Shares of EVI Industries, Inc. (EVI Quick QuoteEVI - Free Report) have plunged 9.9% since the company reported its earnings for the quarter ended Sept. 30, 2024, a dip significantly steeper than the S&P 500 index's change of -0.3% over the same period. Over the past month, EVI’s stock inched up 0.2% compared with the S&P 500’s 3.3% increase, indicating that EVI has been underperforming in both the immediate and one-month periods surrounding its latest earnings announcement.

For the first fiscal quarter that ended Sept. 30, 2024, EVI Industries reported record results across multiple key financial metrics. Its net earnings per share of 21 cents denotes an increase from 9 cents in the same period last year.

Revenues increased 6% from the previous year to reach $93.6 million. 

Gross profit also achieved a record, climbing 12% to $28.9 million, and gross margin improved to 30.8% from 29.2% a year ago. Operating income saw a 92% surge to $5 million, while net income more than doubled, rising 152% to $3.2 million, or 3.5% of revenue, compared with $1.3 million (1.5% of revenue) in the prior year. Adjusted EBITDA likewise reached a record $7.6 million, an increase from last year’s $6 million, reflecting a robust 27% gain.

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Other Key Business Metrics

In addition to revenue and profitability milestones, EVI reported positive momentum in other business metrics. The company secured new customer contracts surpassing the volume of fulfilled orders within the quarter, signaling strong demand and potential future revenue streams. Furthermore, EVI’s initiatives to streamline operations contributed to improved operating efficiencies, allowing the company to achieve notable gains in gross and operating margins.

Management Commentary

Henry M. Nahmad, chairman and CEO, credited the company’s workforce of over 750 associates for its record-breaking performance. He highlighted that EVI’s progress aligns with its long-term goals and reinforced the company’s strategic focus on acquisition-driven expansion, operational efficiencies, and technological investments. According to Nahmad, these initiatives are designed to position EVI as the market leader within the North American commercial laundry distribution and service industry.

Factors Influencing Financial Performance

EVI’s performance was bolstered by a combination of steady order fulfillment, strategic investments in operational efficiencies, and enhancements to the company’s technology infrastructure. The company’s focus on equipping regional business units with advanced field service technology and consolidating systems under an enterprise resource planning framework contributed to its improved operational metrics. Despite the increased costs associated with these initiatives, EVI remains optimistic about the long-term impact on its scalability and profitability.

Financial Position

During the quarter, EVI’s cash flow from operating activities decreased to $0.2 million from $1.5 million a year earlier, primarily due to working capital changes.

The company’s net debt rose from $8.3 million as of June 30, 2024, to $15.5 million as of Sept. 30, 2024, largely attributable to acquisition-related expenses.

Other Developments

Under its long-standing buy-and-build strategy, EVI completed the acquisition of Laundry Pro of Florida, a commercial laundry equipment distributor and service provider based in Lakeland, FL. Following the quarter’s end, EVI further expanded its footprint with the acquisition of O'Dell Equipment and Supply in Jeffersonville, Ind., bolstering its presence in the Southeast region. Additionally, EVI declared a special cash dividend of 31 cents per share, the largest in its history, paid to shareholders on Oct. 7, 2024, underscoring the company’s commitment to shareholder returns alongside growth investments.