EVI Industries, Inc. (NYSE American: EVI) (the “Company” or
“EVI”) announced today results for the fourth quarter and fiscal
year ended June 30, 2020. While the COVID-19 pandemic and
accompanying economic disruption adversely impacted the Company’s
performance, the Company achieved record revenue, gross profit, and
operating cash flows for fiscal year 2020 and reduced net debt 50%
compared to the prior year. This reflects the Company’s continued
execution of its long-term focused buy-and-build growth strategy
and the effectiveness of certain organic growth initiatives offset
by continued investment towards the modernization and optimization
of the Company and the impact of COVID-19. .
Earnings Conference Call The Company
has 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.
50% Decrease to Net Debt and Record Operating Cash
Flows
At June 30, 2020, the Company had $18 million of net debt. This
represents an $8 million, or a 31% decrease to net debt as compared
to March 31, 2020 and an $18 million, or a 50% decrease to net debt
as compared to June 30, 2019. The strengthening of the Company’s
balance sheet was driven by a record $23 million of operating cash
flow for the fiscal year ended June 30, 2020. This record
accomplishment in operating cash flow represents a $32 million
positive swing in operating cash flow over the prior year and is a
function of attractive working capital dynamics and the successful
implementation of an effective cash management program.
Fourth Quarter and Fiscal Year Operating Results
During the second half of fiscal 2020, government orders
resulted in the unprecedented closure of businesses and
restrictions that limited the Company’s access to customers’
facilities. This triggered a deceleration of revenue that started
in March, continued into April, but started to rebound in May and
continued to rebound through June. The deceleration in revenue
resulted in a 16% decrease in revenue for the three months ended
June 30, 2020 compared to the three months ended June 30, 2019;
however, revenue increased 3% for the fiscal year ended June 30,
2020 to a record $236 million.
Henry M. Nahmad, Chairman and CEO commented:
“While we were confronted with the turbulence and chaos caused by
COVID-19 during fiscal 2020, we are pleased with the manner and
speed in which we have been able to adapt. Revenue from industrial
laundry customers was consistent with preplanned delivery and
installation schedules and encouragingly, we accepted customer
deposits for future planned industrial laundries. Revenue from
on-premise laundry customers varied by end-user and geography.
Revenue from vended laundry customers was strong due to factors
that continue to spur investment from entrepreneurs and revenue
from multi-family customers was consistent with contractual
obligations.”
Gross margin for the fourth quarter increased from approximately
24% in fiscal 2019 to 25% in fiscal 2020 and gross margin for the
fiscal year 2020 increased 30-basis points to 23.4% resulting in
record gross profit for fiscal year 2020. Meanwhile, the decline in
Adjusted EBITDA for the fourth fiscal quarter and fiscal 2020,
principally reflect the impact of COVID-19. It also reflects
expenses associated with operating fourteen independent businesses,
inefficiencies related to outdated enterprise resource planning
(ERP) software, and the Company’s ongoing investments to optimize
and modernize its operations. Further, the Company’s operating
results reflect continued investments made in pursuit of
acquisition and strategic investments, and the retention of
substantially all of its employees. Given the essential nature of
its business, the Company’s employees were and remain integral to
the success of its customers’ operations and, in turn, the
Company.
Acquisitions
Consistent with its buy-and-build strategy, during fiscal 2020,
the Company completed three acquisitions. One expanded its
footprint into the northeast and the other two increased its market
share in the mid-Atlantic and the southeast. While the Company
generally maintains a healthy pipeline of acquisition
opportunities, COVID-19 has increased the number of acquisition
opportunities the Company is pursuing at this time both in the
commercial laundry industry and across its targeted complementary
industries. To amplify its efforts, the Company allocated
additional resources to these efforts, which given its reputation,
entrepreneurial culture, and long-term growth plans, the Company
believes will improve its ability to secure additional successful
acquisitions for the Company.
Looking Forward
While the Company pursues these long-term growth opportunities,
its decentralized and entrepreneurial operating philosophy has
generally remain unchanged. However, during the second half of
fiscal 2020, the Company commenced an initiative to consolidate its
operations into five primary subsidiaries with nine operating
branches and to implement an ERP capable of supporting its future
growth and its needs for business intelligence. Beyond the
near-term benefits of realizing certain operating efficiencies, the
Company believes that this technology will improve the
effectiveness of future sales and marketing initiatives, will
result in more efficient service operations, will facilitate
predictive parts sales, will augment the future generation of sales
and service professionals with intuitive selling and servicing
solutions, will create a more connected and powerful experience
with its customers, will be the foundation of its future e-commerce
platform, and will enhance its competitive advantages.
Additionally, the Company believes this plan will be instrumental
in achieving a greater level of profitability from successive
acquisitions earlier in its ownership than it has historically
experienced. While this is a significant undertaking, the Company
has worked diligently towards accomplishing these objectives
without significant operating disruption or time delays. As of
today, the Company successfully implemented its new ERP and related
technologies at one of its five primary subsidiaries and has
accelerated its Company-wide consolidation plan and corresponding
technology implementations.
Mr. Nahmad commented: “We are still very
early in our long-term growth goals. Our financial position remains
strong with ample liquidity, well-managed working capital, and
positive cash flows. Despite disruption and uncertainty resulting
from COVID-19, we continue to believe that we have the right
strategies to drive organic growth and to capture substantial
growth through acquisitions and strategic investments in and around
our industry. Further, we are confident that the benefit of such
growth will be amplified by the continued modernization and
optimization of the Company and that focusing on sustainable
long-term business drivers will yield superior long-term
performance and results for EVI and our shareholders.”
Fourth Quarter and Fiscal Year 2020 Operating Results
(compared to the same period of the prior fiscal year)
Fourth Quarter Results
- Revenue decreased 16% to $54 million,
- Gross profit decreased 15% to $13.5 million,
- Gross margin increased 30 basis points to 25%,
- Operating income was $0.34 million versus $2.4 million,
- Net loss of $(0.1) million versus $1.2 million of net income,
and
- Adjusted EBITDA was $1.9 million versus $3.7 million.
Fiscal Year Results
- Revenue increased 3% to a record
$236 million,
- Gross profit increased 5% to a record $55 million,
- Gross margin increased 30 basis points to 23.4%,
- Operating income was $2.8 million versus $7.0 million,
- Net income was $0.78 million versus $3.7 million,
- Adjusted EBITDA was $8.8 million versus $11.5 million, and
- Operating cash flow was a record
$23.1 million, an increase of $32 million in cash provided by
operations.
For additional information regarding the Company’s results for
the fourth quarter and fiscal year ended June 30, 2020 and further
discussion of the COVID-19 pandemic, including its impact on the
Company’s results and measures taken by the Company in response to
the pandemic, see the Company’s Annual Report on Form 10-K for the
fiscal year ended June 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 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;
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, 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 previously-disclosed loans received 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 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, 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, including long-term growth or superior performance or
results; 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
Unaudited
12-Months
Ended
12-Months
Ended
3-Months
Ended
3-Months
Ended
06/30/20
06/30/19
06/30/20
06/30/19
Revenues
$ 235,802
$ 228,318
$ 54,423
$ 64,882
Cost of Sales
180,595
175,620
40,955
49,005
Gross Profit
55,207
52,698
13,468
15,877
SG&A
52,427
45,693
13,125
13,513
Operating Income
2,780
7,005
343
2,364
Interest Expense, net
1,432
1,389
234
447
Income before Income Taxes
1,348
5,616
109
1,917
Provision for Income Taxes
573
1,873
165
701
Net Income (Loss)
$ 775
$ 3,743
$ (56)
$ 1,216
Net Income (Loss) per Share
Basic
$ 0.06
$ 0.30
$ (0.01)
$ 0.10
Diluted (1)
$ 0.06
$ 0.29
$ (0.01)
$ 0.09
Weighted Average Shares Outstanding
Basic
11,841
11,533
11,921
11,741
Diluted (1)
12,171
12,022
11,921
12,209
(1) For the three-month period ended June 30, 2020 potential
common shares under the treasury stock method were anti-dilutive
because the Company reported a net loss in the period.
EVI Industries, Inc.
Condensed Consolidated Balance Sheets (in
thousands, except per share data)
06/30/20
06/30/19
Assets
Current assets
Cash and cash equivalents
$ 9,789
$ 5,038
Accounts receivable, net
23,042
30,557
Inventories, net
24,063
26,445
Vendor deposits
1,276
403
Contract assets
3,443
2,487
Other current assets
3,041
2,938
Total current assets
64,654
67,868
Equipment and improvements, net
7,992
5,865
Operating lease assets
5,311
-
Intangible assets, net
21,754
22,351
Goodwill
56,678
54,501
Other assets
4,329
3,900
Total assets
$ 160,718
$ 154,485
Liabilities and Shareholders’
Equity
Current liabilities
Accounts payable and accrued expenses
$ 24,292
$ 17,508
Accrued employee expenses
4,764
5,187
Customer deposits
8,511
7,163
Contract liabilities
558
854
Current portion of long-term debt
2,680
-
Current portion of operating lease
liabilities
1,672
-
Total current liabilities
42,477
30,712
Deferred tax liabilities, net
1,728
1,708
Long-term operating lease liabilities
3,657
-
Long-term debt, net
25,030
40,563
Total liabilities
72,892
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
301
296
Additional paid-in capital
79,127
73,010
Retained earnings
10,410
9,635
Treasury stock
(2,012)
(1,439)
Common stock related to acquiree's
ESOP
-
(4,240)
Total shareholders' equity
87,826
77,262
Total liabilities and shareholders'
equity
$ 160,718
$ 154,485
EVI Industries, Inc.
Condensed Consolidated Statements of Cash
Flows (in thousands)
For the twelve months ended
06/30/20
06/30/19
Operating activities:
Net income
$ 775
$ 3,743
Adjustments to reconcile net income to net
cash provided (used)
by operating activities:
Depreciation and amortization
3,696
2,743
Amortization of debt discount
55
95
Provision for bad debt expense
497
283
Non-cash lease expense
18
-
Share-based compensation
2,302
1,740
Inventory reserve
49
86
(Benefit) provision for deferred income
taxes
(178)
861
Other
(109)
-
(Increase) decrease in operating
assets:
Accounts receivable
8,121
(8,934)
Inventories
3,969
(4,335)
Vendor deposits
(873)
203
Contract assets
(956)
(1,475)
Other assets
(356)
(988)
Increase (decrease) in operating
liabilities:
Accounts payable and accrued expenses
5,568
2,381
Accrued employee expenses
(474)
241
Customer deposits
1,258
(5,964)
Contract liabilities
(296)
595
Net cash provided (used) by operating
activities
23,066
(8,725)
Investing activities:
Capital expenditures
(3,375)
(2,979)
Cash paid for acquisitions; net of cash
acquired
(1,379)
(12,542)
Net cash used by investing activities
(4,754)
(15,521)
Financing activities:
Dividends paid
-
(1,619)
Proceeds from borrowings
24,892
112,963
Debt repayments
(37,930)
(82,435)
Payment of debt issuance costs
-
(272)
Repurchases of common stock in
satisfaction of employee tax
withholding obligations
(573)
(728)
Issuances of common stock under employee
stock purchase plan
50
45
Net cash (used) provided by financing
activities
(13,561)
27,954
Net increase in cash and cash
equivalents
4,751
3,708
Cash and cash equivalents at beginning of
period
5,038
1,330
Cash and cash equivalents at end of
period
$ 9,789
$ 5,038
EVI Industries, Inc.
Condensed Consolidated Statements of Cash
Flows (in thousands)
For the twelve months ended
06/30/20
06/30/19
Supplemental disclosures of cash flow
information:
Cash paid during the period for
interest
$ 1,475
$ 1,231
Cash paid during the period for income
taxes
$ 345
$ 1,737
Supplemental disclosure of non-cash
financing activities
Common stock issued for acquisitions
$3,770
$ 21,290
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
Unaudited
12-Months
Ended
12-Months
Ended
3-Months
Ended
3-Months
Ended
06/30/20
06/30/19
06/30/20
06/30/19
Net Income (loss)
$ 775
$ 3,743
$ (56)
$ 1,216
Provision for Income Taxes
573
1,873
165
701
Interest Expense
1,432
1,389
234
447
Depreciation and Amortization
3,696
2,743
1,004
849
Amortization of Share-based
Compensation
2,302
1,740
578
453
Adjusted EBITDA
$ 8,778
$ 11,488
$ 1,925
$ 3,666
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200914005900/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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