ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the financial condition and results of operations (the “financial review”) of ePlus is intended to help investors understand our company and our operations. The financial review is provided as a supplement to, and should be read in conjunction with, the Consolidated Financial Statements and the related notes included elsewhere in this Annual Report on Form 10-K. Unless specifically stated, all discussions below reflect continuing operations for all periods presented.
We have revised our results to reflect the correction of certain misstatements in previously issued financial statements for fiscal years ended March 31, 2024 and March 31, 2025, which we determined are not material either individually or in aggregate. Please refer to Note 2, “Revision of Previously Issued Consolidated Financial Statements” in the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.
Business Description
We are a leading information technology (“IT”) solutions provider in the areas of artificial intelligence (“AI”), cloud, data center, security, networking and collaboration. Leveraging our engineering talent, we assess, plan, deliver, and secure solutions comprised of leading technologies aligned with our customers’ needs. Our expertise and experience enable us to craft optimized solutions for our customers that take advantage of the cost, scale, and efficiency of private, public and hybrid cloud services in an evolving IT market.
We deliver integrated solutions that address our customers’ IT business needs, leveraging the appropriate technologies, both on-premises and in the cloud. Our approach is to lead with advisory consulting, to understand our customers’ needs, and then design, deploy, and manage IT solutions aligned to their objectives. We are skilled in orchestration and automation, application modernization, DevSecOps, zero-trust architectures, data management, data visualization, analytics, network modernization including high-end optical networking, edge computing and other advanced and IT emerging technologies. These solutions are comprised of class-leading technologies from our commercial partners.
AI continues to be a transformative force and a demand driver, particularly for our core products. Across industries, our customers are using AI to enhance their decision making, automate tasks, and drive both growth and efficiency. Through assessments, bespoke workshops and labs and consulting engagements, we deliver actionable outcomes for our customer organizations by using IT and consulting solutions to enhance their decision making, automate tasks and drive business agility and innovation.
As part of our solutions, we provide consulting, professional services, managed services, IT staff augmentation, and complete lifecycle management services in the areas of security, cloud, networking, collaboration, and emerging technologies. Further, we offer professional services to our customers in the spaces of digital signage, electric vehicle (“EV”) charging solutions, loss prevention and security, retail store openings, remodels, and closings.
We are a reseller for thousands of vendors, which enables us to provide our customers with new and evolving IT solutions. We possess top-level IT engineering certifications with a broad range of leading IT vendors that enable us to offer IT solutions that are optimized for each of our customers’ specific requirements.
We serve primarily middle market to large enterprises across diverse markets including telecom, media and entertainment, technology, state and local government and educational institutions (“SLED”), healthcare, and financial services. We sell to customers in the United States (“US”), which account for most of our sales, and to customers in select international markets including the United Kingdom (“UK”), the European Union (“EU”), India, and Singapore.
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On June 30, 2025, we completed the sale of 100% of the membership interests of Expo Holdings, LLC, a Delaware limited liability company and our wholly-owned subsidiary (“HoldCo”), to Marlin Leasing Corporation, a Delaware corporation (d/b/a PEAC Solutions) pursuant to the terms of the Membership Interest Purchase Agreement, dated June 20, 2025 (the “Sale Transaction”). By selling HoldCo, together with its U.S. subsidiaries, we sold our domestic financing business that comprised most of our financing business segment, which is a business that finances information technology equipment, software and related services for customers. We continue to own the international entities in the financing business. This divestiture positions us to focus on being a technology solutions provider and represents a strategic shift in our operations. As a result of the Sale Transaction, we determined that the domestic financing business that was sold met the definition of discontinued operations. Consequently, for all periods presented in these financial statements, we are retrospectively presenting the results of our domestic financing business as discontinued operations. In our audited consolidated balance sheets for all periods, we present the assets and liabilities of our domestic financing business as assets and liabilities of discontinued operations. In our audited consolidated statements of operations for all periods, we present the operating results of our domestic financing business in earnings from discontinued operations. After the Sale Transaction, our remaining three reportable segments are product, professional services, and managed services, which we formerly referred to collectively as our technology business. Please refer to Note 5 , “Discontinued Operations” in the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information.
Business Trends
We believe the following key factors may impact our business performance and our ability to achieve business results:
General economic conditions including changes in law and policy by the US government, inflation, tariffs, export requirements, sanctions, changing interest rates, staffing shortages, remote work trends, geopolitical concerns and changes in US government spending and contracting practices may impact our customers’ willingness to spend on IT and services.
There is a worldwide shortage of memory chips due to the demand for AI-ready products, which is also causing rapid price increases across many IT products. Like others, we may experience ongoing supply constraints for memory chips that may affect lead times for delivery of products, our having to carry more inventory for longer periods, costs of products for us and our customers, vendor return and cancellation policies, and our ability to meet customer demands. We continue to work closely with our vendors to mitigate disruptions outside our control. Despite these actions, we believe extended lead times and price increases will likely persist for at least the next few quarters.
Our customers’ top focus areas include AI, security, cloud solutions, as well as digital transformation and modernization. We have developed advisory services, assessments, solutions, and professional and managed services to meet these priorities and help our customers attain and maintain their desired outcomes.
Modernizing legacy applications, data modernization, reducing operational complexity, securing workloads, the cost and performance of IT operations, and agility are changing the way companies are purchasing and consuming technology. These are fueling deployments of solutions on cloud, managed services and hybrid platforms and licensing models, which may include invoicing over the term of the engagement and may result in additional revenue recognized on a net basis.
Rapid cloud adoption has led to customer challenges around increasing costs, security concerns, and skillset gaps. These challenges are consistent across all industries and business sizes. We have developed a Cloud Managed Services portfolio to address these needs, allowing our clients to focus on driving business outcomes via optimized and secure cloud platforms.
The IT industry continues to shift from upfront, product-based purchasing toward subscription and consumption-based (“ratable”) models, driven by increased adoption of cloud computing, software-as-a-service (“SaaS”), and as-a-service infrastructure offerings. This transition is changing customer buying behavior, elongating revenue recognition periods and increasing revenues recognized on a net basis, and increasing the importance of recurring revenue streams, while also placing greater emphasis on lifecycle management, financing capabilities, and vendor-aligned service delivery.
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Key Business Metrics
Our management monitors several financial and non-financial measures and ratios on a regular basis to track the progress of our business. We believe that the most important of these measures and ratios include net sales, gross profit, gross margin, operating income, net earnings, and net earnings per common share, in each case based on information prepared in accordance with United States Generally Accepted Accounting Principles (“US GAAP”), as well as the non-GAAP financial measures and ratios, including Adjusted EBITDA, Adjusted EBITDA margin, Non-GAAP: Net earnings from continuing operations and Non-GAAP: Net earnings from continuing operations per common share - diluted.
We also 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 our annual budgets. We use gross billings as an operational metric to assess the volume of transactions or market share for our product, professional services, and managed services segments, as well as to understand changes in our accounts receivable and accounts payable balances and our statement of cash flows. We believe our gross billings metric will aid investors in the same manner to evaluate our business.
These key indicators include financial information that is prepared in accordance with US GAAP and presented in our consolidated financial statements, as well as non-GAAP and operational performance measurement tools. Generally, a non-GAAP financial measure is a numerical measure of a company’s performance or financial position that either excludes or includes amounts that are correspondingly not normally excluded or included in the most directly comparable measure calculated and presented in accordance with US GAAP. Our use of non-GAAP information as an analytical tool has limitations and should not be considered in isolation or as a substitute for analysis of our financial results reported under GAAP, as these measures used by management may differ from similar measures used by other companies, even when similar terms are used to identify such measures.
We use Adjusted EBITDA, Adjusted EBITDA margin, Non-GAAP: net earnings from continuing operations and Non-GAAP: net earnings from continuing operations per common share - diluted as supplemental measures of our performance to gain insight into our operating performance and performance trends. We believe that these measures provide management and investors with 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 such non-GAAP financial measures provide useful information to investors and others in understanding and evaluating our operating results. Please see footnotes (1) and (2) of the tables below for more information.
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The following tables provide our key business metrics for our consolidated entity (in thousands, except per share amounts):
Year ended March 31,
Financial metrics
Net sales
Gross profit
Gross margin
Selling, general, and administrative
Depreciation and amortization
Interest and financing costs
Operating expenses
Operating income
Operating income margin
Net earnings from continuing operations
Net earnings from continuing operations margin
Net earnings from continuing operations per common share - diluted
Net earnings from discontinued operations, net of tax
Net earnings
Non-GAAP financial metrics
Non-GAAP: Net earnings from continuing operations (1)
Non-GAAP: Net earnings from continuing operations per common share - diluted (1)
Adjusted EBITDA (2)
Adjusted EBITDA margin (2)
Operational metrics
Gross billings (3)
Networking
Cloud
Security
Collaboration
Other
Product gross billings
Service gross billings
Total gross billings
Non-GAAP: Net earnings from continuing operations and Non-GAAP: Net earnings from continuing operations per common share – diluted are based on net earnings from continuing operations calculated in accordance with US GAAP, adjusted to exclude other (income) expense, net, share-based compensation, acquisition related expenses, acquisition related amortization expense, and the related tax effects.
We believe that the exclusion of other income and acquisition-related amortization expense in calculating Non-GAAP: Net earnings from continuing operations and Non-GAAP: Net earnings from continuing operations per common share – diluted provides management and investors a useful measure for period-to-period comparisons of our business and operating results by excluding items that management believes are not reflective of our underlying operating performance, which helps in understanding and evaluating our operating results. We use Non-GAAP: Net earnings from continuing operations and Non-GAAP: Net earnings from continuing operations per common share – diluted as supplemental measures of our performance to gain and provide insight into our operating performance and performance trends. However, our use of non-GAAP information as an analytical tool has limitations and should not be considered in isolation or as a substitute for analysis of our financial results as reported under US GAAP. In addition, other companies, including companies in our industry, might calculate similar Non-GAAP: Net earnings from continuing operations and Non-GAAP: Net earnings from continuing operations per common share – diluted, or similarly titled measures differently, which may reduce their usefulness as comparative measures. Our acquisition related expenses for the year ended March 31, 2025, are related to our acquisition of Bailiwick Services, LLC (“Bailiwick”).
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The following table provides our calculation of Non-GAAP: Net earnings from continuing operations and Non-GAAP: Net earnings from continuing operations per common share – diluted (in thousands, except per share amounts):
Year ended March 31,
GAAP: Earnings from continuing operations before tax
Share-based compensation
Acquisition related expenses
Acquisition related amortization expense
Other (income), net
Non-GAAP: Earnings from continuing operations before provision for income taxes
GAAP: Provision for income taxes
Share-based compensation
Acquisition related expenses
Acquisition related amortization expense
Other (income), net
Tax benefit on restricted stock
Non-GAAP: Provision for income taxes
Non-GAAP: Net earnings from continuing operations
Year ended March 31,
GAAP: Net earnings from continuing operations per common share - diluted
Share-based compensation expense
Acquisition related expenses
Acquisition related amortization expense
Other (income), net
Tax (benefit) on restricted stock
Total non-GAAP adjustments - net of tax
Non-GAAP: Net earnings from continuing operations per common share - diluted
We define Adjusted EBITDA as net earnings from continuing operations calculated in accordance with US GAAP, adjusted for the following: interest and financing costs, depreciation and amortization, share-based compensation, acquisition related expenses, provision for income taxes, interest and financing costs and other (income), net. In the table below, we provide a reconciliation of Adjusted EBITDA to net earnings from continuing operations, 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 believe that the exclusion of other income in calculating Adjusted EBITDA and Adjusted EBITDA margin provides management and investors with 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, which helps in the understanding and evaluation of our operating results. We use Adjusted EBITDA as a supplemental measure of our performance to gain and provide insight into our operating performance and performance trends. However, our use of Adjusted EBITDA and Adjusted EBITDA margin as analytical tools has limitations and should not be considered in isolation or as substitutes for analysis of our financial results as reported under US GAAP. In addition, other companies, including companies in our industry, might calculate Adjusted EBITDA and Adjusted EBITDA margin, or similarly titled measures, differently which may reduce their usefulness as comparative measures.
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The following table provides our calculations of Adjusted EBITDA (in thousands):
Year ended March 31,
GAAP: Net earnings from continuing operations
Provision for income taxes
Share-based compensation
Depreciation and amortization
Acquisition related expenses
Interest and financing costs
Other (income), net
Non-GAAP: Adjusted EBITDA
Gross billings are the total dollar value of customer purchases of goods and services including shipping charges during the period, net of customer returns, credit memos, and sales or other taxes. Gross billings include the transaction values for certain sales transactions that are recognized on a net basis, and, therefore, include amounts that will not be recognized as revenue.
Results of Operations
The Year Ended March 31, 2026, Compared to the Year Ended March 31, 2025
Net sales : Net sales for the year ended March 31, 2026, increased $442.4 million compared to the prior fiscal year, due to increased net sales to customers in the telecom, media and entertainment, healthcare, technology, retail, and financial services industries, offset by decreased net sales to customers in the SLED industry. Our increase in sales was primarily driven by large enterprise customers. For further information, see the “Segment Results of Operations” below.
Gross profit : Gross profit for the year ended March 31, 2026, increased $104.0 million compared to the prior fiscal year due to increases in net sales in all three of our business segments. Overall, gross margin decreased 40 basis points year over year to 25.2%, primarily due to lower product margin led by a shift in product mix as well as a lower percentage of sales of third-party maintenance and subscriptions that are recognized on a net basis. Additionally, we had lower services margins. For further information, see the “Segment Results of Operations” below.
Selling, general, and administrative : Selling, general, and administrative expenses for the year ended March 31, 2026, increased $36.7 million, compared to the prior fiscal year.
Salaries and benefits, including variable compensation and share-based compensation for the year ended March 31, 2026, increased $33.2 million, compared to the prior fiscal year, primarily due to increases in variable compensation commensurate with the increase in our gross profit and secondarily due to additional salaries and benefits due to our acquisition of Bailiwick on August 19, 2024.
General and administrative expenses for the year ended March 31, 2026, increased $4.7 million as compared to the prior fiscal year, due to the addition of Bailiwick. In total, we had higher professional fees of $3.7 million, higher software, subscription, and maintenance fees of $1.4 million, and higher office rent of $0.7 million. These increases were partially offset by a decrease in acquisition-related expenses of $1.1 million incurred in the prior fiscal year related to the addition of Bailiwick that are not recurring in the current fiscal year.
Provision for credit losses for the year ended March 31, 2026, was $0.5 million as compared to $1.7 million for the prior fiscal year. Our lower provision for credit losses for the year ended March 31, 2026, was due to favorable changes in our net credit exposure.
Depreciation and amortization : Depreciation and amortization for the year ended March 31, 2026, increased by $0.8 million compared to the prior fiscal year, primarily due to amortization from intangible assets acquired in the Bailiwick acquisition.
Operating income : As a result of the foregoing, operating income for the year ended March 31, 2026, increased $66.5 million compared to the prior fiscal year, and operating margin increased by 180 basis points to 6.8%.
Other income, net : Other income for the year ended March 31, 2026, was $7.3 million, compared to $6.4 million for the prior fiscal year. Our increase in other income was primarily due to higher interest income and lower foreign exchange losses in the current fiscal year period compared to the prior fiscal year and earnings from our transition services agreement with PEAC Solutions, offset by $4.2 million in expense in the current fiscal year related to adjustments to our estimate of the fair value of contingent consideration due from PEAC Solutions relating to our sale of HoldCo. We had $11.4 million in interest income for the year ended March 31, 2026, compared to $7.8 million in the prior fiscal year. We had foreign exchange losses of $0.6 million for the year ended March 31, 2026, compared to losses of $1.2 million in the prior fiscal year.
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Provision for income taxes : Our provision for income taxes was $49.3 million for the year ended March 31, 2026, as compared to $29.7 million in the prior fiscal year. Our effective tax rate for the year ended March 31, 2026, was 28.4%, compared with 28.0%, in the prior fiscal year. Our effective income tax rate for the year ended March 31, 2026, was higher compared to the prior fiscal year primarily due to higher state taxes and higher non-deductible executive compensation.
Net earnings from continuing operations : Net earnings from continuing operations for the year ended March 31, 2026 , were $124.1 million, an increase of $47.7 million, as compared to $76.4 million in the prior fiscal year. The net earnings increase was due to the increase in operating profits, and an increase in other income, partially offset by an increase in provision for income taxes.
Net earnings from discontinued operations, net of tax : Net earnings from discontinued operations, net of tax, for the year ended March 31, 2026, was $8.5 million consisting of $11.8 million in earnings before tax, offset by $3.2 million in income tax expense. Our earnings from discontinued operations before tax for the year ended March 31, 2026 includes a $3.8 million gain from the sale of our domestic financing business in the Sale Transaction and $7.9 million in earnings before the Sale Transaction. Our earnings before the Sale Transaction includes a $2.3 million loss to settle a legal matter related to our discontinued operations. We had net earnings from discontinued operations, net of tax, of $28.1 million in the prior fiscal year, consisting of $38.0 million in earnings before income tax, offset by $9.9 million in income tax expense.
Net earnings : Due to the aforementioned reasons, net earnings for the year ended March 31, 2026 , were $132.6 million, as compared to $104.6 million in the prior fiscal year.
The Year Ended March 31, 2025, Compared to the Year Ended March 31, 2024
Net sales : Net sales for the year ended March 31, 2025, decreased $178.1 million compared to the prior fiscal year, due to decreased net sales to customers in the telecom, media and entertainment, healthcare, and financial services industries, offset by increased net sales to customers in the technology and SLED industries. For additional information, see the “Segment Results of Operations” below.
Gross profit : Gross profit for the year ended March 31, 2025, increased $0.4 million compared to the prior fiscal year due to increases in professional and managed services that were partially offset by declines in product sales. Overall, gross margins were up by 210 basis points year over year to 25.6%, primarily due to higher product margins led by a shift in product mix towards sales of third-party maintenance and subscriptions that are recognized on a net basis, partially offset by lower services margins.
Selling, general, and administrative expenses : Selling, general, and administrative expenses for the year ended March 31, 2025, increased $31.1 million compared to the year ended March 31, 2024, mainly due to increases in salaries and benefits.
Salaries and benefits, including variable compensation for the year ended March 31, 2025, increased $22.9 million compared to the prior fiscal year, due to an increase in salaries and benefits, mainly driven by increased headcount, offset by a decrease in variable compensation. Our business had a total of 2,151 employees as of March 31, 2025, an increase of 299 from 1,852 employees as of March 31, 2024. We added 441 employees on August 19, 2024 from our acquisition of Bailiwick. In total, we increased the number of customer-facing employees by 272 employees as of March 31, 2025, compared to the year ended March 31, 2024. Our increase in customer-facing employees consists of an increase of 277 professional and managed services and technical support personnel, partially offset by a decrease of five (5) employees in sales and marketing personnel.
General and administrative expenses for the year ended March 31, 2025, increased $6.9 million as compared to the prior fiscal year. General and administrative expenses were higher mainly due to increases in software, subscription, and maintenance fees, warehouse and logistic fees, and office rent. Our increases in these categories for the year ended March 31, 2025, compared to the prior fiscal year, were partially due to our acquisition of Bailiwick in August 2024. Additionally, we incurred $1.1 million in acquisition related expenses due to our acquisition of Bailiwick during the year ended March 31, 2025.
Provision for credit losses for the year ended March 31, 2025, was $1.7 million, as compared to $0.4 million for the year ended March 31, 2024. Our higher provision for credit losses for the year ended March 31, 2025, was due to an increase in exposure to accounts with higher credit risk.
Depreciation and amortization expense : Depreciation and amortization expense for the year ended March 31, 2025, increased compared to the year ended March 31, 2024, primarily due to amortization from intangible assets acquired in the Bailiwick acquisition during the year ended March 31, 2025.
Operating income : As a result of the foregoing, operating income for the year ended March 31, 2025, decreased $34.1 million compared to the prior fiscal year, and operating margin decreased from 6.1% to 5.0%.
Other income (expense), net: Other income for the year ended March 31, 2025, was $6.4 million, compared to $1.4 million, for the year ended March 31, 2024. Higher other income was driven by increased interest income offset by increased foreign exchange losses. We had $7.7 million in interest income for the year ended March 31, 2025, compared to $1.7 million in the prior fiscal year primarily due to our higher cash balances during the year. We had foreign exchange losses of $1.2 million for the year ended March 31, 2025, compared to a loss of $0.1 million in the prior fiscal year.
Provision for income taxes : Our provision for income tax expense for the years ended March 31, 2025, and 2024 was $29.7 million and $37.9 million, respectively. Our effective income tax rate for the years ended March 31, 2025, and 2024 was 28.0% for both years.
Net earnings from continuing operations : Net earnings from continuing operations for the year ended March 31, 2025, were $76.4 million, a decrease of $20.9 million, as compared to $97.3 million in the prior fiscal year. The net earnings decrease was due to the decrease in operating profits, offset by an increase in other income, driven by increased interest income, and a decrease in provision for income taxes.
Net earnings from discontinued operations, net of tax : Net earnings from discontinued operations, net of tax, for the year ended March 31, 2025, was $28.1 million, as compared to $20.7 million in the prior fiscal year. The net earnings increase was due to the increase in operating profits.
Net earnings
: Due to the aforementioned reasons, net earnings for the year ended March 31, 2025, were $104.6 million, a decrease of $13.4 million, as compared to $118.0 million in the prior fiscal year.
Segment Overview
Following the divestiture of our domestic financing business in the Sale Transaction, we organize our business into three reportable segments (which we formerly referred to collectively as the technology business):
Product segment: Our product segment consists of the sale of third-party hardware, third-party perpetual and subscription software, and third-party maintenance, software assurance, and other third-party services. The product segment also includes internet-based business-to-business supply chain management solutions for IT products. We endeavor to minimize the cost of sales in our product segment through incentive programs provided by vendors.
Professional services segment: Our professional services segment includes our advanced professional services to our customers that are performed under time and materials, fixed fee, or milestone contracts. Professional services include consulting, assessments, architecture, deployment, and configuration, logistic services, training, staff augmentation services, and project management services. Additionally, we offer professional services in the spaces of digital signage, EV charging solutions, loss prevention and security, store openings, remodels, and store closings.
Managed services segment: Our managed services segment includes our advanced managed services that encompass managing various aspects of our customers’ environments that are billed in regular intervals over a contract term, usually between three to five years. Managed services also include security solutions, storage-as-a-service, cloud hosted services, cloud managed services, and service desk.
Our other category consists of the international entities of our financing business that we retained after selling our domestic financing business.
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Segment Results of Operations
The Year Ended March 31, 2026, Compared to the Year Ended March 31, 2025
The results of operations for our segments were as follows (dollars in thousands):
Year ended March 31,
Change
Percent
Change
Net sales
Product segment
Professional services segment
Managed services segment
Total reportable segments
Other
Total
Gross Profit
Product segment
Professional services segment
Managed services segment
Total reportable segments
Other
Total
Gross margin:
Product segment
Professional services segment
Managed services segment
Net sales by customer end market:
Telecom, media & entertainment
Healthcare
SLED
Technology
Financial services
Retail
All others
Total reportable segments
Net sales by type:
Networking
Cloud
Security
Collaboration
Other
Total products segment
Professional services segment
Managed services segment
Total reportable segments
Net sales :
Product segment sales for the year ended March 31, 2026, increased compared to the prior fiscal year, due to increases in revenue from networking, cloud, and security products, offset by a decline in collaboration products. These increases were driven by the timing of purchases by existing customers, which are determined by their buying cycles and the timing of specific IT-related initiatives. Contributing to the increase, the proportion of our sales that were sales of third-party maintenance and subscriptions that are recognized on a net basis decreased for the year ended March 31, 2026, compared to the prior fiscal year.
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Professional services segment sales for the year ended March 31, 2026, increased compared to the prior fiscal year, primarily due to increases in revenues attributable to the acquisition of Bailiwick.
Managed services segment sales for the year ended March 31, 2026, increased compared to the prior fiscal year, due to ongoing expansion of these service offerings, primarily related to ongoing growth in cloud services and enhanced maintenance support.
Gross margin :
Product segment gross margin for the year ended March 31, 2026, decreased by 20 basis points, from the prior fiscal year due to a shift in product mix and a lower proportion of our sales that were sales of third-party maintenance and subscriptions which are recorded on a net basis, partially offset by an increase in vendor consideration. Vendor consideration earned as a percentage of sales for the year ended March 31, 2026 increased by 30 basis points.
Professional services segment gross margin for the year ended March 31, 2026, decreased by 80 basis points, from the prior fiscal year primarily due to our acquisition of Bailiwick whose services have a lower gross margin due to the use of a higher proportion of third parties for delivery than our organic professional services.
Managed services segment gross margin for the year ended March 31, 2026, decreased by 10 basis points, from the prior fiscal year, mainly driven by a decrease in gross margin from our managed services offerings due to increased third-party costs.
The Year Ended March 31, 2025, Compared to the Year Ended March 31, 2024
The results of operations for our segments were as follows (in thousands):
Year ended March 31,
Change
Percent
Change
Net sales
Product segment
Professional services segment
Managed services segment
Total reportable segments
Other
Total
Gross Profit
Product segment
Professional services segment
Managed services segment
Total reportable segments
Other
Total
Gross margin:
Product segment
Professional services segment
Managed services segment
Net sales by customer end market:
Telecom, media & entertainment
SLED
Technology
Healthcare
Financial services
Retail
All others
Total reportable segments
Net sales by type:
Networking
Cloud
Security
Collaboration
Other
Total products segment
Professional services segment
Managed services segment
Total reportable segments
Net sales :
Product segment sales for the year ended March 31, 2025, decreased compared to the year ended March 31, 2024, due to decreases in demand and a shift in product mix towards sales of third-party maintenance and subscriptions that are recognized on a net basis. These changes were driven by the timing of purchases by existing customers, which are determined by their buying cycles, and the timing of specific IT-related initiatives.
Professional services segment sales for the year ended March 31, 2025, increased compared to the year ended March 31, 2024, primarily due to increases in revenues from the acquisition of Bailiwick.
Managed services segment sales for the year ended March 31, 2025, increased compared to the year ended March 31, 2024, due to ongoing expansion of these service offerings, primarily related to ongoing growth in enhanced maintenance support, cloud services, and service desk services.
Gross profit margin :
Product segment margin for the year ended March 31, 2025 , increased by 190 basis points compared to the year ended March 31, 2024, due to a shift in product mix resulting in a higher proportion of sales of third-party maintenance and subscriptions which are recorded on a net basis partially offset by lower margins to certain enterprise customers. Vendor incentives earned as a percentage of product sales for the year ended March 31, 2025 increased by 10 basis points, which had a positive effect on gross margin, as compared to the prior year.
Professional services segment margin for the year ended March 31, 2025 , decreased by 460 basis points, compared to the year ended March 31, 2024, due to our acquisition of Bailiwick whose services tend to have a lower gross margin due to the use of a higher proportion of third parties for delivery than our organic professional services.
Managed services segment margin for the year ended March 31, 2025 , decreased by 110 basis points, compared to the year ended March 31, 2024, due to higher third-party costs incurred for cloud services.
Liquidity and Capital Resources
Overview
We finance our operations through funds generated from operations and through borrowings. We use those funds to meet our capital requirements, which primarily consist of working capital for operational needs, capital expenditures, mergers and acquisitions, the issuance of dividends and repurchase of shares of our common stock.
We believe that cash on hand and funds generated from operations, together with available credit under our credit facility, will be sufficient to finance our working capital, capital expenditures, and other requirements for at least the next year.
Our ability to continue to expand, both organically and through acquisitions, is dependent upon our ability to generate enough cash flow from operations or from borrowing or other sources of financing as may be required. While at this time we do not anticipate requiring any additional sources of financing to fund our current operations, if demand for IT products declines, or if our supply of products is delayed or interrupted, our cash flows from operations may be substantially affected.
Cash Flows
The following table summarizes our sources and uses of cash for the years ended March 31, 2026, and 2025 (in thousands):
Year ended March 31,
Net cash provided by (used in) operating activities of continuing operations
Net cash provided by (used in) operating activities of discontinued operations
Net cash provided by (used in) operating activities
Net cash (used in) investing activities of continuing operations
Net cash provided by investing activities of discontinued operations
Net cash provided by (used in) investing activities
Net cash (used in) financing activities of continuing operations
Net cash provided by (used in) financing activities of discontinued operations
Net cash (used in) financing activities
Effect of exchange rate changes on cash
Net increase in cash and cash equivalents
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Cash flows from operating activities
During the year ended March 31, 2026, we used $117.4 million through operating activities of continuing operations primarily due to increases in accounts receivable and inventory and decreases in accounts payable, partially offset by net earnings. During the year ended March 31, 2026, we provided $1.2 million through operating activities of discontinued operations consisting primarily of earnings prior to the Sale Transaction, partially offset by legal fees related to the Sale Transaction and the payment of $2.3 million to settle a legal matter related to our discontinued operations. During the year ended March 31, 2025, we provided $323.9 million through operating activities of continuing operations primarily due to net earnings and decreases in accounts receivable and inventory, partially offset by increases in deferred costs.
To manage our working capital, we monitor our cash conversion cycle for our business segments, which is defined as days sales outstanding (“DSO”) in accounts receivable plus days of supply in inventory (“DIO”) minus days of purchases outstanding in accounts payable (“DPO”).
The following table presents the components of the cash conversion cycle:
As of March 31,
(DSO) Days sales outstanding (1)
(DIO) Days inventory outstanding (2)
(DPO) Days payable outstanding (3)
Cash conversion cycle
Represents the rolling three-month average of the balance of trade accounts receivable-trade, net at the end of the period divided by Gross billings for the same three-month period.
Represents the rolling three-month average of the balance of inventory, net at the end of the period divided by the direct cost of products billed to our customers for the same three-month period.
Represents the rolling three-month average of the combined balance of accounts payable-trade and accounts payable-floor plan at the end of the period divided by the direct cost of products and services billed to our customers for the same three-month period.
Our standard payment term for customers is between 30 to 60 days; however, certain customer orders may be approved for extended payment terms. Our DSOs for the quarters ended March 31, 2026, and March 31, 2025 were greater than our standard payment terms primarily due to a significant proportion of sales in those quarters to customers with payment terms greater than or equal to net 60 days. Invoices processed through our credit facility, or the A/P-floor plan balance, are typically paid within 45-60 days from the invoice date, while A/P trade invoices are typically paid around 30 to 45 days from the invoice date.
Our cash conversion cycle increased to 51 days for March 31, 2026, compared to 29 days for March 31, 2025, as DSO increased by 4 days, DIO increased by 14 days, and DPO increased by 4 days from March 31, 2025, to March 31, 2026.
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Cash flows related to investing activities
During the year ended March 31, 2026, we used $4.4 million through investing activities of continuing operations consisting primarily of purchases of property and equipment, offset by proceeds from sale of property and equipment. We also provided $164.2 million through investing activities of discontinued operations, consisting of initial net cash proceeds of $156.7 million received by us in connection with the closing of the Sale Transaction in June 2025 and $7.5 million that was received by us in March 2026 upon settlement of the final purchase price adjustment in the Sale Transaction. Our initial net cash proceeds of $156.7 million from the Sale Transaction consisted of cash proceeds of $180.1 million less cash transferred with HoldCo of $23.4 million.
During the year ended March 31, 2025, we used $130.2 million in investing activities of continuing operations, consisting of $124.9 million for the acquisition of Bailiwick and $5.3 million for purchases of property and equipment.
Cash flows from financing activities
During the year ended March 31, 2026, we used $16.5 million through financing activities of continuing operations. We had cash outflows of $30.6 million to repurchase outstanding shares of our common stock and $19.7 million paid out in dividends. These cash outflows were partially offset by cash inflows of $30.2 million in net borrowing on our floor plan facility and $3.6 million in proceeds from the issuance of common stock to employees under our employee stock purchase plan. During the year ended March 31, 2026, we used $6.4 million from financing activities of discontinued operations for the repayment of notes payable related to our discontinued operations.
During the year ended March 31, 2025, we used $61.2 million in financing activities of continuing operations, consisting of $46.9 million to repurchase outstanding shares of our common stock, $15.6 million repayments on the floor plan component of our WFCDF Credit Facility, and $2.3 million paid to the sellers of Peak Resources, Inc. (“Peak”) based on adjustments to a final determination of total net assets delivered in our January 2024 acquisition of Peak, partially offset by $3.6 million via the issuance of common stock to employees under an employee stock purchase plan.
Credit Facility
We finance the operations of our subsidiaries e Plus Technology, inc. and e Plus Technology Services, inc. (collectively, the “Borrowers”) through the WFCDF Credit Facility. The WFCDF Credit Facility has a floor plan facility and a revolving credit facility.
Please refer to Note 10 , “Credit Facility” in the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information concerning our WFCDF Credit Facility.
The loss of the WFCDF Credit Facility could have a material adverse effect on our future results as we currently rely on this facility and its components for daily working capital and liquidity and as an operational function of our accounts payable process.
Floor plan facility
We finance certain purchases of products for sale to our customers through the floor plan facility. Once our customer places a purchase order with us and we have approved their credit, we place an order for the desired products with one of our vendors. Our vendors are generally paid by the floor plan facility and our liability is reflected in “accounts payable—floor plan” in our consolidated balance sheets.
Most customer payments to us are remitted to our lockbox accounts. Once payments are cleared, the monies in the lockbox accounts are automatically and daily transferred to our operating account. We pay down the floor plan facility on three specified dates each month, generally 45 to 60 days from the invoice date. Our borrowings and repayments under the floor plan component are included in “net borrowings (repayments) on floor plan facility” within cash flows from the financing activities in our consolidated statements of cash flows.
As of March 31, 2026, and March 31, 2025, we had a maximum credit limit, including the revolving credit facility, of $500.0 million, and an outstanding balance on the floor plan facility of $119.7 million and $89.5 million, respectively. On our balance sheet, our liability under the floor plan facility is presented as part of accounts payable – floor plan.
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Revolving credit facility
As of March 31, 2026, and March 31, 2025, we did not have any outstanding balance under the revolving credit facility. The maximum credit limit under this facility was $200.0 million as of both March 31, 2026, and March 31, 2025.
Dividends
A summary of dividend activity for our common stock for the year ended March 31, 2026 is as follows:
Dividend amount
Declaration date
Record date
Payment date
August 7, 2025
August 26, 2025
September 17, 2025
November 6, 2025
November 25, 2025
December 17, 2025
February 4, 2026
February 24, 2026
March 18, 2026
On May 28, 2026, we announced that our Board declared a quarterly dividend. The quarterly cash dividend of $0.27 per common share will be paid on June 30, 2026, to stockholders of record as of the close of business on June 17, 2026.
The payment of any future dividends will be at the discretion of our Board and will depend upon our results of operations, financial condition, business prospects, capital requirements, contractual restrictions (including in current or future agreements governing our indebtedness), restrictions imposed by applicable law, tax considerations and other factors that our Board deems relevant.
Performance Guarantees
In the normal course of business, we may provide certain customers with performance guarantees, which are generally backed by surety bonds. In general, we would only be liable for these guarantees in the event of default in the performance of our obligations. We believe we currently comply with the performance obligations under our service contracts for which there is a performance guarantee, and we believe that any liability incurred in connection with these guarantees would not have a material adverse effect on our consolidated statements of operations.
Off-Balance Sheet Arrangements
As part of our ongoing business, we do not participate in transactions that generate relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As of March 31, 2026, and 2025, we were not involved in any such off-balance sheet arrangements.
Adequacy of Capital Resources
The continued implementation of our business strategy will require a significant investment in both resources and managerial focus. For example, we may selectively enter into merger and acquisition transactions with other companies that have attractive customer relationships, skilled sales and/or engineering forces, and/or other attributes that may be complementary to our business or are aligned with our long-term strategy. Specifically, we may acquire technology companies to expand and enhance our geographic footprint, or the platform of bundled solutions to provide additional functionality and value-added services. Further, we may also open facilities in new geographic areas, which may require a significant investment of cash. We may require additional capital due to increases in inventory to accommodate our customers’ IT installation schedules and delivery delays from product shortages to complete orders. These actions may result in increased working capital needs as the business expands. As a result, we may require additional financing to fund our strategy, implementation, potential future mergers and acquisitions, and working capital needs, which may include additional debt and equity financing. While the future is uncertain, we do not expect our WFCDF Credit Facility will be terminated by WFCDF or us.
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Potential Fluctuations in Quarterly Operating Results
Our future quarterly operating results and the market price of our common stock may fluctuate. In the event our revenues or earnings for any quarter are less than the level expected by securities analysts or the market in general, such shortfall could have an immediate and significant adverse impact on the market price of our common stock. Any such adverse impact could be greater if any such shortfall occurs near the time of any material decrease in any widely followed stock index or in the market price of the stock of one or more competitors, IT resellers, major customers, or vendors of ours.
Our quarterly results of operations are susceptible to fluctuations for several reasons, including, but not limited to currency fluctuations, reduction in IT spending by our customers and potential customers, shortages of products from our vendors, the timing and mix of specific transactions, the reduction of vendor incentive programs, and other factors.
We believe that comparisons of quarterly results of our operations are not necessarily meaningful and that results for one quarter should not be relied upon as an indication of future performance.
Contractual Obligations
Our material contractual obligations primarily consist of lease liabilities. Please refer to Note 6 , “Lessee Accounting” in the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information regarding the maturities of these obligations.
Critical Accounting Estimates
Our consolidated financial statements have been prepared in accordance with US GAAP. Our significant accounting policies are described in Note 1 , “Organization and Summary of Significant Accounting Policies” in the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K. The accounting policies described below are significantly affected by critical accounting estimates. Such accounting policies require significant judgments, assumptions, and estimates, and actual results could differ materially from the amounts reported based on these policies.
REVENUE RECOGNITION — When we enter into contracts with customers, we are required to identify the performance obligations in the contract. We recognize most of our revenues from the sales of third-party products, third-party software, third-party maintenance, software support, and services, and e Plus professional and managed services. Our recognition of revenue differs for each of these distinct types of performance obligations and identifying each performance obligation appropriately may require judgment.
When a contract contains multiple distinct performance obligations, we allocate the transaction price to each performance obligation based on its relative standalone selling price. We determine standalone selling prices using expected cost-plus margin.
We recognize revenue from sales of third-party products and third-party software at the point in time that control passes to the customer, which is typically upon delivery of the product to the customer. We perform an analysis to estimate the amount of sales in-transit at the end of the period and adjust revenue and the related costs to reflect only what has been delivered to the customer. This analysis is based upon an analysis of current quarter and historical delivery dates.
We recognize revenue from sales of third-party maintenance, software support, and services when our customer and vendor accept the terms and conditions of the arrangement. On occasion, judgment is required to determine this point in time.
We provide e Plus professional services under both time and materials and fixed price contracts. When services are provided on a time and materials basis, we recognize sales at agreed-upon billing rates as services are performed. When services are provided on a fixed fee basis, we recognize sales over time in proportion to our progress toward complete satisfaction of the performance obligation. Using this method requires us to determine the appropriate input or output method to measure progress. We most often measure progress based on costs incurred in proportion to total estimated costs, commonly referred to as the “cost-to-cost” method. When using this method, significant judgment may be required to estimate the total costs to complete the performance obligation. We typically recognize sales of e Plus managed services on a straight-line basis over the period services are provided.
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GOODWILL — We test goodwill for impairment on an annual basis, as of October 1, and between annual tests if an event occurs, or circumstances change, that would more likely than not reduce the fair value of a reporting unit below its carrying amount. Goodwill is tested for impairment at a level of reporting referred to as a reporting unit.
In a qualitative assessment, we assess qualitative factors to determine whether it is more likely than not (that is, a likelihood of more than 50%) that the fair value of a reporting unit is less than its carrying amount, including goodwill. A significant amount of judgment is involved in determining if an event representing an indicator of impairment has occurred between annual test dates. Such indicators may include: a significant decline in expected future cash flows; a sustained, significant decline in stock price and market capitalization; a significant adverse change in legal factors or in the business climate; unanticipated competition; the testing for recoverability of a significant asset group within a reporting unit; and reductions in revenue or profitability growth rates.
In the quantitative impairment test, we compare the fair value of a reporting unit with its carrying amount, including goodwill. We estimate the fair value of each reporting unit using a combination of the income approach and market approaches.
The income approach incorporates the use of a discounted cash flow method in which the estimated future cash flows and terminal values for each reporting unit are discounted to a present value using a discount rate. Cash flow projections are based on management’s estimates of economic and market conditions which drive key assumptions of revenue growth rates, operating margins, capital expenditures and working capital requirements. The discount rate in turn is based on the specific risk characteristics of each reporting unit, the weighted average cost of capital and its underlying forecast.
The market approach estimates fair value by applying performance metric multiples to the reporting unit’s prior and expected operating performance. The multiples are derived from comparable publicly traded companies with similar operating and investment characteristics as the reporting unit.
The fair values determined by the market approach and income approach, as described above, are weighted to determine the fair value for each reporting unit. Although we have consistently used the same methods in developing the assumptions and estimates underlying the fair value calculations, such estimates are uncertain and may vary from actual results.
VENDOR CONSIDERATION — We receive payments and credits from vendors, including consideration pursuant to volume incentive programs, and shared marketing expense programs. Many of these programs extend over one or more quarters’ sales activities. Different programs have different vendor/program specific goals to achieve. We recognize the rebates pursuant to volume incentive programs, when the rebate is probable and reasonably estimable, based on a systematic and rational allocation of the cash consideration offered to each of the underlying transactions that results in our progress towards earning the rebate. Should our actual performance be different from our estimates, we may be required to adjust our receivables.
ALLOWANCE FOR CREDIT LOSSES — We maintain an allowance for credit losses related to our accounts receivable and financing receivables. We record an expense in the amount necessary to adjust the allowance for credit losses to our current estimate of expected credit losses on financial assets. We estimate expected credit losses based on our internal rating of the customer’s credit quality, our historical credit losses, current economic conditions, and other relevant factors. Prior to providing credit, we assign an internal rating for each customer’s credit quality based on the customer’s financial status, rating agency reports and other financial information. We review our internal ratings for each customer at least annually or when there is an indicator of a change in credit quality, such as a delinquency or bankruptcy. We write off receivables when we deem them to be uncollectable. As of March 31, 2026, we estimated expected credit loss rates at rates comparable to March 31, 2025 across most asset pools.
INCOME TAXES — We make certain estimates and judgments in determining income tax expense for financial statement reporting purposes. These estimates and judgments occur in the calculation of certain tax assets and liabilities, which principally arise from differences in the timing of recognition of revenue and expense for tax and financial statement reporting purposes. We also must analyze income tax reserves, as well as determine the likelihood of recoverability of deferred tax assets and adjust any valuation allowances accordingly.
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Considerations with respect to the recoverability of deferred tax assets include the period of expiration of the tax asset, planned use of the tax asset, and historical and projected taxable income as well as tax liabilities for the tax jurisdiction to which the tax asset relates. Valuation allowances are evaluated periodically and will be subject to change in each future reporting period as a result of changes in one or more of these factors. The calculation of our tax liabilities also involves considering uncertainties in the application of complex tax regulations. We recognize liabilities for uncertain income tax positions based on our estimate of whether, and the extent to which, additional taxes will be required.
Several foreign jurisdictions are implementing or considering a 15% minimum effective tax rate under the OECD's Global Anti-Base Erosion (“Pillar Two”) model rules. This applies to multinational companies with consolidated revenue above €750 million. Companies must calculate a combined effective tax rate for all entities in a jurisdiction, and if it is below 15%, a top-up tax is required. We qualified under the safe harbor provisions in jurisdictions that have implemented Pillar Two to date, therefore, no top-up tax applies.
BUSINESS COMBINATIONS — We account for business combinations using the acquisition method. For each acquisition, we recognize most assets acquired, and liabilities assumed at their fair values at the acquisition date. Our valuations of certain assets acquired, including customer relationships and trade names, and certain liabilities assumed, involve significant judgment and estimation. Additionally, our determination of the purchase price may include an estimate for the fair value of contingent consideration. We utilize independent valuation specialists to assist us in determining the fair value of certain assets and liabilities. Our valuations utilize significant estimates, such as forecasted revenues and profits. Changes in our estimates could significantly impact the value of certain assets and liabilities.
Recent Accounting Pronouncements
Please refer to Note 3 , “Recent Accounting Pronouncements” in the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K.
