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FINANCING RECEIVABLES AND OPERATING LEASES
 3 Months Ended
Jun. 30, 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. Often, 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 three months ended June 30, 2024, and 2023 (in thousands):

 
Three Months Ended June 30,
  
   
2024
    
2023
  
Net sales
  
$
3,510
    
$
7,623
  
Cost of sales
    
3,059
      
7,391
  
Gross profit
  
$
451
    
$
232
  

The following table provides interest income in aggregate on our sales-type leases and lease income on our operating leases for the three  months ended June 30, 2024, and 2023 (in thousands):

 
Three Months Ended June 30,
  
   
2024
    
2023
  
Interest income on sales-type leases
  
$
2,023
    
$
1,362
  
Lease income on operating leases
  
$
2,867
    
$
2,808
  

FINANCING RECEIVABLES—NET

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

    Notes     Sales-Type Lease     Financing  
June 30, 2024
  
Receivable
    
Receivables
    
Receivables
  
Gross receivables
  
$
119,544
    
$
83,590
    
$
203,134
  
Unguaranteed residual value (1)
    
-
      
9,858
      
9,858
  
Unearned income
    
(7,775
)
    
(13,620
)
    
(21,395
)
Allowance for credit losses (2)
    
(1,088
)
    
(1,409
)
    
(2,497
)
Total, net
  
$
110,681
    
$
78,419
    
$
189,100
  
Reported as:
                        
Current
  
$
65,679
    
$
43,440
    
$
109,119
  
Long-term
    
45,002
      
34,979
      
79,981
  
Total, net
  
$
110,681
    
$
78,419
    
$
189,100
  

  (1)
Includes unguaranteed residual values of $3,554 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, 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.

OPERATING LEASES—NET

Operating leases—net represents leases that do not qualify as sales-type leases. The components of the operating leases—net are as follows (in thousands):

 
June 30, 2024
    
March 31, 2024
  
Cost of equipment under operating leases
  
$
12,370
    
$
10,744
  
Accumulated depreciation
    
(7,319
)
    
(7,128
)
Operating leases—net (1)
  
$
5,051
    
$
3,616
  


(1)
Amounts include estimated unguaranteed residual values of $1,711 thousand and $1,346 thousand as of June 30, 2024, and March 31, 2024, respectively.

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 June 30, 2024, and March 31, 2024, we had financing receivables of $52.2 million and $45.8 million, respectively, and operating leases of $2.5 million and $2.8 million, respectively, which were collateral for non-recourse notes payable. See Note 8, “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. During the three months ended June 30, 2024, and 2023, we recognized net gains of $1.3 million for both periods, and total proceeds from these sales were $47.9 million and $61.4 million, respectively.

When we retain servicing obligations in transfers accounted for as sales, we allocate a portion of the proceeds to deferred revenue, which is recognized as we perform the services. As of June 30, 2024, and March 31, 2024, we had deferred revenue of $0.3 million and $0.4 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 June 30, 2024, and March 31, 2024, our total potential liability that could result from these indemnities is immaterial.