EVI Industries, Inc. (NYSE American: EVI) (“EVI” or the
“Company”) announced today its results for the first quarter of its
fiscal year ending June 30, 2024, including record revenue and
gross profit. The Company also provided commentary on its results
of operations, financial strength, growth initiatives, and the
status of its technology investments. Click here to listen to the
Company’s recorded earnings conference call.
Through disciplined execution of its buy-and-build growth
strategy and a thriving entrepreneurial culture, EVI has
established itself as a leader in the highly fragmented North
American commercial laundry distribution and services market. Since
2016, EVI has, among other things, completed twenty-five
acquisitions, expanded into new geographies, retained and invested
in additional sales and service personnel, broadened its OEM
representations, and implemented advanced operating technologies.
As a result of these initiatives, since 2016, EVI’s revenue, net
income, and Adjusted EBITDA have grown at compounded annual growth
rates (CAGRs) of 37%, 24%, and 35%, respectively.
Henry M. Nahmad, EVI’s Chairman and CEO,
commented: “EVI delivered record revenue and gross profit during
the quarter. Our results are a testament to the dedication of our
team and their thoughtful execution of various initiatives they
have undertaken to drive growth, modernize operations, and improve
profitability. Given the success of these initiatives, we will
continue to invest in people capable of driving growth while we
also invest in and deploy technologies that enhance the customer
experience. This approach has served us well and has been the
catalyst to generating incrementally greater operating leverage
over the last few years. Finally, it is important to note that our
first quarter results include a one-time expense related to the
acceleration of stock compensation in connection with the
achievement of specific financial goals during the fiscal year
ended June 30, 2023.”
Select Company Achievements during the
First Quarter of Fiscal 2024
- Generated record first quarter revenue
- Produced record first quarter gross profit
- Sustained a strong balance sheet with $29.7 million of net
debt
- Delivered $1.5 million of operating cash flow, a $7.7 million
increase over the same quarter of the prior fiscal year
- New customer sales order contracts met the value of those
fulfilled during the first fiscal quarter
- Completed one acquisition adding sales and service expertise to
the Company’s Northeast Region
Fiscal First Quarter
Highlights (compared to the first
quarter of fiscal 2023)
- Revenue increased 6% to a first quarter record $88.1
million
- Gross profit increased 5% to a first quarter record $25.7
million
- Gross margin was 29.2% compared to 29.4% in the same quarter of
the prior fiscal year
- Operating income was $2.6 million compared to $4.4 million in
the same quarter of the prior fiscal year
- Operating income adjusted for one-time noncash expense was $3.8
million
- Net income was $1.3 million, or approximately 1.5%, compared to
$2.8 million in the same quarter of prior fiscal year
- Adjusted EBITDA was $6.0 million, or approximately 7%, compared
to $6.5 million in the same quarter of the prior fiscal year
Results of Operations
The 6% increase in revenue for the quarter was the result of an
increase in products available to satisfy steady customer demand
and a larger sales organization that is successfully growing market
share across various end market segments. Given the increasing
installed base of commercial laundry equipment EVI represents,
parts, installation, and routine service revenues also increased.
Concurrently, the Company sustained gross margins of over 29% for
the quarter ended September 30, 2023 reflecting five consecutive
quarters of gross margins equaling or exceeding 28%. The topline
growth and sustained gross margins reflect the benefit of various
initiatives undertaken to improve the customer value proposition
and in turn deliver incrementally better profitability. The first
quarter record revenue and gross profit performance was partially
offset by an approximately $3.0 million, or 15%, increase in
SG&A. The SG&A increase includes a one-time expense of $1.2
million in stock compensation expense (40%), $1.0 million in
additional selling expenses (33%), and $0.8 million in technology
investments and expenses in connection with the new business
acquisition (27%).
More specifically, EVI’s culture to reward performance through a
variety of pay-for-performance incentive programs to its leadership
and sales professionals resulted in a one-time stock compensation
expense related to the acceleration of the vesting of previously
granted restricted stock awards and restricted stock units
triggered by the Company’s achievement of specific financial goals
during the fiscal year ended June 30, 2023. The increase in selling
expense is the result of an increase in commissionable sales and
increased headcount of sales professionals across the Company in
connection with investments in new OEM representations, additional
distribution territories, and collaborative strategies with the
Company’s OEM partners in the pursuit of future growth. Finally,
the increase in other operating expenses reflect expenses related
to acquired businesses and the Company’s continued investments to
modernize and optimize its operations.
Financial Strength, Operating Cash Flow, and
Liquidity
EVI’s strong financial position has been critical to its
performance and at the completion of the first fiscal quarter, the
Company’s balance sheet remains strong with $29.7 million of net
debt. EVI believes that its low leverage position allows the
Company ample liquidity to continue investing in opportunities
consistent with its long-term growth strategy. The Company believes
that its financial strength, access to capital, and history of
consistent growth provides comfort and confidence to its
stakeholders.
During fiscal 2023, management invested much of its free cash
flow into working capital, primarily in inventory required to
support short-term customer equipment and parts needs, and to
fulfill confirmed customer sales order contracts. During the first
fiscal quarter, the Company was able to monetize a portion its
inventory investment resulting in $1.5 million of operating cash
flows, reflecting a $7.7 million increase in cash flow from
operations as compared to the same period of the prior fiscal
year.
Mr. Nahmad commented: “We understand that
managing our financial resources effectively is critical to
achieving sustainable growth over the long term. By taking a
thoughtful and risk mitigating approach to capital allocation, we
believe we can continue to invest in our business and pursue
strategic opportunities simultaneously. This approach has served us
well in the past, and we remain confident that it has positioned us
for success in the years ahead.”
Technology Investments Update
Enterprise Resource Planning Systems: Over the last four years,
the Company has consistently made significant investments to
modernize and optimize its operations, including successful efforts
to regionalize operations and implement new technologies at legacy
business units. These investments and initiatives are designed to
reduce costs, enhance efficiency, and promote consistency across
the Company’s operations that collectively result in a more agile
and responsive organization capable of scaling up with continued
growth. The Company’s new enterprise resource planning (“ERP”)
system provides previously unavailable analytics that management
now uses to make decisions aimed to fine tune continuing operations
with greater speed and accuracy. At this point, the fundamental
initiatives in connection with legacy business units are nearing
completion as approximately 80% of these units are transacting on
the end state system.
Field Service Management Platform: Subsequent to the completion
of the first fiscal quarter, the Company commenced the
configuration and implementation of its Field Service Management
(“FSM”) Platform aimed to transform the customer experience. The
Company’s future FSM Platform will provide EVI’s field service
technicians with real-time access to critical information to
maximize technician utilization and efficiency, including real-time
access to time-sensitive product detail, technical support, parts
pricing and inventory availability, warranty management, route
optimization, and more. The Company believes that this advanced
technology will not only improve the efficiency of service
operations, but also drive future product sales growth.
Mr. Nahmad commented: “The technological
transformation of our Company is a significant undertaking that
requires thoughtful and precise execution. To date, our technology
investments have been primarily focused on our ERP Systems, which
are the foundation of a broader technology strategy. Given our
progress with the ERP Systems, we have increased our focus on
deploying customer facing technology that we believe will
accelerate optimization of newly acquired businesses, and
facilitate market share growth, new customer acquisitions, margin
expansion, and superior customer service. Our technology team is
dedicated to this long-term initiative, and we are confident in the
long-term benefits of these technology investments.”
Acquisitions
During the three months ended September 30, 2023, the Company
completed the acquisition of ALCO Washer Center, a commercial
laundry distributor and service provider. The acquisition
strengthens EVI’s leading market share position in the northeast
region of the United States. Through this acquisition, EVI added
experienced sales professionals with a track record of growth
across an established customer base and a team of knowledgeable
service technicians with a longstanding reputation for providing
reliable services.
Mr. Nahmad commented: “Each acquisition is
integral to achieving our long-term goal to build North America’s
largest value-added distributor of commercial laundry and related
products and the most dynamic network of commercial laundry
technicians. Our Company is excited about the benefits already
delivered by these businesses and appreciate the value each
provides to our growing organization. Looking forward, we continue
to see a strong deal pipeline and believe that business owners,
customers, and prospective leaders will continue to be attracted to
joining the EVI family and to working with our Company in the
months and years ahead.”
EVI’s Core Principles
EVI upholds specific core values and principles for its
business, including:
- Invest and manage with a long-term perspective
- Uphold financial discipline with a view towards ensuring
financial strength and flexibility
- Respect the entrepreneurs and management teams that join the
EVI family
- Operate as a local business and empower leaders to make local
decisions
- Promote an entrepreneurial culture
- Instill a growth mindset and culture of continuous
improvement
- Incentivize and reward performance with equity
participation
- Establish strong relationships with our OEM partners
Mr. Nahmad further added: “Consistent with
our Core Principles, our strategy is long-term focused and takes
time, patience, and thoughtful execution. We continue to pursue
acquisition and other strategic opportunities in the commercial
laundry industry and across other product and service categories
that meet our financial and strategic criteria. While we are
pleased with our operating performance, we continue steadfast in
our relentless pursuit of growth through the execution of our
long-term buy-and-build growth strategy.
Earnings Conference Call and Additional Information
The Company has provided a pre-recorded earnings conference
call, including a business update, which can be accessed under
“Financial Info” 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. For additional
information regarding the Company’s results for the quarter ended
September 30, 2023, please see the Company’s Quarterly Report on
Form 10-Q for the quarter ended September 30, 2023, as 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.
Adjusted EBITDA margin represents adjusted EBITDA divided by
revenues.
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 the
purchase of the Company’s 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 may relate to, among
other things, events, conditions, and trends that may affect the
future plans, operations, business, strategies, operating results,
financial position and prospects of the Company. 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 the Company, or industry trends and results, to
differ materially from the future results, trends, performance or
achievements expressed or implied by such forward looking
statements. These risks and uncertainties include, among others,
those associated with: general economic and business conditions in
the United States and other countries where the Company operates or
where the Company’s customers and suppliers are located; industry
conditions and trends; credit market volatility; risks related to
supply chain delays and disruptions and their impact on the
Company’s business and results, including the Company’s ability to
deliver products and provide services to its customers on a timely
basis; risks relating to inflation, including the current
inflationary trend, and the impact of inflation on the Company’s
costs and its ability to increase the price of its products and
services to offset such costs, and on the market for the Company’s
products and services; risks related to labor shortages and
increases in the costs of labor, and the impact thereof on the
Company, including its ability to deliver products, provide
services or otherwise meet customers’ expectations; risks
associated with international relations and international
hostilities and the impact thereof on economic conditions,
including supply chain constraints and inflationary trends; risks
relating to rising interest rates, including the impact thereof on
the cost of the Company’s indebtedness and the Company’s ability to
raise capital if deemed necessary or advisable; risks related to
the Company’s ability to implement its business and growth
strategies and plans, including changes thereto, and the risk that
the Company may not be successful in achieving its goals; risks and
uncertainties associated with the Company’s ”buy-and-build” growth
strategy, including, without limitation, that the Company may not
be successful in identifying or consummating, or have the liquidity
to or otherwise be financially positioned or able to consummate,
acquisitions or other strategic transactions, integration risks,
risks related to indebtedness incurred by the Company in connection
with the financing of acquisitions, dilution experienced by the
Company’s existing stockholders as a result of the issuance of
shares of the Company’s common stock in connection with
acquisitions, risks related to the business, operations and
prospects of acquired businesses, risks that suppliers of the
acquired business may not consent to the transaction or otherwise
continue its relationship with the acquired business following the
transaction and the impact that the loss of any such supplier may
have on the results of the Company and the acquired business, risks
that the Company’s goals or expectations with respect to
acquisitions and other strategic transactions may not be met, and
risks related to the accounting for acquisitions; risks related to
organic growth initiatives, including that they may not result in
the benefits anticipated; risks that the Company’s technology
investments, including in respect of the enterprise resource
planning system and field service platform, and other investments,
including those in acquired businesses or otherwise in support of
growth, and initiatives in furtherance thereof may not result in
the benefits anticipated and may result in disruptions to the
Company’s operations, expenses in connection with these investments
and initiatives may be more costly than anticipated and the
implementation of these initiatives may not be completed when
expected; technology changes; the risk that the Company’s
performance and results, including that the Company may not achieve
growth consistent with historical levels, at the level expected, or
at all; risks relating to the Company’s relationships with its
principal suppliers and customers, including concentration risks
and the impact of the loss of any such relationship; risks related
to the Company’s indebtedness; the availability, terms and
deployment of debt and equity capital if needed for expansion or
otherwise; the availability and cost of inventory purchased by the
Company, and the risk that the sales of inventory subject to
purchase orders may not be completed as or when expected, or at
all; risks relating to the recognition of revenue, including the
amount and timing thereof (including potential delays resulting
from, among other circumstances, delays in installation; risks
related to the material weakness in the Company’s internal control
over financial reporting, the Company’s ability to remediate such
weakness in the anticipated timeframe, and the costs incurred in
connection therewith; and other economic, competitive,
governmental, technological and other risks and factors discussed
elsewhere in the Company’s filings with the SEC, 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, 2023. Many
of these risks and factors are beyond the Company’s control.
Further, past performance and perceived trends may not be
indicative of future results. The Company 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. The Company does not undertake to, and
specifically disclaims any obligation to, update, revise 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
Unaudited
3-Months Ended
3-Months Ended
09/30/23
09/30/22
Revenues
$88,074
$83,428
Cost of Sales
62,382
58,923
Gross Profit
25,692
24,505
SG&A
23,075
20,122
Operating Income
2,617
4,383
Interest Expense, net
770
377
Income before Income Taxes
1,847
4,006
Provision for Income Taxes
565
1,159
Net Income
$1,282
$2,847
Net Earnings per Share
Basic
$0.09
$0.20
Diluted
$0.09
$0.20
Weighted Average Shares Outstanding
Basic
12,581
12,522
Diluted
13,205
12,526
EVI Industries, Inc.
Condensed Consolidated Balance Sheets (in
thousands, except per share data)
Unaudited
09/30/23
06/30/23
Assets
Current assets
Cash and cash equivalents
$4,189
$5,921
Accounts receivable, net
47,825
48,391
Inventories, net
57,693
59,167
Vendor deposits
2,461
2,291
Contract assets
2,079
1,181
Other current assets
7,623
8,547
Total current assets
121,870
125,498
Equipment and improvements, net
12,909
12,953
Operating lease assets
7,831
8,714
Intangible assets, net
23,601
24,128
Goodwill
74,155
73,388
Other assets
9,121
9,166
Total assets
$249,487
$253,847
Liabilities and Shareholders’ Equity
Current liabilities
Accounts payable and accrued expenses
$31,595
$38,730
Accrued employee expenses
11,458
10,724
Customer deposits
24,327
23,296
Contract liabilities
545
668
Current portion of operating lease
liabilities
2,790
3,027
Total current liabilities
70,715
76,445
Deferred income taxes, net
4,993
5,023
Long-term operating lease liabilities
5,892
6,554
Long-term debt, net
33,878
34,869
Total liabilities
115,478
122,891
Shareholders' equity
Preferred stock, $1.00 par value
-
-
Common stock, $.025 par value
319
318
Additional paid-in capital
103,309
101,225
Treasury stock
(3,509)
(3,195)
Retained earnings
33,890
32,608
Total shareholders' equity
134,009
130,956
Total liabilities and shareholders'
equity
$249,487
$253,847
EVI Industries, Inc.
Condensed Consolidated Statements of Cash
Flows (in thousands) (unaudited)
For the three months ended
09/30/23
09/30/22
Operating activities:
Net income
$1,282
$2,847
Adjustments to reconcile net income to net
cash provided (used) by operating activities:
Depreciation and amortization
1,546
1,446
Amortization of debt discount
9
3
Provision for bad debt expense
124
103
Non-cash lease expense
(16)
(14)
Stock compensation
1,856
680
Inventory reserve
174
(136)
(Benefit) provision for deferred income
taxes
(30)
132
Other
25
(36)
(Increase) decrease in operating
assets:
Accounts receivable
500
(1,239)
Inventories
1,772
(4,162)
Vendor deposits
(170)
(101)
Contract assets
(898)
(3,849)
Other assets
969
(609)
(Decrease) increase in operating
liabilities:
Accounts payable and accrued expenses
(7,191)
113
Accrued employee expenses
734
776
Customer deposits
977
(1,652)
Contract liabilities
(123)
(507)
Net cash provided (used) by operating
activities
1,540
(6,205)
Investing activities:
Capital expenditures
(971)
(771)
Cash paid for acquisitions, net of cash
acquired
(987)
(1,224)
Net cash used by investing activities
(1,958)
(1,995)
Financing activities:
Proceeds from borrowings
19,000
15,000
Debt repayments
(20,000)
(7,000)
Repurchases of common stock in
satisfaction of employee tax withholding obligations
(314)
-
Net cash (used) provided by financing
activities
(1,314)
8,000
Net decrease in cash
(1,732)
(200)
Cash at beginning of period
5,921
3,974
Cash at end of period
$4,189
$3,774
EVI Industries, Inc.
Condensed Consolidated Statements of Cash
Flows (in thousands) (unaudited)
For the three months ended
09/30/23
09/30/22
Supplemental disclosures of cash flow
information:
Cash paid for interest
$767
$371
Cash paid for income taxes
$3,171
$794
Supplemental disclosures of non-cash
financing activities:
Common stock issued for acquisitions
$229
$ -
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
Unaudited
3-Months Ended
3-Months Ended
09/30/23
09/30/22
Net Income
$1,282
$2,847
Provision for Income Taxes
565
1,159
Interest Expense, Net
770
377
Depreciation and Amortization
1,546
1,446
Amortization of Share-based
Compensation
1,856
680
Adjusted EBITDA
$6,019
$6,509
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version on businesswire.com: https://www.businesswire.com/news/home/20231109118530/en/
EVI Industries, Inc. Henry M. Nahmad Chairman and CEO (305)
402-9300
Investor Relations (305) 402-9300 info@evi-ind.com
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