EVI Industries, Inc. (NYSE American: EVI) (the “Company” or
“EVI”) announced today its financial results for the quarter ended
September 30, 2020, the first quarter of the Company’s fiscal year
ending June 30, 2021 (“fiscal 2021”). While the COVID-19 pandemic
and accompanying economic disruption continued to adversely impact
the Company’s performance, the Company achieved record revenue for
the first quarter of fiscal 2021 and reduced its net debt by 18%
from June 30, 2020 to $14.6 million at September 30, 2020. The
Company believes that its results for the quarter reflect the
attributes of the Company’s resilient industry, sustained
investment in future growth and initiatives towards optimization of
the Company, and the Company’s healthy financial position.
Earnings Conference Call
The Company 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.
18% Decrease to Net Debt and Strong Operating Cash
Flows
At September 30, 2020, the Company had $14.6 million of net
debt. This represents a $3.3 million, or 18%, decrease to net debt
as compared to June 30, 2020. The strengthening of the Company’s
balance sheet was driven by $4.3 million of operating cash flow for
the quarter ended September 30, 2020. This represents an increase
of $2.5 million in operating cash flow over the prior fiscal year
period and is a function of attractive working capital dynamics and
the successful implementation of an effective cash management
program.
Record First Fiscal Quarter Revenue
Despite the continued adverse impact of the COVID-19 pandemic,
including with respect to certain of the end user customers the
Company serves, revenue for the first quarter of fiscal 2021 was a
record $58 million, reflecting a 4.0% increase over the same period
of the prior fiscal year and an approximately 6% increase in
successive quarters. First quarter revenue from industrial laundry
products increased consistent with preplanned delivery and
installation schedules reflected in the Company’s backlog,
including the fulfillment of longer-term contracts. Revenue from
on-premise laundry products continued to vary by geography and by
the speed of recovery of specific end user customers. Meanwhile,
revenue from vended and multi-family laundry products was strong
and consistent across nearly all of the geographies the Company
serves.
Henry M. Nahmad, Chairman and CEO commented:
“Our record revenue performance reflects in our opinion the
essential nature of the products and services we provide, the
benefits of our continued investment in a larger and more dynamic
sales and service organization, and our ability to outperform our
competition in terms of resource deployment and customer care
despite the challenging environment posed by the COVID-19
pandemic.”
Gross margin for the first fiscal quarter declined from 25% to
23%; however, the decline was due to a higher mix of revenues
derived from longer-term contracts reflected in the quarter.
Excluding these longer-term contracts, gross margin increased from
25% in the first quarter of fiscal 2020 to 27% in the first quarter
of fiscal 2021 and also increased in successive quarters from 25%
to 27%. This higher gross margin, net of gross margin attributable
to longer-term contracts, principally reflects the margin benefit
the Company derives from providing its customers high-value laundry
solutions, including new products and enhanced technical service
capabilities.
Net income for the first fiscal quarter decreased from $580,000
to $518,000 compared to the prior year period, but increased from a
net loss of $56,000 in the fourth quarter of fiscal 2020. Adjusted
EBITDA for the first fiscal quarter was approximately $2.5 million,
representing a 3% decrease as compared to the prior year period but
a 28% increase compared to the fourth quarter of fiscal 2020. First
quarter Adjusted EBITDA was the result of lower gross margin
attributable to longer-term contracts reflected in the quarter.
This performance also reflects the retention of substantially all
of the Company’s employees, including a 22% increase in sales
professional headcount as compared to this time last year. Lastly,
the Company’s operating results also reflect continued investment
in the modernization and optimization of the Company.
Notwithstanding these factors, SG&A in successive quarters
declined approximately $700,000, or 5.0%, which we believe reflects
a small portion of the benefit the Company expects to accomplish
from its consolidation and optimization initiatives.
Henry M. Nahmad, Chairman and CEO commented:
“We believe that we have a significant opportunity to amplify the
performance of our businesses with the deployment and utilization
of advanced technologies and that our results reflect a small
portion of the benefit that we hope to realize from our continued
efforts to consolidate, modernize, and optimize.”
Completed Acquisition and Expanded Footprint
During the first quarter of fiscal 2021, the Company continued
to pursue and advance acquisition opportunities. Subsequent to the
completion of the first quarter, on November 3, 2020, the Company
completed the acquisition of Yankee Equipment Systems, a
distributor of commercial laundry products and a provider of
related technical installation and maintenance services. Yankee
Equipment is led by Peter Limoncelli, a young, well-respected, and
dynamic leader and entrepreneur that together with a team of 56
skilled laundry professionals, have consistently increased Yankee’s
revenue, profitability, and market share in the New England region
of the United States.
Mr. Nahmad added: “We believe that Yankee
Equipment Systems has the most dynamic team of commercial laundry
professionals in the New England market. We expect to build upon
their longstanding success by expanding their product and service
offerings and by building distribution and service density through
future acquisitions.”
This addition to the EVI family reflects the Company’s continued
efforts to increase its presence in the North American commercial
laundry industry and adds approximately $31 million in revenue
generated from over 2,200 industrial, on-premise, vended, and
multi-family laundry customers. The acquisition of Yankee
represents the Company’s first acquisition in the New England
region of the United States and its fifteenth acquisition in the
last forty-eight months.
Looking Forward
The Company commenced certain initiatives to establish a
stronger position for post-COVID success. In addition, the Company
continues to work towards the consolidation of its various regional
businesses into five operating subsidiaries and to implement
certain technologies to support its future growth and increased
business intelligence requirements.
Mr. Nahmad commented: “We believe our
long-term growth opportunities remain robust, driven by a large
aggregate addressable market across our targeted industries; our
leading and growing market position; and our focus on providing our
growing customer base with a broader product and service offering.
Our track record has earned us the reputation of a knowledgeable,
efficient, and trustworthy acquirer with an operating model and
entrepreneurial growth culture that is attractive to business
owners in and around the commercial laundry industry.”
First Quarter Operating Results
(compared to the same period of the prior fiscal year)
- Revenue increased 4% to a record $58 million,
- Gross profit decreased 4% to $13.3 million,
- Gross margin decreased 180 basis points to 23%,
- Gross margin, net of longer-term contracts, increased from 25%
to 27%,
- Operating income was $0.9 million compared to $1.3
million,
- Net income was $0.5 million compared to $0.6 million,
- Adjusted EBITDA was $2.46 million compared to $2.55
million,
- Operating cash flow was $4.3 million, an increase of $2.5
million in cash provided by operations, and
- Net debt decreased 18% from $17.9 million to $14.6
million.
For additional information regarding the Company’s results for
the quarter ended September 30, 2020, see the Company’s Quarterly
Report on Form 10-Q for the quarter ended September 30, 2020, filed
with the Securities and Exchange Commission on or about the date
hereof.
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 statement of 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,
including the Company’s belief as to the significant factors which
drive its results and the risk that such factors may not continue
to lead to improved performance in the future; 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 and the business,
liquidity and financial condition of EVI’s suppliers and customers,
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, risks related to the loans received
or assumed by the Company and certain of its subsidiaries under the
Paycheck Protection Program established under the Coronavirus Aid,
Relief, and Economic Security Act, including that there is no
assurance that any or all of the loans will be forgiven and that,
while the Company believes that the certifications made by it in
connection with the loan applications are accurate, the
applications will be reviewed and may subject the Company to
potential liability if determined to be inaccurate; 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, 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, including the acquisition of Yankee Equipment, 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,
the impact that the loss of any principal supplier or customer
could have on EVI’s results and financial condition, and the risk
that the Company’s expectations and plans with respect to Yankee
Equipment may not be met or fulfilled; risks related to organic
growth initiatives, market share and other growth strategies, and
modernization, optimization and other initiatives (including the
Company’s recently implemented consolidation initiative), including
the costs associated with such initiatives and the risk that they
may not be implemented when or as expected and may not result in
the benefits anticipated, including long-term growth or superior
performance or results, when or to the extent anticipated or at
all; the risk that SG&A expenses may not continue to decrease
and the risk that the decrease in the current period may not be
indicative of, or constitute a small portion of, any future
decreases; competition, including the Company’s ability to compete
effectively; risks relating to the Company’s ability to enter into
and compete effectively in new industries, as well as risks and
trends related to those industries and the costs and timing of the
Company’s efforts with respect thereto; and other economic,
competitive, governmental, technological and other risks and
factors discussed elsewhere in the Company’s filings with the
Securities and Exchange Commission, including, without limitation,
in the “Risk Factors” section of the Company’s Annual Report on
Form 10-K for the fiscal year ended June 30, 2020. 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)
3-Months Ended
3-Months Ended
09/30/20
09/30/19
Revenues
$ 57,878
$ 55,681
Cost of Sales
44,545
41,847
Gross Profit
13,333
13,834
SG&A
12,437
12,553
Operating Income
896
1,281
Interest Expense, net
169
422
Income before Income Taxes
727
859
Provision for Income Taxes
209
279
Net Income
$ 518
$ 580
Net Income per Share
Basic
$ 0.04
$ 0.05
Diluted
$ 0.04
$ 0.04
Weighted Average Shares Outstanding
Basic
11,935
11,777
Diluted
12,279
12,216
EVI Industries, Inc.
Condensed Consolidated Balance Sheets (in
thousands, except per share data)
09/30/20
06/30/20
(Unaudited)
Assets
Current assets
Cash and cash equivalents
$ 5,111
$ 9,789
Accounts receivable, net
22,433
23,042
Inventories, net
24,694
24,063
Vendor deposits
227
1,276
Contract assets
8,654
3,443
Other current assets
4,386
3,041
Total current assets
65,505
64,654
Equipment and improvements, net
8,952
7,992
Operating lease assets
6,977
5,311
Intangible assets, net
21,321
21,754
Goodwill
56,641
56,678
Other assets
4,641
4,329
Total assets
$ 164,037
$ 160,718
Liabilities and Shareholders’
Equity
Current liabilities
Accounts payable and accrued expenses
$ 27,521
$ 24,292
Accrued employee expenses
4,556
4,764
Customer deposits
11,358
8,511
Contract liabilities
3,399
558
Current portion of long-term debt
383
2,680
Current portion of operating lease
liabilities
1,882
1,672
Total current liabilities
49,099
42,477
Deferred tax liabilities, net
968
1,728
Long-term operating lease liabilities
5,707
3,657
Long-term debt, net
19,341
25,030
Total liabilities
75,115
72,892
Shareholders' equity
Preferred stock, $1.00 par value
-
-
Common stock, $.025 par value
301
301
Additional paid-in capital
79,705
79,127
Retained earnings
10,928
10,410
Treasury stock
(2,012)
(2,012)
Total shareholders' equity
88,922
87,826
Total liabilities and shareholders'
equity
$ 164,037
$ 160,718
EVI Industries, Inc.
Condensed Consolidated Statements of Cash
Flows (in thousands) (Unaudited)
For the three months ended
09/30/20
09/30/19
Operating activities:
Net income
$ 518
$ 580
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
985
811
Amortization of debt discount
14
14
Provision for bad debt expense
96
52
Non-cash lease expense
29
19
Share-based compensation
578
453
Inventory reserve
(26)
53
(Benefit) provision for deferred income
taxes
(760)
17
Other
60
-
(Increase) decrease in operating
assets:
Accounts receivable
530
4,804
Inventories
(585)
(1,892)
Vendor deposits
1,049
(283)
Contract assets
(5,211)
2,156
Other assets
(1,667)
(538)
Increase (decrease) in operating
liabilities:
Accounts payable and accrued expenses
3,229
(4,301)
Accrued employee expenses
(208)
(1,069)
Customer deposits
2,847
1,415
Contract liabilities
2,841
(458)
Net cash provided by operating
activities
4,319
1,833
Investing activities:
Capital expenditures
(997)
(1,286)
Cash paid for acquisitions; net of cash
acquired
-
(324)
Net cash used by investing activities
(997)
(1,610)
Financing activities:
Proceeds from borrowings
12,000
2,000
Debt repayments
(20,000)
(2,000)
Net cash used by financing activities
(8,000)
-
Net (decrease) increase in cash and cash
equivalents
(4,678)
223
Cash and cash equivalents at beginning of
period
9,789
5,038
Cash and cash equivalents at end of
period
$ 5,111
$ 5,261
EVI Industries, Inc.
Condensed Consolidated Statements of Cash
Flows (in thousands) (Unaudited)
For the three months ended
09/30/20
09/30/19
Supplemental disclosures of cash flow
information:
Cash paid during the period for
interest
$ 137
$ 457
Cash paid during the period for income
taxes
$ 453
$ 179
Supplemental disclosure of non-cash
financing activities
Common stock issued for acquisitions
$ -
$ 1,294
The following table reconciles net income (loss), 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)
3-Months Ended
3-Months Ended
09/30/20
09/30/19
Net Income
$ 518
$ 580
Provision for Income Taxes
209
279
Interest Expense
169
422
Depreciation and Amortization
985
811
Amortization of Share-based
Compensation
578
453
Adjusted EBITDA
$ 2,459
$ 2,545
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201109006139/en/
EVI Industries, Inc. Henry M. Nahmad, Chairman and CEO –
(305) 402-9300 Sloan Bohlen, Investor Relations –
info@evi-ind.com
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