EVI EVI Industries Inc

EVI Industries, Inc. (NYSE American: EVI) announced today its results for the three and six months ended December 31, 2021. During the three-months ended December 31, 2021, the Company achieved record operating results in certain performance measures, generated $9.4 million dollars of cash from operating activities that further strengthened its already strong balance sheet, built up its backlog to over $120 million, and continued to successfully implement its advanced operating technologies and experience incrementally greater operating leverage across its modernized business units. In addition, the Company continues to execute on the buy component of its long-term growth strategy with the acquisition of its seventeenth commercial laundry distribution and service business, which was completed on February 7, 2022.

Highlights to EVI’s Financial Results

Three-Month Results (compared to the three months ended December 31, 2020)

• Revenue increased 6% to $61 million
• Gross profit increased 17% to a record $17 million
• Gross margin increased 250 basis-points to a record 27.7%
• Net income increased from $0.46 million to $0.53 million
• Adjusted EBITDA increased 33% from $2.3 million to a record $3.1 million, or approximately 5.0%

Six-Month Results (compared to the six months ended December 31, 2020)

• Revenue increased 8% to a record $124 million
• Gross profit increased 24% to a record $34 million
• Gross margin increased 360 basis-points to a record 27.7%
• Net income increased from $1.0 million to a record $2.5 million
• Adjusted EBITDA increased 56% from $4.8 million to a record $7.4 million, or approximately 6.0%

Henry M. Nahmad, EVI’s Chairman and CEO commented: “We believe that these achievements are a function of the exceptional reputation our Company has earned with owners of high-quality businesses, our disciplined financial management, our thoughtful and deliberate operational execution, and the entrepreneurial culture which we maintain and promotes a collaborative environment yielding best practices and promising opportunities. These achievements come despite supply chain challenges we and our industry are experiencing, installation delays, and an inflationary environment resulting in increased operating expenses. While we expect these challenges to continue in the near term, our loyal suppliers are working to fulfill the significant and growing opportunities our Company is creating for their products across North America.”

Seventeenth Acquisition and Deep Pipeline of Opportunities

On February 7, 2022, EVI completed its acquisition of Raleigh, North Carolina based Consolidated Laundry Equipment and its affiliates. Consolidated is a unique acquisition for EVI in that it serves customers in a geography where EVI already has four businesses operating with wide-ranging capabilities and with distinct product representations. However, the Company believes that the addition of Consolidated will strengthen its leading market share position in the southeast region of the United States with over $90 million in revenue derived from industrial, on-premise, vended, and multi-family laundry customers. Consolidated also has a significant customer base that is loyal to the knowledge, experience, and capabilities of its sales and service organization and a robust operation, which the Company believes will, when synchronized with its existing businesses in the geography, result in the largest and most dynamic commercial laundry operation in the region. Beyond the acquisition of Consolidated, the Company maintains a deep pipeline of acquisition opportunities, and continues to cultivate new opportunities and thoughtfully pursue long-term growth opportunities for the Company.

Health and Strength of the Company

The Company’s ability to complete acquisitions and to make working capital investments is a function of the continued strength of its balance sheet and the ample liquidity it provides. At December 31, 2021, EVI had net debt of $9.0 million, which represents a $3.1 million increase in net debt as compared to the end of fiscal 2021. The change in net debt is due to changes in working capital, including greater levels of inventory, which is primarily the result of delays in the delivery and installation of pro­­­ducts at commercial laundries. Despite the change in working capital, the Company maintains a healthy and strong balance sheet, and has over $100 million of available capital through its debt facility and potential additional capital through other financial resources to deploy in connection with potential investment opportunities in connection with its long-term buy-and-build growth strategy.

Revenue and Record Backlog

Revenue for the second quarter of fiscal 2022 increased to $61 million, a 6% increase compared to the second quarter of fiscal 2021. This increase was achieved despite revenues being adversely impacted by supply chain disruptions at manufacturers of commercial laundry equipment caused by among other factors, limited component availability. Additionally, revenue was adversely impacted by transportation delays and third-party labor shortages slowing what has historically been a fluid and speedy delivery and installation process across the industry. Looking forward, although the Company expects supply chain disruptions and delays to installation schedules to continue in the near term, there continues to be strong demand for the solutions the Company provides, evidenced by the Company’s over $120 million sales order backlog.

Record Gross Margins

Like other industries, manufacturers of commercial laundry products have experienced inflationary pressures and have raised prices accordingly. In connection with the inflationary trend, the Company previously raised selling prices and took certain other measures to improve gross margins. These actions resulted in an increase in gross margins from approximately 25% for the three months ended December 31, 2020 to a record 28% for the three months ended December 31, 2021, and an increase in gross margins from approximately 24% for the six months ended December 31, 2020 to a record 28% for the six months ended December 31, 2021. The increase in sales combined with the increase in gross margins resulted in a record $17 million and a record $34 million of gross profit for the three and six-month periods ended December 31, 2021, respectively. The Company believes that its continuous gross margin improvement reflects the benefits it derives from, among other factors, its efforts to improve and expand upon the comprehensive commercial laundry solutions it sells to and installs for its customers. In connection with these capabilities, it is important to highlight that in the second quarter of fiscal 2022, nine of the fourteen business units included in EVI’s operating results had gross margins equal to or greater than 28%, with a high of 37%. The Company is encouraged by this performance and is striving to further improve gross margin performance across all of its business units.

Record Operating Performance

Adjusted EBITDA for the second quarter of fiscal 2022 increased 33% to a record $3.1 million, or approximately 5.0%, and Adjusted EBITDA for the six-month period ended December 31, 2021 increased 56% to a record $7.4 million, or approximately 6.0%. This performance includes the impact of increased operating expenses due in part to higher personnel costs, increased expenditures in connection with acquisition efforts, and one-time expenses related to the Company’s consolidation and modernization initiatives. This performance also includes all corporate operating expenses and, as such, the Adjusted EBITDA generated by the Company’s business units exceeds the levels set forth above.

Mr. Nahmad commented: “We believe that the operating performance of our business units is a solid indicator that our investments are yielding continuously improved operating results and that with additional acquisitions, the alleviation of our industry's supply challenges, and the fulfillment of sales and installations at a faster pace, we will achieve a significantly greater level of operating leverage.”

Looking Forward

Mr. Nahmad commented: “As we have stated from the beginning, we are a long-term growth focused company that is thoughtful and committed, and that acts with conviction when the opportunity is right. We have stayed true to our financial principles, consistently acquired good businesses, strengthened our customer value proposition, and improved gross and operating margins. We also believe that we are just beginning to realize the benefits of our optimization initiatives. Supporting these efforts is a collection of dynamic, well-respected, and entrepreneurial leaders from across the commercial laundry industry. Our approach and results have earned us a positive reputation in and around our industry, including among owners of quality businesses, which we may add to our growing EVI family, and among talented professionals who we may seek to hire. For these reasons and the others mentioned in this press release and in our earnings call, we remain excited and optimistic about our long-term growth and profitability outlook.”

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 December 31, 2021, see the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 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 and its business units, 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 risks that Company may not be able to increase the prices it charges to its customers to offset the increased prices charged by manufacturers and that any price increase may have an adverse impact on the market for the Company’s products and services; 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 Omicron 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 and resulting inflationary trends, 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 or the financing thereof, 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, including the acquisition of Consolidated Laundry Equipment, 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

 

Unaudited

 

Unaudited

 

 

6-Months Ended

 

6-Months Ended

 

3-Months Ended

 

3-Months Ended

 

12/31/21

 

12/31/20

 

12/31/21

 

12/31/20

 

 

 

 

   

Revenues

 

$

124,443

 

$

115,043

 

$

60,702

 

$

57,165

 

Cost of Sales

 

 

89,997

 

 

87,330

 

 

43,895

 

 

42,785

 

Gross Profit

 

 

34,446

 

 

27,713

 

 

16,807

 

 

14,380

 

SG&A

 

 

30,806

 

 

26,305

 

 

15,836

 

 

13,868

 

Operating Income

 

 

3,640

 

 

1,408

 

 

971

 

 

512

 

Interest Expense

 

 

265

 

 

319

 

 

150

 

 

150

 

Income before Income Taxes

 

 

3,375

 

 

1,089

 

 

821

 

 

362

 

Provision for (benefit from) Income Taxes

 

 

828

 

 

110

 

 

293

 

 

(99

)

Net Income

 

$

2,547

 

$

979

 

$

528

 

$

461

 

 

 

 

 

   

Net Income per Share

 

 

 

 

   

Basic

 

$

0.19

 

$

0.07

 

$

0.04

 

$

0.03

 

Diluted

 

$

0.18

 

$

0.07

 

$

0.04

 

$

0.03

 

 

 

 

 

   

 

Weighted Average Shares Outstanding

 

 

 

 

   

 

Basic

 

 

12,281

 

 

12,027

 

 

12,283

 

 

12,120

 

Diluted

 

 

12,713

 

 

12,427

 

 

12,768

 

 

12,574

 

 

 

 

 

 

 

 

 

 

EVI Industries, Inc.

 

 

 

 

 

Condensed Consolidated Balance Sheets (in thousands, except per share data)

 

 

Unaudited

 

 

 

 

 

12/31/21

 

06/30/21

Assets

 

 

 

Current assets

 

 

 

 

 

Cash

 

 

$

6,004

 

 

$

6,057

 

Accounts receivable, net

 

 

 

29,347

 

 

 

28,904

 

Inventories, net

 

 

 

33,097

 

 

 

25,129

 

Vendor deposits

 

 

 

1,094

 

 

 

367

 

Contract assets

 

 

 

19

 

 

 

347

 

Other current assets

 

 

 

5,878

 

 

 

4,419

 

Total current assets

 

 

 

75,439

 

 

 

65,223

 

Equipment and improvements, net

 

 

 

11,044

 

 

 

10,594

 

Operating lease assets

 

 

 

6,659

 

 

 

7,060

 

Intangible assets, net

 

 

 

22,724

 

 

 

23,677

 

Goodwill

 

 

 

63,895

 

 

 

63,881

 

Other assets

 

 

 

7,036

 

 

 

7,415

 

Total assets

 

 

$

186,797

 

 

$

177,850

 

 

 

 

 

 

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

Current liabilities

 

 

 

 

 

Accounts payable and accrued expenses

 

 

$

26,367

 

 

$

26,227

 

Accrued employee expenses

 

 

 

6,332

 

 

 

7,528

 

Customer deposits

 

 

 

16,654

 

 

 

10,344

 

Contract liabilities

 

 

 

-

 

 

 

3,232

 

Current portion of operating lease liabilities

 

 

 

2,259

 

 

 

2,131

 

Total current liabilities

 

 

 

51,612

 

 

 

49,462

 

Deferred tax liabilities, net

 

 

 

4,632

 

 

 

4,208

 

Long-term operating lease liabilities

 

 

 

5,129

 

 

 

5,567

 

Long-term debt, net

 

 

 

14,900

 

 

 

11,873

 

Total liabilities

 

 

 

76,273

 

 

 

71,110

 

 

 

 

 

 

 

Shareholders' equity

 

 

 

 

 

Preferred stock, $1.00 par value

 

 

 

-

 

 

 

-

 

Common stock, $.025 par value

 

 

 

310

 

 

 

310

 

Additional paid-in capital

 

 

 

91,880

 

 

 

90,501

 

Retained earnings

 

 

 

21,341

 

 

 

18,794

 

Treasury stock

 

 

 

(3,007

)

 

 

(2,865

)

Total shareholders' equity

 

 

 

110,524

 

 

 

106,740

 

Total liabilities and shareholders' equity

 

 

$

186,797

 

 

$

177,850

 

 

 

 

 

 

 

EVI Industries, Inc.

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows (in thousands) (Unaudited)

 

 

For the six months ended

 

 

 

12/31/21

 

12/31/20

Operating activities:

 

 

 

Net income

 

 

$

2,547

 

 

$

979

 

Adjustments to reconcile net income to net cash (used) provided by operating activities:

 

 

 

 

 

Depreciation and amortization

 

 

 

2,476

 

 

 

2,157

 

Amortization of debt discount

 

 

 

27

 

 

 

28

 

Provision for bad debt expense

 

 

 

137

 

 

 

165

 

Non-cash lease expense

 

 

 

91

 

 

 

41

 

Stock compensation

 

 

 

1,320

 

 

 

1,194

 

Inventory reserve

 

 

 

(178

)

 

 

(79

)

Provision for deferred income taxes

 

 

 

424

 

 

 

1,041

 

Other

 

 

 

(14

)

 

 

84

 

(Increase) decrease in operating assets:

 

 

 

 

 

Accounts receivable

 

 

 

(580

)

 

 

3,035

 

Inventories

 

 

 

(7,790

)

 

 

508

 

Vendor deposits

 

 

 

(727

)

 

 

130

 

Contract assets

 

 

 

328

 

 

 

(5,991

)

Other assets

 

 

 

(1,080

)

 

 

(2,262

)

Increase (decrease) in operating liabilities:

 

 

 

 

 

Accounts payable and accrued expenses

 

 

 

140

 

 

 

(593

)

Accrued employee expenses

 

 

 

(1,196

)

 

 

(246

)

Customer deposits

 

 

 

6,310

 

 

 

4,498

 

Contract liabilities

 

 

 

(3,232

)

 

 

2,736

 

Net cash (used) provided by operating activities

 

 

 

(997

)

 

 

7,425

 

 

 

 

 

 

 

Investing activities:

 

 

 

 

 

Capital expenditures

 

 

 

(1,973

)

 

 

(1,436

)

Cash paid for acquisitions, net of cash acquired

 

 

 

-

 

 

 

(4,475

)

Net cash used by investing activities

 

 

 

(1,973

)

 

 

(5,911

)

 

 

 

 

 

 

Financing activities:

 

 

 

 

 

Proceeds from long-term debt

 

 

 

25,000

 

 

 

25,500

 

Debt repayments

 

 

 

(22,000

)

 

 

(31,500

)

Repurchases of common stock in satisfaction of employee tax withholding obligations

 

 

 

(142

)

 

 

(346

)

Issuances of common stock under employee stock purchase plan

 

 

 

59

 

 

 

21

 

Net cash provided (used) by financing activities

 

 

 

2,917

 

 

 

(6,325

)

Net decrease in cash and cash equivalents

 

 

 

(53

)

 

 

(4,811

)

Cash and cash equivalents at beginning of period

 

 

 

6,057

 

 

 

9,789

Cash and cash equivalents at end of period

 

 

$

6,004

$

4,978

EVI Industries, Inc.

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows (in thousands)

 

 

 

For the six months ended

 

 

 

12/31/21

 

12/31/20

Supplemental disclosures of cash flow information:

 

 

 

 

 

Cash paid during the period for interest

 

 

$

238

 

$

287

Cash paid during the period for income taxes

 

 

$

261

 

$

477

 

 

 

 

 

 

Supplemental disclosures of non-cash financing activities:

 

 

 

 

 

Common stock issued for acquisitions

 

 

$

-

 

$

8,521

 

 

 

 

 

 

 

 

 

 

 

 

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

 

Unaudited

 

Unaudited

 

 

6-Months Ended

 

6-Months Ended

 

3-Months Ended

 

3-Months Ended

 

12/31/21

 

12/31/20

 

12/31/21

 

12/31/20

 

 

 

 

   

Net Income

 

$

2,547

 

$

979

 

$

528

 

$

461

 

Provision for (benefit from) Income Taxes

 

 

828

 

 

110

 

 

293

 

 

(99

)

Interest Expense

 

 

265

 

 

319

 

 

150

 

 

150

 

Depreciation and Amortization

 

 

2,476

 

 

2,157

 

 

1,240

 

 

1,172

 

Amortization of Share-based Compensation

 

 

1,320

 

 

1,194

 

 

841

 

 

616

 

Adjusted EBITDA

 

$

7,436

 

$

4,759

 

$

3,052

 

$

2,300

 

 

 

 

 

 

 

 

 

 

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20220209006162/en/

Henry M. Nahmad, Chairman and CEO – (305) 402-9300 Sloan Bohlen, Investor Relations – info@evi-ind.com