EVI Industries, Inc.

’s Discussion and Analysis of Financial Condition and Results of Operations.

 

General

 

The following discussion should be read in conjunction with the Company’s Consolidated Financial Statements and notes thereto contained in Item 8 of this Report. See also “Cautionary Note Regarding Forward Looking Statements” preceding Part I, Item 1 of this Report.

 

Overview

 

The Company, through its wholly-owned subsidiaries, is a value-added distributor, and provides advisory and technical services. Through its vast sales organization, the Company provides its customers with planning, designing, and consulting services related to their commercial laundry operations. The Company sells and/or leases its customers commercial laundry equipment, specializing in washing, drying, finishing, material handling, water heating, power generation, and water reuse applications. In support of the suite of products it offers, the Company sells related parts and accessories. Additionally, through the Company’s robust network of commercial laundry technicians, the Company provides its customers with installation, maintenance, and repair services.

 

The Company’s customers include government, institutional, industrial, commercial and retail customers. Product purchases made by customers range from parts and accessories, to single or multiple units of equipment, to large complex systems. The Company also provides its customers with the services described above.

 

The Company’s growth strategy includes the pursuit of organic growth initiatives and a “buy-and-build” growth strategy. The Company’s “buy-and-build” growth strategy includes (i) the consideration and pursuit of acquisitions and other strategic transactions which management believes may complement the Company’s existing business or otherwise offer growth opportunities for, or benefit, the Company and (ii) the implementation of a growth culture at acquired businesses based on the exchange of ideas and business concepts among the management teams of the Company and the acquired businesses as well as through certain additional initiatives, which may include investments in additional sales and service personnel, new product lines, enhanced service operations and capabilities, new and improved facilities, and advanced technologies. See “Buy-and-Build Growth Strategy” below for information regarding business acquisitions consummated during the fiscal year ended June 30, 2025 (“fiscal 2025”) and the fiscal year ended June 30, 2026 (“fiscal 2026”).

 

As of June 30, 2026, the Company reported its results of operations through a single operating and reportable segment.

 

During July 2026, the Company announced its plans to expand into the consumer garment care services industry and, in connection therewith, the Company entered into a definitive agreement to acquire Miami, Florida-based Sudsies, Inc. (“Sudsies”), a well-established operator in the garment care sector and one of South Florida's premier garment care businesses. The acquisition of Sudsies was consummated on September 1, 2026 for a total purchase price of $37.4 million, which is subject to post-closing adjustments. The Company has established a new division, which will be a separate operating and reportable segment, for its consumer garment care services operations and investments. The expansion into the consumer garment care services industry marks the Company’s first dedicated expansion beyond the commercial laundry distribution and service industry since the Company began executing its “buy-and-build” growth strategy in 2016. This planned expansion is based on the Company's belief that consumer garment care, which is a multibillion dollar industry, represents a compelling long-term opportunity. The consumer garment care services industry serves an essential market has historically displayed steady, recurring demand, and is served by thousands of independent, often family-owned businesses. As consumers place growing value on quality, convenience, and service experience, the Company sees a significant opportunity to build a leading consumer garment care business of national scale.

 

Total revenues for fiscal 2026 increased by 15% compared to fiscal 2025. The increase was attributable to revenues generated by businesses acquired by the Company during fiscal 2025 and  2026.

 

Net income for fiscal 2026 increased by 3% from fiscal 2025. The increase in net income was primarily attributable to increases in revenue (as described above) and gross margin, partially offset by increases in selling, general, and administrative expenses, interest expense, and income taxes.

 

The Company’s operating expenses consist primarily of (a) selling, general and administrative expenses, primarily salaries, and commissions and marketing expenses that are variable and correlate to changes in sales, (b) expenses related to the operation of warehouse facilities, including a fleet of installation and service vehicles, and facility rent, which are payable mostly under non-cancelable operating leases, and (c) operating expenses at the parent company, including compensation expenses, fees for professional services, expenses associated with being a public company and investments and other expenses in furtherance of the Company’s “buy-and-build” growth strategy and other growth and optimization initiatives.

 

 

Buy-and Build Growth Strategy

 

The Company’s acquisitions under its “buy-and-build” growth strategy described above during fiscal 2025 and fiscal 2026 were as follows:

 

During fiscal 2025, the Company acquired Florida-based Laundry Pro of Florida, Inc., Indiana-based O’Dell Equipment & Supply, Inc., Illinois-based Haiges Machinery, Inc., and Wisconsin-based Girbau North America, Inc. The total consideration for these transactions was $51.0 million, consisting of $54.8 million in cash, net of cash acquired, and the settlement of acquirer receivables of $3.8 million.

 

During fiscal 2026, the Company acquired New York-based ASN Laundry Group and Ohio-based Belenky, Inc. The total consideration for these transactions consisted of $3.9 million, consisting of $3.1 million in cash and $0.8 million in amounts payable to the sellers as of June 30, 2026.

 

The companies acquired during fiscal 2026 and 2025 generally distribute commercial, industrial, and vended laundry products and provide installation and maintenance services to the new and replacement segments of the commercial, industrial and vended laundry industry. Acquisitions are generally effected by the Company through an existing or newly-formed subsidiary which acquires (whether by an asset purchase, stock purchase or merger) and operates the acquired business following the transaction. The Company, indirectly through its subsidiary, also assumes certain of the liabilities of the acquired business. The financial position, including assets and liabilities, and results of operations of the acquired businesses following the respective closing dates of the acquisitions are included in the Company’s consolidated financial statements.

 

As previously described, on September 1, 2026, the Company acquired Sudsies, which marked the Company's entry into the consumer garment care service industry. The total consideration paid in the transaction was $37.4 million in cash, which is subject to post-closing adjustments. The financial position, including assets and liabilities, and results of operations of Sudsies following the September 1, 2026 closing date of the acquisition will be included in the Company’s consolidated financial statements commencing in the quarter ending September 30, 2026.

 

See Note 3 to the Consolidated Financial Statements included in Item 8 of this Report for additional information about the acquisitions described above.

 

Consolidated Financial Condition

 

The Company’s total assets decreased from $307.0 million at June 30, 2025 to $304.5 million at June 30, 2026. The decrease in total assets was primarily attributable to a decrease in current assets, partially offset by an increase in equipment and improvements and goodwill. The Company’s total liabilities decreased from $163.6 million at June 30, 2025 to $154.4 million at June 30, 2026, primarily due to decreases in accounts payable, customer deposits, and long-term debt.

 

Liquidity and Capital Resources

 

The Company had approximately $6.8 million of cash at June 30, 2026 compared to $8.9 million of cash at June 30, 2025. The decrease in cash was primarily due to cash consideration paid in connection with business acquisitions, capital expenditures, a dividend payment, and optional payments on the Company’s credit facility, offset in part by cash generated from operations. The Company’s primary sources of cash are sales of products and services, and borrowings under its credit facility. The Company’s primary uses of cash are purchases of the products sold by the Company, employee related costs, and the cash consideration paid in connection with business acquisitions.

 

 

The following table summarizes the Company’s Consolidated Statements of Cash Flows (in thousands):

 

	Fiscal Year Ended June 30,
Net cash provided (used) by:	2026				2025
Operating activities	$	20,606			$	21,265
Investing activities	$	(14,334	)		$	(51,786	)
Financing activities	$	(8,350	)		$	34,815

 

For fiscal 2026, operating activities provided cash of approximately $20.6 million compared to cash provided by operating activities of approximately $21.3 million in fiscal 2025. The $0.7 million decrease in cash provided by operating activities was primarily attributable to decreases in accounts payable, accrued expenses, and customer deposits, offset in part by decreases in accounts receivable and increases in depreciation and amortization, and provision for deferred income taxes.

 

Investing activities used cash of approximately $14.3 million during fiscal 2026 compared to approximately $51.8 million in fiscal 2025. The $37.5 million decrease in cash used by investing activities is due primarily to a greater amount of cash consideration paid in connection with business acquisitions in fiscal 2025 as compared to fiscal 2026.

 

Financing activities used cash of approximately $8.4 million in fiscal 2026 compared to cash provided by financing activities of approximately $34.8 million in fiscal 2025. The $43.2 million decrease in cash provided by financing activities was attributable primarily to an increase in borrowings under the Company’s credit facility to fund the Company’s acquisitions in fiscal 2025.

 

The Company is party, as borrower, to a syndicated credit agreement (the “Credit Agreement”). The Credit Agreement allows for borrowings in the maximum aggregate principal amount of up to $150 million, with an accordion feature to increase the revolving credit facility by up to $50 million for a total of $200 million. A portion of the revolving credit facility is available for swingline loans of up to a sublimit of $7.5 million and for the issuance of standby letters of credit of up to a sublimit of $15 million. The maturity date of the Credit Agreement is March 26, 2030. As of June 30, 2026, $52.2 million was available to borrow under the revolving credit facility.

 

Borrowings (other than swingline loans) under the Credit Agreement bear interest, at a rate, at the Company’s election at the time of borrowing, equal to (a) the Secured Overnight Financing Rate (“SOFR”) plus 0.11% to 0.43%, plus an additional adjustment margin that ranges between 1.25% and 1.75% depending on the Company’s consolidated leverage ratio, which is a ratio of consolidated funded indebtedness to consolidated earnings before interest, taxes, depreciation and amortization (EBITDA) (the “Consolidated Leverage Ratio”) or (b) the highest of (i) prime, (ii) the federal funds rate plus 50 basis points, and (iii) SOFR plus 100 basis points (such highest rate, the “Base Rate”), plus a margin that ranges between 0.25% and 0.75% depending on the Consolidated Leverage Ratio. Swingline loans generally bear interest at the Base Rate plus a margin that ranges between 0.25% and 0.75% depending on the Consolidated Leverage Ratio. As of June 30, 2026, the Company had approximately $51.0 million of outstanding borrowings under the Credit Agreement, which accrued interest at a weighted average rate of 5.24%.

 

The Credit Agreement contains certain covenants, including financial covenants requiring the Company to comply with maximum leverage ratios and minimum interest coverage ratios. The Credit Agreement also contains other provisions which may restrict the Company’s ability to, among other things, dispose of or acquire assets or businesses, incur additional indebtedness, make certain investments and capital expenditures, pay dividends, repurchase shares and enter into transactions with affiliates. As of June 30, 2026, the Company was in compliance with its covenants under the Credit Agreement.

 

The obligations of the Company under the Credit Agreement are collateralized by substantially all of the assets of the Company and certain of its subsidiaries, and are guaranteed, jointly and severally, by certain of the Company’s subsidiaries.

 

On July 28, 2026, the Company's Board of Directors approved a share repurchase program which authorizes the repurchase of up to $10.0 million of the Company's outstanding common stock. Under the share repurchase program, the Company may repurchase shares of its common stock from time to time in management’s discretion through solicited or unsolicited open market transactions, in privately negotiated transactions, or by other means in accordance with applicable federal securities laws, including through the use of trading plans intended to qualify under Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. The timing, manner, price, and amount of shares which may be repurchased under the program will be at management’s discretion based on market conditions, the trading price of the Company’s common stock, the Company’s financial condition, results of operations and capital requirements, general business conditions, alternative investment opportunities, and other factors deemed relevant by management. The share repurchase program does not obligate the Company to repurchase any specific amount of shares, has no expiration date, and may be modified, suspended or terminated at any time without prior notice at the discretion of the Company’s Board of Directors.

 

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 from the filing of this Report, and the foreseeable future thereafter. The Company may also seek to raise funds through the issuance of equity and/or debt securities 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.

 

 

Off-Balance Sheet Financing

 

As of June 30, 2026, the Company had no off-balance sheet financing arrangements within the meaning of Item 303(a)(4) of Regulation S-K.

 

Results of Operations

 

Revenues

 

Revenues for fiscal 2026 increased by approximately $56.7 million (15%) from fiscal 2025. The increase was primarily attributable to revenues generated by businesses acquired by the Company during fiscal 2025 and fiscal 2026.

 

Cost of Sales and Selling, General and Administrative Expenses

 

	Fiscal Year Ended
	June 30,
	2026				2025
As a percentage of revenues:
Cost of sales, net		68.5	%			69.6	%
As a percentage of revenues:
Selling, general and administrative expenses		28.0	%			26.8	%

 

Cost of sales, expressed as a percentage of revenues, decreased to 68.5% in fiscal 2026 from 69.6% in fiscal 2025, representing gross margins of 31.5% in fiscal 2026 and 30.4% in fiscal 2025. The decrease in cost of sales as a percentage of revenues and increase in gross margin were primarily attributable to favorable changes in product and customer mix. The increase in gross margin is also attributable to the Company’s efforts to drive higher quality sales opportunities from promoting solution selling as a value-added distributor.

 

Selling, general and administrative expenses increased by approximately $20.4 million (20%) in fiscal 2026 compared to fiscal 2025, primarily due to (a) operating expenses of acquired businesses, including additional operating expenses at the acquired businesses in pursuit of future growth and in connection with the Company’s optimization initiatives, (b) increases in salary, stock compensation, rent, technology costs, professional fees, and insurance costs to support the Company’s growth, and (c) depreciation and amortization. As a percentage of revenues, selling, general and administrative expenses increased to 28.0% in fiscal 2026 from 26.8% in fiscal 2025.

 

Interest Expense

 

Interest expense, net increased by approximately $1.2 million (44%) in fiscal 2026 compared to fiscal 2025 as the average outstanding debt balances were higher in fiscal 2026, partially offset by decreases in the effective interest rate incurred on outstanding borrowings.

 

Provision for Income Taxes

 

The Company’s effective income tax rate was 34.5% for fiscal 2026 compared to 32.0% in fiscal 2025. The increase in the effective income tax rate in fiscal 2026 is attributable to an increase in the net impact of permanent book-tax differences resulting primarily from nondeductible compensation, partially offset by decreases in the Company's taxable presence in the jurisdictions where the Company operates.

 

Inflation

 

Inflation did not have a significant effect on the Company’s results during fiscal 2026 or fiscal 2025. However, the Company faces risks relating to inflation and other price increases (including due to the imposition of tariffs), which may have an adverse impact on the market for the Company’s products and services, including that there is no assurance that the Company will be able to effectively increase the price of its products and services to offset increased costs.

 

 

Transactions with Related Parties

 

Certain of the Company’s subsidiaries lease warehouse and office space from one or more of the principals (or former principals) of the Company or its subsidiaries. These leases include the following:

 

On October 10, 2016, the Company’s wholly-owned subsidiary, Western State Design, entered into a lease agreement pursuant to which it leases 17,600 square feet of warehouse and office space from an affiliate of Dennis Mack, a director and employee of the Company, and Tom Marks, Executive Vice President, Business Development and President of the West Region of the Company. The lease had an initial term of five years and provides for two successive three-year renewal terms at the option of the Company. The Company exercised its option to renew the lease for the first three-year renewal term, which commenced in October 2021, and the second three-year renewal term, which commenced in October 2024. Base rent for the first renewal term was $19,000 per month. Base rent for the second renewal term is $21,000 per month. In addition to base rent, Western State Design is responsible under the lease for costs related to real estate taxes, utilities, maintenance, repairs and insurance. Payments under this lease totaled approximately $252,000 and $244,000 during fiscal 2026 and fiscal 2025, respectively.

 

On November 1, 2018, the Company’s wholly-owned subsidiary, AAdvantage Laundry Systems, entered into a lease agreement pursuant to which it leases warehouse and office space from an affiliate of Mike Zuffinetti, former Chief Executive Officer of AAdvantage. Pursuant to the lease agreement, on January 1, 2019, the lease expanded to cover additional warehouse space. The lease had an initial term of five years and provides for two successive three-year renewal terms at the option of the Company. The Company exercised its option to renew the lease for the first three-year renewal term, which commenced in November 2023. Base rent for the initial term was $36,000 per month. Base rent for the first renewal term is $40,000 per month. In addition to base rent, AAdvantage is responsible under the lease for costs related to real estate taxes, utilities, maintenance, repairs and insurance. Payments under this lease totaled approximately $480,000 during fiscal 2026 and fiscal 2025.

 

On November 3, 2020, the Company’s wholly-owned subsidiary, Yankee Equipment Systems, entered into a lease agreement pursuant to which it leases a total of 12,500 square feet of warehouse and office space from an affiliate of Peter Limoncelli, President of Yankee Equipment Systems. The lease had an initial term of three years and provides for three successive three-year renewal terms at the option of the Company. The Company exercised its option to renew this lease for the first three-year renewal term, which commenced in November 2023. Base rent for the initial term was $11,000 per month. Base rent for the first year of the renewal term was $12,500 per month. Base rent for the second year of the renewal term is $12,750 per month. Base rent for the third year of the renewal term is $13,000 per month. In addition to base rent, Yankee Equipment Systems is responsible under the lease for costs related to real estate taxes, utilities, maintenance, repairs and insurance. Payments under this lease totaled approximately $155,000 and $152,000 during fiscal 2026 and fiscal 2025, respectively.

 

Critical Accounting Estimates

 

Use of Estimates

 

In connection with the preparation of its financial statements in accordance with generally accepted accounting principles in the United States of America (“GAAP”), the Company makes estimates and assumptions, including those that affect the reported amounts of assets and liabilities, contingent assets and liabilities, and the reported amounts of revenues and expenses during the reported periods. Estimates and assumptions made may not prove to be correct, and actual results may differ from the estimates. The accounting estimates that the Company has identified as critical to its business operations and to an understanding of the Company’s financial statements are set forth below. The critical accounting estimates discussed below are not intended to be a comprehensive list of all of the Company’s accounting policies. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP, with no need for management’s judgment in their application. There are also areas in which management’s judgment in selecting any available alternative would not produce a materially different result.

 

 

Revenue Recognition

 

Performance Obligations and Revenue Over Time

 

From time to time, the Company enters into longer-termed contracts which provide for the sale of equipment by the Company and the provision by the Company of related installation and construction services. The installation on these types of contracts is usually completed within six to twelve months. The Company recognizes a portion of its revenue over time using the cost-to-cost measure of progress, which measures a contract’s progress toward completion based on the ratio of actual contract costs incurred to date to the Company’s estimated costs at completion adjusted for uninstalled materials, as necessary.  Significant judgment may be required by management in the cost estimation process for these contracts, which is based on the knowledge and experience of the Company’s project managers, subcontractors and financial professionals. Changes in job performance and job conditions are factors that influence estimates of the total contract transaction price, total costs to complete those contracts and the Company’s revenue recognition.  The determination of the total estimated cost and progress toward completion requires management to make significant estimates and assumptions. Total estimated costs to complete projects include various costs such as direct labor, material and subcontract costs. Changes in these estimates can have a significant impact on the revenue recognized each period. From time to time, the Company also enters into maintenance and service contracts. These longer-term contracts, maintenance and service contracts have a single performance obligation where revenue is recognized over time using the cost-to-cost measure of progress, which best depicts the continuous transfer of control of goods or services to the customer.

 

The Company measures revenue, including shipping and handling fees charged to customers, as the amount of consideration it expects to be entitled to receive in exchange for its products or services, net of any taxes collected from customers and subsequently remitted to governmental authorities. Costs associated with shipping and handling activities performed after the customer obtains control are accounted for as fulfillment costs.

 

Revenue from products transferred to customers at a point in time is recognized when obligations under the terms of the contract with the Company’s customer are satisfied, which generally occurs with the transfer of control upon shipment.

 

Revenues that are recognized over time include (i) longer-termed contracts that include an equipment purchase with installation and construction services, (ii) maintenance contracts, and (iii) service contracts.

 

 

 

 

Goodwill

 

The Company evaluates goodwill for impairment annually or more frequently when an event occurs or circumstances change that indicate that the carrying value may not be recoverable. Goodwill is tested for impairment at the reporting unit level by first performing a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying value. If the reporting unit does not pass the qualitative assessment, then the reporting unit's carrying value is compared to its fair value. If the fair value is determined to be less than the carrying value, a second step is performed to measure the amount of impairment loss. This step compares the current implied goodwill in the reporting unit to its carrying amount. If the carrying amount of the goodwill exceeds the implied goodwill, an impairment is recorded for the excess. The identification and measurement of goodwill impairment involves the estimation of the fair value of the reporting unit and involves uncertainty because management must use judgment in determining appropriate assumptions to be used in the measurement of fair value. The Company performed its annual impairment test in the fourth quarter of fiscal 2026 and determined there was no impairment.

 

Customer Relationships, Tradenames and Other Intangible Assets

 

Customer relationships, tradenames, non-competes, and other intangible assets are stated at cost less accumulated amortization. These assets with a finite-life are amortized on a straight-line basis over the estimated future periods to be benefited (5-10 years). The estimates of fair value of the Company’s indefinite-lived intangibles are based on information available as of the date of the assessment and take into account management’s assumptions about expected future cash flows and other valuation techniques. The Company reviews the recoverability of intangible assets that are amortized based primarily upon an analysis of undiscounted cash flows from the intangible assets. In the event the expected future cash flows become less than the carrying amount of the assets, an impairment loss would be recorded in the period the determination is made based on the fair value of the related assets.

 

Business Combinations

 

The determination of the fair value of net assets acquired in a business combination requires estimates and judgments of future cash flow expectations for the acquired business and the related identifiable tangible and intangible assets. Fair values of net assets acquired are calculated using expected cash flows and industry-standard valuation techniques. Consideration paid generally consists of cash and, from time to time, shares of the Company’s common stock.

 

Due to the time required to gather and analyze the necessary data for each acquisition, GAAP provides a “measurement period” of up to one year from the date of acquisition in which to finalize these fair value determinations. During the measurement period, preliminary fair value estimates may be revised if new information is obtained about the facts and circumstances existing as of the date of the acquisition, or based on the final net assets and working capital of the acquired business, as prescribed in the applicable purchase agreement. Such adjustments may result in the recognition of, or an adjustment to the fair values of, acquisition-related assets and liabilities and/or consideration paid, and are referred to as “measurement period” adjustments. Measurement period adjustments are recorded to goodwill. Other revisions to fair value estimates, including those relating to facts and circumstances that occur subsequent to the date of the acquisition, are reflected as income or expense, as appropriate.

 

Significant changes in the assumptions or estimates for a particular acquisition or in the underlying acquisition-related valuations, including the expected profitability or cash flows of an acquired business or assumptions related to the existence or amount of the acquired assets or assumed liabilities, could result in materially different estimates of the fair value of the net assets acquired in the acquisition, which could positively or negatively affect the Company’s financial results in future periods.

 

Income Taxes

 

The Company follows Financial Accounting Standards Board (“FASB”) ASC Topic 740, “Income Taxes” (“ASC 740”). Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributed to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under ASC 740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. If it is determined that it is more likely than not that some portion of a deferred tax asset will not be realized, a valuation allowance is recognized.

 

 

Significant judgment is required in developing the Company’s provision for income taxes, deferred tax assets and liabilities, and any valuation allowances that might be required against the deferred tax assets. Management evaluates the Company’s ability to realize its deferred tax assets on a quarterly basis and adjusts its valuation allowance when it believes that it is more likely than not that the asset will not be realized.

 

See Note 10 to the Consolidated Financial Statements included in Item 8 of this Report for additional information regarding income taxes.

 

Recently Issued Accounting Guidance

 

See Note 2 to the Consolidated Financial Statements included in Item 8 of this Report for a description of Recently Issued Accounting Guidance.