EVI Industries, Inc. — FY2022 Form 10-K
Reporting period: Fiscal year ended June 30, 2022, compared with fiscal 2021. Although the request metadata says “2021 Q4,” this filing reports the full fiscal year ended June 30, 2022; it does not provide standalone Q4 results.
Business context
EVI is a single-reportable-segment value-added distributor of commercial laundry equipment, parts and accessories, with installation, maintenance, repair and advisory services. Its buy-and-build strategy combines organic growth with acquisitions.
Financial performance
| Metric | FY2022 | FY2021 | Change / context |
|---|---|---|---|
| Revenue | $267.3 million | $242.0 million | Up $25.3 million, or 10% |
| Gross profit / margin | $73.7 million / 27.6% | $59.8 million / 24.7% | Margin improved 2.9 percentage points |
| SG&A | $67.3 million / 25.2% of revenue | $56.6 million / 23.4% | Up $10.7 million, or 19% |
| Operating income | $6.4 million | $3.2 million | Improved year over year |
| Net income | $4.1 million | $8.4 million | Down 51%; prior year included a $7.0 million PPP-loan forgiveness gain |
| Diluted EPS | $0.29 | $0.61 | Down year over year |
| Operating cash flow | $(1.9) million | $13.7 million | Decline primarily reflected working-capital investment |
| Investing cash flow | $(15.9) million | $(7.6) million | Included $12.0 million net acquisition cash outflow and $4.0 million capital expenditures |
| Financing cash flow | $15.7 million | $(9.8) million | Net borrowings funded business and working-capital needs |
Revenue growth reflected recovering demand and projects delayed during the pandemic, price increases, and acquired businesses. Gross-margin improvement primarily reflected product and customer mix and solution-selling initiatives; lower-margin longer-term federal contracts reduced margin by 30 basis points. SG&A rose with acquired operations, higher selling costs, growth and optimization initiatives, and investments in technology, including ERP and sales/service platforms.
Financial position and liquidity
- Cash was $4.0 million at June 30, 2022, versus $6.1 million a year earlier. Total current assets were $105.6 million and current liabilities were $74.8 million.
- Inventory increased to $49.4 million from $25.1 million; accounts receivable increased to $43.0 million from $28.9 million. Management cited working-capital changes, including inventory and receivables, as key drivers of operating cash use.
- Total assets rose to $230.8 million from $177.9 million; total liabilities rose to $113.1 million from $71.1 million.
- Revolving-credit debt was $28.0 million, compared with $12.0 million at June 30, 2021. The company reported $34.1 million of additional borrowing availability and compliance with credit covenants.
- In May 2022, the credit facility was amended to replace LIBOR with BSBY and extend maturity to May 6, 2027. Borrowings bear variable rates; a hypothetical 1 percentage-point rate increase was estimated to raise annual interest expense by approximately $280,000.
- Management stated that cash, expected operating cash and available credit were sufficient for operations and anticipated capital expenditures for at least the next 12 months from filing.
Material changes, outlook and risks
- FY2022 acquisitions included CLK, CDL, LSS and SPR. Acquired businesses contributed approximately $35.6 million of revenue and $1.2 million of net income in FY2022, as calculated by the company; certain purchase-price allocations remained preliminary.
- There is no specific earnings or revenue guidance in the provided filing text. Management expects the company’s available liquidity to support near-term operations and capital expenditures and sees potential longer-term customer benefits from a larger installed equipment base.
- Management said inflation had not significantly affected operations in FY2022 or FY2021, noting that price increases had, to date, offset higher product costs without an adverse sales impact.
- Key risks include persistent supply-chain delays and product-cost increases, labor availability and costs, acquisition integration and execution, competition, dependence on suppliers (three manufacturers accounted for 56% of FY2022 product purchases), variable-rate debt, and execution of technology and ERP initiatives.
- The SBA retains the right to audit the forgiven PPP loans; the company had not accrued a liability for a possible adverse audit outcome. The filing reports no pending legal proceeding expected to be material and no outstanding performance or payment bonds at year-end.
- The independent auditor gave unqualified opinions on the financial statements and internal control over financial reporting. Management and the auditor excluded CLK, CDL and LSS from the FY2022 internal-control assessment because they were acquired during the year.
Important facts for investors to verify
- Whether inventory and receivables convert to cash and operating cash flow improves after FY2022’s working-capital outflow.
- Whether acquisitions deliver sustainable organic growth and returns, and whether preliminary purchase accounting or integration costs change reported results.
- How higher variable interest rates affect interest expense, debt levels and covenant headroom.
- Whether supplier constraints, labor costs and pricing actions affect delivery timing, demand and gross margins.
- Progress in integrating acquired businesses into internal controls and the company’s ERP and other technology systems.