EVI Industries, Inc. (NYSE American: EVI) announced today its
results for the three and nine months ended March 31, 2022, as well
as updates related to its long-term buy-and-build growth strategy
that occurred following the completion of the third fiscal
quarter.
Highlights to EVI’s Financial Results
Three-Month Results (compared to the three
months ended March 31, 2021)
- Revenue decreased 4% to $60 million
- Gross profit increased 8% to a record $17 million
- Gross margin increased 320 basis points to a record 28.4%
- Net income decreased from $0.63 million to $0.04 million
- Adjusted EBITDA decreased 18% from $2.6 million to $2.1
million, or approximately 3.6%
Nine-Month Results (compared to the nine
months ended March 31, 2021)
- Revenue increased 4% to a record $184 million
- Gross profit increased 18% to a record $52 million
- Gross margin increased 340 basis points to a record 27.9%
- Net income increased 61% from $1.6 million to $2.6 million
- Adjusted EBITDA increased 30% from $7.4 million to a record
$9.6 million, or approximately 5.2% Henry M. Nahmad, EVI’s Chairman
and CEO commented: “Like other companies in our industry, and
almost all industries, during the third fiscal quarter, we
continued to deal with and navigate through certain adverse
economic conditions, including continued supply chain constraints,
unpredictable lead times, inflation, and labor shortages.
Notwithstanding the challenges and their impact on our results, we
were able to successfully complete multiple acquisitions since the
start of calendar year 2022, we have over 20% growth in our backlog
of confirmed customer sales contracts, we achieved record gross
profits and gross margins, we continued to deploy our advanced
operating technologies, and we recently extended our favorable
credit facility for five years.”
Multiple Acquisitions Drive Continued Expansion
The Company continued to deploy capital in connection with
several acquisitions during and following the completion of the
third fiscal quarter, which evidences management’s confidence in
the commercial laundry industry and the Company’s long-term growth
objectives. The Company completed the acquisition of Consolidated
Laundry Equipment during February 2022. In addition, following the
completion of the third fiscal quarter, the Company entered into an
agreement to acquire Lakewood, Colorado based Clean Designs and
Clean Route, and completed the acquisition of Pearl, Mississippi
based Laundry South and the acquisition of Spynr, a highly
specialized full-service marketing agency with vast experience and
connections in the commercial laundry industry from which the
Company believes it will be able to provide critical digital
marketing services to existing and prospective laundry business
customers.
Mr. Nahmad commented: “We believe that our
acquisition of Clean Designs, if consummated, will strengthen our
leading market share position in Colorado and the surrounding area.
With our acquisition of Laundry South, we expand our sales and
service operations into the state of Mississippi and increase our
presence and market share in eastern Louisiana. These acquisitions,
along with the acquisition of Consolidated Laundry Equipment during
February 2022, are consistent with four primary objectives of our
growth strategy: (1) to build the industry’s foremost group of
sales professionals, (2) to amass the most knowledgeable and
well-trained network of commercial laundry technicians, (3) to add
product representations and service capabilities to better serve
our growing customer base, and (4) to continue building a modern
and technologically advanced operation, including well-located
distribution facilities from which we may best support our sales
and service operations. ”
Strong and Flexible Balance Sheet
As the Company has previously stated, the health and strength of
its balance sheet is critical to long-term success. The Company’s
balance sheet continues to be strong and afford management the
necessary flexibility to act when needed in connection with
attractive investment opportunities. At March 31, 2022, EVI had net
debt of $18.3 million, which represents a $12.5 million increase in
net debt as compared to the end of fiscal 2021. The change in net
debt is primarily due to changes in working capital and cash used
in connection with the acquisition of Consolidated Laundry
Equipment. With respect to working capital, accounts receivable
increased over $4.0 million and inventory increased nearly $16
million as compared to June 30, 2021, of which approximately $2
million was acquired in connection with acquisitions. These
increases were offset in part by a nearly $11 million increase in
customer deposits.
Mr. Nahmad commented: “The increase in
inventory is due to increased purchases in light of constrained
product availability and lengthened lead times, as well as
inventory held by us pending delivery and installation due in large
part to third-party labor shortages slowing what has historically
been a fluid and speedy delivery and installation process across
our industry. While it is difficult to ascertain how long these
adverse conditions will persist, it is important to know that the
majority of the roughly $6.0 million buildup of inventory in
successive quarters attributed to continuing operations is
associated with confirmed customer sales contracts.”
In addition, on May 6, 2022, we were successful in extending our
up to $140 million credit facility for an additional five
years.
Record Backlog of Confirmed Customer Sales Contracts
During the third fiscal quarter, the Company’s backlog increased
by over 20% reaching nearly $150 million. As of today, the
Company’s backlog is even greater after accounting for the backlog
acquired in connection with acquisitions completed following the
end of the third fiscal quarter and new customer sales
contracts.
Mr. Nahmad commented: “We believe that the
size and increase in our backlog reflects the capabilities of our
growing and talented sales organization combined with our
representation of loyal suppliers that deliver efficient,
effective, and well supported products. For these reasons and
others, we are confident that we have a significant advantage in
capturing a greater portion of future demand for the commercial
laundry products and services we provide across the industrial,
OPL, vended, and multifamily segments in the geographies we
cover.”
Revenue and Customer Activity
Revenue performance during the third fiscal quarter reflects the
adverse impact of supply chain disruptions OEMs continue to
experience, which results in constrained product availability and
lengthened lead times. The unpredictable timing of product
deliveries combined with labor shortages has caused installation
and service delays. Accordingly, revenue for the third fiscal
quarter was $60 million or 4.0% less as compared to the same period
of the prior fiscal year, and revenue was flat in successive
quarters. Meanwhile, revenue for the nine-month period ended March
31, 2022 increased 4.0% as compared to the same period of the prior
fiscal year.
Mr. Nahmad commented: “Despite these
challenges and our revenue performance during the third fiscal
quarter, we are encouraged by the fact that industrial laundry
customers have returned to market, that travel and hospitality
occupancy rates are increasing, and that the healthcare industry
remains strong. These are just a few of the factors that are
driving demand for the OPL products and services we provide.
Additionally, vended laundry owners continue to execute on new
store opportunities and equipment replacement and repair, and
revenue derived from multi-family customers remains consistent with
contractual obligations. All of these trends have contributed to
the growth of our backlog of confirmed customer sales contracts,
which we expect to recognize in future quarters.”
Record Gross Profit and Gross Margins
Although revenue was adversely impacted, the Company set records
for both gross profit and gross margin for the third fiscal quarter
and the nine-month period ended March 31, 2022. Like other
industries, manufacturers of commercial laundry products have
experienced inflationary pressures and continue to raise prices.
Accordingly, the Company raised selling prices and took certain
other measures to improve gross margins. For the third fiscal
quarter, gross margins increased over 300 basis points to a record
28.4% as compared to the same period of the prior fiscal year.
Gross margins for the nine-month period ended March 31, 2022
increased over 300 basis points from 24.5% during the same period
of the prior fiscal year to a record 27.9%. The increase in gross
margin resulted in an 8.0% increase in gross profit for a record
$17.1 million during the third fiscal quarter and an 18% increase
in gross profit for a record $51.5 million during the nine-month
period ended March 31, 2022, each as compared to the same period of
the prior fiscal year.
Mr. Nahmad commented: “We believe that our
continued gross margin improvement reflects the benefits we derive
from our efforts to improve and expand upon the comprehensive
commercial laundry solutions we sell, install, and service for our
customers. In connection with these capabilities, it is important
to highlight that in the third fiscal quarter, ten of the fifteen
business units included in EVI’s operating results had gross
margins equal to or greater than 28%. Given we are still early in
the growth of our Company, we are encouraged by this performance
and are striving to continuously improve gross margin performance
at all of our business units.”
Looking Forward
Mr. Nahmad commented: “Our long-term
confidence is based on our achievements during and following the
completion of the third fiscal quarter, including that we acquired
three additional businesses and have a definitive agreement to
acquire a fourth additional business, we have a backlog worth
nearly $150 million, we set records for gross profit and gross
margin, we sustained a healthy balance sheet, we secured ample and
well-priced liquidity for an additional five years, we continued to
further modernize our business, and we attracted and retained
talented professionals to support our growth and profitability
objectives. As our approach and results have earned us a positive
reputation in and around our industry, including among owners of
quality businesses which we may seek to add to our growing EVI
family and among talented professionals who we may seek to hire, we
remain highly confident in the long-term growth and profitability
prospects of our Company.”
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 March 31, 2022, see the Company’s Quarterly
Report on Form 10-Q for the quarter ended March 31, 2022, 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, inflationary trends and labor shortages, and the
length and severity of these adverse conditions, 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; the
risk that orders in the Company’s backlog may not be fulfilled as
or when expected, including potential delays resulting from delays
in installation or in receiving required supplies; 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 its pandemic on the business, financial condition, liquidity
and results of the Company and suppliers to and customers of the
Company, 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, 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 may not be met, risks related to the accounting for
acquisitions, and the risk that the contemplated acquisition of
Clean Designs and Clean Route may not be consummated when expected
or at all; 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, and the Company’s
ability to retain or hire, qualified employees; 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; 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. 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
9-Months Ended
9-Months Ended
3-Months Ended
3-Months Ended
03/31/22
03/31/21
03/31/22
03/31/21
Revenues
$
184,485
$
177,456
$
60,042
$
62,413
Cost of Sales
132,977
133,989
42,980
46,659
Gross Profit
51,508
43,467
17,062
15,754
SG&A
47,680
41,330
16,874
15,025
Operating Income
3,828
2,137
188
729
Interest and Other (Expense) Income,
net
(390
)
(122
)
(125
)
197
Income before Income Taxes
3,438
2,015
63
926
Provision for Income Taxes
851
411
23
301
Net Income
$
2,587
$
1,604
$
40
$
625
Net Income per Share
Basic
$
0.19
$
0.12
$
0.00
$
0.05
Diluted
$
0.18
$
0.12
$
0.00
$
0.04
Weighted Average Shares Outstanding
Basic
12,321
12,101
12,402
12,252
Diluted
12,696
12,545
12,663
12,785
EVI Industries, Inc.
Condensed Consolidated Balance Sheets (in
thousands, except per share data)
Unaudited
03/31/22
06/30/21
Assets
Current assets
Cash
$
5,604
$
6,057
Accounts receivable, net
33,124
28,904
Inventories, net
40,781
25,129
Vendor deposits
2,022
367
Contract assets
357
347
Other current assets
6,953
4,419
Total current assets
88,841
65,223
Equipment and improvements, net
12,140
10,594
Operating lease assets
7,466
7,060
Intangible assets, net
23,943
23,677
Goodwill
65,861
63,881
Other assets
6,930
7,415
Total assets
$
205,181
$
177,850
Liabilities and Shareholders’
Equity
Current liabilities
Accounts payable and accrued expenses
$
26,346
$
26,227
Accrued employee expenses
6,420
7,528
Customer deposits
21,114
10,344
Contract liabilities
20
3,232
Current portion of operating lease
liabilities
2,458
2,131
Total current liabilities
56,358
49,462
Deferred tax liabilities, net
4,157
4,208
Long-term operating lease liabilities
5,784
5,567
Long-term debt, net
23,914
11,873
Total liabilities
90,213
71,110
Shareholders' equity
Preferred stock, $1.00 par value
-
-
Common stock, $.025 par value
315
310
Additional paid-in capital
96,342
90,501
Retained earnings
21,381
18,794
Treasury stock
(3,070
)
(2,865
)
Total shareholders' equity
114,968
106,740
Total liabilities and shareholders'
equity
$
205,181
$
177,850
EVI Industries, Inc.
Condensed Consolidated Statements of Cash
Flows (in thousands) (Unaudited)
For the nine months ended
03/31/22
03/31/21
Operating activities:
Net income
$
2,587
$
1,604
Adjustments to reconcile net income to net
cash (used) provided by operating activities:
Depreciation and amortization
3,795
3,388
Amortization of debt discount
41
41
Provision for bad debt expense
231
252
Non-cash lease expense
138
47
Stock compensation
1,947
1,834
Inventory reserve
(274
)
(178
)
(Benefit) provision for deferred income
taxes
(51
)
953
Other
(24
)
(277
)
(Increase) decrease in operating
assets:
Accounts receivable
(3,129
)
2,799
Inventories
(13,476
)
(674
)
Vendor deposits
(1,485
)
(1,459
)
Contract assets
(10
)
(8,873
)
Other assets
(1,214
)
(2,153
)
Increase (decrease) in operating
liabilities:
Accounts payable and accrued expenses
(829
)
3,323
Accrued employee expenses
(1,170
)
684
Customer deposits
10,081
2,062
Contract liabilities
(3,212
)
2,117
Net cash (used) provided by operating
activities
(6,054
)
5,490
Investing activities:
Capital expenditures
(3,066
)
(1,934
)
Cash paid for acquisitions, net of cash
acquired
(3,187
)
(4,818
)
Net cash used by investing activities
(6,253
)
(6,752
)
Financing activities:
Proceeds from long-term debt
46,000
37,500
Debt repayments
(34,000
)
(42,500
)
Repurchases of common stock in
satisfaction of employee tax withholding obligations
(205
)
(629
)
Issuances of common stock under employee
stock purchase plan
59
21
Net cash provided (used) by financing
activities
11,854
(5,608
)
Net decrease in cash and cash
equivalents
(453
)
(6,870
)
Cash and cash equivalents at beginning of
period
6,057
9,789
Cash and cash equivalents at end of
period
$
5,604
$
2,919
EVI Industries, Inc.
Condensed Consolidated Statements of Cash
Flows (in thousands)
For the nine months ended
03/31/22
03/31/21
Supplemental disclosures of cash flow
information:
Cash paid during the period for
interest
$
320
$
388
Cash paid during the period for income
taxes
$
261
$
526
Supplemental disclosures of non-cash
financing activities:
Common stock issued for acquisitions
$
3,840
$
8,877
Forgiveness of PPP Loan
$
-
$
916
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
9-Months Ended
9-Months Ended
3-Months Ended
3-Months Ended
03/31/22
03/31/21
03/31/22
03/31/21
Net Income
$
2,587
$
1,604
$
40
$
625
Provision for Income Taxes
851
411
23
301
Interest and Other Expense (Income)
390
122
125
(197
)
Depreciation and Amortization
3,795
3,388
1,319
1,231
Amortization of Share-based
Compensation
1,947
1,834
627
640
Adjusted EBITDA
$
9,570
$
7,359
$
2,134
$
2,600
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220510006464/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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