Exchange: AMEX | Sector: Industrials | Industry: Industrial Distribution
Q3 2024
Published: May 9, 2024
Earnings Highlights
Revenue of $83.98M down 10.7% year-over-year
EPS of $0.06 decreased by 65.3% from previous year
Gross margin of 28.9%
Net income of 956.00K
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EVI Industries Inc (EVI) QQ3 2024 Results: Revenue Decline Driven by Cyclic Industrials; Modest Margin Pressure but Robust Free Cash Flow Support
Executive Summary
EVI Industries reported QQ3 2024 revenue of $83.98 million, down 10.7% year-over-year and 8.1% quarter-over-quarter, reflecting the cyclical nature of industrial distribution. Gross profit was $24.29 million with a margin of 28.93%, while operating income came in at $2.41 million and EBITDA at $3.90 million, yielding an operating margin of 2.87% and an EBITDA margin of 4.64%. Net income was $0.96 million, or $0.0659 per basic share and $0.0635 per diluted share, down meaningfully from the prior-year period (net income down 65.2% YoY). Despite a softer top line and margin pressure, the company generated solid operating cash flow of $9.42 million and free cash flow of $8.14 million in the quarter, underscoring strength in working capital management and cash conversion. Balance sheet remains liquid with $3.30 million in cash and cash equivalents and a net debt position of approximately $28.40 million. Current ratio stands at 1.53 and quick ratio at 0.77, indicating modest liquidity given working capital dynamics. Management commentary on the call (where available) is not provided in the dataset; as a result, this section relies on disclosed results and related ratios to gauge business health and trajectory. The stock trades with elevated valuation metrics (P/E about 79.9x, EV/EBITDA about 85.6x) relative to visible profitability, signaling high sensitivity to earnings stability and potential multiple compression if near-term demand remains soft.
Summary of notable metrics and trend context:
- Revenue: $83.98M; YoY change: -10.72%; QoQ change: -8.08%
- Gross Profit: $24.29M; Gross Margin: 28.93%; YoY margin change: -8.59%; QoQ: -8.00%
- Operating Income: $2.41M; Operating Margin: 2.87%; YoY: -18.87%; QoQ: -18.40%
- Net Income: $0.96M; Net Margin: 1.14%; YoY: -65.24%; QoQ: -28.71%
- EPS: Basic $0.0659; Diluted $0.0635; YoY EPS change: -65.32%; QoQ: -28.68%
- EBITDA: $3.90M; EBITDA Margin: 4.64%
- Cash Flow: Operating cash flow $9.42M; Free cash flow $8.14M; FCF margin ≈ 9.7% of revenue
- Balance sheet: Total assets $239.31M; Total liabilities $105.84M; Total equity $133.47M; Cash and equivalents $3.30M; Net debt ≈ $28.40M
- Liquidity: Current ratio 1.53; Quick ratio 0.77; Cash ratio 0.046
- Working capital dynamics: Net working capital components reflect a positive operating cash cycle (Days Sales Outstanding 50.85, Days Inventory Outstanding 83.02, Days Payables Outstanding 44.04; CCC ≈ 133.87 days)
- Valuation (as of QQ3 results): P/E ≈ 79.9x; P/Book ≈ 2.29x; EV/EBITDA ≈ 85.6x; Dividend yield ≈ 1.33% (if implied by data)
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
83.98M
-10.72%
-8.08%
Gross Profit
24.29M
-8.59%
-8.00%
Operating Income
2.41M
-18.87%
-18.40%
Net Income
956.00K
-65.24%
-28.71%
EPS
0.07
-65.32%
-28.68%
Key Financial Ratios
currentRatio
1.53
grossProfitMargin
28.9%
operatingProfitMargin
2.87%
netProfitMargin
1.14%
returnOnAssets
0.4%
returnOnEquity
0.72%
debtEquityRatio
0.24
operatingCashFlowPerShare
$0.74
freeCashFlowPerShare
$0.64
dividendPayoutRatio
426%
priceToBookRatio
2.29
priceEarningsRatio
79.89
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Earnings call transcript was not provided in the dataset. Consequently, there are no management quotes or thematic highlights available to corroborate or augment the numerical results. The forward-looking assessment below relies on disclosed QQ3 2024 financials and peer context rather than management-specific commentary.
N/A
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N/A
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Forward Guidance
There is no formal forward guidance in the supplied data for QQ3 2024. Given the macro cyclicality of the Industrial Distribution sector and EVI’s revenue mix, near-term dynamics will likely hinge on (1) demand stabilization in core industrial and government channels, (2) pricing/actions to offset rising input costs and product mix shifts, and (3) continued working capital discipline to sustain free cash flow. Without explicit guidance, the qualitative read is cautious: modest revenue headwinds may persist in the near term, but the company’s cash flow generation (free cash flow of $8.14M in the quarter) provides a buffer for sustaining investments, optionality for deleveraging, or small strategic moves. Key factors investors should monitor include: order activity/arbitrage in the commercial laundry and boiler segments, changes in working capital that could impact cash flows, and any potential pricing or product-mix shifts that could improve gross margins beyond the current 28.9% level.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
EVI Focus
28.93%
2.87%
0.72%
79.89%
DXPE
29.90%
8.55%
4.45%
8.92%
GIC
32.80%
7.95%
8.41%
15.41%
CNM
27.00%
11.90%
6.33%
11.39%
WSO-B
26.20%
11.60%
6.34%
29.22%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
EVI Industries presents a cash-generative profile within a cyclical industrial distribution sector. The QQ3 2024 results show a modest top-line decline and margin compression versus the prior year, but the company generated meaningful free cash flow and maintained a stable balance sheet. Valuation remains elevated relative to current profitability, suggesting that upside depends on a re-acceleration of revenue, improved operating leverage, or stronger service/parts revenue contributing to margin expansion. The absence of QQ3 management guidance in the dataset limits near-term predictability; however, the company’s cash flow resilience and balance sheet stability imply optionality for deleveraging or shareholder-friendly actions if macro conditions improve. Risk-tolerant investors may view EVI as a selective position within Industrials, contingent on signs of revenue stabilization and margin improvement. A cautious stance, with a focus on follow-on quarterly results and any disclosed strategic updates (pricing, acquisitions, or operating efficiency programs), is prudent until profitability and leverage trends demonstrate sustained improvement.
Key Investment Factors
Growth Potential
Potential drivers include expansion of equipment rental/lease offerings, cross-sell of parts and maintenance services, and incremental geographic penetration (US, Canada, Caribbean, Latin America, Asia). Free cash flow stability creates flexibility for capex, acquisitions, or shareholder returns if market conditions improve. Long-term gross margin resilience will depend on mix shifts toward higher-margin service and parts revenue and pricing power to offset commodity and logistics costs.
Profitability Risk
Key risks include cyclicality of end markets (industrial equipment demand), competitive pricing pressure in a fragmented distribution landscape, reliance on an asset-light to asset-heavy mix that can impact utilization rates, and the relatively high goodwill/intangible footprint (~$96.7M) which raises impairment risk if revenue trajectories deteriorate. Balance sheet leverage is modest but remains a concern if cash generation weakens. Elevated valuation metrics (P/E around 80x, EV/EBITDA around 86x) imply sensitivity to earnings leverage and multiple compression if quarterly results deteriorate.
Financial Position
Solid cash generation with operating cash flow of $9.42M and free cash flow of $8.14M in QQ3. Cash balance of $3.30M and net debt of ~$28.4M indicate manageable leverage but limited liquidity headroom in a stressed macro scenario. Current ratio of 1.53 and gross margin near 29% suggest moderate near-term profitability but limited cushion for sharp downturns. The balance sheet also features a sizable goodwill/intangible asset base (~$96.7M) that warrants monitoring.
SWOT Analysis
Strengths
Robust free cash flow generation in QQ3 2024: $8.14 million free cash flow supported by operating cash flow of $9.42 million.
Solid liquidity position with a low net debt load (~$28.4 million) and ongoing cash conversion.
Diverse product and service mix across commercial laundry, industrial equipment, and related parts/maintenance, enabling recurring revenue in maintenance and replacement parts.
Weaknesses
Revenue and profitability declined meaningfully in QQ3 2024 (revenue down 10.7% YoY; net income down 65.2% YoY).
Low ROE (≈0.72%) and modest asset turnover indicate limited earnings leverage from equity base in the near term.
Material goodwill/intangible assets (~$96.7 million) create impairment risk if demand softens.
Opportunities
Upsell of service, maintenance, and replacement parts to existing equipment, potentially lifting gross margin and recurring revenue.
Geographic expansion opportunities in Canada, the Caribbean, Latin America, and Asia could broaden addressable market.
Operational improvements and disciplined working capital management could further enhance free cash flow generation.
Threats
Cyclical industrial demand and end-market softness could pressure revenue and margins.
Competitive pricing in a fragmented distribution landscape and potential supply chain disruptions affecting cost structure.
Macro risk and interest rate volatility could influence customers’ capex decisions and leasing demand.