Diplomat.is/more

I’m Jay.I have chronic lymphocytic leukemia.I’m a retired submarine commander, a father, a husband, an avid woodcarver.I bike 20 miles a day.I know the Diplomat Difference.

Copyright © 2015 by Diplomat Pharmacy Inc. Diplomat is a registered trademark of Diplomat Pharmacy Inc. All rights reserved.

Investor PresentationNovember 2016

Confidential

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This presentation may contain “forward-looking” statements that involve risks, uncertainties and assumptions. If the risks or uncertainties ever materialize or the assumptions prove incorrect, our results may differ materially from those expressed or implied by such forward-looking statements. All statements other than statements of historical fact could be deemed forward-looking, including, but not limited to, any projections of financial information; any statements about historical results that may suggest trends for our business and results of operations; any statements of the plans, strategies and objectives of management for future operations; any statements of expectation or belief regarding future events, health care developments, or specialty pharmaceutical industry market sizes, shares, trends or growth; and any statements of assumptions underlying any of the foregoing.

Any forward-looking statements contained in this presentation are based on management's good-faith belief and reasonable judgment based on current information, and these statements are qualified by important factors, many of which are beyond our control, that could cause our actual results to differ materially from those in the forward-looking statements, including changes in global, regional or local economic, business, competitive, market, regulatory and other factors, many of which are beyond our control, including but not limited to the following risks related to our business: our ability to adapt to changes or trends within the specialty pharmacy industry; significant and increasing pricing pressure from third-party payors, our relationships with key pharmaceutical manufacturers; our limited history with integrating acquisitions; and the effects of competition. These and other risks and uncertainties associated with our business are described in the prospectus for our proposed follow-on offering, including under the heading “Risk Factors.” We assume no obligation and do not intend to update these forward-looking statements.

In addition to U.S. GAAP financials, this presentation includes certain non-GAAP financial measures. These historical and forward-looking non-GAAP measures are in addition to, not a substitute for or superior to, measures of financial performance prepared in accordance with GAAP. A reconciliation between GAAP and non-GAAP measures is included in the appendix to this presentation.

Diplomat is a registered trademark of Diplomat Pharmacy, Inc. This presentation also contains additional trademarks and service marks of ours and of other companies. We do not intend our use or display of other companies’ trademarks or service marks to imply a relationship with, or endorsement or sponsorship of us by, these other companies.

Important note

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Investment Highlights

• Specialty Pharmacy industry is a high growth market • Drug development pipeline remains robust

− Oncology is the largest and fastest growing segment of the Diplomat portfolio• Limited distribution growing in importance

• Diplomat is unique within the specialty pharmacy industry• Taking market share as the largest independent specialty pharmacy• Access to ~100 limited distribution drugs

• Significant progress in building out the platform since the IPO (Oct. 9, 2014)• Expanded access to limited distribution drugs; ~ 30 new LDs• Completed three strategic acquisitions which broadened service offerings, deepened

therapeutic expertise, and improved geographic footprint

• Strong financial performance• Five-year revenue CAGR of 42% & EBITDA CAGR of 65%• Diversified revenue and profitability streams• Modest balance sheet leverage – ample dry powder

• Experienced senior management team • CEO founded Diplomat 40+ years ago• Leadership team has broad ranging experience across the industry

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(1) CAGR based on 2010-2015 results

(1)

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Diplomat at a glance

Founded: 1975; Headquarters: Flint, MI Employees: ~1,900 2016E revenue: ~$4.5 billion Diversified base of marquee partners

Corporate Overview

CVS Health/Omnicare

33%

Express Scripts25%

Walgreens10%

3%

OptumRx/Catamaran

8%

Avella 1%

Others20%

2015 Market share ($98 billion total market size) (1)

Exceptional above market revenue growth

62% CAGR 2005-2015

Scaled business: National footprint

($ in millions)

Source:(1) 2015 – 2016 Economic Report on Retail, Mail and Specialty Pharmacies, Drug

Channel Institute (2) Based on mid-point of management’s estimate range for FY 2016

(2)

Pharmacy Locations

ArizonaCaliforniaConnecticutFloridaIllinoisIowaMarylandMassachusettsMichiganMinnesotaNorth CarolinaOhioPennsylvaniaTexas

(2)

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016E

$27 $58 $167 $271 $377$578

$772$1,127

$1,515

$2,215

$3,367

$4,500

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DIR (Direct and Indirect Remuneration) Fees

• Term used by CMS to address price concessions that ultimately impact the prescription drug costs of Medicare Part D plans, but are not captured at the point of sale

Some PBMs use DIR as a “catch-all” term to encompass a number of different types of fees

• Final 2014 Part D rule established a new definition of “negotiated price”, effective in 2016, to include all pharmacy price concessions which can be reasonably determined at point of sale

Some Plans / PBMs restructured programs for 2016, to make it more difficult for their DIR fees to be “reasonably determined” in anticipation of this legislation

Some PBMs assert that DIR fees cannot be determined at the point of sale as the performance against certain quality measurements are not known at the time of adjudication

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DIR Fees• Not New – been around in some format for a few years

Major changes in 2016; rates, methodology, timing, transparency

• Retroactive – Received first 2016 scorecard in 3Q 2016, but retroactive to 1/1/2016

Measured with very dissimilar retail pharmacies

• DIR fees were originally intended to be a tool to improve care in retail pharmacy categories such as diabetes, high blood pressure and cholesterol management

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Impact of DIR Fees to DPLO YTD 2016

• $10.1 million year to date total DIR fees recognized

• DIR fees have a minor impact on revenues, but all drop to the bottom line

• Going forward we anticipate DIR fees of $5-$6 million in 4Q16 and approximately $20-$30 million in 2017

(millions)1Q 2016 2Q 2016 3Q 2016 YTD 2016

Recognized in GAAP Financials

$0.6 $1.0 $8.5 $10.1

Appropriate "Normalized" Timing

2.3 3.3 4.5 10.1

Retroactive Impact $1.7 $2.3 $(4.0) $--

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Legal and Regulatory Strategies for combating DIR fees

• Proposed legislative – already in House and Senate to prevent DIR Fees being implemented in current fashion

• Multiple Industry stakeholders reviewing other legislative options

• Direct discussion with CMS to control PBM interpretations of DIR language

• Legal Challenges being reviewed by multiple SP groups and stakeholders

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Ongoing business strategies

• Continued expansion of direct contracts with payors not affected by DIR fees

• Continued contracting with manufacturer partners to insure the highest service levels for patients, physicians and health plans

• Continued expansion of our service with multiple industry stakeholders

• Continued review of M&A opportunities in areas unaffected by DIR

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Diplomat’s revenue and profits come from multiple industry sectors

DIR fees primarily affect core specialty pharmacy sector only

Complementary Opportunities Minimize Payer/PBM Risk, AND Mitigate Risk of Inflation Abatement

Other Services Envoy Health – HUB and other

services Retail Specialty Network Hospital Specialty Network 340(b) PAP All services enhance DPLO’s

relevance in healthcare

Specialty Infusion Subset of specialty pharmacy

Many similar characteristics (chronic, high cost, etc.)

Few differentiators (nursing component, more medical billing)

Higher margin business Unique/separate payer networks Payer-driven site of care transition

opportunities

Core Specialty Pharmacy(orals and self-injectables)

Oncology dominance Limited distribution expertise Outpacing industry revenue growth

organically Mix shift driving revenue and profit

growth Price inflation a very small

component of revenue Serving open, preferred, narrow, and

exclusive payer networks Increase focus on direct contracts with

payorsPharmaceutical Manufacturer Services

Discounts, rebates, services, data fees High margin Not dependent on payers or price inflation Making progress, but significant upside opportunity remains

Revenue Source: Payers

Revenue Source: Pharma & Others

Financial Impact:Higher Revenue, Lower Margin

Financial Impact:Lower Revenue,Higher Margin

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Growing list of services across the specialty pharmacy eco-system

Envoy Health Services

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Payors Partners

Call Center Support

Specialty PBM Services

Clinical Trials

TechnologySolutions

Higher MarginServices

Medical Management

Specialty Pharmacy Services

HUB/PAP/Wholesale Distribution

Utilization Management

The continued growth and expansion of small biotech companies creates a dramatic and

growing marketplace

Branding Services Educational

Services

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Diplomat controls the journey of a specialty patient

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Patient

Physician

Payor

Patient

Patient visits

physician

Payor approves script

Diplomat monitors adherence and collects data for

manufacturers

Diplomat dispenses drug

Diplomat provides:Benefit

verificationPrior

authorizationClinical

intervention

Physician writes script

Patient receives

drugs ClinicalLo

gist

ics

Operational

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Specialty spend under pharmacy benefit to grow ~5x(1)

Specialty pharmacy industry continues to show

exceptional growthSpecialty share of spend growing dramatically(1)

Specialty continues to dominate top 10 drug spend(1)

Source:(1) The 2016 Economic Report on Retail, Mail, and Specialty Pharmacies – January 2016

7 out of top 10 9 out of top 10

2014A 2020E

85%

15%27%

73%44%

56%

Diplomat 2%

$41 billion $212 billion

2010A 2020E

Traditional

2010A 2015E 2020E

Specialty

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Limited distribution a central and growing theme in specialty

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Benefits to DiplomatBenefits to biotech / pharma Completely eliminate or reduce

reliance on wholesaler Real-time clinical data Commercialization assistance Improves appropriate utilization

Barrier to entry Deeper, and earlier,

partnerships with pharma / biotech

Increased value proposition to payors

Market share opportunity

Portfolio of ~100 limited distribution drugs, comprising approximately 45% of revenue in 2015, and well positioned for

disproportionate growth from future drug approvals

Recent unique limited panels…Diplomat exclusive or semi-exclusive

What is limited distribution? Targeted channel strategy Provides certain specialty

pharmacies with exclusive or preferred dispensing rights to certain drugs

Fast-growing trend

(2013)

(2012)

(2015)

Traditional:

Limited:

Manufacturer

Multiple Wholesalers

65,000 Pharmacies

PatientManufacturer

One/few pharmacies Patient

DPLO EXCLUSIVE DPLO LARGEST OF 4

DPLO 1 of 4

(2016)

DPLO 1 of 4

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Unique competitive position

LARGE PBM / RETAILPHARMACY

SMALLER SPECIALTYPHARMACIES

Diversification distracts from specialty pharmacy

Less flexible / less nimble

Limited scale Most focused on

one or a few disease states

Fragmented market

Consolidation opportunity for Diplomat

Singularly focused on specialty

High-touch model

Flexible and nimble

Entrepreneurial culture

National reach

Scalable infrastructure

Acquired Feb 2016

Acquired 2013-2016

Acquired Sept 2016

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Base business continues to gain momentum

Specialty pharmacy market grew ~25% in 2015

3,000+ oncology and immunology drugs in global drug development

Increased prevalence of limited distribution panels

Biosimilars launching in U.S.

2015 record year for drug approvals

Improving trends across specialty pharmacy…

…driving key milestones and achievements at Diplomat

Diplomat grew revenues by 52% from 2014 to 2015

Recent new drug contracts

The majority of which are limited distribution drugs

Oncology

Hepatitis C

Other• 51 total approvals: - 45 NMEs and 6 biologics

• 21 of 45 NMEs were Orphan designation

• 16 of 45 NMEs were “First in Class”• 69% of all approvals were

specialty

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Accomplishments since the IPO

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Core Capabilities

# of LD Drugs

Successful Acquisitions

Management Team

Board of Directors

Trailing Revenue

Gross Profit /Script

Trailing Adjusted EBITDA

Market Share

At IPO – October 9, 2014 September 30, 2016

~2% of $63 billion market ~4% of a $100+ billion market

Oncology, Immunology, MS Oncology, Infusion, Immunology, MS, HepC

~70 ~1002 prior to IPO 3 since IPO

Diverse Expanded/Improved

6 Members, 1 Independent 7 Members, 4 Independent

$2.0 billion $4.3 billion$143/prescription $305/prescription

$30.5 million $109.4 million

(1)

(2)

(1)

Source:(1) Trailing four quarters(2) 2Q14 compared to “normalized” 3Q16

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Future M&A criteriaWhen considering acquisitions, we look for targets that will potentially benefit Diplomat in one or more of the following ways:

Expand into new therapeutic areas and/or geographic regions Enhance clinical capabilities to improve competitive advantage Access to Limited Distribution drugs Access to new/expanded specialty prescriber base Accelerate our higher margin business opportunities Bring new services and technologies under our umbrella Makes DPLO better, not just bigger

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Outstanding financial profile

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Traditional Drug

Specialty Drug A

Specialty Drug B

Specialty Drug C

Specialty Drug B (10% price

incr.)

Revenue $100 $3,700 $10,000 $27,000 $11,000

Gross Profit ($) $10 $185 $400 $810 $440

Gross Margin (%) 10% 5% 4% 3% 4%

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RevenuePayors

Distributors / pharmaceutical manufacturers

Patient

DiplomatCOGS

Physical drug movement$ flows

How we make money and grow profitability(Illustrative example)

How we make money

Drug mix and positive pricing trends are tremendous profit tailwinds for Diplomat

Inflation Impact

Diplomat mix shift movement over time

Our core focus

$305

Diplomat’s 3Q’16 Average*

(AWP – Y%) (WAC – X%)

Note AWP = WAC x 1.20

(1)

(1)

Example:AWP $11,905 - 16% = $10,000 Revenue WAC $9,921 - 3% = $9,600 COGS

$400 Gross Profit4% Gross Margin

*Normalized to remove Q1 and Q2 DIR fees from Q3 results

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Normalized Third Quarter 2016 Results

(1) Based on dispensed scripts only.(2) Gross profit / net sales (i.e., based on dispensed and serviced scripts).(3) 3Q15 Adjusted EBITDA benefited from one time pharma dollars and reversal of 2Q 2015 bad

debt expense

Revenue

AdjustedEBITDAmargin 3.5%

Adjusted EBITDAGross Profit /Script($ in millions) ($ in millions)

2.2%7.0%8.0%

(1)

Grossmargin

(2)3Q15A 3Q16

$947

$1,185

3Q15A 3Q16

$33

$27

3Q15A 3Q16

$301$305

(3)

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First Nine Months of 2015

First Nine Months of 2016

$2,380

$3,265

First Nine Months of 2015

First Nine Months of 2016

$67$81

$8$15

$11$19

$35

96% (28%) 75% 85% 170%

1.3% 2.0% 1.0% 1.3% 2.8%

2010A 2011A 2012A 2013A 2014A 2015A

Strong long-term financial performance…

Adjusted EBITDA2010 – First Nine Months of 2016

Total Revenue2010 – First Nine Months of 2016

% margin

% growth

($ in millions)

$578 $772$1,127

$1,515

$2,215

34% 46% 34% 46% 52%

2010A 2011A 2012A 2013A 2014A 2015A

% growth

($ in millions)

Pre-IPO infrastructure investments

Volume, price and mix all driving superior revenue growth

Natural operating leverage and acquisitions driving EBITDA growth and margin expansion

53%

27%

Note: Historical financials are not pro forma for any acquisitions.

1.6%

$3,367

$95

37% growth

21% growth

2.8% 2.5%

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First Nine Months of 2015

First Nine Months of 2016

$269

$319

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… with continued growth in profitability

Gross Profit / Script (1)

2010 – First Nine Months of 2016

Note: Financials are not pro forma for BioRx acquisition.(1) Based on dispensed scripts only.(2) Gross profit / net sales (i.e., based on dispensed and serviced scripts).

$71$93 $97

$116

$167

2010A 2011A 2012A 2013A 2014A 2015A

% growth 12% 20%31% 4%

% margin 7.1% 5.9%7.3% 6.2%

Several factors drive growth in our Gross Profit / Script(1): Continued mix shift towards higher price, higher profit drugs (including acquisitions) Favorable pricing trends

(2)

Gross margin expansion opportunities: Recent acquisitions with higher gross margins (%) Pharma $$ opportunities Specialty generics and biosimilars (longer term)

44%

6.3%

68%

7.8%

$280 19% growth

7.8% 7.4%

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Components of Quarterly Revenue Growth($ in millions)

Quar

terly

Rev

enue

• Price inflation has comprised 5-6% of revenue over the last 5 quarters

No meaningful change to date

• Chronic disease expertise provides an annuity-like revenue base

Limited distribution leadership and rich drug pipeline driving revenue growth from new drugs

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Annual Revenue by Drug Year Launch

$-

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

2013 2014 2015

2015

2014

2013

2012

2011

2006 - 2010

2001 - 2005

1996 - 2000

1995 and Prior

$1.5B

$2.2B

$3.3B

5%

21%

2%18%

3%

16%

95%$1.4B

77%$1.7B

63%$2.1B

• Drugs across all launch years continue to grow substantially over time

2012 and prior drugs have grown ~50% from 2013 to 2015

• 2015 a record year for FDA approval of specialty drugs, yet 2015 launch drugs contributed less than 3% of 2015 revenue

Will ramp up dramatically in 2016 and beyond

• Pipeline remains an important element of near-term and long-term growth; existing drugs will also contribute meaningfully

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Balance Sheet / Cash Flow snapshot

($ in millions)

(1) Includes $6mm in cash-based contingent consideration(2) ProForma to include 12 months of TNH

2016 2015Cash $17 $28

Total Debt $154 $119 (1)

Shareholders’ equity $613 $516

Net Debt/ProForma TTM EBITDA(2) ~1.2x ~.8x

Cash Flow From Operations (period ended) $31 $29

December 31,September 30,

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Appendix

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Revenue by Therapeutic Class($ in millions)

2015% of Total 2014 2013

Oncology 1,432,091$ 43% 1,068,751$ 736,987$ Hepatitis 520,771 15% <10% <10%

Immunology 510,708 15% 438,145 378,685Infusion 374,884 11% <10% <10%

Multiple Sclerosis <10% N/A 226,805 169,470Other (none greater than 10% in the period) 528,177 16% 481,255 229,997

3,366,631$ 2,214,956$ 1,515,139$

Limited distribution drug % of total 45% 44% 40%

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2016 Normalized Income Statement

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(millions)

Reported Normalized (1) Reported Normalized (1) Reported Normalized (1)

Revenue 995,870$ 1,088,506$ 1,181,173$ 994,169$ 1,086,174$ 1,185,206$

Gross Profit 79,238$ 83,270$ 78,512$ 77,537$ 80,938$ 82,545$

Gross Margin 8.0% 7.6% 6.6%7.8% 7.5% 7.0%

Adj EBITDA 29,019$ 29,643$ 22,614$ 27,318$ 27,311$ 26,647$

Adj EBITDA Margin 2.9% 2.7% 1.9%2.7% 2.5% 2.2%

332$ 339$ 289$ 325$ 329$ 305$

1Q 2016 2Q 2016 3Q 2016

Gross Profit/ Prescription Dispensed

(1)

Adjustments : 1Q 2015 2Q 2015 3Q 2015 FYDIR fees (1,701)$ (2,332)$ 4,033$ -$

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Recent Acquisitions

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Acquired Company Consideration Rationale Other

June 1, 2016

• $75M gross purchase price• $65M cash, $10M stock• ~8.0x CY 2015 EBITDA

• Oncology focused specialty pharmacy; 22 LDs• Strengthens Diplomat’s footprint in key geographic markets

(California and Texas)• Revenue synergy opportunities• Promising proprietary technology; some components of

TNH’s portal can be leveraged across Diplomat’s platform

• Lack of auction/marketed process

• Founder/owner led• Management all on

board at DPLO

June 19, 2015

• $87M gross purchase price*• $77M cash*, $10M stock• ~4.2x CY 2014 EBITDA

• Hep C dominance in Mid Atlantic• Hep C is a fast growing and highly profitable

disease state• Proprietary technology (HealthTrac) with applicability across

Diplomat’s Hep C platform• Proven management team

• 50 year old company, run by 2nd generation pharmacist

• No marketed sales process – Diplomat had a one-off look

• Lack of auction/marketed process

• Founder/owner led• Management all on

board at DPLO

April 1, 2015

• $272M adjusted purchase price* (~$50M tax benefit)• $217M cash*, $105M stock• ~11.8x CY 2014 EBITDA

• One year earnout of 1.35M shares (all stock)

• Adds significant scale to specialty infusion business• Provides ability to compete for national contracts• Increases exposure to higher margin businesses• Addition of new disease states, therapeutic categories & 5

new LD’s

• Lack of auction/marketed process

• Founder/owner led• Management all on

board at DPLO

June 27, 2014

• $68.5 million gross purchase price*• $52M cash upfront, $12M

stock• ~8x CY 2013 EBITDA

• Two year earnout max. $11.5M (all cash)

• Strong management team• Strong therapy mix: IVIG and Hemophilia• Favorable geographic footprint

• Lack of auction/marketed process

• Founder/owner led• Management all on

board at DPLO

* Value includes closing working capital adjustments

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Calendar year ending December 31,

($ in millions)3Q'16

A3Q'15

A 2015A 2014A 2013A 2012A 2011A 2010ANet income (loss) attributable to Diplomat $5.4 $16.0 $25.8 $4.8 ($26.1) ($2.6) $9.2 ($7.8)

Depreciation & Amortization $13.7 $9.9 $30.8 $8.1 $3.9 $3.8 $3.1 $2.2 Interest Expense $1.8 $1.5 $5.2 $2.5 $2.0 $1.1 $0.6 $0.5 Income tax expense ($3.2) $9.8 $16.2 $4.7 - - - -EBITDA $17.7 $37.2 $78.1 $20.1 ($20.2) $2.3 $12.8 ($5.2)Share-based compensations expense $1.4 $1.3 $4.0 $2.9 $0.9 $0.9 $1.4 $0.8 Change in fair value of redeemable common shares - - - ($9.1) $34.3 $6.6 - $10.7 Termination of existing stock redemption agreement - - - $4.8 - - - -

Employer payroll taxes - option repurchases $0.1 $0.3 $1.6 - - - - -Restructuring and impairment charges $2.5 - $0.2 - $1.0 $0.4 $0.4 $1.5 Equity loss of non-consolidated entity - - - $6.2 $1.1 $0.3 $0.1 -Severance and related fees $0.1 $0.1 $0.5 $0.4 $0.2 $0.4 $0.7 -Merger and acquisition related expenses $0.4 ($6.3) $9.2 $7.2 $0.7 - - -Private company expenses - - - $0.2 $0.2 - - -Tax credits and other - - - $1.0 - ($0.1) ($0.6) -Other items $0.4 $0.4 $1.5 $1.4 $0.7 $0.1 $0.2 ($0.0)Adjusted EBITDA $22.6 $33.0 $95.0 $35.2 $19.0 $10.9 $15.1 $7.7

Reconciliation of Net income (loss) and Adjusted EBITDA

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(1)

(2)

(3)

(4)

(5)

(6)

(7)

(8)

Note: Financials are not pro forma for acquisitions.Detailed footnotes on the following page.

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Reconciliation of Net income (loss) and Adjusted EBITDA

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1) Share-based compensation expense relates to director and employee share-based awards.(2) Restructuring and impairment charges reflect decreases in the fair market value of non-core property and assets, or actual losses on disposal of such assets. Q3 2016 charge primarily related to the full impairment of the definite-lived intangible assets associated with Primrose Healthcare LLC. 2013 charges primarily relate to the $932 write-down of our former Swartz Creek, Michigan headquarters facility to its fair value, after we vacated it in favor of our present Flint, Michigan facility. 2012 charges primarily relate to our write-down of an externally purchased software package we no longer utilize, as well as sales of Company-owned vehicles. 2011 charges include expense associated with the closure of our former Cleveland, Ohio facility, the move of our Chicago, Illinois area facility, and sales of Company-owned vehicles.(3) During the fourth quarter of 2014, we reassessed the recoverability of our investment in our non-consolidated entity, Ageology. Based upon this assessment, we determined that a full impairment of $4,869 was warranted, primarily due to updated projections of continuing losses into the foreseeable future. The remaining amounts in 2014, 2013 and 2012 represents our share of losses recognized by Ageology, using the equity method of accounting. We first invested in Ageology, an anti-aging physician network dedicated to nutrition, fitness and hormones, in October 2011, in connection with its formation.(4) Employee severance and related fees primarily relates to severance for former management.(5) Fees and expenses directly related to merger and acquisition activities, and the impact of changes in the fair value of related contingent consideration liabilities.(6) Primarily includes philanthropic activities performed at the direction of our majority shareholder.(7) Represents (a) various tax credits received from the state of Michigan for facility improvement and employee hiring initiatives, (b) the one-time costs associated with converting from an S-Corporation to a C-Corporation, and (c) a 2014 charge of $1,825 related to non-income tax obligations.(8) Includes other expenses, predominantly option redemption payroll taxes and IT operating leases. Operating leases were initiated, in lieu of purchases or capital leases for a subset of our IT spend, for a short period of time in 2013 and 2014 for liquidity purposes. We have since discontinued the practice of leasing IT equipment. The cost of purchased IT equipment is reflected in depreciation and amortization.