EVI Industries, Inc. — Form 10-Q Summary
Reporting period: Quarter and nine months ended March 31, 2024 (fiscal third quarter of FY2024; unaudited). The request metadata says “2023 Q3,” but the filing itself covers March 31, 2024. EVI distributes, leases, installs, and services commercial laundry equipment and related products.
Financial performance
Amounts are in millions except per-share data. Comparisons are with the periods ended March 31, 2023.
| Metric | Three months | Nine months |
|---|---|---|
| Revenue | $84.0 vs. $94.1; down 11% | $263.4 vs. $260.1; up 1% |
| Gross profit / margin | $25.8 / 30.7% vs. $26.6 / 28.3% | $77.9 / 29.6% vs. $75.9 / 29.2% |
| Operating income | $2.4 vs. $4.5 | $8.0 vs. $12.5 |
| Net income | $1.0 vs. $2.8 | $3.6 vs. $7.8 |
| Diluted EPS | $0.06 vs. $0.19 | $0.24 vs. $0.54 |
| Interest expense, net | $0.7 vs. $0.7 | $2.3 vs. $1.7 |
SG&A was $23.4 million for the quarter and $69.9 million for the nine months, up 6% and 10%, respectively. The nine-month effective tax rate was 37.3% versus 27.4%; the quarterly rate was 44.8% versus 26.6%. The company attributed higher rates mainly to nondeductible compensation and lower net income.
Cash flow, balance sheet, and debt
- Cash flow: Nine-month operating cash flow was $20.3 million, versus cash used of $6.6 million a year earlier. Investing activities used $4.6 million, including $3.7 million of capital expenditures and $1.0 million net cash paid for acquisitions. Financing activities used $18.3 million, including $13.0 million net debt repayments and a $4.1 million special dividend. Cash declined $2.6 million to $3.3 million. Operating cash flow less capital expenditures was approximately $16.6 million.
- Liquidity: Working capital was $38.2 million at March 31, down from $49.1 million at June 30, 2023. Current assets were $110.4 million and current liabilities $72.3 million. Management said existing cash, anticipated operating cash flow, and credit availability should fund operations and expected capital expenditures for at least the next 12 months.
- Debt: Revolver borrowings were $22.0 million, down from $35.0 million at June 30; balance-sheet debt, net, was $21.9 million. The company reported $58.1 million available under its $100 million facility (expandable to $140 million), covenant compliance, and a May 2027 maturity. The March 31 weighted-average interest rate was 6.60%; a hypothetical 1% rate increase would add about $220,000 to annual interest expense.
- Other balance-sheet items: Total assets were $239.3 million, down from $253.8 million; total liabilities were $105.8 million, down from $122.9 million. Customer deposits increased to $29.2 million from $23.3 million.
Material changes and notable items
- Quarterly revenue fell largely because construction and other delays prevented some customers from receiving products; the prior-year quarter also included large industrial projects. Nine-month revenue growth reflected price increases.
- Gross margin improved, which management linked to product and customer mix and project timing. Higher SG&A—including acquired-business costs, salaries, rent, technology, professional fees, insurance, and increased stock compensation—more than offset gross-profit growth over nine months.
- ALCO Washer Center was acquired September 1, 2023, for $987,000 cash and 8,621 EVI shares valued at approximately $229,000. Its results are included from the acquisition date; $793,000 of goodwill was recorded.
- The company paid a one-time $0.28-per-share special dividend, totaling approximately $4.1 million, in October 2023. It says it has not historically paid regular dividends.
- Variable lease costs rose significantly: $3.5 million for the nine months versus $156,000 reported in the prior-year period. The filing says the prior-period omission was not considered material.
Outlook, risks, and controls
The filing provides no specific financial guidance. Management described its acquisition-led “buy-and-build” strategy and cited potential revenue timing effects from installation or customer-site delays. It also identified risks involving economic conditions, inflation and pricing, labor availability and costs, supply-chain disruptions, competition, interest rates, acquisition integration, customer and supplier relationships, and cybersecurity. The BSBY benchmark is scheduled to be discontinued in November 2024 and is expected to be replaced under the credit agreement by SOFR plus an adjustment.
A material weakness in internal control over financial reporting—related to review and approval of manual journal entries at certain subsidiaries—remained unremediated at March 31, 2024. Disclosure controls were therefore concluded to be ineffective. Management reported ongoing remediation, and stated that the weakness had not resulted in identified misstatements in the periods referenced.
Outstanding performance and payment bonds totaled $1.2 million; the filing reports no material change in legal proceedings and no material change in risk factors from the FY2023 Form 10-K. The company also disclosed related-party facility leases. Adoption of the expected-credit-loss accounting standard had no material financial-statement impact.
Important facts for investors to verify
- Whether delayed customer deliveries and lower quarterly revenue recover in subsequent periods, and how project timing affects margins.
- Whether SG&A and stock-compensation costs moderate, and whether ALCO and other growth initiatives contribute as expected.
- Cash generation, working-capital trends, remaining revolver availability, covenant headroom, and exposure to variable interest rates.
- Progress and testing of controls remediation before management declares the material weakness resolved.
- Future dividend decisions and any restrictions under the credit agreement.