EVI Industries Q2 Fiscal 2026 Earnings Call - Record revenue and margin gains, but heavy modernization lifts operating costs

Henry Nahmad, Chairman and CEO, EVI Industries: Hello, and welcome to EVI Industries’ earnings call for the second quarter of fiscal 2026. I am Henry Nahmad, Chairman and CEO of EVI Industries. Before we begin, I’d like to remind you that this presentation contains forward-looking statements within the meaning of the federal securities laws. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those discussed. For additional information, please refer to our earnings press release issued today and to our filings with the SEC, including the Risk Factors section of our most recent annual report on Form 10-K. This discussion will also include a reference to Adjusted EBITDA, which is a non-GAAP financial measure. A full definition and reconciliation to net income can be found in our earnings release. First, I want to thank all our dedicated associates across North America for another great quarter.

Your dedication, hard work, creativity, and commitment to our customers continue to drive EVI’s progress and performance. During the second quarter, we achieved another set of record results, records in revenue, gross profit, operating profit, and continued strength across our business. These results reflect not only strong execution, but also the enduring demand for the products and services we provide and the value our teams deliver every day. This was another strong quarter for EVI. We delivered record second quarter revenue, gross profit, and operating profit, and we surpassed $425 million in trailing twelve months revenue for the period ended December 31, 2025. At the same time, we continued to invest deliberately in modernization and optimization initiatives that are shaping the long-term trajectory of our business. Before walking through the quarter, I want to step back and frame where we are as an enterprise.

Since beginning execution of our long-term growth strategy in 2016, EVI has undergone a significant transformation. We’ve grown from a single location business in Florida with 31 employees into a North American commercial laundry distribution and service enterprise, encompassing 31 businesses and more than 900 associates, including over 200 sales professionals and more than 425 service personnel. That evolution has been driven by disciplined execution over time. Since 2016, we’ve generated compounded annual growth rates of approximately 30% in revenue, 16% in net income, and 27% in adjusted EBITDA over such 10-year period, and we’ve established EVI as a leader in a highly fragmented industry where execution, service capability, and customer relationships matter.

A defining strength of our enterprise today is the depth and frequency of our customer relationships, supported by the largest sales and service organizations in the industry. Every day, we engage in thousands of customer interactions across North America. To fully leverage that reach, we’re making significant investments in people, processes, and technology. These investments are intentional and long-term in nature, and they are designed to transform our growing enterprise into a more scalable, integrated, and efficient organization, positioning us for improved operating efficiency and long-term profitability. As these initiatives advance, they are enhancing our ability to deliver best-in-class laundry solutions, expand complementary products and service offerings, respond more rapidly to technical service needs, and execute more coordinated and efficient equipment installations. Just as importantly, those daily interactions, combined with our highly entrepreneurial culture, give us direct, real-time insight into customer needs and emerging growth opportunities.

At a high level, EVI has built a differentiated enterprise with deep customer relationships, expansive sales and service reach, and a strategy to become the undisputed leader in our industry. An important component of that strategy is building the broadest and most flexible portfolio of products in the industry, sourced from leading OEMs around the world, enabling us to address the full range of customer needs across all market segments. The investments we are making today in people, technology, and operational capabilities are grounded in the strength of our underlying business. We believe these actions are expanding our competitive advantages, strengthening our foundation, and positioning EVI to deliver sustained growth, improved efficiency, customer satisfaction, and long-term value for our shareholders. Turning to the quarter.

During the second quarter, revenue increased 24% year-over-year to $115 million, driven primarily by contributions from acquired businesses, with legacy operations also contributing. Gross margin expanded to nearly 31%, reflecting favorable product mix, pricing discipline, and the continued benefits of strategic acquisitions, including Continental. Net income increased 110% to 2.1% of revenues, and Adjusted EBITDA increased 49% to $7.7 million, or 6.6% of revenue, demonstrating strong underlying operating performance across the business. For the six-month period, revenue increased 20% to more than $223 million, with gross margin expanding to 31%, underscoring the durability of demand for our products and services.... On a consolidated basis, our operations generated positive operating leverage compared to the prior year period.

However, operating margin expansion was impacted by higher operating expenses associated with continuing investments in technology, modernization, service capability expansion, integration activities, and organizational infrastructure. These investments reflect our long-term confidence in the business and our commitment to build a more scalable enterprise. Modernization remains a central focus for EVI. During the quarter, we continued deploying data-driven operational systems designed to improve service execution, decision support, and scalability. Investments in field service technology strengthened scheduling and responsiveness, contributing to approximately a 13% improvement in average response time over the past 12 months. The platform supported just under 9,000 service appointments during the quarter, consistent with normal seasonal patterns. We also expanded technician utilization analytics and operational dashboards, improving visibility into productivity, utilization, and monetization. These tools are enabling more effective staffing, scheduling, pricing, and margin management, and they have already contributed to improved service margins as adoption scales.

In addition, we continued investing in analytics-driven inventory and procurement tools across more than 15,000 SKUs sold over the last 12 months, ended December 31, 2025. As adoption continues to scale across the organization, these systems are expected to strengthen inventory controls, improve demand planning, and enhance coordination from order capture through service delivery. Management believe these initiatives will be critical to improving operating efficiency, working capital management, and long-term margin potential as the enterprise continues to grow. EVI remains a highly regarded acquirer with a strong entrepreneurial culture, and we continue to evaluate a robust pipeline of acquisition opportunities. In parallel, we are pursuing select strategic initiatives to expand Continental’s product portfolio and deepen relationships with OEM partners seeking consistent access to customers across North America.

We are also taking a broader view of growth, evaluating opportunities in and around the laundry ecosystem that can be supported by our existing operations, relationships, and distribution reach. We believe this balanced approach allows us to pursue growth while maintaining the discipline and flexibility that have defined our strategy. EVI continues to operate from a position of balance sheet strength and financial flexibility. We generated positive operating cash flow during both the 3- and 6-month periods under December 31, 2025. Operating cash flow during the period was impacted by a planned inventory buildup of approximately $12 million to support confirmed customer sales orders in our backlog. Cash flow was also affected by the strategic use of capital, including the payment of an approximately $5 million cash dividend and the final purchase price payment related to the Continental acquisition.

Despite these uses of cash, we maintain strong liquidity, solid working capital, and access to low-cost capital, providing flexibility to continue investing, pursuing disciplined growth initiatives, and executing on our buy and build growth strategy. In closing, this was another strong quarter for EVI. We are growing. We are investing with discipline. We are building the foundation for long-term scalability, efficiency, and profitability. We remain confident in our strategy, our people, and the opportunities ahead, and we believe we are well-positioned to continue delivering durable value for our customers, employees, and shareholders. Thank you for your time and continued support of EVI Industries. Until next time, be well.