EVI Industries Reports Third Quarter Results Including Record Cash Flows
Achieved Record Revenue and Gross Profits, and a Record
In 2016, EVI commenced the execution of a long-term growth strategy to build the undisputed leader in and around the commercial laundry industry and in doing so, produce attractive returns for its shareholders over the long-term. Since 2016, EVI has established itself as a leader in the highly fragmented North American commercial laundry distribution and service industry. The Company has grown from one business operating from a single location in the state of
Nine-Month Results
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Revenue increased 1% to a record
$263 million -
Gross profit increased 3% to a record
$77.9 million - Gross margin increased 40 basis-points to a record 29.6% compared to 29.2%
-
Operating income was
$8.0 million compared to$12.5 million -
Net income was
$3.6 million , or 1.4%, compared to$7.8 million , or 3.0% -
Adjusted EBITDA was
$16.4 million , or 6.2%, compared to$19.2 million , or 7.4%
Three-Month Results
-
Revenue decreased 11% to
$84.0 million -
Gross profit decreased 3% to
$25.8 million - Gross margin increased to a record 30.7% compared to 28.3%
-
Operating income was
$2.4 million compared to$4.5 million -
Net income was
$1.0 million , or 1.1%, compared to$2.8 million , or 2.9% -
Adjusted EBITDA was
$4.9 million , or 5.9%, compared to$6.7 million , or 7.2%
Other Company Achievements for the Nine-Month Period Ended
-
Record operating cash flows of
$20 million for the nine-months, a$27 million increase over the prior year -
Net debt declined 36% to
$18.6 million as ofMarch 31, 2024 - New confirmed customer sales order contracts exceeded the value of those fulfilled during the period
-
Completed one acquisition adding sales and service expertise to the Company’s
Northeast Region -
Paid a
$4.1 million dividend, the largest dividend since the inception of the Company’s buy-and-build strategy
Operating Results
Operating results for the three- and nine-month periods come against the backdrop of record-breaking performance in the comparable periods of the prior fiscal year. The 11% decline in revenue during the third fiscal quarter is primarily attributed to the irregular cadence of industrial revenue and in part to delays in the completion of certain large on-premise laundry customer sales order contracts. Specifically, the third quarter of prior fiscal year included a disproportionately greater amount of industrial revenues derived from a small number of large customer sales order contracts. While the Company generates a recurring base of industrial business, the timing of revenue related to industrial projects is subject to longer sales cycles and complex installations that from time to time are uneven as compared to revenue derived from other commercial laundry categories. It is important to note that excluding the impact of large industrial customer sales order contracts in each of the current and comparable prior year periods, during the third fiscal quarter equipment revenue increased 4.5%, parts revenue increased 5.1%, service revenue increased 13%, and gross margins were 30.7%. These results demonstrate the incremental positive impact derived from the Company’s investment in additional sales professionals and service technicians, which are core to the Company’s long-term market share strategy. Looking forward, the Company expects to benefit from the completion of confirmed sales order contracts contributing to its $100+ million equipment sales backlog.
Given the Company’s long-term objectives and as mentioned in prior releases, the Company is investing heavily in key areas aimed to drive future growth and profitability. Operating results include the total cost and only partial benefit of twenty-one new and additional sales professionals integral to the Company’s sales growth goals. Operating results also include the total cost of thirty-nine new and additional service-related personnel as compared to the same period of prior fiscal year. Finally, operating results include increased investment across key areas of the Company’s technology strategy. While the combination of these investments adversely impacted operating results in the current periods, the Company is incrementally benefiting from these investments in the form of greater sales and service penetration and a 4.0% reduction in support personnel as compared to the prior year periods and expects to benefit more as the Company’s scalable technologies are deployed.
Technology Strategy
In 2020 the Company initiated a comprehensive modernization initiative to transform EVI into a modern, data-driven company capable of continuous outperformance in the digital era. Since 2020, EVI’s technology group has grown significantly, various third-party technology professionals have been retained, and multiple technology initiatives were undertaken to strengthen the Company’s leadership position, accelerate sales and profit growth, increase the speed, convenience and efficiency in serving customers, extend EVI’s reach into new geographies and sales channels, and create scalable operating processes.
EVI’s growing team of technology focused professionals is leading efforts to consolidate business units into end-state Enterprise Resource Planning (ERP) Systems, configuring multiple software, enriching numerous data sets, and building master databases. These initiatives are prerequisites to the efficient utilization of internal applications and to the launch of customer facing technologies aimed to transform the customer experience. While the aggregate cost and expense associated with these, and other modernization initiatives adversely impacts EVI’s financial performance in the near-term, the Company believes these technological capabilities will be a catalyst to achieving the Company’s long-term growth and profitability goals.
Examples of benefits expected to be derived from implemented technologies include:
- Business intelligence and data analytics that enable insightful decision-making by managers across the Company.
- Digital mobile sales quoting application that empowers sales professionals to deliver instant customer sales order proposals with the benefit of real-time costing, product availability, lead times, installation scheduling, and more.
- Streamlined operating processes designed to improve the speed and reduce the cost of doing business.
- CRM capabilities designed to improve customer prospecting and communications and increase close rates.
Cash Flows and Financial Strength
Operating cash flow for the nine-month period was a record
This record level of operating cash flows follows the payment of a special cash dividend on the Company’s common stock of
Acquisitions
During the nine months ended
Important Fundamentals and Growth Drivers
The Company believes that the essential nature of commercial laundry products and continuous demand and growth across all end customer markets of the commercial laundry industry are catalysts for a growing installed base of commercial laundry systems across
EVI’s Core Principles
EVI upholds specific core values and principles for its business, including:
- Invest and manage with a long-term perspective
- Uphold financial discipline with a view towards ensuring financial strength and flexibility
- Respect the entrepreneurs and management teams that join the EVI family
- Operate each business as a local business and empower its leaders to make local decisions
- Promote an entrepreneurial culture
- Instill a growth mindset and culture of continuous improvement
- Incentivize and reward performance with equity participation
- Establish strong relationships with our OEM partners
Earnings Call and Additional Information
The Company has provided a pre-recorded earnings conference call, including a business update, which can be accessed under “Financial Info” in the “Investors” section of the Company’s website at www.evi-ind.com or by visiting https://ir.evi-ind.com/message-from-the-ceo. For additional information regarding the Company’s results for the three and nine months ended
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.
About
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
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Condensed Consolidated Results of Operations (in thousands, except per share data) |
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Unaudited |
Unaudited |
Unaudited |
Unaudited |
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9-Months
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9-Months
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3-Months
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3-Months
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Revenues |
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Cost of Sales |
185,533 |
184,237 |
58,193 |
67,488 |
Gross Profit |
77,884 |
75,895 |
25,786 |
26,578 |
SG&A |
69,908 |
63,403 |
23,378 |
22,113 |
Operating Income |
7,976 |
12,492 |
2,408 |
4,465 |
Interest Expense, net |
2,268 |
1,719 |
675 |
717 |
Income before Income Taxes |
5,708 |
10,773 |
1,733 |
3,748 |
Provision for Income Taxes |
2,129 |
2,952 |
777 |
998 |
Net Income |
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Net Earnings per Share |
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Basic |
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Diluted |
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Weighted Average Shares Outstanding |
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Basic |
12,639 |
12,545 |
12,677 |
12,570 |
Diluted |
13,231 |
12,753 |
13,153 |
12,950 |
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Condensed Consolidated Balance Sheets (in thousands, except per share data) |
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Unaudited |
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Assets |
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Current assets |
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Cash and cash equivalents |
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Accounts receivable, net |
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44,848 |
48,391 |
Inventories, net |
|
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52,870 |
59,167 |
Vendor deposits |
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2,186 |
2,291 |
Contract assets |
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998 |
1,181 |
Other current assets |
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6,228 |
8,547 |
Total current assets |
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110,434 |
125,498 |
Equipment and improvements, net |
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13,699 |
12,953 |
Operating lease assets |
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8,886 |
8,714 |
Intangible assets, net |
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22,548 |
24,128 |
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74,156 |
73,388 |
Other assets |
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9,586 |
9,166 |
Total assets |
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Liabilities and Shareholders’ Equity |
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Current liabilities |
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Accounts payable and accrued expenses |
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Accrued employee expenses |
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10,567 |
10,724 |
Customer deposits |
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29,219 |
23,296 |
Contract liabilities |
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- |
668 |
Current portion of operating lease liabilities |
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3,272 |
3,027 |
Total current liabilities |
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72,261 |
76,445 |
Deferred income taxes, net |
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5,153 |
5,023 |
Long-term operating lease liabilities |
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6,532 |
6,554 |
Long-term debt, net |
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21,895 |
34,869 |
Total liabilities |
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105,841 |
122,891 |
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Shareholders' equity |
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Preferred stock, |
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- |
- |
Common stock, |
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322 |
318 |
Additional paid-in capital |
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105,469 |
101,225 |
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(4,439) |
(3,195) |
Retained earnings |
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32,116 |
32,608 |
Total shareholders' equity |
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133,468 |
130,956 |
Total liabilities and shareholders' equity |
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Condensed Consolidated Statements of Cash Flows (in thousands) (unaudited) |
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For the nine months ended |
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Operating activities: |
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Net income |
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Adjustments to reconcile net income to net cash provided (used) by operating activities: |
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Depreciation and amortization |
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4,492 |
4,409 |
Amortization of debt discount |
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26 |
21 |
Provision for bad debt expense |
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493 |
523 |
Non-cash lease expense |
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51 |
95 |
Stock compensation |
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3,956 |
2,267 |
Inventory reserve |
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257 |
(723) |
Provision for deferred income taxes |
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130 |
224 |
Other |
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25 |
(183) |
(Increase) decrease in operating assets: |
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Accounts receivable |
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3,107 |
(12,759) |
Inventories |
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6,512 |
(11,561) |
Vendor deposits |
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105 |
(429) |
Contract assets |
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183 |
610 |
Other assets |
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1,899 |
(1,845) |
(Decrease) increase in operating liabilities: |
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Accounts payable and accrued expenses |
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(9,583) |
1,893 |
Accrued employee expenses |
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(157) |
878 |
Customer deposits |
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5,869 |
1,950 |
Contract liabilities |
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(668) |
161 |
Net cash provided (used) by operating activities |
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20,276 |
(6,648) |
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Investing activities: |
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Capital expenditures |
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(3,654) |
(2,291) |
Cash paid for acquisitions, net of cash acquired |
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(987) |
(1,947) |
Net cash used by investing activities |
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(4,641) |
(4,238) |
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Financing activities: |
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Dividends paid |
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(4,071) |
- |
Proceeds from borrowings |
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49,500 |
62,000 |
Debt repayments |
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(62,500) |
(51,000) |
Repurchases of common stock in satisfaction of employee tax withholding obligations |
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(1,244) |
(125) |
Issuances of common stock under employee stock purchase plan |
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63 |
59 |
Net cash (used) provided by financing activities |
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(18,252) |
10,934 |
Net (decrease) increase in cash |
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(2,617) |
48 |
Cash at beginning of period |
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5,921 |
3,974 |
Cash at end of period |
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Condensed Consolidated Statements of Cash Flows (in thousands) (unaudited) |
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For the nine months ended |
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Supplemental disclosures of cash flow information: |
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Cash paid for interest |
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Cash paid for income taxes |
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Supplemental disclosures of non-cash financing activities: |
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Common stock issued for acquisitions |
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The following table reconciles net income, the most comparable GAAP financial measure, to Adjusted EBITDA.
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Condensed Consolidated Earnings before Interest, Taxes, Depreciation, Amortization, and Amortization of Share-based Compensation (in thousands) |
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Unaudited |
Unaudited |
Unaudited |
Unaudited |
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9-Months
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9-Months
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3-Months
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3-Months
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Net Income |
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Provision for Income Taxes |
2,129 |
2,952 |
777 |
998 |
Interest Expense, Net |
2,268 |
1,719 |
675 |
717 |
Depreciation and Amortization |
4,492 |
4,409 |
1,492 |
1,497 |
Amortization of Share-based Compensation |
3,956 |
2,267 |
1,032 |
785 |
Adjusted EBITDA |
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View source version on businesswire.com: https://www.businesswire.com/news/home/20240509037340/en/
Chairman and CEO
(305) 402-9300
Director of Finance and Investor Relations
(305) 402-9300
info@evi-ind.com
Source: