognition as a separate intangible asset. The total amount of goodwill is expected to be deductible for tax purposes. The amount of revenues and earnings of the acquiree since the acquisition date are not material. Likewise, the impact to the revenue and earnings of the combined entity for the current reporting period as though the acquisition date had been April 1, 2020, is not material.

As of our filing date, our accounting for this business combination is incomplete in respect to determining the final consideration transferred and the fair value of assets acquired, and liabilities assumed.

ABS Technology

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

Our sum of consideration transferred was $15.3 million consisting of $13.8 million paid in cash at closing plus $1.7 million that was paid primarily during the year ended March 31, 2020, upon the collection of certain accounts receivable, and less $0.2 million that was repaid to us in December 2019 due to a working capital adjustment. Our allocation of the purchase consideration to the assets acquired and liabilities assumed is presented below (in thousands):

	Acquisition Date Amount			Acquisition Date Amount
Accounts receivable		9,208		$	9,208
Other assets		743			743
Identified intangible assets		5,720			5,720
Accounts payable and other current liabilities		(6,715	)		(6,715	)
Performance obligation		(1,140	)		(1,140	)

Total identifiable net assets		7,816			7,816
Goodwill		7,461			7,461

Total purchase consideration	$	15,277		$	15,277

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

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

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17.	SEGMENT REPORTING

Our operations are conducted through 2 operating segments that are also both reportable segments. Our technology segment includes sales of IT products, third-party software, third-party maintenance, advanced professional and managed services, and our proprietary software to commercial enterprises, state and local governments, and government contractors. Our financing segment consists of the financing of IT equipment, software, and related services to commercial enterprises, state and local governments, and government contractors. We measure the performance of the segments based on operating income.

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Our reportable segment information for the three- and ~~six-month~~nine-month periods ended ~~September 30,~~December 31, 2020, and 2019 are summarized in the following tables (in thousands):

	Three Months Ended													Three Months Ended
	September 30, 2020						September 30, 2019							December 31, 2020						December 31, 2019
	Technology		Financing		Total		Technology		Financing		Total			Technology		Financing		Total		Technology		Financing		Total

Sales
Product	$	369,934	$	13,722	$	383,656	$	349,650	$	13,847	$	363,497		$	363,478	$	12,034	$	375,512	$	360,206	$	18,363	$	378,569
Service		49,425		0		49,425		48,068		0		48,068			52,092		0		52,092		50,422		0		50,422
Net sales		419,359		13,722		433,081		397,718		13,847		411,565			415,570		12,034		427,604		410,628		18,363		428,991

Cost of Sales
Product		301,006		1,957		302,963		276,475		2,388		278,863			295,310		2,204		297,514		290,980		2,229		293,209
Service		31,156		0		31,156		29,671		0		29,671			31,939		0		31,939		32,086		0		32,086
Total cost of sales		332,162		1,957		334,119		306,146		2,388		308,534			327,249		2,204		329,453		323,066		2,229		325,295
Gross Profit		87,197		11,765		98,962		91,572		11,459		103,031			88,321		9,830		98,151		87,562		16,134		103,696

Selling, general, and administrative		62,586		4,303		66,889		67,189		3,334		70,523			62,377		3,013		65,390		67,759		5,331		73,090
Depreciation and amortization		3,313		28		3,341		3,529		28		3,557			3,115		28		3,143		3,619		28		3,647
Interest and financing costs		1		246		247		0		576		576			0		355		355		0		694		694
Operating expenses		65,900		4,577		70,477		70,718		3,938		74,656			65,492		3,396		68,888		71,378		6,053		77,431

Operating income		21,297		7,188		28,485		20,854		7,521		28,375			22,829		6,434		29,263		16,184		10,081		26,265

Other income						184						(40	)						813						997

Earnings before tax					$	28,669					$	28,335						$	30,076					$	27,262

Net Sales
Contracts with customers	$	412,357	$	1,028	$	413,385	$	394,585	$	1,411	$	395,996		$	411,175	$	1,904	$	413,079	$	404,918	$	1,689	$	406,607
Financing and other		7,002		12,694		19,696		3,133		12,436		15,569			4,395		10,130		14,525		5,710		16,674		22,384
Net Sales	$	419,359	$	13,722	$	433,081	$	397,718	$	13,847	$	411,565		$	415,570	$	12,034	$	427,604	$	410,628	$	18,363	$	428,991

Selected Financial Data - Statement of Cash Flow

Depreciation and amortization	$	3,499	$	1,182	$	4,681	$	3,658	$	1,455	$	5,113		$	3,311	$	991	$	4,302	$	3,691	$	1,449	$	5,140
Purchases of property, equipment and operating lease equipment	$	990	$	0	$	990	$	1,426	$	1,944	$	3,370		$	959	$	1	$	960	$	786	$	1,535	$	2,321

Selected Financial Data - Balance Sheet

Total assets	$	812,633	$	226,078	$	1,038,711	$	690,648	$	223,618	$	914,266		$	887,684	$	238,270	$	1,125,954	$	733,174	$	219,434	$	952,608

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Six Months Ended
September 30, 2020 September 30, 2019
Technology Financing Total Technology Financing Total

Sales
Product $ 663,367 $ 27,529 $ 690,896 $ 672,414 $ 26,684 $ 699,098
Service 97,216 0 97,216 93,839 0 93,839
Net sales 760,583 27,529 788,112 766,253 26,684 792,937

Cost of Sales
Product 525,549 4,048 529,597 534,529 4,397 538,926
Service 60,996 0 60,996 58,341 0 58,341
Total cost of sales 586,545 4,048 590,593 592,870 4,397 597,267
Gross Profit 174,038 23,481 197,519 173,383 22,287 195,670

Selling, general, and administrative 128,142 8,214 136,356 129,856 6,454 136,310
Depreciation and amortization 6,801 56 6,857 6,936 84 7,020
Interest and financing costs 266 558 824 0 1,204 1,204
Operating expenses 135,209 8,828 144,037 136,792 7,742 144,534

Operating income 38,829 14,653 53,482 36,591 14,545 51,136

Other income 282 (85 )

Earnings before tax $ 53,764 $ 51,051

Net Sales
Contracts with customers $ 746,344 $ 1,988 $ 748,332 $ 758,266 $ 2,200 $ 760,466
Financing and other 14,239 25,541 39,780 7,987 24,484 32,471
Net Sales $ 760,583 $ 27,529 $ 788,112 $ 766,253 $ 26,684 $ 792,937

Selected Financial Data - Statement of Cash Flow

Depreciation and amortization $ 7,133 $ 2,327 $ 9,460 $ 7,283 $ 2,794 $ 10,077
Purchases of property, equipment and operating lease equipment $ 3,101 $ 166 $ 3,267 $ 2,675 $ 2,213 $ 4,888

Selected Financial Data - Balance Sheet

Total assets $ 812,633 $ 226,078 $ 1,038,711 $ 690,648 $ 223,618 $ 914,266

	Nine Months Ended
	December 31, 2020						December 31, 2019
	Technology		Financing		Total		Technology		Financing		Total

Sales
Product	$	1,026,845	$	39,563	$	1,066,408	$	1,032,620	$	45,047	$	1,077,667
Service		149,308		0		149,308		144,261		0		144,261
Net sales		1,176,153		39,563		1,215,716		1,176,881		45,047		1,221,928

Cost of Sales
Product		820,859		6,252		827,111		825,509		6,626		832,135
Service		92,935		0		92,935		90,427		0		90,427
Total cost of sales		913,794		6,252		920,046		915,936		6,626		922,562
Gross Profit		262,359		33,311		295,670		260,945		38,421		299,366

Selling, general, and administrative		190,519		11,227		201,746		197,615		11,785		209,400
Depreciation and amortization		9,916		84		10,000		10,555		112		10,667
Interest and financing costs		266		913		1,179		0		1,898		1,898
Operating expenses		200,701		12,224		212,925		208,170		13,795		221,965

Operating income		61,658		21,087		82,745		52,775		24,626		77,401

Other income						1,095						912

Earnings before tax					$	83,840					$	78,313

Net Sales
Contracts with customers	$	1,157,519	$	3,892	$	1,161,411	$	1,163,184	$	3,889	$	1,167,073
Financing and other		18,634		35,671		54,305		13,697		41,158		54,855
Net Sales	$	1,176,153	$	39,563	$	1,215,716	$	1,176,881	$	45,047	$	1,221,928

Selected Financial Data - Statement of Cash Flow

Depreciation and amortization	$	10,444	$	3,318	$	13,762	$	10,974	$	4,243	$	15,217
Purchases of property, equipment and operating lease equipment	$	4,060	$	167	$	4,227	$	3,461	$	3,748	$	7,209

Selected Financial Data - Balance Sheet

Total assets	$	887,684	$	238,270	$	1,125,954	$	733,174	$	219,434	$	952,608

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Technology Segment Disaggregation of Revenue

We analyze net sales for our technology segment by customer end market and by vendor, as opposed to discrete product and service categories, which are summarized for the three and ~~six~~nine month periods ended ~~September 30,~~December 31, 2020, and 2019 in the tables below (in thousands):

	Three Months Ended September 30,						Six Months Ended September 30,						Three Months Ended December 31,						Nine Months Ended December 31,
	2020			2019			2020			2019			2020			2019			2020			2019
Customer end market:
Technology	$	76,321		$	97,502		$	146,288		$	173,682		$	57,346		$	77,841		$	203,634		$	251,523
Telecom, Media & Entertainment		96,927			71,044			153,579			133,510			123,441			84,707			277,020			218,217
Financial Services		46,732			44,605			94,153			92,847			60,610			56,395			154,763			149,241
State and local government and educational institutions		76,492			71,866			147,055			143,057			50,703			55,908			197,758			198,964
Healthcare		59,252			59,818			105,788			115,926			44,706			60,275			150,494			176,202
All others		63,635			52,883			113,720			107,231			78,764			75,502			192,484			182,734
Net sales		419,359			397,718			760,583			766,253			415,570			410,628			1,176,153			1,176,881

Less: Revenue from financing and other		(7,002	)		(3,133	)		(14,239	)		(7,987	)		(4,395	)		(5,710	)		(18,634	)		(13,697	)

Revenue from contracts with customers	$	412,357		$	394,585		$	746,344		$	758,266		$	411,175		$	404,918		$	1,157,519		$	1,163,184

	Three Months Ended September 30,						Six Months Ended September 30,						Three Months Ended December 31,						Nine Months Ended December 31,
	2020			2019			2020			2019			2020			2019			2020			2019
Vendor
Cisco Systems	$	173,166		$	172,605		$	301,098		$	318,786		$	132,290		$	169,265		$	433,388		$	488,051
NetApp		9,914			9,771			25,335			23,198			13,861			15,799			39,196			38,997
HP Inc. & HPE		16,395			18,986			33,433			42,099			14,100			15,853			47,533			57,952
Dell EMC		15,349			12,494			46,430			26,275			34,027			12,025			80,457			38,300
Arista Networks		13,443			26,766			20,263			47,716			22,157			12,862			42,420			60,578
Juniper Networks		24,716			24,370			38,295			31,424			29,781			27,419			68,076			58,843	��
All others		166,376			132,726			295,729			276,755			169,354			157,405			465,083			434,160
Net sales		419,359			397,718			760,583			766,253			415,570			410,628			1,176,153			1,176,881

Less: Revenue from financing and other		(7,002	)		(3,133	)		(14,239	)		(7,987	)		(4,395	)		(5,710	)		(18,634	)		(13,697	)

Revenue from contracts with customers	$	412,357		$	394,585		$	746,344		$	758,266		$	411,175		$	404,918		$	1,157,519		$	1,163,184

Financing Segment Disaggregation of Revenue

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

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Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

This discussion is intended to further the reader’s understanding of our consolidated financial condition and results of operations. It should be read in conjunction with the financial statements included in this quarterly report on Form 10-Q and our 2020 Annual Report. These historical financial statements may not be indicative of our future performance. This Management’s Discussion and Analysis of Financial Condition and Results of Operations may contain forward-looking statements, all of which are based on our current expectations and could be affected by the uncertainties and risks described in Part I, Item 1A, “Risk Factors,” in our 2020 Annual ~~Report.,~~Report, and in Part II, Item 1A. “Risk Factors” in this Report.

EXECUTIVE OVERVIEW

Business Description

We are a leading solutions provider that delivers actionable outcomes for organizations by using IT and consulting solutions to drive business agility and innovation. Leveraging our engineering talent, we assess, plan, deliver, and secure solutions comprised of leading technologies and consumption models aligned with our customers’ needs. Our expertise and experience enable ePlus to craft optimized solutions that take advantage of the cost, scale and efficiency of private, public and hybrid cloud in an evolving market. We also provide consulting, staffing, professional, managed, IT staff augmentation, and complete lifecycle management services including flexible financing and solutions in the areas of security, cloud, networking, data center, collaboration and emerging technologies. We have been in the business of selling, leasing, financing, and managing IT and other assets for more than 30 years.

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

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

Our go-to-market strategy focuses primarily on diverse end-markets for middle market to large enterprises. For the trailing twelve-month period ended ~~September 30,~~December 31, 2020, the percentage of revenue by customer end market within our technology segment includes ~~technology industry 19%, telecommunications,~~telecom, media and entertainment ~~20%~~23%, technology industry 18%, state and local government and educational institutions (“SLED”) 16%, healthcare ~~15%~~14%, and financial services 13%. The majority of our sales were generated within the United States (“US”); however, we have the ability to support our customers nationally and internationally, including physical locations in the United Kingdom (“UK”) and India. Our technology segment accounts for 97% of our net sales, and ~~73%~~78% of our operating income, while our financing segment accounts for 3% of our net sales, and ~~27%~~22% of our operating income, for the ~~six~~nine months ended ~~September 30,~~December 31, 2020.

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Impact of COVID-19 on Our Business Operations

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

As COVID-19 impacts continue to expand across the country and globe, we have been adjusting our business activities for the safety of our employees and to best serve our customers in this rapidly evolving environment. We have implemented a flexible work from home strategy applicable to all offices and operational continuity plans to provide sufficient resources to continue supporting our customers. For employees who wish to return to the office, we have reopened our headquarters with limited capacity and required health and safety protocols in place. We plan to reopen our other offices using a phased approach but currently have not set a schedule to do so. Our configuration centers have remained open with our employees working in them following required health and safety protocols. In addition, we also have a procedure to review and approve employees’ business-related travel. Our managed service teams are distributed across the US with the ability to leverage technology to provide coverage while working from home. While we and many of our customers and vendor partners have restricted travel, we are leveraging video and other collaborative tools to continue to be responsive.

Our account relationship teams are actively engaging with our customers, to ensure they have the support needed in adjusting to changes in the business environment and government directives. In addition, we granted a limited number of customers temporary payment term extensions. Also, we are working closely with our vendor partners to address varying impacts on their supply chain to satisfy infrastructure needs. Certain of our vendor partners extended payment terms to us and our competitors.

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

The extent to which the COVID-19 pandemic impacts our business going forward will depend on numerous evolving factors we cannot reliably predict, including the duration and scope of the ~~pandemic;~~pandemic including the impact of various mutations; governmental, business, and ~~individuals'~~individuals’ actions in response to the pandemic; the vaccine effectiveness, duration of the vaccination process, and demand by citizens to be inoculated; and the impact on economic activity including the possibility of recession or financial market instability. These factors may adversely impact business, and government spending on technology as well as our ~~customers'~~customers’ ability to pay for our products and services on an ongoing basis. This uncertainty also affects management’s accounting estimates and assumptions, which could result in greater variability in a variety of areas that depend on these estimates and assumptions. Refer to Part I, Item 1A, “Risk Factors,” in our 2020 Annual Report.

Key Business Metrics

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

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

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Our key business metrics for the three- and ~~six-month~~nine-month periods ended ~~September 30,~~December 31, 2020, and 2019 are summarized in the following tables (dollars in thousands):

	Three Months Ended September 30,						Six Months Ended September 30,						Three Months Ended December 31,						Nine Months Ended December 31,
Consolidated	2020			2019			2020			2019			2020			2019			2020			2019
Net sales	$	433,081		$	411,565		$	788,112		$	792,937		$	427,604		$	428,991		$	1,215,716		$	1,221,928

Gross profit	$	98,962		$	103,031		$	197,519		$	195,670		$	98,151		$	103,696		$	295,670		$	299,366
Gross margin		22.9	%		25.0	%		25.1	%		24.7	%		23.0	%		24.2	%		24.3	%		24.5	%
Operating income margin		6.6	%		6.9	%		6.8	%		6.4	%		6.8	%		6.1	%		6.8	%		6.3	%

Net earnings	$	19,846		$	20,098		$	37,206		$	36,286		$	21,638		$	19,550		$	58,844		$	55,836
Net earnings margin		4.6	%		4.9	%		4.7	%		4.6	%		5.1	%		4.6	%		4.8	%		4.6	%
Net earnings per common share - diluted	$	1.48		$	1.51		$	2.78		$	2.71		$	1.62		$	1.46		$	4.39		$	4.16

Non-GAAP: Net earnings (1)	$	22,470		$	24,228		$	42,677		$	43,687		$	23,929		$	21,941		$	66,606		$	65,628
Non-GAAP: Net earnings per common share - diluted (1)	$	1.68		$	1.81		$	3.19		$	3.26		$	1.79		$	1.64		$	4.97		$	4.89

Adjusted EBITDA (2)	$	33,561		$	35,405		$	64,275		$	63,972		$	34,395		$	31,856		$	98,670		$	95,828
Adjusted EBITDA margin		7.7	%		8.6	%		8.2	%		8.1	%		8.0	%		7.4	%		8.1	%		7.8	%

Purchases of property and equipment used internally	$	990		$	1,426		$	3,101		$	2,675		$	959		$	786		$	4,060		$	3,461
Purchases of equipment under operating leases		-			1,944			166			2,213			1			1,535			167			3,748
Total capital expenditures	$	990		$	3,370		$	3,267		$	4,888		$	960		$	2,321		$	4,227		$	7,209

Technology Segment
Net sales	$	419,359		$	397,718		$	760,583		$	766,253		$	415,570		$	410,628		$	1,176,153		$	1,176,881
Adjusted gross billings (3)	$	601,064		$	579,084		$	1,147,458		$	1,127,447		$	587,825		$	586,308		$	1,735,283		$	1,713,755

Gross profit	$	87,197		$	91,572		$	174,038		$	173,383		$	88,321		$	87,562		$	262,359		$	260,945
Gross margin		20.8	%		23.0	%		22.9	%		22.6	%		21.3	%		21.3	%		22.3	%		22.2	%

Operating income	$	21,297		$	20,854		$	38,829		$	36,591		$	22,829		$	16,184		$	61,658		$	52,775
Adjusted EBITDA (2)	$	26,275		$	27,789		$	49,436		$	49,208		$	27,876		$	21,687		$	77,312		$	70,895

Financing Segment
Net sales	$	13,722		$	13,847		$	27,529		$	26,684		$	12,034		$	18,363		$	39,563		$	45,047

Gross profit	$	11,765		$	11,459		$	23,481		$	22,287		$	9,830		$	16,134		$	33,311		$	38,421

Operating Income	$	7,188		$	7,521		$	14,653		$	14,545		$	6,434		$	10,081		$	21,087		$	24,626
Adjusted EBITDA (2)	$	7,286		$	7,616		$	14,839		$	14,764		$	6,519		$	10,169		$	21,358		$	24,933

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

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

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	Three Months Ended September 30,					Six Months Ended September 30,					Three Months Ended December 31,						Nine Months Ended December 31,
	2020			2019		2020			2019		2020			2019			2020			2019
GAAP: Earnings before tax	$	28,669		$	28,335	$	53,764		$	51,051	$	30,076		$	27,262		$	83,840		$	78,313
Share based compensation		1,764			2,135		3,671			4,077		1,756			1,944			5,427			6,021
Acquisition and integration expense		(30	)		1,338		(1	)		1,739		233			-			232			1,739
Acquisition related amortization expense		2,172			2,345		4,400			4,532		1,986			2,421			6,386			6,953
Other (income) expense		(184	)		40		(282	)		85		(813	)		(997	)		(1,095	)		(912	)
Non-GAAP: Earnings before provision for income taxes		32,391			34,193		61,552			61,484		33,238			30,630			94,790			92,114

GAAP: Provision for income taxes		8,823			8,237		16,558			14,765		8,438			7,712			24,996			22,477
Share based compensation		541			624		1,128			1,183		493			553			1,621			1,736
Acquisition and integration expense		(9	)		391		-			506		65			-			65			506
Acquisition related amortization expense		648			663		1,315			1,270		541			668			1,856			1,938
Other (income) expense		(56	)		12		(86	)		25		(228	)		(283	)		(314	)		(258	)
Tax (expense) benefit on restricted stock		(26	)		38		(40	)		48		-			39			(40	)		87
Non-GAAP: Provision for income taxes		9,921			9,965		18,875			17,797		9,309			8,689			28,184			26,486

Non-GAAP: Net earnings	$	22,470		$	24,228	$	42,677		$	43,687	$	23,929		$	21,941		$	66,606		$	65,628

GAAP: Net earnings per common share - diluted	$	1.48		$	1.51	$	2.78		$	2.71	$	1.62		$	1.46		$	4.39		$	4.16

Non-GAAP: Net earnings per common share - diluted	$	1.68		$	1.81	$	3.19		$	3.26	$	1.79		$	1.64		$	4.97		$	4.89

	Three Months Ended September 30,				Six Months Ended September 30,					Three Months Ended December 31,						Nine Months Ended December 31,
	2020		2019		2020			2019		2020			2019			2020			2019
GAAP: Net earnings per common share - diluted	$	1.48	$	1.51	$	2.78		$	2.71	$	1.62		$	1.46		$	4.39		$	4.16

Share based compensation		0.09		0.11		0.19			0.22		0.10			0.10			0.29			0.32
Acquisition and integration expense		-		0.07		-			0.09		0.01			-			0.01			0.09
Acquisition related amortization expense		0.11		0.12		0.23			0.24		0.10			0.14			0.33			0.38
Other (income) expense		-		-		(0.01	)		-		(0.04	)		(0.05	)		(0.05	)		(0.05	)
Tax benefit on restricted stock		-		-		-			-		-			(0.01	)		-			(0.01	)
Total non-GAAP adjustments - net of tax		0.20		0.30		0.41			0.55		0.17			0.18			0.58			0.73

Non-GAAP: Net earnings per common share - diluted	$	1.68	$	1.81	$	3.19		$	3.26	$	1.79		$	1.64		$	4.97		$	4.89

(2)

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

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

2931

Table of Contents

	Three Months Ended September 30,					Six Months Ended September 30,					Three Months Ended December 31,						Nine Months Ended December 31,
Consolidated	2020			2019		2020			2019		2020			2019			2020			2019
Net earnings	$	19,846		$	20,098	$	37,206		$	36,286	$	21,638		$	19,550		$	58,844		$	55,836
Provision for income taxes		8,823			8,237		16,558			14,765		8,438			7,712			24,996			22,477
Share based compensation		1,764			2,135		3,671			4,077		1,756			1,944			5,427			6,021
Interest and financing costs		1			-		266			-		-			-			266			-
Acquisition and integration expense		(30	)		1,338		(1	)		1,739		233			-			232			1,739
Depreciation and amortization		3,341			3,557		6,857			7,020		3,143			3,647			10,000			10,667
Other (income) expense		(184	)		40		(282	)		85		(813	)		(997	)		(1,095	)		(912	)
Adjusted EBITDA	$	33,561		$	35,405	$	64,275		$	63,972	$	34,395		$	31,856		$	98,670		$	95,828

Technology Segment
Operating income	$	21,297		$	20,854	$	38,829		$	36,591	$	22,829		$	16,184		$	61,658		$	52,775
Depreciation and amortization		3,313			3,529		6,801			6,936		3,115			3,619			9,916			10,555
Share based compensation		1,694			2,068		3,541			3,942		1,699			1,884			5,240			5,826
Interest and financing costs		1			-		266			-		-			-			266			-
Acquisition and integration expense		(30	)		1,338		(1	)		1,739		233			-			232			1,739
Adjusted EBITDA	$	26,275		$	27,789	$	49,436		$	49,208	$	27,876		$	21,687		$	77,312		$	70,895

Financing Segment
Operating income	$	7,188		$	7,521	$	14,653		$	14,545	$	6,434		$	10,081		$	21,087		$	24,626
Depreciation and amortization		28			28		56			84		28			28			84			112
Share based compensation		70			67		130			135		57			60			187			195
Adjusted EBITDA	$	7,286		$	7,616	$	14,839		$	14,764	$	6,519		$	10,169		$	21,358		$	24,933

(3)

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

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

	Three Months Ended September 30,				Six Months Ended September 30,				Three Months Ended December 31,				Nine Months Ended December 31,
	2020		2019		2020		2019		2020		2019		2020		2019
Technology segment net sales	$	419,359	$	397,718	$	760,583	$	766,253	$	415,570	$	410,628	$	1,176,153	$	1,176,881
Costs incurred related to sales of third party maintenance, software assurance and subscription/Saas licenses, and services		181,705		181,366		386,875	$	361,194		172,255		175,680		559,130	$	536,874
Adjusted gross billings	$	601,064	$	579,084	$	1,147,458	$	1,127,447	$	587,825	$	586,308	$	1,735,283	$	1,713,755

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

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

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

Part I. Financial Information:

Item 1.	Financial Statements

	Unaudited Consolidated Balance Sheets as of ~~September 30,~~December 31, 2020, and March 31, 2020	5

	Unaudited Consolidated Statements of Operations for the Three and ~~Six~~Nine Months Ended ~~September 30,~~December 31, 2020, and 2019	6

	Unaudited Consolidated Statements of Comprehensive Income for the Three and ~~Six~~Nine Months Ended ~~September 30,~~December 31, 2020, and 2019	7

	Unaudited Consolidated Statements of Cash Flows for the ~~Three and Six~~Nine Months Ended ~~September 30,~~December 31, 2020, and 2019	8

	Unaudited Consolidated Statements of Stockholders’ Equity for the ~~Three and Six~~Nine Months Ended ~~September 30,~~December 31, 2020, and 2019	10

	Notes to Unaudited Consolidated Financial Statements	11

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2628

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4345

Item 4.	Controls and Procedures	4446

Part II. Other Information:

Item 1.	Legal Proceedings	4446

Item 1A.	Risk Factors	4547

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4547

Item 3.	Defaults Upon Senior Securities	4548

Item 4.	Mine Safety Disclosures	4548

Item 5.	Other Information	4548

Item 6.	Exhibits	4649

Signatures & Certifications		4750

	September 30, 2020
Remainder of the year ending March 31, 2021	$	2,432
Year ending March 31, 2022		4,319
Year ending March 31, 2023		3,093
Year ending March 31, 2024		1,249
Year ending March 31, 2025 and thereafter		813
Total lease payments	$	11,906
Less: interest		(617	)
Present value of lease liabilities	$	11,289

	Six Months Ended
	September 30, 2020						September 30, 2019
	Technology		Financing		Total		Technology		Financing		Total

Sales
Product	$	663,367	$	27,529	$	690,896	$	672,414	$	26,684	$	699,098
Service		97,216		0		97,216		93,839		0		93,839
Net sales		760,583		27,529		788,112		766,253		26,684		792,937

Cost of Sales
Product		525,549		4,048		529,597		534,529		4,397		538,926
Service		60,996		0		60,996		58,341		0		58,341
Total cost of sales		586,545		4,048		590,593		592,870		4,397		597,267
Gross Profit		174,038		23,481		197,519		173,383		22,287		195,670

Selling, general, and administrative		128,142		8,214		136,356		129,856		6,454		136,310
Depreciation and amortization		6,801		56		6,857		6,936		84		7,020
Interest and financing costs		266		558		824		0		1,204		1,204
Operating expenses		135,209		8,828		144,037		136,792		7,742		144,534

Operating income		38,829		14,653		53,482		36,591		14,545		51,136

Other income						282						(85	)

Earnings before tax					$	53,764					$	51,051

Net Sales
Contracts with customers	$	746,344	$	1,988	$	748,332	$	758,266	$	2,200	$	760,466
Financing and other		14,239		25,541		39,780		7,987		24,484		32,471
Net Sales	$	760,583	$	27,529	$	788,112	$	766,253	$	26,684	$	792,937

Selected Financial Data - Statement of Cash Flow

Depreciation and amortization	$	7,133	$	2,327	$	9,460	$	7,283	$	2,794	$	10,077
Purchases of property, equipment and operating lease equipment	$	3,101	$	166	$	3,267	$	2,675	$	2,213	$	4,888

Selected Financial Data - Balance Sheet

Total assets	$	812,633	$	226,078	$	1,038,711	$	690,648	$	223,618	$	914,266

	Twelve Months Ended September 30,									Twelve Months Ended December 31,
	2020			2019			Change			2020			2019			Change
Revenue by customer end market:
Technology		19	%		22	%		(3	%)		18	%		22	%		(4	%)
Telecom, Media & Entertainment		20	%		16	%		4	%		23	%		17	%		6	%
SLED		16	%		17	%		(1	%)		16	%		17	%		(1	%)
Healthcare		15	%		15	%		0	%		14	%		15	%		(1	%)
Financial Services		13	%		14	%		(1	%)		13	%		14	%		(1	%)
All others		17	%		16	%		1	%		16	%		15	%		1	%
Total		100	%		100	%					100	%		100	%

							As of December 31,
	As of September 30,						2020			2019
	2020			2019
(DSO) Days sales outstanding (1)		61			59			62			57
(DIO) Days inventory outstanding (2)		14			10			13			10
(DPO) Days payable outstanding (3)		(54	)		(46	)		(51	)		(41	)
Cash conversion cycle		21			23			24			26

Maximum Credit Limit at September 30, 2020		Balance as of September 30, 2020		Maximum Credit Limit at March 31, 2020		Balance as of March 31, 2020
$275,000		$218,970		$300,000		$127,416

Maximum Credit Limit at December 31, 2020				Balance as of December 31, 2020				Maximum Credit Limit at March 31, 2020				Balance as of March 31, 2020
$	275,000			$	177,084			$	300,000			$	127,416

Period	Total number of shares purchased (1)		Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs		Maximum number (or approximate dollar value) of shares that may yet be purchased under the plans or programs			Total number of shares purchased (1)		Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs		Maximum number (or approximate dollar value) of shares that may yet be purchased under the plans or programs
April 1, 2020 through April 30, 2020		-	$	-		-		339,324	(2)		-	$	-		-		339,324	(2	)
May 1, 2020 through May 27, 2020		996	$	66.75		-		339,324	(3)		996	$	66.75		-		339,324	(3	)
May 28, 2020 through May 31, 2020		-				-		500,000	(4)		-				-		500,000	(4	)
June 1, 2020 through June 30, 2020		36,644	$	71.94		-		500,000	(5)		36,644	$	71.94		-		500,000	(5	)
July 1, 2020 through July 31, 2020		-				-		500,000	(6)		-				-		500,000	(6	)
August 1, 2020 through August 31, 2020		-	$	-		-		500,000	(7)		-	$	-		-		500,000	(7	)
September 1, 2020 through September 30, 2020		24,318	$	73.37		24,318		475,682	(8)		24,318	$	73.37		24,318		475,682	(8	)
October 1, 2020 through October 31, 2020											25,455	$	70.67		25,455		450,227	(9	)
November 1, 2020 through November 30, 2020											9,328	$	70.99		9,328		440,899	(10	)
December 1, 2020 through December 31, 2020											-	$	-		-		440,899	(11	)

Exhibit Number		Exhibit Description

3.1		ePlus inc. Amended and Restated Certificate of Incorporation as amended September 15, 2008 (Incorporated herein by reference as Exhibit 3.1 to our Current Report on Form 8-K filed on September 19, 2008).

3.2		Amended and Restated Bylaws of ePlus inc., as amended February 15, 2018 (Incorporated herein by reference to Exhibit 3.1 to our Current Report on Form 8-K filed on February 20, 2018).

31.1		Certification of the Chief Executive Officer of ePlus inc. pursuant to the Securities Exchange Act Rules 13a-14(a) and 15d-14(a).

31.2		Certification of the Chief Financial Officer of ePlus inc. pursuant to the Securities Exchange Act Rules 13a-14(a) and 15d-14(a).

32		Certification of the Chief Executive Officer and Chief Financial Officer of ePlus inc. pursuant to 18 U.S.C. § 1350.

101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema Document

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		XBRL Taxonomy Extension Label Linkbase Document

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

104		Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).

	~~ePlus~~ ePlus inc.

Date: ~~November 4, 2020~~February 3, 2021	/s/ MARK P. MARRON
	By: Mark P. Marron
	Chief Executive Officer and President
	(Principal Executive Officer)

Date: ~~November 4, 2020~~February 3, 2021	/s/ ELAINE D. MARION
	By: Elaine D. Marion
	Chief Financial Officer
	(Principal Financial Officer)