EPLUS INC

Previous wording

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 unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q and the audited consolidated financial statements included in our annual report on Form 10-K for the year ended March 31, 2023 (“2023 Annual Report”), and our Form 8-K that we filed with the SEC on October 6, 2023, which recasts the disclosures in certain portions of our 2023 Annual Report to reflect changes in our reportable segments. 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 2023 Annual Report, as updated by our Form 8-K that we filed with the SEC on October 6, 2023, as well as in our other filings with the SEC.

Current wording

The below 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 unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q and the audited consolidated financial statements included in our annual report on Form 10-K for the year ended March 31, 2024 (“2024 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 2024 Annual Report, as well as in our other filings with the SEC.

Previous wording

Our primary focus is to deliver integrated solutions that address our customers’ 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 solutions aligned to their objectives. Underpinning the broader areas of cloud, security, networking, and collaboration are specific skills in orchestration and automation, application modernization, DevSecOps, zero-trust architectures, data management, data visualization, analytics, network modernization, edge compute and other advanced and emerging technologies. These solutions are comprised of class-leading technologies from partners such as Amazon Web Services, Arista Networks, Check Point, Cisco Systems, Citrix, Commvault, Crowdstrike, Deepwatch, Dell EMC, F5 Networks, Foresite, Fortinet, Gigamon, HPE, Juniper Networks, Lenovo, Microsoft, NetApp, Nutanix, NVIDIA, Oracle, Palo Alto Networks, Proficio, Pure Storage, Rubrik, Splunk, Varonis, and VMware, among many others. We are an authorized reseller of over 1,500 vendors, which enable us to provide our customers with new and evolving IT solutions. We possess top-level engineering certifications with a broad range of leading IT vendors that enable us to offer 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.

Current wording

Our primary focus is to deliver integrated solutions that address our customers’ 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 solutions aligned to their objectives. Underpinning the broader areas of cloud, security, networking, and collaboration are specific skills in orchestration and automation, application modernization, DevSecOps, zero-trust architectures, data management, data visualization, analytics, network modernization, edge compute and other advanced and emerging technologies. These solutions are comprised of class-leading technologies from partners such as Amazon Web Services, Arista Networks, Check Point, Cisco Systems, Citrix, Commvault, Crowdstrike, Deepwatch, Dell EMC, F5 Networks, Foresite, Fortinet, Gigamon, HPE, Juniper Networks, Lenovo, Microsoft, NetApp, Nutanix, NVIDIA, Oracle, Palo Alto Networks, Proficio, Pure Storage, Rubrik, Splunk, Varonis, and VMware by Broadcom, among many others. We are an authorized reseller of over 1,800 vendors, which enable us to provide our customers with new and evolving IT solutions. We possess top-level engineering certifications with a broad range of leading IT vendors that enable us to offer 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.

Previous wording

Our go-to-market strategy focuses primarily on diverse end-markets for middle market to large enterprises. We serve customers in markets including telecom, media and entertainment, technology, state and local government and educational institutions (“SLED”), healthcare, and financial services. We sell to customers in the United States (“US”), which account for most of our sales, and to customers in select international markets including the United Kingdom (“UK”), the European Union (“EU”), India, Singapore, and Israel. Our technology business segments accounted for 98% of our net sales and 84% of our operating income, while our financing segment accounted for 2% of our net sales and 16% of our operating income, for the nine months ended December 31, 2023.

Current wording

Our go-to-market strategy focuses primarily on diverse end-markets for middle market to large enterprises. We serve customers in markets including telecom, media and entertainment, technology, state and local government and educational institutions (“SLED”), healthcare, and financial services. We sell to customers in the United States (“US”), which account for most of our sales, and to customers in select international markets including the United Kingdom (“UK”), the European Union (“EU”), India, Singapore, and Israel. Our technology business segments accounted for 98% of our net sales and 90% of our operating income, while our financing business segment accounted for 2% of our net sales and 10% of our operating income, for the three months ended June 30, 2024.

Previous wording

Our management monitors several financial and non-financial measures and ratios on a regular basis to track the progress of our business. We believe that the most important of these measures and ratios include net sales, gross margin, operating income margin, net earnings, and net earnings per common share, in each case based on information prepared in accordance with US GAAP, as well as the non-GAAP financial measures and ratios, including Adjusted EBITDA, Adjusted EBITDA margin, Non-GAAP: Net earnings and Non-GAAP: Net earnings per common share.

Current wording

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 and margin, operating income margin, net earnings, and net earnings per common share, in each case based on information prepared in accordance with US GAAP, as well as the non-GAAP financial measures and ratios, including Adjusted EBITDA, Adjusted EBITDA margin, Non-GAAP: Net earnings and Non-GAAP: Net earnings per common share - diluted.

Previous wording

Operating expenses: Operating expenses for the three months ended December 31, 2023, increased $3.9 million, or 4.2%, to $95.8 million, as compared to $91.9 million for the same three-month period in the prior year. The increase in operating expenses was primarily due to an increase of $4.3 million in salaries and benefits, mainly driven by an increase in headcount and salary increases offset by a decrease of $1.1 million in variable compensation corresponding to the decrease in gross profit. As of December 31, 2023, we had 1,897 employees, an increase of 8.7% from 1,745 as of December 31, 2022.

Current wording

Operating expenses: Operating expenses for the three months ended June 30, 2024, increased $3.1 million, or 3.2%, to $99.0 million, as compared to $95.9 million for the same three-month period in the prior year. Our increase in operating expenses was primarily due to an increase in salaries and benefits offset by a decrease in provision for credit losses, and interest and financing costs. As of June 30, 2024, we had 1,907 employees, an increase of 2.9% from 1,853 as of June 30, 2023. For additional information, see the “Segment Results of Operations” below.

Previous wording

Operating income: As a result of the foregoing, operating income for the three months ended December 31, 2023, decreased $8.5 million, or 18.3%, to $38.0 million, as compared to $46.5 million for the three months ended December 31, 2022, and operating margin remained flat at 7.5%. The decrease in operating income was due to decreases from our technology business, which was offset by higher operating income from our financing business segment.

Current wording

Operating income: As a result of the foregoing, operating income for the three months ended June 30, 2024, decreased $10.8 million, or 23.3%, to $35.5 million, as compared to $46.3 million for the same three-month period in the prior year, and operating income margin decreased by 160 basis points to 6.5%.

Previous wording

Adjusted EBITDA for the three months ended December 31, 2023, was $46.2 million, a decrease of $7.1 million, or 13.4%, as compared to $53.3 million for the same three-month period in the prior year. Adjusted EBITDA margin for the three months ended December 31, 2023, increased 50 basis points to 9.1%, as compared to the three months ended December 31, 2022, of 8.6%. The decrease in Adjusted EBITDA was due to decreases from our technology business, which was offset by higher Adjusted EBITDA from our financing business segment.

Current wording

Adjusted EBITDA for the three months ended June 30, 2024, was $43.1 million, a decrease of $10.8 million, or 20.0%, compared to $53.9 million for the same three-month period in the prior year. Adjusted EBITDA margin for the three months ended June 30, 2024, decreased 150 basis points to 7.9%, as compared to the three months ended June 30, 2023, of 9.4%. The decrease in Adjusted EBITDA margin was due to a decrease in gross profit and an increase in operating expenses.

Previous wording

Net earnings per common share diluted for the three months ended December 31, 2023, decreased $0.32, or 23.9%, to $1.02 per share, as compared to $1.34 per share in the same three-month period in the prior year. Non-GAAP: Net earnings per common share diluted for the three months ended December 31, 2023, decreased $0.20, or 14.5%, to $1.18 per share, as compared to $1.38 per share for the three months ended December 31, 2022.

Current wording

Net earnings per common share—diluted for the three months ended June 30, 2024, decreased $0.25, or 19.7%, to $1.02 per share, as compared to $1.27 per share in the same three-month period in the prior year. Non-GAAP: Net earnings per common share—diluted for the three months ended June 30, 2024, decreased $0.28, or 19.9%, to $1.13 per share, as compared to $1.41 per share for the three months ended June 30, 2023.

Previous wording

The quarter ended June 30, 2023, was the first quarterly period in which we reported these three separate segments within our technology business as we previously consolidated this information within a single technology segment. We manage the technology business segments based on gross profit and the operating expenses associated with these segments in total as our technology business. Based upon our current business and operations, we intend to continue reporting these three segments that will comprise our technology business. We recast prior periods to conform with our current segment organization.

Current wording

We manage the technology business segments based on gross profit and the operating expenses associated with these segments in total as our technology business.

Previous wording

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

Current wording

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

Previous wording

Our financing business segment offers financing solutions to corporations, government contractors, state and local governments, and educational institutions in the US, which accounts for most of our transactions, and to corporations in select international markets including Canada, the UK, and the EU. The financing business segment derives revenue from leasing IT equipment, medical equipment, and other equipment, and the disposition of that equipment at the end of the lease. The financing business segment also derives revenues from the financing of third-party software licenses, software assurance, maintenance, and other services.

Current wording

Our financing business segment offers financing solutions to corporations, government contractors, and SLED institutions in the US, which accounts for most of our transactions, and to corporations in select international markets including Canada, the UK, and the EU. The financing business segment derives revenue from leasing IT equipment, medical equipment, and other equipment, and the disposition of that equipment at the end of the lease. The financing business segment also derives revenues from the financing of third-party software licenses, software assurance, maintenance, and other services.

Previous wording

Net sales: Net sales for the three months ended December 31, 2023, decreased $114,.4 million, or 18.4%, to $509.1 million, compared to $623.5 million in the same three-month period in the prior year. The decrease in net sales was partially driven by lower net sales from our product segment due to decreased sales volume and was partially offset by higher net sales from professional services segment, managed services segment, and financing segment net sales due to higher transaction gains.

Current wording

The three months ended June 30, 2024, compared to the three months ended June 30, 2023

Previous wording

The results of operations for our technology business segments were as follows (in thousands):

Current wording

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

Previous wording

Net sales of the combined technology business segments for the nine months ended December 31, 2023, increased compared to the nine months ended December 31, 2022, driven by demand from customers in SLED, financial services, and healthcare industries, offset by decreased volume with customers in telecom, media, and entertainment, and technology industries.

Current wording

Net sales: Net sales of the combined technology business segments for the three months ended June 30, 2024, decreased compared to the three months ended June 30, 2023, driven by decreased demand from customers in telecom, media and entertainment, financial services, SLED, and healthcare industries, offset by increased demand from customers in the technology industry.

Previous wording

Product segment sales for the three months ended December 31, 2023, decreased compared to the same three-month period in the prior year due to lower sales of networking equipment, cloud, and security products. 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. Offsetting these decreases was the addition of product sales to customers from the NSG acquisition, which contributed $15.5 million.

Current wording

Product segment sales for the three months ended June 30, 2024, decreased compared to the same three-month period in the prior year, due to lower sales of networking equipment and cloud products, offset by an increase in sales of collaboration and security products. 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.

Previous wording

Managed services segment sales for the three and nine months ended December 31, 2023, increased compared to the three and nine months ended December 31, 2022, due to ongoing expansion of these service offerings during both periods primarily related to ongoing growth in enhanced maintenance support, service desk, and security operations center revenues.

Current wording

Managed services segment sales for the three months ended June 30, 2024, increased compared to the same three-month period in the prior year, due to ongoing expansion of these service offerings primarily related to ongoing growth in enhanced maintenance support, and service desk revenues.

Previous wording

Gross profit: Gross profit of the combined technology business segments for the three months ended December 31, 2023, decreased compared to the three months ended December 31, 2022, due mainly to the decrease in product segment sales, offset by increases in managed service, and professional service sales. Gross profit margin increased by 340 basis points to 24.3% during this three-month period due to higher product, managed service, and professional service margin.

Current wording

Gross profit: Gross profit of the combined technology business segments for the three months ended June 30, 2024, decreased compared to the three months ended June 30, 2023, due to a decrease in product sales, offset by an increase in professional service, and managed service sales. Gross profit margin decreased by 30 basis points to 23.7% due to lower product margin, offset by higher managed service margin and professional service margin.

Previous wording

Selling, general, and administrative: Selling, general, and administrative expenses for the three and nine months ended December 31, 2023, for the technology business, increased compared to the three and nine months ended December 31, 2022, mainly due to increases in salaries and benefits.

Current wording

Selling, general, and administrative: Selling, general, and administrative expenses for thethree months ended June 30, 2024, for the technology business, increased compared to the three months ended June 30, 2023, mainly due to increases in salaries and benefits offset by a decrease in provision for credit losses.

Previous wording

Salaries and benefits for the three months ended December 31, 2023, increased $3.4 million, or 4.8% to $73.9 million, as compared to $70.5 million for the same three-month period in the prior year, due to an increase of $3.4 million in salaries and benefits, mainly driven by increased headcount and salary increases. Our technology business had an aggregate of 1,863 employees as of December 31, 2023, an increase of 154 from 1,709 as of December 31, 2022. We added 83 employees from our acquisition of NSG. In total, we added 134 additional customer-facing employees for the three months ended December 31, 2023, compared to the same three-month period in the prior year, of which 60 were professional services and technical support personnel due to demand for our services.

Current wording

Salaries and benefits, including variable compensation and share-based compensation for the three months ended June 30, 2024, increased $3.5 million, or 4.7% to $77.6 million, as compared to $74.1 million for the same three-month period in the prior year, due to an increase of $3.7 million in salaries and benefits, mainly driven by increased headcount and salary increases, and an increase of $0.6 million in share-based compensation, driven by increases in employee awards as well as increases from the employee stock purchase plan. Our technology business had an aggregate of 1,872 employees as of June 30, 2024, an increase of 54 from 1,818 as of June 30, 2023. In total, we added 60 additional customer-facing employees in the technology business for the three months ended June 30, 2024, compared to the same three-month period in the prior year, of which 29 were professional services and technical support personnel due to demand for our services. Offsetting these increases was a decrease in variable compensation of $0.8 million, which was a result of the corresponding decrease in gross profit.

Previous wording

General and administrative expenses for our technology business for the nine months ended December 31, 2023, increased $4.0 million, or 11.4%, to $39.3 million, as compared to $35.3 million for the same nine-month period in the prior year. General and administrative expenses increased due to higher travel and entertainment costs of $1.0 million due to the return of in-person business meetings and events, higher software, subscription and maintenance fees of $0.9 million, higher consulting fees of $0.8 million, higher advertising and marketing fees of $0.7 million, and higher facility rent of $0.6 million due to the opening of our new Customer Innovation Center.

Current wording

General and administrative expenses for our technology business for the three months ended June 30, 2024, decreased $0.1 million, or 0.8%, to $12.4 million, as compared to $12.5 million for the same three-month period in the prior year, due to lower professional fees of $0.8 million, offset by higher software, subscription, and maintenance fees of $0.5 million, and higher travel and entertainment costs of $0.2 million due to the return of in-person business meetings and events.

Previous wording

Provision for credit losses for our technology business for the nine months ended December 31, 2023, was $0.4 million, as compared to $1.3 million for the same nine-month period in the prior year. Our lower provision for credit losses for the nine months ended December 31, 2023, was due to changes in our net credit exposure.

Current wording

Provision for credit losses for our technology business for the three months ended June 30, 2024, was $0.1 million, as compared to $0.5 million for the same three-month period in the prior year. Our lower provision for credit losses for the three months ended June 30, 2024, was due to changes in our net credit exposure.

Previous wording

Depreciation and amortization: Depreciation and amortization of our technology business for the three and nine months ended December 31, 2023, increased compared to the three and nine months ended December 31, 2022, primarily due to more amortization from intangible assets acquired in the NSG and Future Com acquisitions.

Current wording

Depreciation and amortization: Depreciation and amortization for our technology business for the three months ended June 30, 2024, increased compared to the three months ended June 30, 2023, primarily due to more amortization from intangible assets acquired in the NSG acquisition.

Previous wording

Interest and financing costs: Interest and financing costs of our technology business for the three months ended December 31, 2023, decreased by 83.4% to $0.2 million compared to $1.3 million for the three months ended December 31, 2022, primarily due to lower average borrowings under our WFCDF Credit Facility. Interest and financing costs of our technology business for the nine months ended December 31, 2023, decreased by 32.5% to $1.4 million compared to $2.1 million for the nine months ended December 31, 2022, due to lower average borrowings outstanding under our WFCDF Credit Facility.

Current wording

Interest and financing costs: Interest and financing costs for our technology business for the three months ended June 30, 2024, decreased compared to the three months ended June 30, 2023, due to lower average borrowings outstanding under our WFCDF Credit Facility.

Previous wording

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

Current wording

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

Previous wording

Net sales for the nine months ended December 31, 2023, decreased due to lower post-contract earnings offset by higher portfolio earnings and transactional gains. Post-contract earnings decreased due to lower proceeds from sales of off-lease equipment, and lower month-to-month rents. Portfolio earnings increased compared to the same period in the prior year mainly due to higher average investments outstanding as well as a higher average earnings rate. Transactional gains increased due to higher volume of financial assets sold during the year. Total proceeds from sales of financing receivables were $704.3 million and $586.1 million for the nine months ended December 31, 2023, and 2022, respectively. Our proceeds from sales of financing receivables for the nine months ended December 31, 2023, are higher than the same period in the prior year due in part to a few large transactions in the current year period.

Current wording

Net sales: Net sales for the three months ended June 30, 2024, increased due to higher portfolio earnings offset by lower post-contract earnings. Portfolio earnings increased due to higher average investments outstanding as well as a higher average earnings rate. Post-contract earnings decreased due to lower proceeds from sales of off-lease equipment, and lower month-to-month rents.

Previous wording

Interest and financing costs: Interest and financing costs for the three and nine months ended December 31, 2023, increased compared to the three and nine months ended December 31, 2022, due to higher interest rates. As of December 31, 2023, our non-recourse notes payable decreased to $48.4 million from $48.5 million as of December 31, 2022. Our weighted average interest rate for non-recourse notes payable was 6.64% and 5.05% as of December 31, 2023, and 2022, respectively.

Current wording

Interest and financing costs: Interest and financing costs for the three months ended June 30, 2024, increased compared to the three months ended June 30, 2023, due to higher average borrowings outstanding and higher interest rates. Our weighted average interest rate for non-recourse notes payable was 6.52% and 5.22% as of June 30, 2024, and June 30, 2023, respectively.

Previous wording

Provision for income taxes: Our provision for income tax expense for the three and nine months ended December 31, 2023, was $11.1 million and $36.1 million, respectively, as compared to $13.7 million and $34.1 million for the same three-and nine-month periods in the prior year, respectively. Our effective income tax rates for the three and nine months ended December 31, 2023, were 29.0% and 27.8%, respectively, compared to 27.7% and 28.3% for the three and nine months ended December 31, 2022, respectively. Our effective tax rate was higher for the three months ended December 31, 2023, as compared to the same three-month period in the prior year, primarily due to an unfavorable return to provision adjustment in the three months ended December 31, 2023, compared to a favorable return to provision adjustment in same three-month period in the prior year. Our effective tax rate was lower for the nine months ended December 31, 2023, as compared to the same nine-month period in the prior year, primarily due to lower state effective tax rates and less non-deductible executive compensation in the current period.

Current wording

Provision for income taxes: Our provision for income tax expense for the three months ended June 30, 2024, was $10.2 million, as compared to $12.7 million for the same three-month period in the prior year. Our effective income tax rate for the three months ended June 30, 2024, and 2023, were both 27.2%.

Previous wording

Net earnings: Net earnings for thethree months ended December 31, 2023, were $27.3 million, a decrease of 23.6% or $8.4 million, as compared to $35.7 million in the same three-month period in the prior year, mainly due to a decrease in operating profits from our technology business offset by an increase in operating profits within our financing business segment. In addition, we had a decrease in other income, net driven by higher foreign exchange gains and other income in the prior three-month period. These decreases were offset by lower income taxes. Net earnings for thenine months ended December 31, 2023, were $93.8 million, an increase of 8.4% or $7.3 million, as compared to $86.5 million in the same nine-month period in the prior year, mainly due to the increase in operating profits from our technology business, and an increase in other income, net driven by less foreign exchange losses. These increases were offset by higher income taxes.

Current wording

Net earnings: Net earnings for thethree months ended June 30, 2024, were $27.3 million, a decrease of 19.2% or $6.5 million, as compared to $33.8 million for the same three-month period in the prior year. The net earnings decrease was due to the decrease in operating profits from our technology business, offset by an increase in other income, driven by increased interest income, and a decrease in provision for income taxes.

Previous wording

Basic earnings per common share and diluted earnings per common share were both $1.02 for the three months ended December 31, 2023, a decrease of 23.9%, as compared to $1.34 for both our basic earnings per common share and diluted earnings per common share for the three months ended December 31, 2022. Basic earnings per common share and diluted earnings per common share were $3.53 and $3.52, respectively, for thenine months ended December 31, 2023, an increase of 8.3% and 8.6%, respectively, as compared to $3.26 and $3.24 for our basic earnings per common share and diluted earnings per common share, respectively, for thenine months ended December 31, 2022.

Current wording

Basic earnings per common share and diluted earnings per common share for the three months ended June 30, 2024, were $1.03 and $1.02, respectively, a decrease of 18.9% and 19.7%, as compared to $1.27 for both our basic earnings per common share and diluted earnings per common share for the three months ended June 30, 2023.

Previous wording

Weighted average common shares outstanding used in the calculation of basic earnings per common share and diluted earnings per common share were 26.6 million and 26.7 million, respectively, for the three months ended December 31, 2023. Weighted average common shares outstanding used in the calculation of basic earnings per common share and diluted earnings per common share were both 26.6 million for the three months ended December 31, 2022. Weighted average common shares outstanding used in the calculation of basic earnings per common share and diluted earnings per common share for thenine months ended December 31, 2023, and 2022, were 26.6 million and 26.7 million respectively.

Current wording

Weighted average common shares outstanding used in the calculation of basic and diluted earnings per common share were 26.6 million and 26.8 million, respectively, for the three months ended June 30, 2024. Weighted average common shares outstanding used in the calculation of basic and diluted earnings per common share were both 26.6 million for the three months ended June 30, 2023.

Previous wording

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

Current wording

The following table summarizes our sources and uses of cash for the three months ended June 30, 2024, and 2023 (in thousands):

Previous wording

Cash flows from operating activities: We had cash provided by operating activities of $143.5 million during the nine months ended December 31, 2023, compared to cash used in operating activities of $147.0 million for the nine months ended December 31, 2022. See below for a breakdown of operating cash flows by business (in thousands):

Current wording

Cash flows from operating activities: We provided $97.1 million from operating activities during the three months ended June 30, 2024, compared to using $20.9 million for the three months ended June 30, 2023. See below for a breakdown of operating cash flows by segment (in thousands):

Previous wording

For the nine months ended December 31, 2022, our combined technology business segments used $115.8 million from operating activities primarily due to increases in our accounts receivable and inventories, partially offset by net earnings.

Current wording

For the three months ended June 30, 2023, our combined technology business segments used $48.3 million from operating activities primarily due to increases in our accounts receivable of $159.3 million, offset by an increase in accounts payable - trade of $60.2 million and net earnings.

Previous wording

Our cash conversion cycle increased to 54 days as of December 31, 2023, as compared to 51 days as of December 31, 2022. Our standard payment term for customers is between 30-60 days; however, certain customer orders may be approved for extended payment terms. Our DSO increased 9 days to 71 days as of December 31, 2023, compared to 62 days as of December 31, 2022, reflecting higher sales to customers with terms greater than or equal to net 60 days. Our DIO decreased to 27 days as of December 31, 2023, compared to 30 days as of December 31, 2022. Our DPO increased 3 days as of December 31, 2023. Invoices processed through our WFCDF Credit Facility, or the A/P-floor plan balance, are typically paid within 45-60 days from the invoice date, while A/P trade invoices are typically paid within 30-60 days from the invoice date.

Current wording

Our cash conversion cycle decreased to 37 days as of June 30, 2024, as compared to 48 days as of June 30, 2023. Our standard payment term for customers is between 30-60 days; however, certain customer orders may be approved for extended payment terms. Our DSO increased 6 days to 68 days as of June 30, 2024, compared to 62 days as of June 30, 2023, reflecting higher sales to customers with terms greater than or equal to net 60 days. Our DIO decreased to 14 days as of June 30, 2024, compared to 32 days as of June 30, 2023. Our DPO decreased 1 day as of June 30, 2024. Invoices processed through our WFCDF Credit Facility, or the A/P-floor plan balance, are typically paid within 45 to 60 days from the invoice date, while A/P trade invoices are typically paid around 30 days from the invoice date.

Previous wording

Cash flows related to investing activities: For the nine months ended December 31, 2023, we used $55.8 million in investing activities, consisting of $48.6 million for the acquisition of NSG, and $7.7 million for purchases of property, equipment and operating lease equipment, partially offset by $0.5 million of proceeds from the sale of property, equipment, and operating lease equipment. For the nine months ended December 31, 2022, we used $15.6 million in investing activities, consisting of $13.3 million in cash used in acquiring Future Com and $5.7 million for purchases of property, equipment, and operating lease equipment, partially offset by $3.3 million of proceeds from the sale of property, equipment, and operating lease equipment.

Current wording

Cash flows related to investing activities: For the three months ended June 30, 2024, we used $1.9 million from investing activities, primarily due to $2.0 million in purchases of property, equipment, and operating lease equipment offset by $0.1 million of proceeds from the sale of property, equipment, and operating lease equipment.

Previous wording

Cash flows from financing activities: For the nine months ended December 31, 2023, we used $48.7 million in financing activities, consisting of $58.1 million in net repayments onthe floor plan component of our WFCDF Credit Facility and $9.8 million to repurchase outstanding shares of our common stock, partially offset by $16.2 million innet borrowings of non-recourse and recourse notes payable, and$3.0 million in proceeds of issuance of common stock to employees under an employee stock purchase plan. For the nine months ended December 31, 2022, cash provided by financing activities was $103.6 million, consisting of net borrowings of non-recourse and recourse notes payable of $101.6 million, partially offset by $7.2 million in cash usedto repurchase outstanding shares of our common stock and $9.2 million in net repayments on the accounts payable floor plan facility.

Current wording

For the three months ended June 30, 2023, cash provided by financing activities was $82.6 million, consisting of net borrowings of non-recourse and recourse notes payable of $56.4 million, net borrowings on the floor plan component of our credit facility of $32.3 million, and proceeds of issuance of common stock to employees under an employee stock purchase plan of $1.4 million, partially offset by $7.5 million in cash usedto repurchase outstanding shares of our common stock.

Previous wording

Floor plan facility: We finance most 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.

Current wording

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

Previous wording

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

Current wording

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.

Previous wording

As of December 31, 2023, and March 31, 2023, 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 $92.5 million and $134.6 million, respectively. On our balance sheet, our liability under the floor plan facility is presented as part of accounts payable – floor plan.

Current wording

As of June 30, 2024, and March 31, 2024, we had a maximum credit limit of $500.0 million, and an outstanding balance on the floor plan facility of $119.5 million and $105.1 million, respectively. On our balance sheet, our liability under the floor plan facility is presented as part of accounts payable – floor plan.

Previous wording

As of December 31, 2023, and March 31, 2023, 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 December 31, 2023, and March 31, 2023, and is a sublimit of the $500.0 million facility.

Current wording

As of June 30, 2024, and March 31, 2024, 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 June 30, 2024, and March 31, 2024.