EVI Industries, Inc. (NYSE American: EVI) announced today
results for the six- and three-month periods ended December 31,
2019, including records in revenue, gross profit, and operating
cash flows. The Company’s operating performance reflects the
results of the Company’s continued execution of its long-term
focused buy-and-build growth strategy and organic growth, as
further described below.
Earnings Conference Call
The Company has provided a pre-recorded earnings conference call
and 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.
Financial Performance (compared to the same period of the
prior fiscal year)
Three-Month Results
- Revenue increased 10% to a record $67 million,
- Gross profit increased 3% to a record $14.1 million,
- Gross margin decreased 140 basis points to 21%,
- Operating income decreased from $2.1 million to $0.81
million,
- Net income decreased from $1.3 million to $0.3 million,
and
- Adjusted EBITDA decreased from $3.2 million to $2.2
million.
Six Month Results
- Revenue increased 17% to a record $122 million,
- Gross profit increased 19% to a record $28 million,
- Gross margin increased 30 basis points to 23%,
- Operating income decreased from $3.5 million to $2.1
million,
- Net income decreased from $2.1 million to $0.84 million,
- Adjusted EBITDA decreased from $5.6 million to $4.7 million,
and
- Operating cash flow was a record $9.6 million, an increase of
$19.5 million in cash provided by operating activities.
Highlights to Acquisition Activity
Acquisitions
On August 1, 2019, the Company acquired substantially all of the
assets of New York-based Commercial Laundry Products, Inc.,
Professional Laundry Systems of PA, Inc., and Professional Laundry
Systems West, Inc. (collectively, “PLS”). The addition of PLS
expands the Company’s geographic footprint and increases its market
share in the Northeast. The results of operations of PLS subsequent
to the August 1, 2019 closing date are reflected in the Company’s
financial performance for the current periods.
Additionally, on December 16, 2019, the Company entered into a
definitive agreement to acquire all of the outstanding shares of
Sevierville, Tennessee-based Laundry Systems of Tennessee and
certain affiliated entities (collectively “LST”), which distribute
commercial, industrial, and vended laundry products and provide
related installation and maintenance services to the new and
replacement markets of the commercial laundry industry. The Company
completed the LST acquisition on January 31, 2020; therefore, the
results of operations of LST are not reflected in either of the
current periods.
Earlier today, the Company announced that it entered into a
definitive agreement to acquire Commercial Laundry Equipment
Company Inc. (“CLE”), a Richmond, Virginia based distributor of
on-premise and vended laundry products and a provider of related
installation and maintenance services. CLE has a large customer
base that is loyal to the knowledge, experience, and capabilities
of its sales and service organization. Given that CLE serves
customers in a geography where EVI already has three businesses
operating with wide-ranging capabilities and with distinct product
representations, the Company believes CLE’s customers will benefit
from EVI’s regional capabilities and from all of the resources and
benefits available through EVI to enhance the customer value
proposition.
Henry M. Nahmad, Chairman and CEO of the Company, commented: “We
take great pride in our Company’s reputation as a friendly,
thoughtful, and disciplined buyer and builder of industrial
distribution and service businesses. Our approach and our record
have been instrumental in the number of new and attractive
acquisition opportunities available to our Company. We continue to
pursue these opportunities and remain focused on executing our
long-term growth strategy.”
Highlights to Financial Performance
Impact of “Build” Investments
We believe that EVI’s operating model provides its business
units and their entrepreneurial leaders the necessary autonomy to
invest in achieving revenue and market share growth. To that end,
the Company has invested, and continues to invest, in its acquired
businesses with a focus on increasing revenue and market share.
Such investments include, but are not limited to, increasing and
improving their sales organizations, broadening their portfolio of
products, and expanding service operations and capabilities. In
connection with these efforts, the two-year compounded annual
revenue growth rate for the four subsidiaries that the Company has
owned for at least 24 months as of December 31, 2019 was 8.0%1.
Revenue
The increases in revenue for the six- and three-months periods
ended December 31, 2019 were due to the results of operations of
acquired businesses that were not consolidated into the Company’s
financial statements for all or part of the prior year periods.
Additionally, the increases in revenue reflect the effectiveness of
certain sales growth strategies executed by the Company to increase
market share in existing geographies and favorable trends and
dynamics across the commercial laundry industry.
Gross Margin
The decrease in gross margin for the three-month period ended
December 31, 2019 reflects the Company’s aggressive efforts to
build market share by increasing the installed base of commercial
laundry equipment the Company represents. The Company’s strategic
goal is to build a larger and recurring customer base into which
the Company may increasingly sell or lease complementary equipment,
sell additional products and enter into contracted service
relationships, all of which may generate higher gross margins.
Operating Income and Adjusted
EBITDA
Operating income and Adjusted EBITDA reflect the Company’s
continued investment in its acquired businesses as part of its
long-term growth strategy, which includes increased expenses
related to recruiting, training, and deploying sales and service
professionals, and efforts to cultivate future leaders of our
businesses. The Company also strives to develop and establish best
operating practices across its acquired businesses through
consistent collaboration between its leadership teams. Operating
results also reflect increased investment aimed to modernize its
acquired businesses through the implementation of advanced
technologies from which the Company may achieve operating
efficiencies. Additionally, operating expenses have increased due
to the Company’s growth, including increased public company and
related expenses, and continued investment in the pursuit of
various acquisition and strategic opportunities. EVI believes these
investments and initiatives will have a positive impact on the
Company’s ability to achieve its long-term growth goals.
Balance Sheet and Operating Cash
Flows
During the six-months ended December 31, 2019, the Company
generated a record $9.6 million in operating cash flows reflecting
a $19.5 million improvement over the same period of the prior
fiscal year. This improvement resulted in a 19% decrease in net
debt from $36 million at June 30, 2019 to $29 million at December
31, 2019.
Henry M. Nahmad, Chairman and CEO commented: “Our results are a
favorable indication that the investments we are making in our
acquired businesses are yielding attractive organic revenue growth
and this quarter in particular reflects our increased focused on
market share growth in existing geographies. We intend to continue
making such investments and collaborating with our loyal and
long-term focused supplier partners, while pursuing operating
efficiencies through the consolidation of regional operations, the
establishment of best operating practices, and the implementation
of advanced technologies. We believe that the combination of
revenue growth and an increasingly modern and efficient operation
will lead to the achievement of a high-level of operating leverage
across our Company over the long-term.”
Footnote
1 Given the nature of the Company’s business, as more thoroughly
described in the Company’s Quarterly Report on Form 10-Q for the
quarter ended December 31, 2019, it is important to note that the
timing of revenue recognition related to the sale and installation
of industrial, on-premise, and vended laundry products are
occasionally impacted by delays related to installation schedules.
Accordingly, the Company believes that the compounded annual
revenue growth rate formula set forth above best captures the
Company’s revenue growth rate trend. Also, and as previously
discussed, under the accounting standards for revenue recognition
adopted by the Company on July 1, 2018, gross profit on delivered
but uninstalled equipment sold under longer-term contracts is
deferred and recognized as installation is completed instead of
upon the shipment of equipment.
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,
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 related
to organic growth initiatives, risks related to market share 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. Many
of these risks and factors are beyond EVI’s control. In addition,
the contemplated acquisition of CLE described herein is subject to
certain closing conditions, and there is no assurance that such
acquisition will be consummated. 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)
6-Months Ended
6-Months Ended
3-Months Ended
3-Months Ended
12/31/19
12/31/18
12/31/19
12/31/18
Revenues
$122,338
$104,216
$66,657
$60,841
Cost of Sales
94,429
80,817
52,582
47,164
Gross Profit
27,909
23,399
14,075
13,677
SG&A
25,823
19,865
13,270
11,575
Operating Income
2,086
3,534
805
2,102
Interest Expense, net
855
539
433
374
Income before Income Taxes
1,231
2,995
372
1,728
Provision for Income Taxes
388
934
109
463
Net Income
$843
$2,061
$263
$1,265
Net Income per Share
Basic
$0.07
$0.17
$0.02
$0.10
Diluted
$0.06
$0.16
$0.02
$0.10
Weighted Average Shares Outstanding
Basic
11,787
11,364
11,797
11,492
Diluted
12,208
11,870
12,199
11,966
EVI Industries, Inc.
Condensed Consolidated Balance Sheets (in
thousands, except per share data)
12/31/19
06/30/19
(Unaudited)
Assets
Current assets
Cash and cash equivalents
$ 5,924
$ 5,038
Accounts receivable, net
23,436
30,557
Inventories, net
29,400
26,445
Vendor deposits
103
403
Contract assets
1,483
2,487
Other current assets
3,948
2,938
Total current assets
64,294
67,868
Equipment and improvements, net
7,181
5,865
Operating lease assets
5,727
-
Intangible assets, net
21,808
22,351
Goodwill
55,529
54,501
Other assets
3,862
3,900
Total assets
$ 158,401
$ 154,485
Liabilities and Shareholders’
Equity
Current liabilities
Accounts payable and accrued expenses
$ 15,612
$ 17,508
Accrued employee expenses
5,200
5,187
Customer deposits
8,971
7,163
Contract liabilities
1,755
854
Current portion of operating lease
liabilities
1,621
-
Total current liabilities
33,159
30,712
Deferred tax liabilities, net
2,044
1,708
Long-term operating lease liabilities
4,136
-
Long-term debt, net
34,791
40,563
Total liabilities
74,130
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
297
296
Additional paid-in capital
75,244
73,010
Retained earnings
10,478
9,635
Treasury stock
(1,748)
(1,439)
Common stock related to acquiree's
ESOP
-
(4,240)
Total shareholders' equity
84,271
77,262
Total liabilities and shareholders'
equity
$ 158,401
$ 154,485
EVI Industries, Inc.
Condensed Consolidated Statements of Cash
Flows (in thousands) (Unaudited)
For the six months ended
12/31/19
12/31/18
Operating activities:
Net income
$ 843
$ 2,061
Adjustments to reconcile net income to net
cash provided (used) by operating activities:
Depreciation and amortization
1,730
1,255
Amortization of debt discount
28
68
Provision for bad debt expense
101
104
Non-cash lease expense
30
-
Share-based compensation
915
838
Inventory reserve
94
91
Provision for deferred income taxes
336
131
(Increase) decrease in operating
assets:
Accounts receivable
7,209
(10,985)
Inventories
(2,270)
(3,347)
Vendor deposits
300
(237)
Contract assets
1,004
963
Other assets
(971)
(1,492)
Increase (decrease) in operating
liabilities:
Accounts payable and accrued expenses
(2,412)
2,402
Accrued employee expenses
(38)
(907)
Customer deposits
1,808
(3,357)
Contract liabilities
901
2,557
Net cash provided (used) by operating
activities
9,608
(9,855)
Investing activities:
Capital expenditures
(2,165)
(1,200)
Cash paid for acquisitions, net of cash
acquired
(474)
(7,231)
Net cash used by investing activities
(2,639)
(8,431)
Financing activities:
Proceeds from borrowings
4,000
99,963
Debt repayments
(9,800)
(72,235)
Payment of debt issuance costs
-
(263)
Repurchases of common stock in
satisfaction of employee tax withholding obligations
(309)
(359)
Issuances of common stock under employee
stock purchase plan
26
23
Net cash (used) provided by financing
activities
(6,083)
27,129
Net increase in cash and cash
equivalents
886
8,843
Cash and cash equivalents at beginning of
period
5,038
1,330
Cash and cash equivalents at end of
period
$ 5,924
$ 10,173
EVI Industries, Inc.
Condensed Consolidated Statements of Cash
Flows (in thousands) (Unaudited)
For the six months ended
12/31/19
12/31/18
Supplemental disclosures of cash flow
information:
Cash paid during the period for
interest
$ 870
$ 387
Cash paid during the period for income
taxes
$ 136
$ 1,117
Supplemental disclosure of non-cash
financing activities
Common stock issued for acquisitions
$1,294
$ 14,633
Dividends payable
$ -
$ 1,619
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)
6-Months Ended
6-Months Ended
3-Months Ended
3-Months Ended
12/31/19
12/31/18
12/31/19
12/31/18
Net Income
$843
$2,061
$263
$1,265
Provision for Income Taxes
388
934
109
463
Interest Expense
855
539
433
374
Depreciation and Amortization
1,730
1,255
919
722
Amortization of Share-based
Compensation
915
838
462
424
Adjusted EBITDA
$4,731
$5,627
$2,186
$3,248
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200210005797/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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