EVI Industries, Inc. — Form 10-Q Summary
Reporting period: Quarter and nine months ended March 31, 2023; comparative periods ended March 31, 2022. The filing covers EVI’s fiscal 2023 third quarter (not 2022 Q3, as indicated in the request metadata). Figures below are in millions of dollars except per-share data.
Business context and financial results
EVI distributes commercial laundry equipment and related parts, and provides planning, installation, maintenance, and repair services. Its growth strategy combines organic initiatives with acquisitions.
| Metric | Three months ended Mar. 31, 2023 | Three months ended Mar. 31, 2022 | Nine months ended Mar. 31, 2023 | Nine months ended Mar. 31, 2022 |
|---|---|---|---|---|
| Revenue | $94.1 | $60.0 | $260.1 | $184.5 |
| Gross profit | $26.6 | $17.1 | $75.9 | $51.5 |
| Gross margin | 28.3% | 28.4% | 29.2% | 27.9% |
| Operating income | $4.5 | $0.2 | $12.5 | $3.8 |
| Interest expense, net | $0.7 | $0.1 | $1.7 | $0.4 |
| Net income | $2.8 | $0.04 | $7.8 | $2.6 |
| Diluted EPS | $0.19 | $0.00 | $0.54 | $0.18 |
Cash flow, balance sheet, and liquidity
- For the nine months, operating activities used $6.6 million of cash, investing activities used $4.2 million, and financing activities provided $10.9 million. Cash increased $48,000 to $4.0 million.
- Working capital was $51.3 million at March 31, 2023, compared with $30.8 million at June 30, 2022. Current assets were $132.6 million and current liabilities $81.3 million.
- Inventory rose to $62.9 million from $49.4 million; accounts receivable rose to $55.6 million from $43.0 million. Management attributed these increases mainly to project inventory and completed federal-government projects awaiting payment. EVI received $9.3 million from the federal government on April 4, 2023, related to receivables outstanding at quarter-end.
- Long-term debt, net, was $38.9 million, up from $27.8 million at June 30, 2022; cash was $4.0 million. The revolving facility had $49.4 million available. The company reported compliance with its covenants; the facility matures May 6, 2027.
- Borrowings carried a 6.19% weighted-average interest rate at March 31, 2023. Management estimated a 1 percentage-point increase in daily rates would raise annual interest expense by approximately $390,000.
Changes, acquisitions, and management commentary
- Revenue increased 57% for the quarter and 41% for the nine-month period. Management cited improved post-pandemic conditions, completion of previously delayed projects, significant industrial jobs, price increases, and revenue from acquired businesses.
- Gross margin improved year to date, which management linked partly to higher-margin solution selling. Quarterly margin edged down to 28.3%, mainly due to lower-margin large industrial jobs.
- SG&A increased 31% for the quarter and 33% year to date, reflecting acquired-business costs, growth and optimization spending, higher sales-related commissions and payroll, and increased depreciation, amortization, and stock compensation.
- Interest expense increased substantially, primarily due to higher average debt and interest rates. Despite higher earnings, operating cash flow remained negative, largely amid working-capital needs.
- EVI acquired Aldrich Clean-Tech Equipment Corp. and K&B Laundry Service, LLC, both on September 1, 2022, and substantially all assets of Wholesale Commercial Laundry Equipment Company SE, LLC, on November 1, 2022. Acquired operations and pro forma results were described as immaterial at the time of acquisition.
Outlook, risks, and other items
- The filing provides no quantified revenue, earnings, or margin guidance. Management said cash, expected operating cash flows, and facility availability should fund operations and anticipated capital expenditures for at least the next 12 months.
- Key stated risks include economic weakness, supply-chain delays, inflation and pricing pressure, labor shortages and costs, rising interest rates, acquisition and integration execution, competition, and project installation or customer-facility delays that could defer revenue recognition.
- The revolving credit agreement is secured by substantially all company assets and includes financial and other covenants that may constrain borrowing, acquisitions, capital spending, dividends, and share repurchases.
- There were no performance or payment bonds outstanding at March 31, 2023. The filing reports no material changes to previously disclosed legal proceedings or risk factors.
- The company disclosed leases with affiliates of current or former subsidiary principals and executives. It also reported no foreign-exchange contracts outstanding and noted exposure for cash balances exceeding FDIC coverage.
Important facts for investors to verify
- Whether elevated receivables and inventory convert to cash as projects are delivered and customers pay; in particular, the effect of the reported $9.3 million government payment.
- Whether revenue and margin growth persist after accounting for acquisitions, price increases, project timing, and the mix of large industrial jobs.
- Debt levels, variable-rate borrowing costs, covenant headroom, and the company’s ability to generate positive operating cash flow.
- Acquisition integration and the returns from acquired businesses, alongside dilution and financing needs under the buy-and-build strategy.
- The impact of related-party facility leases and the material risks described in the filing.