FINANCING RECEIVABLES AND OPERATING LEASES

12 Months Ended

Mar. 31, 2024

FINANCING RECEIVABLES AND OPERATING LEASES [Abstract]

FINANCING RECEIVABLES AND OPERATING LEASES

4. FINANCING RECEIVABLES AND OPERATING LEASES

Our financing receivables and operating leases consist of our financing receivables from notes receivable and sales-type leases and the carrying value of our assets that we are leasing to our customers on leases that are classified as operating leases. We generally lease IT, communication, and medical equipment. Our lease terms generally range from 2 to 6 years, with most terms ranging between 3 to 4 years. Our leases often provide the lessee the option to purchase the underlying asset at the end of the lease term. Occasionally, our leases provide the lessee a bargain purchase option. We classify our leases as either sales-type leases or operating leases. Additionally, we finance purchases of third-party software and third-party services for our customers, which we classify as notes receivable.

The following table provides the profit recognized for sales-type leases at their commencement date, including modifications that are recognized on a net basis, for the years ended March 31, 2024, and 2023 (in thousands):

	Year Ended March 31,
	2024		2023
Net sales	$	21,578	$	22,677
Cost of sales		19,557		19,009
Gross profit	$	2,021	$	3,668

The following table provides interest income in aggregate on our sales-type leases and lease income on our operating leases for the years ended March 31, 2024, and 2023 (in thousands):

	Year Ended March 31,
	2024		2023
Interest income on sales-type leases	$	6,769	$	3,943
Lease income on operating leases	$	10,886	$	17,421

FINANCING RECEIVABLES—NET

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

	Notes			Sales-Type Lease			Financing
March 31, 2024	Receivable			Receivables			Receivables
Gross receivables	$	114,713		$	75,658		$	190,371
Unguaranteed residual value (1)		-			9,078			9,078
Unearned income		(6,503	)		(12,036	)		(18,539	)
Allowance for credit losses (2)		(1,056	)		(1,435	)		(2,491	)
Total, net	$	107,154		$	71,265		$	178,419
Reported as:
Current	$	61,830		$	40,770		$	102,600
Long-term		45,324			30,495			75,819
Total, net	$	107,154		$	71,265		$	178,419

(1) Includes unguaranteed residual values of $3,718 thousand that we retained after selling the related lease receivable.

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

	Notes			Sales-Type Lease			Financing
March 31, 2023	Receivable			Receivables			Receivables
Gross receivables	$	117,008		$	60,157		$	177,165
Unguaranteed residual value (1)		-			8,161			8,161
Unearned income		(5,950	)		(8,050	)		(14,000	)
Allowance for credit losses (2)		(801	)		(981	)		(1,782	)
Total, net	$	110,257		$	59,287		$	169,544
Reported as:
Current	$	65,738		$	24,091		$	89,829
Long-term		44,519			35,196			79,715
Total, net	$	110,257		$	59,287		$	169,544

(1) Includes unguaranteed residual values of $4,222 thousand that we retained after selling the related lease receivable.

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

The following table provides the future scheduled minimum lease payments to be received from our sales-type leases as of March 31, 2024 (in thousands):

Year ending March 31, 2025	$	34,513
2026		22,600
2027		12,380
2028		4,901
2029		1,263
2030 and thereafter		1
Total	$	75,658

OPERATING LEASES—NET

Operating leases—net represents the carrying value of assets that we are leasing to our customers on leases that are classified as operating leases. The components of operating leases—net are as follows (in thousands):

	March 31, 2024			March 31,2023
Cost of equipment under operating leases	$	10,744		$	15,301
Accumulated depreciation		(7,128	)		(10,599	)
Operating leases—net (1)	$	3,616		$	4,702

(1) Amounts include estimated unguaranteed residual values of $1,346 thousand and $1,717 thousand as of March 31, 2024, and 2023 respectively.

The following table provides the future scheduled minimum lease rental payments to be received from our operating leases as of March 31, 2024 (in thousands):

Year ending March 31, 2025	$	1,984
2026		1,271
2027		222
Total	$	3,477

TRANSFERS OF FINANCIAL ASSETS

We enter into arrangements to transfer the contractual payments due under financing receivables and operating lease agreements.

For transfers accounted for as a secured borrowing, the corresponding investments serve as collateral for non-recourse notes payable. As of March 31, 2024, and March 31, 2023, we had financing receivables of $45.8 million and $35.7 million, respectively, and operating leases of $2.8 million and $2.5 million, respectively which were collateral for non-recourse notes payable. See Note 9, “Notes Payable and Credit Facility.”

For transfers accounted for as sales, we derecognize the carrying value of the financial asset transferred plus any liability and recognize a net gain or loss on the sale, which are presented within net sales in the consolidated statement of operations. For the years ended March 31, 2024, 2023, and 2022, we recognized net gains of $19.0 million, $16.1 million, and $18.2 million, respectively, and total proceeds from these sales were $762.6 million, $706.0 million, and $855.1 million, respectively.

When we retain servicing obligations in transfers accounted for as sales, we allocate a portion of the proceeds to deferred revenues, which is recognized as we perform the services. As of March 31, 2024, and March 31, 2023, we had deferred revenue of $0.4 million and $0.5 million, respectively, for servicing obligations.

In a limited number of transfers accounted for as sales, we indemnified the assignee in the event that the lessee elects to early terminate the lease. As of March 31, 2024, our total potential liability that could result from these indemnities is immaterial.