EPLUS INC

Previous wording

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Current wording

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Previous 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.

Current wording

The below is intended to provide context to our consolidated financial condition and results of continuing 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, 2025 (“2025 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 2025 Annual Report, as well as in our other filings with the SEC.

Previous wording

We are a leading solutions provider in the areas of security, cloud, networking, collaboration, artificial intelligence (“AI”), and emerging technologies to domestic and foreign organizations across all industry segments. We deliver actionable outcomes for organizations by using information technology (“IT”) and consulting solutions to drive business agility and innovation. Leveraging our engineering talent, we assess, plan, deliver, and secure solutions comprised of leading technologies and consumption models aligned with our customers’ needs. Our expertise and experience enable us to craft optimized solutions that take advantage of the cost, scale, and efficiency of private, public and hybrid cloud services in an evolving market. 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. With our acquisition of Bailiwick Services, LLC (“Bailiwick”) on August 19, 2024, our professional services segment also includes projects supporting digital signage, EV charging solutions, loss prevention and security, store openings, and store closings. Additionally, we offer flexible financing for purchases from us and from third parties. We have been in the business of selling, leasing, financing, and managing IT and other assets for more than 30 years.

Current wording

We are a leading solutions provider in the areas of security, cloud, networking, collaboration, artificial intelligence (“AI”), and emerging technologies. We deliver actionable outcomes for organizations by using information technology (“IT”) and consulting solutions to drive business agility and innovation. Leveraging our engineering talent, we assess, plan, deliver, and secure solutions comprised of leading technologies and consumption models aligned with our customers’ needs. Our expertise and experience enable us to craft optimized solutions that take advantage of the cost, scale, and efficiency of private, public and hybrid cloud services in an evolving market.

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 computing 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 for thousands of vendors, which enables us to provide our customers with new and evolving IT solutions. Our employees 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

We 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 computing and other advanced and emerging technologies. These solutions are comprised of class-leading technologies from our commercial partners.

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, retail, 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. Our technology business segments accounted for 97% of our net sales and 71% of our operating income, while our financing business segment accounted for 3% of our net sales and 29% of our operating income, for the nine months ended December 31, 2024.

Current wording

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

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We believe the following key factors impact our business performance and our ability to achieve business results:

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 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.

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 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 and Non-GAAP: Net earnings per common share - diluted.

Previous wording

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 annual budgets. We use gross billings as an operational metric to assess the volume of transactions or market share for our technology business segments—product, professional services, and managed services—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 metrics will aid investors in the same manner to evaluate our business.

Current wording

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 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.

Previous wording

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

Current wording

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

Previous wording

The following tables provide our key business metrics for our consolidated entity, our technology business segments- consisting of our product, professional services, and managed services segments- and our financing business segment (in thousands, except per share amounts):

Current wording

The following tables provide our key business metrics for our consolidated entity (in thousands, except per share amounts):

Previous wording

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

Current wording

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, share-based compensation, and acquisition and integration expenses, and the related tax effects.

Previous wording

We use Non-GAAP: Net earnings and Non-GAAP: Net earnings per common share – diluted as supplemental measures of our performance to gain insight into our operating performance and performance trends. We believe that the exclusion of other income and acquisition-related amortization expense in calculating Non-GAAP: Net earnings and Non-GAAP: Net earnings per common share – diluted provides management and investors a useful measure for period-to-period comparisons of our business and operating results by excluding items that management believes are not reflective of our underlying operating performance. Accordingly, we believe that Non-GAAP: Net earnings and Non-GAAP: Net earnings per common share – diluted provide useful information to investors and others in understanding and evaluating our operating results. However, our use of non-GAAP information as analytical tools has limitations, and you should not consider them in isolation or as substitutes for analysis of our financial results as reported under US GAAP. In addition, other companies, including companies in our industry, might calculate similar Non-GAAP: Net earnings and Non-GAAP: Net earnings per common share – diluted or similarly titled measures differently, which may reduce their usefulness as comparative measures. Our acquisition related expenses for the three and nine months ended December 31, 2024 are related to our acquisition of Bailiwick.

Current wording

We believe that the exclusion of other income and acquisition-related amortization expense in calculating Non-GAAP: Net earnings and Non-GAAP: Net earnings per common share – diluted provides management and investors a useful measure for period-to-period comparisons of our business and operating results by excluding items that management believes are not reflective of our underlying operating performance, which helps in understanding and the evaluation of 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 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 similar Non-GAAP: Net earnings and Non-GAAP: Net earnings per common share – diluted or similarly titled measures differently, which may reduce their usefulness as comparative measures.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

We define Adjusted EBITDA as net earnings from continuing operations calculated in accordance with US GAAP, adjusted for the following: interest expense, depreciation and amortization, share-based compensation, acquisition and integration expenses, provision for income taxes, and other income. 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.

Previous wording

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

Current wording

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.

Previous wording

(3) Gross billings are the total dollar value of customer purchases of goods and services including shipping charges during the period, net of customer returns and credit memos, sales, or other taxes. Gross billings includes the transaction values for certain sales transactions that are recognized on a net basis, and, therefore, includes amounts that will not be recognized as revenue.

Current wording

Gross billings are the total dollar value of customer purchases of goods and services including shipping charges during the period, net of customer returns and credit memos, sales, or other taxes from our product, professional services, and managed services segments. 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.

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Net sales: Net sales of the combined technology business segments for the three months ended December 31, 2024, decreased compared to the three months ended December 31, 2023, driven by decreased net sales to customers in telecom, media, and entertainment, and technology industries, partially offset by increased net sales to customers in SLED, healthcare, and financial service industries.

Current wording

Net sales: Net sales for the three months ended June 30, 2025, increased $101.7 million compared to the three months ended June 30, 2024, due to increased net sales to customers in the telecom, media, and entertainment industries, offset by decreased net sales to customers in the technology, SLED, financial services, and healthcare industries. For further information, see the “Segment Results of Operations” below.

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Gross profit: Gross profit for the three months ended December 31, 2024, increased 5.3%, to $140.9 million, compared to $133.8 million in the same three-month period in the prior year as increases in professional and managed services were partially offset by declines in product sales. Overall, gross margins were up by 130 basis points to 27.6%, 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.

Current wording

Gross profit: Consolidated gross profit for the three months ended June 30, 2025, increased $21.3 million compared to the prior three-month period due to increases in net sales in all three of our operating segments. Overall, gross margins were down by 40 basis points year over year to 23.3%, primarily due to lower product margins led by a shift in product mix as we sold less third-party maintenance and subscriptions that are recognized on a net basis, and lower services margins. For further information, see the “Segment Results of Operations” below.

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Selling, general, and administrative: Selling, general, and administrative expenses for the technology business for the three and nine months ended December 31, 2024, increased compared to the three and nine months ended December 31, 2023, mainly due to increases in salaries and benefits.

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Selling, general, and administrative: Selling, general, and administrative expenses for the three months ended June 30, 2025, increased $14.4 million compared to the three months ended June 30, 2024, mainly due to increases in salaries and benefits and general and administrative costs due to our acquisition of Bailiwick Services, LLC (“Bailiwick”) on August 19, 2024 that impacted the three months ended June 30, 2025 but not the corresponding 2024 period.

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Provision for credit losses for our technology business for the nine months ended December 31, 2024, was $1.5 million, as compared to $0.4 million for the same nine-month period in the prior year. Our higher provision for credit losses for the nine months ended December 31, 2024, was due to an increase in exposure to accounts with higher credit risk.

Current wording

Provision for credit losses for the three months ended June 30, 2025, was $0.6 million, as compared to $0.1 million for the same three-month period in the prior year. Our higher provision for credit losses for the three months ended June 30, 2025, was due to an increase in exposure to accounts with higher credit risk.

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Depreciation and amortization: Depreciation and amortization for our technology business for the three and nine months ended December 31, 2024, increased compared to the three and nine months ended December 31, 2023, primarily due to amortization from intangible assets acquired in the Bailiwick acquisition during the current nine-month period.

Current wording

Depreciation and amortization: Depreciation and amortization for the three months ended June 30, 2025, increased compared to the three months ended June 30, 2024, primarily due to amortization from intangible assets acquired in the Bailiwick acquisition.

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Operating income: As a result of the foregoing, operating income for the three months ended December 31, 2024, decreased $9.5 million, or 25.1%, to $28.5 million, as compared to $38.0 million for the same three-month period in the prior year, and operating income margin decreased by 190 basis points to 5.6%.

Current wording

Operating income: As a result of the foregoing, operating income for the three months ended June 30, 2025, increased $4.7 million compared to the prior three-month period, and operating margin decreased by 20 basis points to 5.7%.

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Other income for the nine months ended December 31, 2024, was $6.3 million, compared to $0.7 million for the nine months ended December 31, 2023. Higher other income was driven by increased interest income and decreased foreign exchange losses. We had $6.7 million in interest income for the nine months ended December 31, 2024, compared to $1.1 million for the nine months ended December 31, 2023. We had foreign exchange losses of $0.4 millionfor the nine months ended December 31, 2024, compared to losses of $0.5 million for the same nine-month period in the prior year.

Current wording

Other income (expense), net: Other income for the three months ended June 30, 2025, was $0.6 million, compared to $1.7 million for the three months ended June 30, 2024. Lower other income was driven by increased foreign exchange losses and decreased interest income. We had foreign exchange losses of $1.5 million for the three months ended June 30, 2025, compared to losses of $0.5 million for the same three-month period in the prior year. We had $2.1 million in interest income for the three months ended June 30, 2025, compared to $2.2 million for the three months ended June 30, 2024.

Previous wording

Provision for income taxes*:* Our provision for income tax expense for the three and nine months ended December 31, 2024, was $8.0 million and $30.2 million, respectively, as compared to $11.1 million and $36.1 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, 2024, were 25.0% and 26.7%, respectively, compared to 29.0% and 27.8% for the three and nine months ended December 31, 2023, respectively. Our effective tax rate was lower for the three and nine months ended December 31, 2024, as compared to the same three- and nine-month periods in the prior year, primarily due to lower state taxes.

Current wording

Provision for income taxes: Our provision for income tax expense for the three months ended June 30, 2025, was $9.7 million, as compared to $9.0 million for the same three-month period in the prior year. Our effective income tax rate for the three months ended June 30, 2025, and 2024, were 26.3% and 27.1%, respectively. Our effective income tax rate was lower for the three months ended June 30, 2025, as compared to the three months ended June 30, 2024, primarily due to lower state taxes.

Previous wording

● 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.

Current wording

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 and distributors.

Previous wording

● 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, configuration, logistic services, training, staff augmentation services, and project management services. With the acquisition of Bailiwick, our professional services also include projects supporting digital signage, EV charging solutions, loss prevention and security, store openings, and store closings.

Current wording

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.

Previous wording

● 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 services.

Current wording

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.

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Net sales: Net sales for the three months ended December 31, 2024, increased 0.4%, to $511.0 million, or an increase of $1.9 million compared to $509.1 million in the same three-month period in the prior year. The increase in net sales was driven by higher service revenues from our technology business segments and higher revenue from our financing business segment, offset by lower product revenue in our technology business segments. For additional information, see the “Segment Results of Operations” below.

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The three months ended June 30, 2025, compared to the three months ended June 30, 2024

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

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

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Product segment sales for the three and nine months ended December 31, 2024, decreased compared to the same three- and nine-month periods in the prior year, due to lower sales of networking equipment, cloud, collaboration, and security products. Our decrease in net sales for the three months ended December 31, 2024, compared to the same period in the prior year, was due to a shift in product mix towards sales of third-party maintenance and subscriptions that are recognized on a net basis, partially offset by higher demand. Our decrease in net sales for the nine months ended December 31, 2024, compared to the same period in the prior year, was due to decreases in demand and ashift 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.

Current wording

Product segment sales for the three months ended June 30, 2025, increased compared to the same three-month period in the prior year, due to increases in demand and a shift in product mix, as we sold less 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.

Previous wording

Professional services segment sales for the three and nine months ended December 31, 2024, increased compared to the same three- and nine-month periods in the prior year, primarily due to increases in revenues from the acquisition of Bailiwick.

Current wording

Professional services segment sales for the three months ended June 30, 2025, increased compared to the same three-month period in the prior year, primarily due to increases in revenues from the acquisition of Bailiwick.

Previous wording

Managed services segment sales for the three and nine months ended December 31, 2024, increased compared to the same three- and nine-month periods in the prior year, due to ongoing expansion of these service offerings, primarily related to ongoing growth in enhanced maintenance support, cloud services, and service desk services.

Current wording

Managed services segment sales for the three months ended June 30, 2025, 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 cloud services.

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Product segment margin for the three and nine months ended December 31, 2024, increased by 20 and 50 basis points, respectively, compared to the same three- and nine-month period in the prior year 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.

Current wording

Product segment margin for the three months ended June 30, 2025, decreased by 110 basis points from the same three-month period in the prior year due to a shift in product mix resulting in a lower proportion of sales of third-party maintenance and subscriptions which are recorded on a net basis. Vendor incentives earned as a percentage of sales for the three months ended June 30, 2025 were flat compared to the same three-month period in the prior year.

Previous wording

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

Current wording

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, acquisitions and the repurchase of shares of our common stock.

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

Current wording

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

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The following table summarizes our sources and uses of cash for the nine months ended December 31, 2024, and 2023 (in thousands):

Current wording

The following table summarizes our sources and uses of cash for the three months ended June 30, 2025, and 2024 (in thousands):

Previous wording

Technology business: For the nine months ended December 31, 2024, our combined technology business segments provided $180.7 million from operating activities primarily due to net earnings, decreases in accounts receivable and inventory, offset by decreases in accounts payable.

Current wording

During the three months ended June 30, 2024, we provided $110.1 million primarily from operating activities of continuing operations primarily due to net earnings and decreases in our accounts receivable and inventories, partially offset by decreases in our accounts payable - trade.

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To manage our working capital, we monitor our cash conversion cycle for our technology 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”).

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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”).

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The following table presents the components of the cash conversion cycle for our technology business segments:

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The following table presents the components of the cash conversion cycle for our business segments:

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(1) Represents the rolling three-month average of the balance of trade accounts receivable-trade, net for our technology business segments at the end of the period divided by gross billings for the same three-month period.

Current wording

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.