10-Q: EVI Industries Reports Increased Revenue and Gross Profit in Q2 2025 Despite Rising Operating Expenses

EVI Industries saw revenue and gross profit gains in the second quarter of fiscal year 2025, driven by price increases and recent acquisitions, though operating expenses also rose.

Summary

• EVI Industries, Inc. reported its financial results for the six and three months ended December 31, 2024.
• Revenues increased by 4% to $186.3 million for the six months and by 1% to $92.7 million for the three months ended December 31, 2024, compared to the same periods in the prior fiscal year.
• The revenue increase is attributed to price increases and contributions from acquired businesses.
• Gross profit increased by 8% to $56.4 million for the six months and by 4% to $27.5 million for the three months ended December 31, 2024.
• Gross margins slightly increased to 30.3% for the six months and 29.7% for the three months ended December 31, 2024, due to a more favorable product and customer mix.
• Selling, general, and administrative expenses increased by 5% to $49.0 million for the six months and by 7% to $25.1 million for the three months ended December 31, 2024.
• The increase in operating expenses is primarily due to acquired businesses, increased selling costs, and higher technology, insurance, and professional fees.
• Net income for the six months ended December 31, 2024, was $4.4 million ($0.29 per share basic and diluted) compared to $2.6 million ($0.18 per share basic and $0.17 per share diluted) for the same period in 2023.
• Net income for the three months ended December 31, 2024, was $1.1 million ($0.08 per share basic and $0.07 per share diluted) compared to $1.3 million ($0.09 per share basic and diluted) for the same period in 2023.
• The company completed the acquisitions of Laundry Pro of Florida, Inc. on July 1, 2024, and ODell Equipment & Supply, Inc. on November 1, 2024.
• On February 1, 2025, the Company acquired Illinois-based Haiges Machinery, Inc. for total consideration of $2.0 million in cash.
• The company's revolving credit agreement allows for borrowings up to $100 million, with an accordion feature to increase it to $140 million.
• As of December 31, 2024, the company had $28.0 million of outstanding borrowings under the Credit Agreement, which accrued interest at a weighted average rate of 5.88%.

Sentiment

Score: 7

Explanation: The sentiment is moderately positive. Revenue and gross profit increased, and the company is executing its acquisition strategy. However, operating expenses also rose, and the company faces risks related to inflation and interest rates.

Positives

• Revenue increased by 4% for the six months ended December 31, 2024, driven by price increases and acquisitions.
• Gross profit increased by 8% for the six months ended December 31, 2024, indicating improved profitability.
• Net income increased to $4.4 million, or $0.29 per share, for the six months ended December 31, 2024.
• Gross margins slightly increased to 30.3% for the six months and 29.7% for the three months ended December 31, 2024, due to a more favorable product and customer mix.
• The company was in compliance with its covenants under the Credit Agreement and $58.4 million was available to borrow under the revolving credit facility as of December 31, 2024.

Negatives

• Operating expenses increased by 5% for the six months and by 7% for the three months ended December 31, 2024, impacting net income for the three-month period.
• Net income for the three months ended December 31, 2024, decreased compared to the same period in 2023.
• Cash decreased by approximately $0.7 million during the six-month period ended December 31, 2024.

Risks

• The company faces risks related to inflation, which may impact the market for its products and services.
• The company's indebtedness subjects it to interest rate risk.
• The company is exposed to credit risk to the extent its cash balances exceed the current $250,000 in maximum FDIC coverage.
• Delays in construction and/or the preparation of customer facilities for the installation of purchased commercial laundry equipment and systems may impact revenue recognition.

Future Outlook

The company believes that its existing cash, anticipated cash from operations, and funds available under its Credit Agreement will be sufficient to fund its operations and anticipated capital expenditures for at least the next twelve months and thereafter. The Company may also seek to raise funds through the issuance of equity and/or debt securities in public or private transactions or the incurrence of additional secured or unsecured indebtedness, including in connection with acquisitions or other transactions pursued by the Company as part of its buy-and-build growth strategy.

Industry Context

EVI Industries operates in the commercial laundry industry, which is influenced by factors such as economic conditions, government regulations, and technological advancements. The company's buy-and-build strategy reflects a trend of consolidation in the distribution and service sectors.

Comparison to Industry Standards

• It is difficult to provide a precise comparison to industry standards without detailed information on specific competitors and benchmarks.
• However, the company's revenue growth and profitability can be compared to other distributors and service providers in related industries.
• Key competitors include companies like Alliance Laundry Systems, a manufacturer of commercial laundry equipment, and various regional distributors and service providers.
• EVI's acquisition strategy is similar to that of other companies seeking to expand their market presence and service offerings through consolidation.

Related Party Transactions

• Certain of the Company's subsidiaries lease warehouse and office space from one or more of the principals or former principals of those subsidiaries.
• Western State Design leases space from an affiliate of Dennis Mack and Tom Marks.
• AAdvantage Laundry Systems leases space from an affiliate of Mike Zuffinetti.
• Yankee Equipment Systems leases space from an affiliate of Peter Limoncelli.

Stakeholder Impact

• Shareholders may be positively impacted by the increased revenue and profitability.
• Employees of acquired businesses may experience changes as a result of the integration process.
• Customers may benefit from the company's expanded product and service offerings.
• Suppliers may be affected by the company's acquisition strategy and changes in purchasing patterns.

Next Steps

• The company will continue to integrate acquired businesses.
• The company will continue to pursue its buy-and-build growth strategy.
• The company will monitor and manage its debt levels and interest rate risk.
• The company will monitor and manage the impact of inflation on its business.

Key Dates