10-Q: EVI Industries Q2 2026: Revenue Soars 24%, Net Income Mixed

EVI Industries reports strong revenue growth driven by acquisitions and price increases, though six-month net income saw a slight dip while the three-month period surged.

Summary

• Revenues for the three months ended December 31, 2025, increased by 24% to $115.3 million, and for the six months, by 20% to $223.6 million, primarily due to acquisitions and price adjustments.
• Gross profit for the three months rose 29% to $35.5 million, and for the six months, 23% to $69.4 million, with gross margins improving to 30.8% and 31.1% respectively.
• Net income for the three months ended December 31, 2025, more than doubled to $2.4 million, while net income for the six months slightly decreased by 3.3% to $4.2 million.
• Operating expenses increased by 24% for the three months and 26% for the six months, driven by acquired businesses, selling costs, and other operational expenses, including a $550,000 expense for an industry exposition.
• Cash decreased by $4.6 million for the six months ended December 31, 2025, compared to a $0.7 million decrease in the prior year, primarily due to financing activities shifting from providing to using cash.
• Working capital improved to $56.1 million at December 31, 2025, from $50.6 million at June 30, 2025.
• The company completed the acquisition of ASN Laundry Group on August 1, 2025, for $0.5 million in cash and assumed $0.1 million in liabilities.
• A subsequent acquisition for $3.2 million was agreed upon on January 30, 2026, expected to close in Q3 fiscal 2026.
• A special cash dividend of $0.33 per share ($5.0 million total) was declared on September 11, 2025, and paid on October 6, 2025.

Sentiment

Score: 7

Explanation: StockSavvy.ai views this as a positive report, driven by strong revenue and gross profit growth, successful acquisition integration, and improved quarterly net income. The slight dip in six-month net income and increased expenses warrant attention, but the overall strategic execution and liquidity position are favorable.

Positives

• Strong revenue growth: 24% increase for the three months ($115.3 million) and 20% for the six months ($223.6 million) ended December 31, 2025.
• Significant gross profit improvement: 29% increase for the three months ($35.5 million) and 23% for the six months ($69.4 million).
• Improved gross margins: Increased to 30.8% for the three months and 31.1% for the six months, driven by product and customer mix.
• Substantial net income growth for the quarter: More than doubled to $2.4 million for the three months ended December 31, 2025.
• Increased operating cash flow: $5.1 million provided by operating activities for the six months ended December 31, 2025, up from $2.2 million in the prior year.
• Successful execution of "buy-and-build" strategy with the acquisition of ASN Laundry Group and an agreement for another acquisition.
• Working capital increased to $56.1 million, indicating improved short-term liquidity.
• The company remains in compliance with all covenants under its $150 million revolving credit facility, with $43.0 million available for borrowing.
• Effective tax rate decreased to 27.4% for the six months and 25.1% for the three months ended December 31, 2025, due to decreased taxable presence in certain jurisdictions.

Negatives

• Net income for the six months ended December 31, 2025, slightly decreased by 3.3% to $4.2 million, despite significant revenue and gross profit growth.
• Cash balance decreased by $4.6 million for the six months ended December 31, 2025, compared to a $0.7 million decrease in the prior year.
• Financing activities shifted from providing $9.8 million in cash in the prior year to using $1.4 million in the current six-month period.
• Interest expense increased significantly by 73.5% for the six months ($2.0 million) and 61.6% for the three months ($1.1 million) due to higher average outstanding borrowings.
• Selling, general and administrative expenses increased substantially by 26% for the six months and 24% for the three months, outpacing revenue growth in the six-month period.

Risks

• General economic and business conditions, including economic uncertainty, credit market volatility, and international hostilities.
• Supply chain delays and disruptions impacting product and service delivery.
• Inflation and other price increases (e.g., tariffs), and the inability to successfully offset these costs through price increases, potentially reducing demand.
• Labor shortages and increases in labor costs affecting the ability to deliver products and services.
• Interest rate increases impacting the cost of indebtedness and ability to raise capital.
• Risks associated with the "buy-and-build" growth strategy, including difficulty identifying/consummating acquisitions, integration risks, increased indebtedness, potential dilution, and acquired business underperformance.
• The risk that the contemplated acquisition pursuant to the asset purchase agreement entered into on January 30, 2026, may not be consummated as expected or at all.
• Pricing concessions and market share growth efforts may adversely impact gross margins.
• Equipment sales may not result in anticipated ancillary benefits (e.g., increased customers, higher margin sales of parts/services).
• Service operations may not expand as expected.
• Cybersecurity threats or incidents, including data breaches or operational disruptions.
• Changes in, or failure to comply with, government regulation, including environmental regulations.
• Litigation risks, including significant expenses and adverse rulings.
• Availability and cost of inventory, and the potential failure of inventory management initiatives.
• Fluctuations in the relative value of the United States dollar to foreign currencies, particularly a weaker U.S. dollar increasing costs.
• Revenue recognition delays due to construction delays or facility preparation at customer sites.
• Risks related to the adoption of new accounting standards.
• The decentralized operating model and diversity strategies may not yield anticipated benefits.
• Investments, initiatives, and expenses (e.g., ERP system, field service platform) may not result in anticipated benefits.
• Exposure to cash balances in depositary accounts exceeding the $250,000 FDIC insurance coverage.
• Dividends may not be paid in the future.

Future Outlook

The company anticipates continued growth through its "buy-and-build" strategy, including further acquisitions, and organic initiatives. Management believes existing cash, anticipated cash from operations, and available credit will be sufficient to fund operations and capital expenditures for at least the next twelve months. The company is evaluating the impact of new accounting standards (ASU 2023-09 and ASU 2024-03) and the recently enacted One Big Beautiful Bill Act (OBBBA) on future financial statements. There is a potential for future capital raises through equity or debt to support acquisitions.

Management Comments

• The accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting only of normal recurring accruals and adjustments) which are necessary in order to state fairly the Company's results of operations, financial position, shareholders' equity and cash flows as of and for the periods presented.
• Management does not believe that accounting standards and updates which have been issued but are not yet effective will have a material impact on the Company's condensed consolidated financial statements upon adoption, other than as described above.
• While the Company generally realizes a lower gross margin from such longer-term contracts, the Company believes that the long-term benefit from the increase in its installed equipment will outweigh the possible short-term impact to gross margin.
• The Company believes that its existing cash, anticipated cash from operations and funds available under the Company's Credit Agreement will be sufficient to fund its operations and anticipated capital expenditures for at least the next twelve months and thereafter.
• The Company's management does not believe that the covenants contained in the Company's Credit Agreement currently materially limit the Company's ability to pay dividends or are reasonably likely to materially limit the Company's ability to pay dividends in the future.
• Inflation did not have a significant effect on the Company's results during any of the reported periods.

Industry Context

StockSavvy.ai notes that EVI Industries' continued revenue growth and strategic acquisitions in the commercial laundry distribution sector align with a consolidation trend seen in fragmented industries. The focus on a "buy-and-build" strategy, coupled with efforts to improve gross margins through product mix and price increases, suggests a mature industry where scale and efficiency are key competitive advantages. The company's ability to increase operating cash flow despite higher interest expenses and SG&A indicates effective integration of acquired businesses and operational leverage, which is crucial in a capital-intensive distribution business.

Comparison to Industry Standards

• StockSavvy.ai observes that EVI Industries' gross margin improvement to 30.8%-31.1% is a positive indicator, especially when compared to general industrial distributors which often operate with gross margins in the 20-30% range. For example, a company like Fastenal (FAST) in industrial distribution typically reports gross margins around 45-50%, while smaller, specialized distributors might see lower figures. EVI's focus on value-added services and complex equipment sales likely supports these higher margins within its niche.
• The 20-24% revenue growth is robust for a mature industry, suggesting successful market share capture and effective integration of acquisitions. This growth rate would be considered strong against peers like UniMac or Dexter Laundry distributors, where organic growth might be in the low single digits.
• The increase in long-term debt to $58 million and a weighted average interest rate of 5.14% reflects the current higher interest rate environment and the financing of acquisitions. This leverage needs to be monitored, though the company's compliance with covenants and available credit facility capacity ($43 million) indicates a manageable debt profile compared to highly leveraged private equity-backed distributors.

Corporate Governance

Legal Proceedings

• No material changes to legal proceedings from the disclosure in the Annual Report on Form 10-K for the fiscal year ended June 30, 2025.
• The company may from time to time become subject to litigation and other legal proceedings in the ordinary course of business, which could incur significant expenses and adverse outcomes.

Related Party Transactions

• Western State Design leases 17,600 square feet of warehouse and office space from an affiliate of Dennis Mack (director and employee) and Tom Marks (Executive VP, Business Development and President of West Region). The lease was renewed in October 2024 for $21,000 per month.
• AAdvantage Laundry Systems leases warehouse and office space from an affiliate of Mike Zuffinetti (former CEO). The lease was renewed in November 2023 for $40,000 per month.
• Yankee Equipment Systems leases 12,500 square feet of warehouse and office space from an affiliate of Peter Limoncelli (President). The lease was renewed in November 2023, with base rent for the third year of the renewal term at $13,000 per month.

Stakeholder Impact

• Shareholders are impacted by special cash dividends ($0.33 per share), potential dilution from future equity raises, and changes in EPS. The approval of the 2025 Equity Incentive Plan could lead to further share-based compensation.
• Employees benefit from the Employee Stock Purchase Plan (ESPP) and equity incentive plans (restricted stock awards and units).
• Customers benefit from the company's "buy-and-build" strategy, which aims to increase the installed base of equipment and expand service operations, potentially leading to a broader range of products and services.
• Suppliers: The company's growth strategy and acquisitions may lead to increased demand for products, but risks exist if suppliers of acquired businesses do not continue relationships.
• Creditors are impacted by the increase in long-term debt and the company's compliance with credit facility covenants. The company's assets secure the debt.

Next Steps

• Continue evaluating the effect of ASU 2023-09 on income tax disclosures for annual periods beginning after December 15, 2024.
• Evaluate the impact of ASU 2024-03 on financial statement presentation and related disclosures, effective for the fiscal year ending June 30, 2028.
• Complete the acquisition of a distributor for $3.2 million, expected to close in the third quarter of fiscal 2026.
• Continue the valuation of intangible assets, deferred tax liabilities, and certain working capital adjustments related to the GNA acquisition, which is subject to adjustment for up to one year.
• Assess the impact of the One Big Beautiful Bill Act (OBBBA) on fiscal 2026 consolidated financial statements.
• The Board of Directors will determine future dividend payments based on financial condition, cash flow, profitability, prospects, and liquidity needs.

Key Dates

Recommendation

EVI Industries demonstrates strong revenue and gross profit growth, driven by successful acquisitions and strategic pricing. The significant increase in quarterly net income is positive. However, the slight decline in six-month net income, coupled with rising operating and interest expenses, suggests some margin pressure and integration costs. While the "buy-and-build" strategy is promising, the associated risks of integration and increased debt warrant a cautious approach. The company's liquidity appears sufficient, and it is in compliance with debt covenants. A "hold" recommendation is appropriate as investors should monitor the sustained profitability of acquired businesses and the impact of ongoing expense management on net income, especially given the mixed six-month performance.

Keywords

Commercial laundry equipment, Industrial laundry, Distribution, Acquisitions, SEC filing, 10-Q, Financial results, EVI Industries, Laundry services, Corporate growth strategy, Value-added distributor, Financial performance, Quarterly report