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FINANCING RECEIVABLES AND OPERATING LEASES | 6 Months Ended
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Sep. 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 and six months ended September 30, 2024, and 2023 (in thousands):
|  | Three months Ended September 30, |  |  | Six months Ended September 30, |
|  | 2024 |  |  | 2023 |  |  | 2024 |  |  | 2023 |
Net sales |  | $ | 7,855 |  |  | $ | 4,872 |  |  | $ | 11,365 |  |  | $ | 12,495 |
Cost of sales |  |  | 6,956 |  |  |  | 4,132 |  |  |  | 10,015 |  |  |  | 11,523 |
Gross profit |  | $ | 899 |  |  | $ | 740 |  |  | $ | 1,350 |  |  | $ | 972 |
The following table provides interest income in aggregate on our sales-type leases and lease income on our operating leases for the three and six months ended September 30, 2024, and 2023 (in thousands):
|  | Three months Ended September 30, |  |  | Six months Ended September 30, |
|  | 2024 |  |  | 2023 |  |  | 2024 |  |  | 2023 |
Interest income on sales-type leases |  | $ | 2,219 |  |  | $ | 1,624 |  |  | $ | 4,242 |  |  | $ | 2,986 |
Lease income on operating leases |  | $ | 2,094 |  |  | $ | 2,801 |  |  | $ | 4,961 |  |  | $ | 5,609 |
FINANCING RECEIVABLES—NET The following tables provide a disaggregation of our financing receivables – net (in thousands):
|  | Notes |  |  | Sales-Type Lease |  |  | Financing |
September 30, 2024 |  | Receivable |  |  | Receivables |  |  | Receivables |
Gross receivables |  | $ | 148,407 |  |  | $ | 94,819 |  |  | $ | 243,226 |
Unguaranteed residual value (1) |  |  | - |  |  |  | 11,963 |  |  |  | 11,963 |
Unearned income |  |  | (8,319 | ) |  |  | (20,591 | ) |  |  | (28,910 | )
Allowance for credit losses (2) |  |  | (1,236 | ) |  |  | (1,828 | ) |  |  | (3,064 | )
Total, net |  | $ | 138,852 |  |  | $ | 84,363 |  |  | $ | 223,215 |
Reported as: |  |  |  |  |  |  |  |  |  |  |  |
Current |  | $ | 92,092 |  |  | $ | 44,265 |  |  | $ | 136,357 |
Long-term |  |  | 46,760 |  |  |  | 40,098 |  |  |  | 86,858 |
Total, net |  | $ | 138,852 |  |  | $ | 84,363 |  |  | $ | 223,215 |
(1) | Includes unguaranteed residual values of $4,683 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):
|  | September 30, 2024 |  |  | March 31, 2024 |
Cost of equipment under operating leases |  | $ | 11,026 |  |  | $ | 10,744 |
Accumulated depreciation |  |  | (7,323 | ) |  |  | (7,128 | )
Operating leases—net (1) |  | $ | 3,703 |  |  | $ | 3,616 |
(1) | Amounts include estimated unguaranteed residual values of $1,708 thousand and $1,346 thousand as of September 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 September 30, 2024, and March 31, 2024, we had financing receivables of $49.3 million and $45.8 million, respectively, and operating leases of $2.1 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 a sale, we derecognize the carrying value of the 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 September 30, 2024, and 2023, we recognized net gains of $14.5 million and $6.9 million, respectively, and total proceeds from these sales were $277.0 million and $220.8 million, respectively. For the six months ended September 30, 2024, and 2023, we recognized net gains of $15.8 million and $8.2 million, respectively, and total proceeds from these sales were $324.9 million and $282.2 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 September 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 if the lessee elects to early terminate the lease. As of September 30, 2024, and March 31, 2024, the total potential payments that could result from these indemnities was immaterial.

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