EnviroStar, Inc. (NYSE American: EVI) (“EVI” or the “Company”)
reported record results for the fiscal year ended June 30,
2018.
The record results reflect the Company’s consistent execution of
its buy-and-build growth strategy. For the fiscal year ended June
30, 2018, the Company generated revenues of approximately $150
million, an increase of 60% over the prior fiscal year. As reported
in the Company’s fiscal 2018 Annual Report on Form 10-K, pro forma
revenue1 for fiscal 2018 reflecting the three business acquisitions
consummated during the year was approximately $177 million. In
addition, as described in further detail below, subsequent to the
completion of fiscal 2018, EVI completed the acquisitions of
Industrial Laundry Services, Inc. and Scott Equipment, Inc. The
following are financial highlights of EVI’s fiscal 2018:
Fiscal 2018 Highlights (compared to EVI’s results for the
fiscal year ended June 30, 2017):
- Revenue increased 60% to a record $150
million,
- Gross Margin increased from 22% to
24%,
- Operating income increased 30% to a
record $6.9 million,
- Net income increased 25% to a record
$4.0 million,
- Adjusted EBITDA increased 59% to a
record $10.1 million, and
- Diluted earnings per share increased 6%
to a record $0.33 per share.
Revenue increased 60% largely due to the acquisitions of
Tri-State Technical Services, Inc. (“Tri-State”), AAdvantage
Laundry Systems, Inc. (“AAdvantage”), and Sky-Rent LP (“Sky-Rent”)
during fiscal 2018. Gross margins improved from 22% to 24%
reflecting the benefits of our high-margin rental/lease portfolio
and a more favorable product mix. Revenue and gross profit growth
were partially offset by increases in SG&A, which primarily
reflect increases to corporate level expenses in connection with
EVI’s growth and in support of the execution of EVI’s buy-and-build
growth strategy.
Buy-and-Build Growth Strategy
EVI executes a buy-and-build growth strategy, which involves
buying businesses that meet certain financial and strategic
criteria and building them through the implementation of a growth
culture that promotes collaboration between EVI’s businesses on the
execution of long-term growth initiatives. EVI’s “buy”
opportunities are predominantly focused on longstanding, well-run,
family and/or entrepreneur-owned businesses and EVI’s “build”
opportunities include expanding its product offerings and enhancing
its service capabilities to build market share and increase revenue
generation. EVI believes that the consistent execution of its
buy-and-build growth strategy will deliver significant shareholder
value over the long-term.
Buy Activity
During fiscal 2018, EVI continued the execution of its
buy-and-build growth strategy through the addition of market
leading businesses, Tri-State, a Georgia-based business, which EVI
acquired on October 31, 2017, and AAdvantage and Sky-Rent, two
Texas-based businesses, which EVI acquired on February 9, 2018. The
addition of AAdvantage and Sky-Rent marked EVI’s first investment
in the Texas market and included a broad portfolio of rental and
lease agreements acquired through Sky-Rent.
Subsequent to the completion of fiscal 2018, EVI added
Industrial Laundry Services, a Florida-based business, on September
4, 2018, and Scott Equipment, a Houston, Texas-based business, on
September 12, 2018. It is expected that the addition of ILS will
bolster the service capabilities of EVI’s Florida operations and
that the addition of Scott Equipment will double EVI’s market share
in Texas. Combined, Industrial Laundry Services and Scott Equipment
generated over $25 million in revenue during the twelve months
ended December 31, 2017.
Since the completion of fiscal 2016 when EVI commenced the
pursuit of its buy-and-build growth strategy, EVI has added seven
businesses. In addition, while EVI’s fiscal 2018 results do not
reflect full year results for three of those businesses (Tri-State,
AAdvantage, and Sky-Rent) nor any results for an additional two of
those businesses (Industrial Laundry Services and Scott Equipment),
EVI’s revenues for fiscal 2018 represent a 317% increase compared
to its revenues for fiscal 2016. EVI maintains a deep pipeline of
potential “buy” opportunities of businesses of varying sizes and
that meet its financial and strategic criteria. To support its
“buy” efforts, EVI recently received a commitment letter for debt
financing that, if consummated, would significantly increase EVI’s
borrowing capacity.
Build Activity
In addition to the acquisitions described above, EVI’s
leadership teams have undertaken growth initiatives, including the
addition of new product lines, the enhancement of installation and
service capabilities, and the implementation of scalable
technologies. EVI believes that these growth initiatives may have a
positive impact on the Company’s future performance. To lead and
fulfill these and other growth initiatives, during fiscal 2018, EVI
successfully recruited, and continues to recruit, talented and
long-term focused professionals.
Henry M. Nahmad, Chairman, Chief Executive Officer and President
of EVI, commented: “Our goal is to build a significant and
sustainable enterprise that delivers substantial shareholder value.
In that pursuit, the execution of our buy-and-build growth strategy
requires time, patience, and thoughtful execution. We believe that
EVI represents a compelling opportunity for well-respected owners
of high-quality businesses to achieve a new level of personal
diversification, including investing in our high-growth enterprise,
and to make meaningful contributions to our collective growth. We
are pleased with the growth of EVI’s entrepreneurial family and we
remain focused on achieving our growth goals over the short, mid,
and long-term.”
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 EnviroStar
EnviroStar, Inc., through its wholly-owned subsidiaries, is a
distributor that sells, leases, and rents commercial, industrial,
and vended laundry and dry cleaning equipment and steam and hot
water boilers manufactured by others, supplies related replacement
parts and accessories, designs and plans turn-key laundry, dry
cleaning, and boiler systems, and provides installation and
maintenance services to thousands of customers, which include
commercial, industrial, institutional, government, and retail
customers. These activities are conducted in the United States,
Canada, the Caribbean and Latin America.
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, growth strategy, market share and prospects,
risks related to EVI’s ability to successfully build its existing
operations, risks related to organic growth initiatives, including
EVI’s recruitment efforts, including that such initiatives may not
be successful or otherwise have a positive impact on EVI’s
financial condition and results of operations, risks associated
with the EVI’s buy and build growth strategy, including that EVI
may not be successful in identifying or consummating acquisitions
or other strategic opportunities, that the potential benefits of
acquisitions may not be realized to the extent anticipated or at
all, integration risks, risks related to indebtedness incurred in
connection with acquisitions, dilution experienced by EVI’s
stockholders as a result of shares issued in connection with
acquisitions, and risks related to the business, operations and
prospects of acquired businesses, risks related to EVI’s and its
acquired businesses’ relationships with principal suppliers and
customers and the impact that the loss of any principal supplier or
customer could have on EVI’s results and financial condition, the
risk that the financing contemplated by the commitment letter
discussed in this press release may not be received on the
contemplated terms, when expected, or at all, risks related to
EVI’s indebtedness, including increases in its debt position, 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, 2018. Many of these risks and
factors are beyond EVI’s control. In addition, pro forma
information is prepared based on a number of assumptions and using
certain pro forma adjustments, is presented for illustrative
purposes only, and may not be indicative of would EVI’s actual
results for the fiscal year ended June 30, 2018 would have been had
the transactions occurred on the date assumed or of EVI’s results
for any future period. Further, past performance of EVI and its
acquired businesses and perceived 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.
1 Pro forma revenue was calculated as if the acquisition of each
of Tri-State, AAdvantage and Sky-Rent was consummated on July 1,
2017 and based on other assumptions and adjustments described in
the Company’s Annual Report on Form 10-K for the fiscal year ended
June 30, 2018.
EnviroStar, Inc. Condensed
Consolidated Results of Operations (in thousands)
Fiscal Year Ended
June 30, 2018
June 30, 2017 Revenues $150,007 $93,978 Cost of
Sales 113,501 73,639 Gross Profit 36,506 20,339 SG&A
29,572 14,989 Operating Income 6,934 5,350 Interest Expense,
net 552 160 Income before Income Taxes 6,382 5,190 Provision
for Income Taxes 2,416 2,023 Net Income $3,966 $3,167
Net Income per Share Basic $0.34 $0.31 Diluted $0.33 $0.31
Weighted Average Shares Outstanding Basic 10,840 9,449
Diluted 11,277 9,537
The following table reconciles net income, the most comparable
GAAP financial measure, to Adjusted EBITDA.
EnviroStar, Inc. Condensed
Consolidated Earnings before Interest, Taxes, Depreciation,
Amortization, and Amortization of Share-based Compensation (in
thousands) Fiscal Year Ended
June 30,
2018 June 30, 2017 Net Income $3,966
$3,167 Provision for Income Taxes 2,416 2,023 Interest Expense 552
160 Depreciation and Amortization 1,579 576 Amortization of
Share-based Compensation 1,575 421 Adjusted EBITDA $10,088
$6,347
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EnviroStar, Inc.Henry M. Nahmad, 305-754-8676Michael Steiner,
305-754-8676
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