EVI Industries, Inc. (NYSE American: EVI) achieved record
revenue, gross profit, gross margin, operating profit, net income,
and Adjusted EBITDA for the three-months ended September 30, 2021,
the first quarter of the Company’s fiscal year ending June 30, 2022
(“fiscal 2022”). The Company’s record operating results reflect
continued strong demand for the Company’s products and services,
growth from continuing operations and from recent acquisitions, and
the realization of certain benefits in connection with the
Company’s optimization while continuing the recovery from the
COVID-19 pandemic.
Highlights to EVI’s First Quarter Record Operating Results
(Compared to the First Quarter of Fiscal 2021)
- Revenue increased 10% to a record $64 million
- Gross profit increased 32% to a record $18 million
- Gross margin increased by 470 basis-points to a record
27.7%
- Net income increased from $.52 million to a record $2.0
million
- Adjusted EBITDA increased 78% from $2.5 million to a record
$4.4 million, or approximately 7.0%
Henry M. Nahmad, EVI’s Chairman and CEO commented: “Our record
operating results for the first quarter of fiscal 2022 reflect
continued recovery across our end customer categories and the
success of our efforts to overcome product shortages, shipping
challenges, and rapidly rising product costs to take advantage of
the solid demand for commercial laundry products and services. Our
Company continues to execute at a high level and leverage our
market leadership position and significant commercial and
operational capabilities to gain market share. With ongoing
positive market trends, steady improvement in our capabilities, and
acquisition and strategic transaction opportunities, we are
confident in our ability to continue to build our business and
deliver superior results during fiscal 2022 and beyond.”
Factors Impacting Fiscal Q1 Operating Performance
Product Pricing. During calendar 2021, like other
industries, manufacturers of commercial laundry products have
experienced significant inflationary pressures and have raised
prices accordingly. In connection with the inflationary trend, the
Company raised selling prices and took certain other measures to
improve gross margins, including the promotion of specific sales
methods aimed at delivering enhanced solutions to customers and
further implementation of the Company’s gross margin incentive
program which is designed to reward its sales professionals for
higher gross margin sales. The Company actively monitors market
conditions, communicates with suppliers, and makes necessary
adjustments in order to sustain competitiveness and profitability.
The combination of these actions, together with the continued
recovery from the COVID-19 pandemic, resulted in increased sales
and gross margins for the first quarter of fiscal 2022.
Product Availability. Manufacturers of commercial laundry
equipment have experienced supply chain disruptions caused by
component availability, labor shortages, transportation delays or
other supply chain challenges, all of which have impacted typical
lead times and overall availability of commercial laundry products.
While supply chain disruptions adversely impacted sales during the
first quarter of fiscal 2022, the Company nonetheless experienced
an increase in sales (as described above) and is encouraged by
steady demand evidenced by continued growth in its sales order
backlog. The Company expects the supply chain disruptions to
continue for the foreseeable future, including during fiscal 2022,
and it is actively working with its suppliers in an effort to
timely fulfill strong end-user demand.
Operating Expenses. Operating expenses increased during
the first quarter of fiscal 2022 due in part to higher personnel
costs and other operating expenses in connection with measures
taken to service customers in light of supply chain disruptions.
Additionally, the Company continued to incur one-time expenses in
connection with operational optimization initiatives, which to date
have proven to deliver improved operating performance. The Company
expects most of these incremental costs to be temporary and
moderate during the beginning part of fiscal 2023 as the supply
chain starts to normalize and the consolidation and modernization
initiatives are completed.
Technology Investments. The Company continues to invest
in the deployment of advanced operating technologies. Spending in
connection with the Company’s technology investments increased 151%
in the first quarter of fiscal 2022 as compared to the same period
of the prior fiscal year. This ongoing initiative has enabled the
Company to accelerate the consolidation of its regional groups of
businesses, which has resulted in the elimination of redundant
functions, the realization of operating efficiencies, and
incremental optimization of operating performance. Additionally,
the Company’s operating technologies include sales and service
tools that have facilitated improved salesforce and service
personnel productivity. The Company expects that the complete
installation of its operating technologies will result in an
optimized business with the capacity to achieve its expected
operating leverage on a sustained basis.
Balance Sheet Strength, Liquidity, and Operating Cash
Flow
On September 30, 2021, the Company had net debt of $17 million,
which represents an $11 million increase in net debt as compared to
June 30, 2021. The increase in net debt is primarily attributable
to a $4.8 million increase in accounts receivable, which is due in
large part to a 10% increase in sales and a $3.9 million increase
in inventory, which is due to an increase in stock orders and
delays in the delivery and installation of products at commercial
laundries. This change in working capital resulted in $10 million
of negative operating cash flows for the first fiscal quarter.
However, the Company maintains a healthy and strong balance sheet,
including over $100 million of available capital to deploy in
connection with acquisition opportunities the Company is pursuing
under its buy-and-build growth strategy.
Looking Forward
Mr. Nahmad commented: “Our operating performance reflects the
continued recovery from the COVID-19 pandemic, the benefits of a
thoughtful acquisition program, and the effectiveness of the
strategic investments we are making in optimizing our operations.
Given our success, 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, which takes time, patience, and thoughtful
execution. While we are pleased with our operating performance, we
remain steadfast in our pursuit of significant growth and the
execution of our long-term buy and build growth strategy.”
Earnings Conference Call
The Company 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.
For additional information regarding the Company’s results for
the quarter ended September 30, 2021, see the Company’s Quarterly
Report on Form 10-Q for the quarter ended September 30, 2021, 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.
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 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; risks relating to supply chain disruptions
and inflationary trends and the length and severity of the supply
chain disruptions and inflationary trends the industry is currently
facing, including that they may not subside when expected, the
Company’s actions taken in response thereto may not be successful
and the expenses associated therewith may be greater and/or endure
longer than expected, and the Company may not be able to increase
prices it charges to its customers to offset the increased prices
charged by manufacturers; demand for the Company’s products and
services may not remain strong or meet the Company’s expectations;
risks relating to the Company’s ability to build its business,
increase market share or otherwise meet its goals; the risk that
measures to improve gross margins may not be successful; risks
related to the Company’s consolidation and modernization
initiatives, including that they may not continue to deliver
improved operating performance; the risks that the Company’s
investments in advanced technologies may not result in the benefits
anticipated; 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 the
Company and its business, financial condition, liquidity and
results, which in large part will depend on future developments and
are highly uncertain and beyond the Company’s control, the length
and severity of the COVID-19 pandemic and the pace of recovery
following the COVID-19 pandemic, the persistence of the Delta
variant and the potential emergence and spread of new variants,
risks related to vaccine mandates, including the potential loss of
employees, fines for non-compliance, and loss of or inability to
procure certain contracts, including those with the federal
government, the success of actions taken or which may be taken by
the Company 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, delays in the fulfillment
of orders, business restrictions, worker absenteeism, quarantines
and other health-related restrictions, governmental and agency
orders, mandates and guidance in response to the COVID-19 pandemic,
the impact of the COVID-19 pandemic on the Company’s suppliers and
customers, including those operating in certain industries
(including the hospitality industry), the impact of the provisions
of the Coronavirus Aid, Relief, and Economic Security Act (the
“CARES Act”), including its impact on the Company’s income taxes,
the potential impairment of goodwill or other intangible assets,
and risks related to potential audits of the loans received by the
Company and certain of its subsidiaries under the Payroll
Protection Program established under the CARES Act notwithstanding
the forgiveness of the loans during the fourth quarter of fiscal
2021; the Company’s ability to implement its business and growth
strategies and plans, including changes thereto; 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 acquisitions or other
strategic opportunities, integration risks, risks related to the
Company’s ability to finance acquisitions and 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; technology changes; competition, including the
Company’s ability to compete effectively and the impact that
competition may have on the Company and its results, including the
prices which the Company may charge for its products and services
and on the Company’s profit margins, and competition for qualified
employees; to the extent applicable, 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; risks relating to the Company’s relationships with its
principal suppliers and customers, including 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; changes in, or
the failure to comply with, government regulation, including
environmental regulations; litigation risks, including the costs of
defending litigation and the impact of any adverse ruling; the
availability and cost of inventory purchased by the Company; the
relative value of the United States dollar to currencies in the
countries in which the Company’s customers, suppliers and
competitors are located; risks relating to the recognition of
revenue, including the amount and timing thereof (including
potential delays resulting from delays in installation or in
receiving required supplies) and that orders in the Company’s
backlog may not be fulfilled as or when expected; risks related to
the adoption of new accounting standards and the impact it may have
on the Company’s financial statements and results; 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, 2021. 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, including, without
limitation, in light of the impact of, and uncertainties associated
with, the COVID-19 pandemic. 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
09/30/21
09/30/20
Revenues
$ 63,741
$ 57,878
Cost of Sales
46,102
44,545
Gross Profit
17,639
13,333
SG&A
14,970
12,437
Operating Income
2,669
896
Interest Expense
115
169
Income before Income Taxes
2,554
727
Provision for Income Taxes
535
209
Net Income
$ 2,019
$ 518
Net Income per Share
Basic
$ 0.15
$ 0.04
Diluted
$ 0.15
$ 0.04
Weighted Average Shares Outstanding
Basic
12,278
11,935
Diluted
12,659
12,279
EVI Industries, Inc.
Condensed Consolidated Balance Sheets (in
thousands, except per share data)
Unaudited
09/30/21
06/30/21
Assets
Current assets
Cash
$ 2,773
$ 6,057
Accounts receivable, net
33,685
28,904
Inventories, net
29,055
25,129
Vendor deposits
410
367
Contract assets
125
347
Other current assets
5,595
4,419
Total current assets
71,643
65,223
Equipment and improvements, net
10,693
10,594
Operating lease assets
7,153
7,060
Intangible assets, net
23,190
23,677
Goodwill
63,895
63,881
Other assets
6,998
7,415
Total assets
$ 183,572
$ 177,850
Liabilities and Shareholders’
Equity
Current liabilities
Accounts payable and accrued expenses
$ 23,774
$ 26,227
Accrued employee expenses
7,210
7,528
Customer deposits
11,327
10,344
Contract liabilities
200
3,232
Current portion of operating lease
liabilities
2,293
2,131
Total current liabilities
44,804
49,462
Deferred tax liabilities, net
4,046
4,208
Long-term operating lease liabilities
5,598
5,567
Long-term debt, net
19,886
11,873
Total liabilities
74,334
71,110
Shareholders' equity
Preferred stock, $1.00 par value
-
-
Common stock, $.025 par value
310
310
Additional paid-in capital
90,980
90,501
Retained earnings
20,813
18,794
Treasury stock
(2,865)
(2,865)
Total shareholders' equity
109,238
106,740
Total liabilities and shareholders'
equity
$ 183,572
$ 177,850
EVI Industries, Inc.
Condensed Consolidated Statements of Cash
Flows (in thousands) (Unaudited)
For the three months ended
09/30/21
09/30/20
Operating activities:
Net income
$ 2,019
$ 518
Adjustments to reconcile net income to net
cash (used) provided by operating activities:
Depreciation and amortization
1,236
985
Amortization of debt discount
13
14
Provision for bad debt expense
108
96
Non-cash lease expense
100
29
Share-based compensation
479
578
Inventory reserve
(31)
(26)
Benefit for deferred income taxes
(162)
(760)
Other
(14)
60
(Increase) decrease in operating
assets:
Accounts receivable
(4,889)
530
Inventories
(3,895)
(585)
Vendor deposits
(43)
1,049
Contract assets
222
(5,211)
Other assets
(759)
(1,667)
Increase (decrease) in operating
liabilities:
Accounts payable and accrued expenses
(2,453)
3,229
Accrued employee expenses
(318)
(208)
Customer deposits
983
2,847
Contract liabilities
(3,032)
2,841
Net cash (used) provided by operating
activities
(10,436)
4,319
Investing activities:
Capital expenditures
(848)
(997)
Net cash used by investing activities
(848)
(997)
Financing activities:
Proceeds from borrowings
15,000
12,000
Debt repayments
(7,000)
(20,000)
Net cash provided (used) by financing
activities
8,000
(8,000)
Net decrease in cash and cash
equivalents
(3,284)
(4,678)
Cash and cash equivalents at beginning of
period
6,057
9,789
Cash and cash equivalents at end of
period
$ 2,773
$ 5,111
EVI Industries, Inc.
Condensed Consolidated Statements of Cash
Flows (in thousands)
For the three months ended
09/30/21
09/30/20
Supplemental disclosures of cash flow
information:
Cash paid during the period for
interest
$ 98
$ 137
Cash paid during the period for income
taxes
$ 18
$ 453
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
09/30/21
09/30/20
Net Income
$ 2,019
$ 518
Provision for Income Taxes
535
209
Interest Expense
115
169
Depreciation and Amortization
1,236
985
Amortization of Share-based
Compensation
479
578
Adjusted EBITDA
$ 4,384
$ 2,459
View source
version on businesswire.com: https://www.businesswire.com/news/home/20211109006555/en/
Henry M. Nahmad, Chairman and CEO – (305) 402-9300 Sloan Bohlen,
Investor Relations – info@evi-ind.com
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