EnviroStar(EVI) - 2025 Q2 - Quarterly Report

Financial Performance - Revenues for the six-month period ended December 31, 2024 increased by $6.9 million, or 4%, compared to the same period in the prior fiscal year[95] - Gross profit for the six-month period ended December 31, 2024 increased by$ 4.3 million, or 8%, with gross margins rising from 29.0% to 30.3%[96] - Operating expenses increased by $2.5 million, or 5%, for the six-month period ended December 31, 2024, primarily due to expenses from acquired businesses and increased selling costs[97] - Interest expense decreased to$ 1.2 million for the six-month period ended December 31, 2024, down from $1.6 million in the same period of the prior year[98] - The effective tax rate decreased to 30.0% for the six-month period ended December 31, 2024, compared to 34.0% for the same period in the prior year[100] - Net income for the six-month period ended December 31, 2024 was$ 4.4 million, an increase from $2.6 million in the same period of the prior year[101] - Gross profit for the three-month period ended December 31, 2024 increased by$ 1.1 million, or 4%, compared to the same period in the prior fiscal year[96] Acquisitions and Growth Strategy - The Company acquired Laundry Pro of Florida, Inc. for $5.9 million in cash on July 1, 2024, and O'Dell Equipment & Supply, Inc. for$ 4.6 million in cash on November 1, 2024[89] - The Company implemented a "buy-and-build" growth strategy, focusing on acquisitions and optimizing operations at acquired businesses[89] - The Company aims to increase market share through various strategies, which may lead to lower gross margins in the short term but strengthen customer relationships in the long term[91] Assets and Liabilities - Total assets increased from $230.7 million at June 30, 2024 to$ 248.8 million at December 31, 2024, primarily due to increases in current assets and intangible assets from acquisitions[102] - Total liabilities rose from $94.1 million at June 30, 2024 to$ 110.8 million at December 31, 2024, mainly driven by an increase in long-term debt[102] - Working capital increased from $32.1 million at June 30, 2024 to$ 41.4 million at December 31, 2024, reflecting higher accounts receivable and inventory[104] Cash Flow and Financing - Cash provided by operating activities decreased to $2.2 million for the six months ended December 31, 2024, down from$ 10.9 million in the same period of 2023[107] - Net cash used in investing activities increased to $12.6 million for the six months ended December 31, 2024, compared to$ 3.4 million in 2023, with cash paid for acquisitions rising by $9.5 million[108] - Financing activities provided cash of$ 9.8 million for the six months ended December 31, 2024, compared to cash used of $9.2 million in 2023, primarily due to increased debt borrowings[109] - As of December 31, 2024, the Company had approximately$ 28.0 million of outstanding borrowings under its Credit Agreement with a weighted average interest rate of 5.88%[120] - The Credit Agreement allows for borrowings up to $100 million, with an accordion feature to increase by up to$ 40 million, and the maturity date is May 6, 2027[110] Economic Factors - Inflation did not significantly affect the Company's results, but there are risks related to the current inflationary trend impacting product pricing[114] - The Company believes existing cash and anticipated cash from operations will be sufficient to fund operations and capital expenditures for at least the next twelve months[113]