EVI Industries, Inc. (NYSE American: EVI) (the “Company” or
“EVI”) announced today results for the nine- and three-month
periods ended March 31, 2020. While the COVID-19 pandemic and
accompanying economic disruption adversely impacted the Company’s
performance, particularly resulting in a deceleration of revenue
beginning in March 2020, the Company achieved record gross profit
for the three-month period and record revenue, gross profit, and
operating cash flows for the nine-month period. These results also
reflect the Company’s continued execution of its long-term focused
buy-and-build growth strategy, the effectiveness of certain organic
growth initiatives, and continued investment towards the
modernization and optimization of the Company.
Earnings Conference Call
The Company has provided a pre-recorded earnings conference call
including a business update, which can be accessed in the
“Investors” section of the Company’s website at www.evi-ind.com or
by visiting https://ir.evi-ind.com/message-from-the-ceo.
Balance Sheet
At March 31, 2020, the Company had $26 million of net debt,
including approximately $4.0 million of cash and $30 million of
borrowings drawn from its credit facility. This represents a $10
million, or a 27%, decrease to net debt as compared to June 30,
2019 and a $3 million, or a 10%, decrease to net debt as compared
to December 31, 2019. The strengthening of the Company’s balance
sheet was driven by a record level of operating cash flow of $14.3
million for the nine-month period ended March 31, 2020. As a
precautionary measure to increase its cash position and preserve
financial flexibility in light of uncertainty in the global markets
resulting from the COVID-19 pandemic, on April 1, 2020, the Company
increased its borrowings from its credit facility.
Discussion of COVID-19 Pandemic
Since the onset of the COVID-19 pandemic, EVI’s businesses have
remained operational as relevant authorities have generally
designated the nature of the Company’s industry to be ‘essential’.
Early on, the Company’s leaders acted quickly and decisively in
response to the COVID-19 pandemic to reduce costs and preserve
capital, and they continue to actively monitor the COVID-19
pandemic and may take further actions as circumstances change.
Further, the Company accelerated certain of its planned
modernization and optimization initiatives, including the
elimination and consolidation of facilities, the implementation of
certain advanced technology systems, the establishment of certain
alternative financing tools, and other initiatives meant to
increase growth and profitability. However, the COVID-19 pandemic
and specifically stay-at-home-orders, have and continue to create
disruption to the economy and the Company’s business and
results.
Henry M. Nahmad, EVI’s Chairman and CEO
stated, “While the duration and severity of the COVID-19 pandemic
and its impact on our business and results is uncertain, as we
navigate through these times, we are bolstered by the depth of
experience across our organization, our entrepreneurial culture,
and the extraordinary dedication and perseverance of our valued
employees.”
Geographic, Customer, and Product Diversity
The Company operates in a historically resilient industry and
its growth strategy and operating model are focused on long-term
growth.
Geographic Markets: EVI operates
from 24 distribution locations in 14 states and exports to Latin
America and the Caribbean from its Florida operations. Across and
beyond this geography, the Company employs approximately 125 sales
professionals that partner with the Company’s customers by
providing planning, designing, and consulting services that
generally result in long-term customer relationships.
End-User Customers: Today, EVI
completes tens of thousands of transactions per quarter to
thousands of customers that operate industrial, on-premise, vended,
and or route laundries dedicated to a wide range of end-user
customers. These transactions are sourced by the Company’s vast
sales organization and are generally supported and fulfilled by the
Company’s internal installation and service network including
approximately 200 technicians.
Product Range: EVI offers a wide
variety of commercial laundry equipment and an assortment of
related parts and accessories along with specialized water heating,
water treatment, and material handling products sourced from many
suppliers. The Company sources commercial laundry equipment from 12
domestic and international OEMs and sells over 25 brand names with
a wide variety of price points, features, and capabilities to meet
the needs of varying commercial laundry end-user customers.
Mr. Nahmad commented: “We believe that, among
other benefits, the combination of geographic and end-user customer
diversity, and a broad product range mitigates the risk that a
disruption to any one geography, any one end-user customer, and or
any one product category can materially impact the entire
Company.”
Acquisitions
During the three-month period ended March 31, 2020, the Company
completed the acquisition of Sevierville, Tennessee based Laundry
Systems of Tennessee and affiliates and Richmond, Virginia based
Commercial Laundry Equipment, Inc. The newly acquired businesses
are distributors of on-premise and vended laundry products and
providers of related installation and maintenance services. Their
addition expands EVI’s market share and adds additional sales and
service presence in the mid-Atlantic and southeast United
States.
Three-Month and Nine-Month Operating Results (compared to
the same period of the prior fiscal year)
Three-Month Results
- Revenue was flat at $59 million,
- Gross profit increased 3% to a record $13.8 million,
- Gross margin increased 80 basis points to 23%,
- Operating income was $0.35 million versus $1.1 million,
- Net income was $(0.0) million versus $0.5 million, and
- Adjusted EBITDA was $2.1million versus $2.2 million.
Nine-Month Results
- Revenue increased 11% to a record $181 million,
- Gross profit increased 13% to a record $42 million,
- Gross margin increased 50 basis points to 23%,
- Operating income was $2.4 million versus $4.6 million,
- Net income was $0.83 million versus $2.5 million,
- Adjusted EBITDA was $6.9 million versus $7.8 million, and
- Operating cash flow was a record $14.3 million, an increase of
$24 million in cash provided by operations.
Revenue
The 11% increase in revenue for the nine-month period ended
March 31, 2020 was due to the results of operations of acquired
businesses and increases in revenue resulting from certain sales
growth strategies executed by the Company to increase market share
in existing geographies. These increases for the nine-month period
were partially offset by a deceleration of revenue beginning in
mid-March 2020 resulting from the onset of the COVID-19 pandemic,
including the delayed completion of a number of open sales
contracts as a result of shelter-in-place orders and other
restrictions. This deceleration in revenues contributed to revenues
being flat in the three months ended March 31, 2020 compared to the
three months ended March 31, 2019.
Adjusted EBITDA
Adjusted EBITDA for the fiscal three-month period ended March
31, 2020 was flat year over year and decreased 12% for the
nine-month period ended March 31, 2020 compared to the same period
of the prior fiscal year. These results reflect the Company’s
ongoing investments to optimize and modernize its acquired
businesses and investments made in pursuit of acquisition and
strategic opportunities, combined with the unforeseen impact of the
COVID-19 pandemic.
Mr. Nahmad commented: “Despite the short-term
turbulence caused by the COVID-19 pandemic, we remain steadfast in
our long-term approach to building a significant enterprise and we
believe that favorable industry dynamics combined with our
financial principles, decentralized operating model,
entrepreneurial culture, and credible reputation are the foundation
of our long-term growth and investment strategy.”
For additional information regarding the Company’s results for
the three and nine-month periods ended March 31, 2020 and further
discussion of the COVID-19 pandemic, see the Company’s Quarterly
Report on Form 10-Q for the quarter ended March 31, 2020, filed
with the Securities and Exchange Commission.
Use of Non-GAAP Financial Information
In this press release, EVI discloses the non-GAAP financial
measure of Adjusted EBITDA, which EVI defines as earnings before
interest, taxes, depreciation, amortization, and amortization of
share-based compensation. Adjusted EBITDA is determined by adding
interest expense, income taxes, depreciation, amortization, and
amortization of share-based compensation to net income as shown in
the attached Condensed Consolidated Earnings before Interest,
Taxes, Depreciation, Amortization, and Amortization of Share-based
Compensation. EVI considers Adjusted EBITDA to be an important
indicator of its operating performance. Adjusted EBITDA is also
used by companies, lenders, investors and others because it
excludes certain items that can vary widely across different
industries or among companies within the same industry. For
example, interest expense can be dependent on a company’s capital
structure, debt levels and credit ratings, and the tax positions of
companies can vary because of their differing abilities to take
advantage of tax benefits and because of the tax policies of the
jurisdictions in which they operate. Adjusted EBITDA should not be
considered as an alternative to net income or any other measure of
financial performance or liquidity, including cash flow, derived in
accordance with GAAP, or to any other method of analyzing EVI’s
results as reported under GAAP. In addition, EVI’s definition of
Adjusted EBITDA may not be comparable to definitions of Adjusted
EBITDA or other similarly titled measures used by other
companies.
About EVI Industries
EVI Industries, Inc., through its wholly owned subsidiaries, is
a value-added distributor and a provider of advisory and technical
services. Through its vast sales organization, the Company provides
its customers with planning, designing, and consulting services
related to their commercial laundry operations. The Company sells
and/or leases its customers commercial laundry equipment,
specializing in washing, drying, finishing, material handling,
water heating, power generation, and water reuse applications. In
support of the suite of products it offers, the Company sells
related parts and accessories. Additionally, through the Company’s
robust network of commercial laundry technicians, the Company
provides its customers with installation, maintenance, and repair
services. The Company’s customers include retail, commercial,
industrial, institutional, and government customers. Purchases made
by customers range from parts and accessories, to single or
multiple units of equipment, to large complex systems, as well as
installation, maintenance and repair services.
Safe Harbor Statement
Except for the historical matters contained herein, statements
in this press release are forward-looking and are made pursuant to
the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. Forward-looking statements are subject to a
number of known and unknown risks and uncertainties that may cause
actual results, trends, performance or achievements of EVI, or
industry trends and results, to differ from the future results,
trends, performance or achievements expressed or implied by such
forward-looking statements. These risks and uncertainties include,
among others, the risks related to EVI’s business, results,
financial condition, prospects, and growth strategy and plans;
general economic and business conditions in the United States and
other countries where EVI operates or where its customers and
suppliers are located; industry conditions and trends; risks
relating to the COVID-19 pandemic and the rapidly changing effects
thereof and developments with respect thereto, including the impact
of the COVID-19 pandemic on EVI and its business, liquidity and
results, which in large part will depend on future developments and
are highly uncertain and beyond EVI’s control, the length and
severity of the COVID-19 pandemic and the pace of recovery
following the COVID-19 pandemic, the success of actions taken or
which may be taken by EVI in response to the COVID-19 pandemic,
volatility in the economy, including in the credit markets, supply
chain disruptions, reduced demand for products and services,
business restrictions, worker absenteeism, quarantines and other
health-related restrictions, governmental and agency orders,
mandates and guidance in response to the COVID-19 pandemic,
including stay-at home orders, and the impact of the COVID-19
pandemic on EVI’s suppliers and customers; risks associated with
EVI’s buy-and-build growth strategy, including that EVI may not be
successful in identifying or consummating acquisitions or other
strategic opportunities where or when expected, or at all, that
acquisition and other strategic opportunities may not be available
to EVI to the extent anticipated or at all, that the potential
benefits of transactions may not be realized to the extent
anticipated or at all, integration risks, risks related to
indebtedness incurred in connection with transactions, dilution
experienced by EVI’s stockholders as a result of shares issued in
connection with transactions, risks related to the business,
operations and prospects of acquired businesses, their ability to
achieve growth and EVI’s ability to support growth efforts, risks
related to EVI’s and its acquired businesses’ relationships with
principal suppliers and customers, including EVI’s ability to
expand or maintain such relationships, and the impact that the loss
of any principal supplier or customer could have on EVI’s results
and financial condition; risks that EVI’s decentralized operating
model, and that product, end-user and geographic diversity, may not
result in the benefits anticipated and may change over time; risks
related to organic growth initiatives and market share and other
growth strategies, including that they may not result in the
benefits anticipated; risks that investments, initiatives and
expenses, including, without limitation, investments in acquired
businesses and modernization initiatives, may not result in the
benefits anticipated, including long-term growth; risks related to
revenue recognition and the timing thereof, including that delays
in installation or other factors may result in revenue expected to
be recognized in future periods to not be recognized when or to the
extent anticipated; and other economic, competitive, governmental,
technological and other risks and factors, including those
discussed in the Company’s filings with the Securities and Exchange
Commission, including, without limitation, the Company’s Annual
Report on Form 10-K for the fiscal year ended June 30, 2019 and
Quarterly Report on Form 10-Q for the quarter ended March 31, 2020.
Many of these risks and factors are beyond EVI’s control. Further,
past performance of EVI and its acquired businesses and trends may
not be indicative of future results. EVI cautions that the
foregoing factors are not exclusive. The reader should not place
undue reliance on any forward-looking statement, which speaks only
as of the date made. EVI does not undertake to, and specifically
disclaims any obligation to, update or supplement any
forward-looking statement, whether as a result of changes in
circumstances, new information, subsequent events or otherwise,
except as may be required by law.
EVI Industries, Inc.
Condensed Consolidated Results of
Operations (in thousands, except per share data) (Unaudited)
9-Months Ended
9-Months Ended
3-Months Ended
3-Months Ended
03/31/20
03/31/19
03/31/20
03/31/19
Revenues
$ 181,379
$ 163,436
$ 59,041
$ 59,290
Cost of Sales
139,640
126,615
45,211
45,867
Gross Profit
41,739
36,821
13,830
13,423
SG&A
39,302
32,180
13,479
12,316
Operating Income
2,437
4,641
351
1,107
Interest Expense, net
1,198
942
343
403
Income before Income Taxes
1,239
3,699
8
704
Provision for Income Taxes
408
1,172
20
238
Net Income (Loss)
$ 831
$ 2,527
$ (12)
$ 466
Net Income (Loss) per Share
Basic
$ 0.06
$ 0.20
$ (0.00)
$ 0.04
Diluted
$ 0.06
$ 0.20
$ (0.00)
$ 0.04
Weighted Average Shares Outstanding
Basic
11,815
11,463
11,872
11,666
Diluted
12,188
11,960
11,872
12,145
EVI Industries, Inc.
Condensed Consolidated Balance Sheets (in
thousands, except per share data)
03/31/20
06/30/19
(Unaudited)
Assets
Current assets
Cash and cash equivalents
$ 3,917
$ 5,038
Accounts receivable, net
26,560
30,557
Inventories, net
27,108
26,445
Vendor deposits
613
403
Contract assets
116
2,487
Other current assets
3,430
2,938
Total current assets
61,744
67,868
Equipment and improvements, net
7,971
5,865
Operating lease assets
5,780
-
Intangible assets, net
22,189
22,351
Goodwill
56,574
54,501
Other assets
4,186
3,900
Total assets
$ 158,444
$ 154,485
Liabilities and Shareholders’
Equity
Current liabilities
Accounts payable and accrued expenses
$ 17,647
$ 17,508
Accrued employee expenses
4,070
5,187
Customer deposits
10,510
7,163
Contract liabilities
834
854
Current portion of operating lease
liabilities
1,744
-
Total current liabilities
34,805
30,712
Deferred tax liabilities, net
2,347
1,708
Long-term operating lease liabilities
4,060
-
Long-term debt, net
29,804
40,563
Total liabilities
71,016
72,983
Common stock related to acquiree's
Employee Stock Ownership Plan ("ESOP")
-
4,240
Shareholders' equity
Preferred stock, $1.00 par value
-
-
Common stock, $.025 par value
300
296
Additional paid-in capital
78,526
73,010
Retained earnings
10,466
9,635
Treasury stock
(1,864)
(1,439)
Common stock related to acquiree's
ESOP
-
(4,240)
Total shareholders' equity
87,428
77,262
Total liabilities and shareholders'
equity
$ 158,444
$ 154,485
EVI Industries, Inc.
Condensed Consolidated Statements of Cash
Flows (in thousands) (Unaudited)
For the nine months ended
03/31/20
03/31/19
Operating activities:
Net income
$ 831
$ 2,527
Adjustments to reconcile net income to net
cash provided (used) by operating activities:
Depreciation and amortization
2,692
1,894
Amortization of debt discount
41
82
Provision for bad debt expense
136
181
Non-cash lease expense
24
-
Share-based compensation
1,724
1,287
Inventory reserve
133
125
Provision for deferred income taxes
416
234
Other
(85)
-
(Increase) decrease in operating
assets:
Accounts receivable
4,961
(4,847)
Inventories
902
(5,759)
Vendor deposits
(210)
(438)
Contract assets
2,371
(2,445)
Other assets
(602)
(1,384)
Increase (decrease) in operating
liabilities:
Accounts payable and accrued expenses
(1,076)
2,899
Accrued employee expenses
(1,168)
(1,600)
Customer deposits
3,257
(2,629)
Contract liabilities
(20)
255
Net cash provided (used) by operating
activities
14,327
(9,618)
Investing activities:
Capital expenditures
(2,785)
(1,741)
Cash paid for acquisitions; net of cash
acquired
(1,334)
(12,542)
Net cash used by investing activities
(4,119)
(14,283)
Financing activities:
Dividends paid
-
(1,619)
Proceeds from borrowings
8,000
110,963
Debt repayments
(18,930)
(79,435)
Payment of debt issuance costs
-
(272)
Repurchases of common stock in
satisfaction of employee tax withholding obligations
(425)
(359)
Issuances of common stock under employee
stock purchase plan
26
23
Net cash (used) provided by financing
activities
(11,329)
29,301
Net (decrease) increase in cash and cash
equivalents
(1,121)
5,400
Cash and cash equivalents at beginning of
period
5,038
1,330
Cash and cash equivalents at end of
period
$ 3,917
$ 6,730
EVI Industries, Inc.
Condensed Consolidated Statements of Cash
Flows (in thousands) (Unaudited)
For the nine months ended
03/31/20
03/31/19
Supplemental disclosures of cash flow
information:
Cash paid during the period for
interest
$ 1,215
$ 799
Cash paid during the period for income
taxes
$ 224
$ 1,354
Supplemental disclosure of non-cash
financing activities
Common stock issued for acquisitions
$3,770
$ 21,290
The following table reconciles net income, the most comparable
GAAP financial measure, to Adjusted EBITDA.
EVI Industries, Inc.
Condensed Consolidated Earnings before
Interest, Taxes, Depreciation, Amortization, and Amortization of
Share-based Compensation (in thousands) (Unaudited)
9-Months Ended
9-Months Ended
3-Months Ended
3-Months Ended
03/31/20
03/31/19
03/31/20
03/31/19
Net Income (loss)
$ 831
$ 2,527
$ (12)
$ 466
Provision for Income Taxes
408
1,172
20
238
Interest Expense
1,198
942
343
403
Depreciation and Amortization
2,692
1,894
962
639
Amortization of Share-based
Compensation
1,724
1,287
809
449
Adjusted EBITDA
$ 6,853
$ 7,822
$ 2,122
$ 2,195
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200511005938/en/
Henry M. Nahmad, Chairman and CEO – (305) 402-9300 Sloan Bohlen,
Investor Relations – info@evi-ind.com
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