EnviroStar, Inc. (NYSE American: EVI), a leader in the
commercial, industrial, and vended laundry industry sent the
following letter to stockholders from the Company’s Chairman and
Chief Executive Officer.
A Letter from the Chairman and Chief Executive Officer of
EnviroStar, Inc.(NYSE American: EVI):
To Our Stockholders: Thank you for your investment in and
support of EVI. I am pleased to share with you that EVI
accomplished another year of strong financial performance and
significant progress towards achieving our goals of building a
multibillion dollar enterprise and delivering significant
shareholder value over the long-term. Our goals take time,
patience, and thoughtful execution to achieve, and to appreciate
the merits of our approach, I want to highlight our key
accomplishments over the last two fiscal years, our financial
position, and our reputation, which we believe has us positioned to
achieve the next level of growth.
Acquisition Growth: Since the implementation of our
buy-and-build growth strategy in 2015, EVI has completed ten
acquisitions, including five during fiscal 2017 and 2018, and
already another five during our current fiscal year 2019. Today, we
own eleven commercial, industrial, and vended laundry distributors
and service providers in North America. We have earned a reputation
as a knowledgeable, capable, and friendly acquirer and business
owners continue to be compelled by the opportunity of joining our
company. Thus, we maintain a variety of acquisition and other
strategic opportunities, both in our industry and in related
industries that represent products and services complementary to
ours.
Owners and Leaders, Not Sellers: Although we pursue
acquisition opportunities regardless of ownership profile, we have
focused on entrepreneur owned businesses. Nobody knows better the
potential of our businesses than the entrepreneurs that built them
in the first place. The entrepreneurs endorse our growth strategy
and the future prospects of our acquired businesses with the
financial and leadership commitment they make to EVI. To date, the
owners of our ten acquired businesses accepted approximately 46% of
the contractual consideration paid in EVI stock. Moreover, twelve
of the fourteen original owners continue to lead their businesses
under our decentralized operating model and the average age of
these owners is 53.
Financial Performance: For the fiscal year ended June 30,
2018, EVI generated revenue, net income, and Adjusted EBITDA of
approximately $150 million, $4.0 million, and $10.1 million,
respectively. These results represent an increase in revenue, net
income, and Adjusted EBITDA of 317%, 128%, and 254%, respectively,
compared to the fiscal year ended June 30, 2016, and 60%, 25%, and
59%, respectively, compared to the fiscal year ended June 30, 2017.
Additionally, pro forma revenue for fiscal 2018 reflecting the
three acquisitions consummated during fiscal 2018 was approximately
$177 million.
It is important to note that while we own eleven businesses, our
longest ownership of an acquired business is just twenty-five
months, the shortest is less than one month, and the average is
eight months. Additionally, in connection with our growth efforts
and the compliance standards applicable to us based on the
increased size of our public company, our financial results also
reflect investments at the corporate level, including costs related
to adding experienced personnel and engaging national professional
service firms to support our growing size and scale. Consequently,
at no point since the implementation of our buy-and-build growth
strategy have our financial results included twelve months of all
of our acquired businesses nor do we believe that they reflect the
full potential of our company as a consolidated enterprise.
Today, our leaders collaborate on and pursue organic
opportunities including new brand representations, new product
categories, new services, new capabilities, and new territories
both in our industry and in related industries. Additionally, our
leaders are pursuing opportunities to create new efficiencies and
improved productivity through investments in technology.
Ultimately, the strength of our organization are the entrepreneurs
and professional managers that lead our businesses and I have great
confidence in their ability to create more growth, profitability,
and efficiency from our existing and future operations.
Financial Strength: Another EVI strength is our ability
to effectively allocate capital while exercising financial
discipline. Between October 10, 2016 and September 30, 2018, we
completed seven acquisitions for which we paid net contractual
consideration of $65.5 million, using $33.1 million of stock and
$32.4 million of cash. On September 30, 2018, EVI had net debt of
$19.5 million after having deployed $32.4 million of cash for
acquisitions, primarily sourced from bank borrowings, and after
having paid a total of approximately $2.4 million of dividends
during fiscal 2017 and 2018. Our modest level of debt is a
testament to our prudent capital allocation strategy and to the
favorable working capital dynamics of our business.
The combination of completing numerous acquisitions, delivering
increasingly positive financial performance, and maintaining a
healthy balance sheet earned us the confidence of multiple lenders,
as evidenced by the new $100 million credit facility we secured
during November 2018, which includes the option to increase the
facility to a total of $140 million. We believe that this new
credit facility will provide us with additional financial
flexibility to support our future growth.
A Proven Formula: As a result of disciplined execution of
our growth strategy during the last two years, we acquired ten
businesses, we built an effective team of owners and leaders, we
delivered attractive financial performance while investing in human
and strategic resources, and we maintained financial strength.
These results demonstrate that our buy-and-build growth strategy is
a proven formula for future success.
The Future: Our customers primarily purchase commercial
and industrial laundry equipment, parts, and services, but they
also purchase supplies and consumables, and material handling,
power generation, and water heating, purification, and recycling
equipment, parts, and related installation and maintenance
services. Customer demand for utility, water, labor, energy, and
environmental savings is driving technological innovations to the
products and services we promote. This demand results in increased
customer reliance on our professionals to fulfill more sales,
installation, and maintenance service requirements. Ultimately,
these products and services represent multibillion dollar
industries, which we believe are addressable markets with
attractive fundamentals and long-term growth prospects for our
businesses.
In the years ahead, we intend to continue the thoughtful
execution of our growth strategy, including the acquisition of
quality businesses and the realization of organic growth and new
levels of efficiency and productivity through collaboration and the
successful tech-enablement of our businesses.
Let me close by expressing my gratitude to the entrepreneurs and
valued employees who have joined and are an integral part of EVI,
and to all of our shareholders for their support of our company. I
trust you share my excitement about EVI’s growth record and our
prospects for a promising future, and I hope you can join us at the
2018 Annual Meeting of Stockholders on December 11, 2018 in Miami,
FL.
Sincerely,
Henry M. Nahmad
Chairman and Chief Executive Officer
EnviroStar, Inc.
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.
Forward-Looking Statement
This press release contains forward-looking statements within
the meaning of the safe harbor provisions of the U.S. Private
Securities Litigation Reform Act of 1995. Forward-looking
statements may be identified by use of the words “may,” “will,”
“believes,” “expects,” “anticipates,” “intends,” “plans,”
“estimates,” “projects,” “could,” “would,” “should” or similar
expressions or statements. Actual results, performance or
achievements could differ materially from those contemplated,
expressed or implied by the forward-looking statements.
Forward-looking statements are based largely on the expectations,
beliefs and assumptions of EVI’s management and on the information
currently available to it and are subject to a number of risks and
uncertainties that may affect EVI, including its future plans,
operations, business, strategies, prospects, operating results and
financial position. These risks and uncertainties include without
limitation: the risks related to EVI’s business, results,
profitability, financial condition, growth, growth strategy,
prospects and goals, including EVI’s ability to achieve its goals
and create growth from existing or future operations, risks related
to EVI’s ability to successfully build its existing operations,
risks related to organic growth initiatives, including that such
initiatives may not drive growth or efficiencies or otherwise be
successful or have a positive impact on EVI’s financial condition
or 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, risks relating to EVI’s
ability to successfully enter into and compete effectively in
related industries as well as trends related to those industries
and the timing of any such efforts, risks related to EVI’s expenses
in connection with its growth efforts and public company compliance
and other expenses, including that they may be greater than
anticipated, the risk that EVI’s business and growth strategies and
plans may change from those currently contemplated, risks related
to EVI’s indebtedness, including increases in its debt position and
EVI’s ability to use borrowings to support its growth initiatives,
and other economic, competitive, governmental, technological and
other risks and factors, including those described in the “Risk
Factors” section of EVI’s Annual Report on Form 10-K for the fiscal
year ended June 30, 2018 or elsewhere in EVI’s filings with the
Securities and Exchange Commission. 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 what EVI’s actual results 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.
Notes
This letter includes references to Adjusted EBITDA, which is a
non-GAAP financial measure. For information about EVI’s Adjusted
EBITDA, including how EVI defines Adjusted EBITDA, the reasons why
EVI considers its Adjusted EBITDA, and a reconciliation of Adjusted
EBITDA to net income, the most comparable GAAP financial measure,
please see EVI’s press release dated September 13, 2018, which is
available in the “Investors-Press Releases” section of EVI’s
website at www.envirostarinc.com.
The pro forma revenue referenced in this letter was calculated
as if each of the three acquisitions completed during fiscal 2018
was consummated on July 1, 2017 and based on other assumptions and
adjustments described in EVI’s Annual Report on Form 10-K for the
fiscal year ended June 30, 2018, which is available in the
“Investors-SEC Filings” section of EVI’s website at
www.envirostarinc.com and on the SEC’s
website at www.sec.gov.
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version on businesswire.com: https://www.businesswire.com/news/home/20181121005536/en/
EnviroStar, Inc.Henry M. Nahmad (305) 754-8676
Michael Steiner (305) 754-8676
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