Eplus Inc: Form 10-Q for the period ended Dec 31, 2025

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

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, the audited consolidated financial statements included in our annual report on Form 10-K for the year ended March 31, 2025 (“2025 Annual Report”), and our current report on Form 8-K that we filed with the SEC on January 26, 2026, which recasts prior period financial information and related disclosures in certain portions of our 2025 Annual Report to present the operations of the domestic financing business as discontinued operations separately from our continuing operations. 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 those described in Part II, Item 1A. “Risk Factors” of our subsequent Quarterly Reports on Form 10-Q and in our other filings with the SEC.

EXECUTIVE OVERVIEW

BUSINESS DESCRIPTION

We are a leading solutions provider in the areas of security, cloud, networking, collaboration, artificial intelligence (“AI”), and emerging technologies. AI continues to be a transformative force and demand driver particularly for our core products: Compute, Cloud, security, networking and our consultative services. Across industries, customers are using AI to enhance decision making, automate tasks, and drive both growth and efficiency. Through assessments, bespoke workshops and labs and consulting engagements, we deliver actionable outcomes for organizations by using information technology (“IT”) and consulting solutions to enhance decision making, automate tasks and 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. Further, we offer professional services in the spaces of digital signage, electric vehicle (“EV”) charging solutions, loss prevention and security, store openings, remodels, and store closings.

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.

We are a reseller for thousands of manufacturers, 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.

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 unaudited 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 unaudited 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, our remaining three reportable segments are product, professional services, and managed services, which we formerly referred to collectively as our technology business. Refer to Note 4, “Discontinued Operations” in the notes to the accompanying unaudited consolidated financial statements for further 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 technology 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, our and the customer’s costs of products, vendor return and cancellation policies, and our ability to meet customer demands. We continue to work closely with our suppliers and manufacturers 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.

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 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 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 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 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.

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 below tables for more information.

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

(1)

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 related amortization and integration expenses, 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 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 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.

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):

27

(2)

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) expense. 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.

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

(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 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.

RESULTS OF OPERATIONS

Net sales: Net sales for the three months ended December 31, 2025, increased $121.6 million compared to the three months ended December 31, 2024, 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 demand was primarily driven by midmarket, large enterprise, and healthcare customers. For further information, see the “Segment Results of Operations” below.

Net sales for the nine months ended December 31, 2025, increased $338.7 million compared to the nine months ended December 31, 2024, 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 demand was primarily driven by large enterprise customers. For further information, see the “Segment Results of Operations” below.

Gross profit: Consolidated gross profit for the three months ended December 31, 2025, increased $33.6 million compared to the prior three-month period due to increases in net sales in our product segment and managed services segment, offset by a decrease in our professional services segment. Overall, gross margin increased 40 basis points year over year to 25.8%, primarily due to higher product margin led by a shift in product mix and higher vendor incentives, partially offset by a lower percentage of sales of third-party maintenance and subscriptions that are recognized on a net basis and lower services margin. For further information, see the “Segment Results of Operations” below.

Consolidated gross profit for the nine months ended December 31, 2025, increased $89.7 million compared to the prior nine-month period due to increases in net sales in all three of our operating segments. Overall, gross margin increased 30 basis points year over year to 25.2%, primarily due to higher product margin led by a shift in product mix as we sold more third-party maintenance and subscriptions that are recognized on a net basis, offset by lower services margin. For further information, see the “Segment Results of Operations” below.

Selling, general, and administrative: Selling, general, and administrative expenses for the three and nine months ended December 31, 2025, increased $7.8 million and $34.1 million, compared to the three and nine months ended December 31, 2024, respectively.

Salaries and benefits, including variable compensation and share-based compensation for the three months ended December 31, 2025, increased $8.1 million, compared to the same three-month period in the prior year, primarily due to increases in variable compensation commensurate with the increase in our gross profit.

Salaries and benefits, including variable compensation and share-based compensation for the nine months ended December 31, 2025, increased $31.1 million, compared to the same nine-month period in the prior 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 three months ended December 31, 2025, increased $0.5 million as compared to the prior three-month period, mainly driven by higher legal fees.

General and administrative expenses for the nine months ended December 31, 2025, increased $3.9 million as compared to the prior nine-month period, due to the addition of Bailiwick. In total, we had higher professional fees of $1.9 million, higher software, subscription, and maintenance fees of $1.8 million, higher office rent of $0.7 million, and higher travel and entertainment expenses of $0.7 million. These increases were offset by a decrease in acquisition-related expenses of $1.0 million, due to the addition of Bailiwick in the prior nine-month period.

Provision for credit losses for the three and nine months ended December 31, 2025, was $0.4 million and $0.6 million, respectively, as compared to $1.2 million and $1.5 million for the prior three- and nine-month periods, respectively. Our lower provision for credit losses for the three and nine months ended December 31, 2025, was due to favorable changes in our net credit exposure.

Depreciation and amortization: Depreciation and amortization for the three months ended December 31, 2025, decreased compared to the three months ended December 31, 2024, primarily due to decreased acquisition amortization expense.

Depreciation and amortization for the nine months ended December 31, 2025, increased compared to the nine months ended December 31, 2024, primarily due to amortization from intangible assets acquired in the Bailiwick acquisition.

Operating income: As a result of the foregoing, operating income for the three months ended December 31, 2025, increased $27.0 million compared to the prior three-month period, and operating margin increased by 380 basis points to 7.1%.

As a result of the foregoing, operating income for the nine months ended December 31, 2025, increased $53.6 million compared to the prior nine-month period, and operating margin increased by 200 basis points to 6.9%.

Other income, net: Other income, net for the three months ended December 31, 2025, was $2.1 million, compared to $3.4 million for the three months ended December 31, 2024. Our decrease in other income was primarily due to lower foreign exchange gains in the current three-month period compared to the same period in the prior year and $1.2 million in expense in the current three-month period related to adjustments to our estimate of the fair value of contingent consideration due from PEAC Solutions relating to our sale of HoldCo, offset by higher interest income in the current three-month period compared to the same period in the prior year. We had foreign exchange gains of $0.1 million for the three months ended December 31, 2025, compared to $1.9 million for the same period in the prior year. We had $3.0 million in interest income for the three months ended December 31, 2025, compared to $1.6 million for the same period in the prior year.

Other income for the nine months ended December 31, 2025, was $7.9 million, compared to $5.5 million for the nine months ended December 31, 2024. Our increase in other income was primarily due to higher interest income in the current nine-month period compared to the same period in the prior year and earnings from our transition services agreement with PEAC offset by higher foreign exchange losses in the current nine-month period compared to the same period in the prior year and $1.1 million in expense in the current nine-month period 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 $9.0 million in interest income for the nine months ended December 31, 2025, compared to $5.9 million for the same period in the prior year. We had foreign exchange losses of $0.6 million for the nine months ended December 31, 2025, compared to losses of $0.4 million for the same period in the prior year.

Provision for income taxes: Our provision for income tax expense was $12.2 million and $37.7 million for the three and nine months ended December 31, 2025, as compared to $5.4 million and $21.8 million for the same three- and nine-month periods in the prior year. Our effective tax rate for the three and nine months ended December 31, 2025, was 26.7% and 27.6% respectively, compared with 26.9% and 27.2%, respectively, for the same three- and nine-month periods in the prior year. Our effective income tax rate for the three months ended December 31, 2025, was lower compared to the same three-month period in the prior year primarily due to lower state taxes. Our effective income tax rate for the nine months ended December 31, 2025, was higher compared to the same nine-month period in the prior year primarily due a higher tax benefit from restricted stock and state taxes in the prior year.

Net earnings from continuing operations: Net earnings from continuing operations for the three months ended December 31, 2025, were $33.4 million, an increase of $18.8 million, as compared to $14.6 million for the same three-month period in the prior year. The net earnings increase was due to the increase in operating profits, offset by an increase in provision for income taxes and decrease in other income.

Net earnings from continuing operations for the nine months ended December 31, 2025, were $98.7 million, an increase of $40.1 million, as compared to $58.6 million for the same nine-month period in the prior year. The net earnings increase was due to the increase in operating profits, and an increase other income, 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 three months ended December 31, 2025, was $1.7 million consisting of a gain of $2.3 million from settling a legal matter, offset by an income tax expense of $0.6 million. In December 2025, we paid $2.3 million to settle a legal matter related to our discontinued operations, which we had recorded as a contingent liability of $4.6 million during the three months ended September 30, 2025. As a result of this settlement, we recognized a gain of $2.3 million. We had net earnings from discontinued operations, net of tax, of $9.6 million for the same three-month period in the prior year consisting of $12.3 million in earnings before income tax, offset by income tax of $2.7 million.

Net earnings from discontinued operations, net of tax, for the nine months ended December 31, 2025, was $8.9 million consisting of $12.3 million in earnings before tax, offset by $3.4 million in income tax expense. Our earnings from discontinued operations before tax for the nine months ended December 31, 2025 include a $4.4 million gain from the sale of our domestic financing business and 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 $24.2 million for the same nine-month period in the prior year consisting of $32.6 million in earnings before income tax, offset by $8.4 million in income tax expense.

Net earnings: Due to the aforementioned reasons, net earnings for the three months ended December 31, 2025, were $35.1 million, an increase of $11.0 million, as compared to $24.1 million for the same three-month period in the prior year.

Due to the aforementioned reasons, net earnings for the nine months ended December 31, 2025, were $107.6 million, an increase of $24.8 million, as compared to $82.8 million for the same nine-month period in the prior year.

SEGMENT OVERVIEW

Following the divestiture of our domestic financing business, 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 and distributors.

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.

SEGMENT RESULTS OF OPERATIONS

The three and nine months ended December 31, 2025, compared to the three and nine months ended December 31, 2024

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

32

Net sales:

Product segment sales for the three months ended December 31, 2025, increased compared to the same three-month period in the prior year, due to increases in revenue from networking, cloud, security, and collaboration products. Product segment sales for the nine months ended December 31, 2025, increased compared to the same nine-month period in the prior 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 both the three and nine months ended December 31, 2025, compared to the same periods in the prior year.

Professional services segment sales for the three months ended December 31, 2025, decreased compared to the same three-month period in the prior year, primarily due to decreases in revenues from project services and staff augmentation, offset by increases in consulting revenue. Professional services segment sales for the nine months ended December 31, 2025, increased compared to the same nine-month period in the prior year, primarily due to increases in revenues attributable to the acquisition of Bailiwick.

Managed services segment sales for the three and nine months ended December 31, 2025, 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 and cloud services.

Gross profit margin:

Product segment margin for the three and nine months ended December 31, 2025, increased by 170 basis points and 70 basis points, respectively, from the same three- and nine-month periods in the prior year due to a shift in product mix and vendor incentives, offset by a decrease in the proportion of our sales that were 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 and nine months ended December 31, 2025 increased by 140 basis points and 50 basis points, respectively, which had a positive effect on gross margin, as compared to the same three- and nine-month periods in the prior year.

Professional services segment margin for the three and nine months ended December 31, 2025, decreased by 90 basis points and 190 basis points, respectively, from the same three- and nine-month periods in the prior 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 margin for the three and nine months ended December 31, 2025, decreased by 80 basis points and 60 basis points, respectively, from the same three- and nine-month periods in the prior year, mainly driven by a decrease in gross margin from our managed services offerings due to increased third party costs.

LIQUIDITY AND CAPITAL RESOURCES

LIQUIDITY OVERVIEW

We finance our operations through funds generated from operations and through borrowings. We use those funds to meet our capital requirements, which primarily consist of working capital for operational needs, capital expenditures, mergers and acquisitions, and the 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 next year.

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

CASH FLOWS

The following table summarizes our sources and uses of cash for the nine months ended December 31, 2025, and 2024 (in thousands):

Cash flows from operating activities: During the nine months ended December 31, 2025, we used $223.4 million through operating activities of continuing operations primarily due to an increase in our accounts receivable and inventories, partially offset by net earnings. During the nine months ended December 31, 2024, we provided $186.6 million through operating activities of continuing operations primarily due to net earnings and decreases in our accounts receivable and inventories, partially offset by a decrease in our accounts payable.

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 for our business segments as of December 31, 2025, and December 31, 2024:

(1)

Represents the rolling three-month average of the balance of accounts receivable-trade, net at the end of the period divided by gross billings for the same three-month period.

(2)

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 and services billed to our customers for the same three-month period.

(3)

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 cash conversion cycle increased to 41 days as of December 31, 2025, as compared to 32 days as of December 31, 2024. 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 1 day to 63 days as of December 31, 2025, compared to 62 days as of December 31, 2024, reflecting higher sales to customers with terms less than or equal to net 60 days. Our DIO increased to 22 days as of December 31, 2025, compared to 13 days as of December 31, 2024, due to longer customer delivery schedules. Our DPO increased by 1 day to 44 days as of December 31, 2025, as compared to December 31, 2024. We pay invoices, processed through our WFCDF Credit Facility from our accounts payable-floor plan balance or paid directly from our accounts payable-trade balances typically within 45 to 60 days from the invoice date.

Cash flows related to investing activities: During the nine months ended December 31, 2025, we used $3.2 million through investing activities of continuing operations consisting primarily of purchases of property and equipment. We also provided $156.7 million through investing activities of discontinued operations, consisting primarily of cash proceeds from our sale of HoldCo of $180.1 million less cash transferred with the HoldCo entities of $23.4 million. During the nine months ended December 31, 2024, we used $128.3 million through investing activities of continuing operations consisting of $124.9 million for the acquisition of Bailiwick, and $3.4 million for purchases of property and equipment.

Cash flows from financing activities: During the nine months ended December 31, 2025, we provided $9.8 million through financing activities of continuing operations. We had cash outflows of $24.3 million to repurchase outstanding shares of our common stock and $13.1 million paid for dividends. These cash outflows were partially offset by cash inflows of $43.6 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 nine months ended December 31, 2024, we used $21.5 million through financing activities of continuing operations. We had cash outflows of $33.5 million to repurchase outstanding shares of our common stock and $2.3 million paid in connection with our purchase of certain assets of Peak Resources, Inc. based on adjustments to the determination of total net assets received from our January 2024 acquisition of that company. These cash outflows were partially offset by cash inflows of $10.6 million in net borrowings on the floor plan component of our credit facility and $3.6 million in proceeds from the issuance of common stock to employees under our employee stock purchase plan.

CREDIT FACILITY

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

Please refer to Note 7, “Credit Facility” to the accompanying Consolidated Financial Statements included in "Part I, Item 1. Financial Statements" 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 customers place a purchase order with us and we have approved their credit, we place an order for the desired products with one of our vendors. Our vendors are generally paid by the floor plan facility and our liability is reflected in “accounts payable—floor plan” in our consolidated balance sheets.

Most customer payments to us are remitted to our lockbox accounts. Once payments are cleared, the monies in the lockbox accounts are automatically and daily transferred to our operating account. We pay down the floor plan facility on three specified dates each month, generally 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 December 31, 2025, and March 31, 2025, we had a maximum credit limit of $500.0 million, and an outstanding balance on the floor plan facility of $133.2 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.

Revolving credit facility: We did not have any activity on our revolving credit facility during the three months ended December 31, 2025, and 2024. As of December 31, 2025, 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 December 31, 2025, and March 31, 2025.

DIVIDENDS

A summary of fiscal year-to-date dividend activity for our common stock is as follows:

On February 4, 2026, we announced that our Board of Directors declared a quarterly dividend. The quarterly cash dividend of $0.25 per common share will be paid on March 18, 2026, to shareholders of record as of the close of business on February 24, 2026.

The payment of any future dividends will be at the discretion of our Board of Directors 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 of Directors 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 comply with the performance obligations under all service contracts for which there is a performance guarantee, and we believe that any liability incurred in connection with these guarantees would not have a material adverse effect on our consolidated statements of operations.

OFF-BALANCE SHEET ARRANGEMENTS

As part of our ongoing business, we do not participate in transactions that generate relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements, or other contractually narrow or limited purposes. As of December 31, 2025, we were not involved in any unconsolidated special purpose entity transactions.

ADEQUACY OF CAPITAL RESOURCES

The continued implementation of our business strategy will require a significant investment in both resources and managerial focus. In addition, we may selectively 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. We may also open facilities in new geographic areas, which may require a significant investment of cash. We may also acquire technology companies to expand and enhance our geographic footprint, or the platform of bundled solutions to provide additional functionality and value-added services. We may require additional capital due to increases in inventory to accommodate our customers’ IT installation schedules. 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.

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 a number of reasons, including, but not limited to currency fluctuations, reduction in IT spending, shortages of product from our vendors due to material shortages, the timing and mix of specific transactions, the reduction of manufacturer incentive programs, and other factors. See Part I, Item 1A, “Risk Factors,” in our 2025 Annual Report, as supplemented in subsequently filed reports, and in Part II, Item 1A. “Risk Factors” in this Quarterly Report.

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.

CRITICAL ACCOUNTING ESTIMATES

Our critical accounting estimates have not changed from those reported in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2025 Annual Report.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

FOREIGN CURRENCY RISK

We have foreign currency exposure when transactions are not denominated in our subsidiaries’ functional currency, which include purchases and sales of the products and services we provide, as well as loans with other ePlus entities. To date, foreign currency exposure associated with purchases and sales of the products and services we provide has not been significant. We have incurred foreign currency transaction gains and losses in certain foreign subsidiaries on US dollar denominated loans. Fluctuations in currency exchange rates may impact our results of operations and financial position.

CONTROLS AND PROCEDURES

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer (“CEO”) and our Chief Financial Officer (“CFO”), of the effectiveness of the design and operation of our disclosure controls and procedures, or “disclosure controls,” as defined in the Exchange Act Rule 13a-15(e). Disclosure controls are controls and procedures designed to reasonably ensure that information required to be disclosed in our reports filed under the Exchange Act, such as this Quarterly Report, is recorded, processed, summarized, and reported within the periods specified in the SEC’s rules and forms. Disclosure controls include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to our management, including our CEO and CFO, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Our disclosure controls include some, but not all, components of our internal control over financial reporting. Based upon that evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective as of December 31, 2025.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

There have not been any changes in our internal control over financial reporting during the quarter ended December 31, 2025, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

LIMITATIONS AND EFFECTIVENESS OF CONTROLS

Our management, including our CEO and CFO, do not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system cannot provide absolute assurance due to its inherent limitations; it is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. A control system also can be circumvented by collusion or improper management override. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of such limitations, disclosure controls and internal control over financial reporting cannot prevent or detect all misstatements, whether unintentional errors or fraud. However, these inherent limitations are known features of the financial reporting process; therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.

RISK FACTORS

Other than as disclosed in “Part II, Item 1A. “Risk Factors” of our Quarterly Report on Form 10-Q for the quarter ended June 30, 2025, there has not been any material change in the risk factors disclosed in “Part I, Item 1A. Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended March 31, 2025.