Quarterly Report for Quarter Ending December 31, 2025 (Form 10-Q)

Management's Discussion and Analysis of Financial Conditions and Results of Operations.

Forward Looking Statements

Certain statements in this Quarterly Report on Form 10-Q are "forward looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. When used in this Quarterly Report on Form 10-Q, words such as "may," "should," "could," "seek," "believe," "expect," "anticipate," "estimate," "project," "intend," "strategy" and similar expressions are intended to identify forward looking statements. Forward looking statements may relate to, among other things, events, conditions and trends that may affect the future plans, operations, business, strategies, operating results, financial position and prospects of the Company. Forward looking statements are subject to a number of known and unknown risks and uncertainties that may cause actual results, trends, performance or achievements of the Company, or industry trends and results, to differ materially from the future results, trends, performance or achievements expressed or implied by such forward looking statements. These risks and uncertainties include, among others, those associated with: general economic and business conditions in the United States and other countries where the Company operates or where the Company's customers and suppliers are located; economic uncertainty, including as it relates to governmental measures such as the imposition of tariffs and their effect on global trading markets, the availability and pricing of products, credit markets, industry conditions, economic conditions generally or otherwise on the Company and its business, costs and results; industry conditions and trends; credit market volatility; risks related to supply chain delays and disruptions and their impact on the Company's business and results, including the Company's ability to deliver products and services to its customers on a timely basis; risks relating to inflation, and other price increases (including due to the imposition of tariffs), and their impact on the Company's business, costs and results (including that, if desired, the Company may not be able to successfully increase the price of its products and services to offset such costs, in whole or in part, and that price increases may result in reduced demand for the Company's products and services); risks related to labor shortages and increases in the costs of labor, and the impact thereof on the Company, including its ability to deliver products, provide services or otherwise meet customers' expectations; risks related to interest rate increases, including the impact thereof on the cost of the Company's indebtedness and the Company's ability to raise capital if deemed necessary or advisable; risks associated with international relations and international hostilities, and the impact thereof on economic conditions; the Company's ability to implement its business and growth strategies and plans, including changes thereto; risks and uncertainties associated with the Company's "buy-and-build" growth strategy, including, without limitation, that the Company may not be successful in identifying or consummating acquisitions or other strategic transactions, integration risks, risks related to indebtedness incurred by the Company in connection with the financing of acquisitions and other strategic transactions, dilution experienced by the Company's existing stockholders as a result of the issuance of shares of the Company's common stock in connection with acquisitions or other strategic transactions (or for other purposes), risks related to the business, operations and prospects of acquired businesses, risks that suppliers of the acquired business may not consent to the transaction or otherwise continue its relationship with the acquired business following the transaction and the impact that the loss of any such supplier may have on the results of the Company and the acquired business, risks that the Company's goals or expectations with respect to acquisitions and other strategic transactions may not be met, the risk that the contemplated acquisition pursuant to the asset purchase agreement entered into on January 30, 2026 may not be consummated when expected, or at all, and risks related to the accounting for acquisitions; risks relating to the impact of pricing concessions and other measures which the Company may take from time to time in connection with its expansion efforts and pursuit of market share growth, including that they may not be successful and may adversely impact the Company's gross margin and other financial results; technology changes; competition, including the Company's ability to compete effectively and the impact that competition may have on the Company and its results, including the prices which the Company may charge for its products and services and on the Company's profit margins, and competition for qualified employees; to the extent applicable, risks relating to the Company's ability to enter into and compete effectively in new industries, as well as risks and trends related to those industries; risks relating to the Company's relationships with its principal suppliers and customers, including the impact of the loss of any such relationship; risks that equipment sales may not result in the ancillary benefits anticipated, including that they may not lead to increases in customers (or a stronger relationship with customers) or higher gross margin sales of parts, accessories, supplies, and technical services related to the equipment, and the risk that the benefit of lower gross margin equipment sales under longer-term contracts will not outweigh the possible short-term impact to gross margin; the risk that the Company's service operations may not expand; risks related to the Company's indebtedness; the availability, terms and deployment of debt and equity capital if needed for expansion or otherwise; risks of cybersecurity threats or incidents, including the potential misappropriation or use of assets or confidential information, corruption of data or operational disruptions; changes in, or the failure to comply with, government regulation, including environmental regulations; litigation risks, including the costs of defending litigation and the impact of any adverse ruling; the availability and cost of inventory purchased by the Company, and the risk that inventory management initiatives may not be successful; the relative value of the United States dollar to currencies in the countries in which the Company's customers, suppliers and competitors are located, including, in particular, that a weaker U.S. dollar would result in increased costs, which in turn would negatively affect the Company's operating results; risks relating to the recognition of revenue, including the amount and timing thereof (including potential delays resulting from, among other circumstances, delays in installation (including due to delays in construction or the preparation of the customer's facilities) or in receiving required supplies) and that orders in the Company's backlog may not be fulfilled as or when expected; risks related to the adoption of new accounting standards and their impact on the Company's financial statements and results; risks that the Company's decentralized operating model, and that product, end-user and geographic diversity, may not result in the benefits anticipated and may change over time; risks related to organic growth initiatives and market share and other growth strategies, including that they may not result in the benefits anticipated; risks that investments, initiatives and expenses, including, without limitation, investments in acquired businesses and modernization initiatives, expenses associated with the Company's implementation of its enterprise resource planning system and field service platform, and other investments, initiatives and expenses, may not result in the benefits anticipated; the Company's exposure with respect to its cash balances in depositary accounts in excess of the $250,000 in maximum Federal Deposit Insurance Corporation ("FDIC") insurance coverage; dividends may not be paid in the future; and other economic, competitive, governmental, technological and other risks and factors discussed in the Company's filings with the Securities and Exchange Commission (the "SEC"), including, without limitation, in the "Risk Factors" section of the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2025. Many of these risks and factors are beyond the Company's control. Further, past performance and perceived trends may not be indicative of future results. The Company cautions that the foregoing factors are not exclusive. The reader should not place undue reliance on any forward-looking statement, which speaks only as of the date made. The Company does not undertake to, and specifically disclaims any obligation to, update, revise or supplement any forward-looking statement, whether as a result of changes in circumstances, new information, subsequent events or otherwise, except as may be required by law.

Company Overview

EVI Industries, Inc., through its wholly-owned subsidiaries (collectively, the "Company"), 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 operating expenses consist primarily of (a) selling, general and administrative expenses, which are comprised primarily of 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, other expenses associated with being a public company, and expenses in furtherance of the Company's growth strategy and initiatives.

Growth Strategy

In addition to its pursuit of organic growth initiatives, the Company's growth strategy includes a "buy-and-build" growth strategy. The "buy" component of the strategy includes the consideration and pursuit of acquisitions and other strategic transactions which management believes would complement the Company's existing business or otherwise offer growth opportunities for, or benefit, the Company. The "build" component of the strategy involves implementing 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 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. As described in greater detail in Note 4 to the unaudited condensed consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q, on August 1, 2025, the Company acquired New York-based ASN Laundry Group. The financial position, including assets and liabilities, of ASN Laundry Group, is included in the Company's consolidated balance sheet as of December 31, 2025 and the results of operations of ASN Laundry Group, subsequent to the August 1, 2025 closing date are included in the Company's consolidated financial statements for the three and six months ended December 31, 2025.

The Company pursues market share growth using a variety of strategies aimed at increasing the installed base of the wide range of commercial laundry equipment the Company represents. Certain market share growth tactics may, from time to time, result in lower gross margins. However, the Company believes that a greater installed base of equipment strengthens the Company's existing customer relationships and may lead to increases in the total number of customers, consequently creating a larger and stronger customer base to which the Company may sell products and services. These may include the sale or provision of certain higher margin products and services and any additional products and services which the Company may offer or sell from time to time, including as a result of any business acquisitions, the sale or lease of complementary products, and any expansion of its service operations. From time to time, the Company also enters into longer-term contracts, including to fulfill large complex laundry projects for divisions of the federal government, where the nature of, and competition for, such contracts may result in a lower gross margin as compared to other equipment sales. While the Company generally realizes a lower gross margin from such longer-term contracts, the Company believes that the long-term benefit from the increase in its installed equipment will outweigh the possible short-term impact to gross margin.

Further, as a value-added distributor and a provider of technical services in the commercial laundry industry, the Company partners with its customers to plan, design, install, and maintain their commercial laundry operations. The nature of the Company's business not only requires an experienced and well-trained sales organization to procure customer orders, but also requires proper, timely, and cost-effective installation ranging from single units of equipment to complex multimillion dollar laundry systems. Such installations also require coordination and collaboration with the Company's customers and any third parties they may retain. Consequently, the recognition of revenue may from time to time be impacted by delays in construction and/or the preparation of customer facilities for the installation of purchased commercial laundry equipment and systems. This may result in decreased revenue and profit in a current period but a source of future revenue and profit through the ultimate fulfillment of the orders.

Recent Accounting Pronouncements

Refer to Note 3 to the unaudited condensed consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q for a description of Recently Issued Accounting Guidance.

Results of Operations

Six and Three-Month Period Ended December 31, 2025 Compared to the Six and Three-Month Period Ended December 31, 2024

Revenues

Revenues for the six and three-month periods ended December 31, 2025 increased $37.2 million, or 20%, and $22.6 million, or 24%, respectively, compared to the same periods of the prior fiscal year. The increases in revenue were primarily attributable to revenues generated by businesses acquired during the fiscal year ended June 30, 2025, as well as price increases established throughout the Company's product lines and service offerings aimed at maintaining or increasing margins to cover incremental product and operating costs.

Gross Profit

Gross profit for the six and three-month periods ended December 31, 2025 increased $13.0 million, or 23%, and $8.0 million, or 29%, respectively, compared to the same period of the prior fiscal year. The increases were primarily the result of the increased revenues described above. Gross margins increased from 30.3% for the six-month period ended December 31, 2024 to 31.1% for the six-month period ended December 31, 2025 and from 29.7% for the three-month period ended December 31, 2024 to 30.8% for the three-month period ended December 31, 2025, in each case primarily due to changes in product and customer mix.

Selling, General and Administrative Expenses

Operating expenses increased $12.6 million, or 26%, and $6.1 million, or 24%, for the six and three-month periods ended December 31, 2025 compared to the same period of the prior fiscal year. The increases are primarily attributable 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 selling costs, including commissions, from increases in revenues during the periods, (c) increases in salary, professional, stock compensation, insurance, depreciation, amortization, and technology costs, and (d) with respect to the six months ended December 31, 2025, approximately $550,000 in expenses related to the Company's participation at the industry's largest North American exposition during such period.

Interest Expense, Net

Interest expense for the six and three-month periods ended December 31, 2025 was $2.0 million and $1.1 million, respectively, compared to $1.2 million and $0.7 million for the six and three-month periods ended December 31, 2024, respectively. The increases in interest expense were attributable primarily to increases in the average outstanding borrowings, partially offset by decreases in the effective interest rate incurred on outstanding borrowings.

Income Taxes

The Company's effective tax rate was 27.4% and 25.1% for the six and three-month periods ended December 31, 2025, respectively, compared to 30.0% and 34.4% for the six and three-month periods ended December 31, 2024, respectively. The decreases in the effective tax rate are attributable to decreases in the Company's taxable presence in the jurisdictions where the Company operates.

Net Income

Net income for the six and three-month periods ended December 31, 2025 was $4.2 million and $2.4 million, respectively, compared to net income of $4.4 million and $1.1 million for the six and three-month periods ended December 31, 2024, respectively. The increase in net income for the three-month period was attributable primarily to the increase in revenues and gross margin, partially offset by the increase in operating expenses, in each case as described in further detail above.

Consolidated Financial Condition

The Company's total assets increased from $307.0 million at June 30, 2025 to $315.6 million at December 31, 2025. The increase in total assets was primarily attributable to an increase in current assets, including inventory and other current assets, partially offset by a decrease in accounts receivable and cash. The Company's total liabilities increased from $163.6 million at June 30, 2025 to $171.7 million at December 31, 2025. This increase was primarily the result of an increase in accounts payable, accrued expenses, contract liabilities, and long-term debt, partially offset by a decrease in customer deposits.

Liquidity and Capital Resources

For the six-month period ended December 31, 2025, cash decreased by approximately $4.6 million compared to a decrease of approximately $0.7 million during the six-month period ended December 31, 2024. The Company's primary sources of cash are product and service sales and borrowings under the Company's 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.

Working Capital

Working capital increased from $50.6 million at June 30, 2025 to $56.1 million at December 31, 2025, primarily reflecting increases in inventory and other current assets, and decreases in customer deposits. The increase in working capital was partially offset by increases in accounts payable and contract liabilities, and decreases in accounts receivable and cash.

Cash Flows

The following table summarizes the Company's cash flow activity for the six months ended December 31, 2025 and 2024 (in thousands):

		Six Months Ended
		December 31,
		2025				2024
Net cash provided (used) by:
Operating activities		$	5,061			$	2,176
Investing activities		$	(8,295	)		$	(12,609	)
Financing activities		$	(1,368	)		$	9,780

The individual items contributing to cash flow changes for the periods presented are detailed in the unaudited condensed consolidated statements of cash flows included in Item 1 of this Quarterly Report on Form 10-Q.

Operating Activities

For the six months ended December 31, 2025, operating activities provided cash of $5.1 million compared to $2.2 million of cash provided by operating activities during the six months ended December 31, 2024. This $2.9 million increase in cash provided by operating activities was primarily attributable to changes in working capital and an increase in non-cash expenses such as depreciation and amortization, and stock compensation. The changes in working capital include increases in cash provided by operating activities from changes in accounts receivable, accounts payable, and contract liabilities, partially offset by decreases from changes in inventory and customer deposits.

Investing Activities

For the six months ended December 31, 2025, investing activities used cash of $8.3 million compared to $12.6 million of cash used by investing activities during the six months ended December 31, 2024. This $4.3 million decrease in cash used by investing activities was primarily attributable to a decrease in cash paid in connection with business acquisitions.

Financing Activities

For the six months ended December 31, 2025, financing activities used cash of $1.4 million compared to $9.8 million of cash provided by financing activities during the six months ended December 31, 2024. This $11.2 million increase in cash used by financing activities was primarily attributable to a decrease in net borrowings to fund acquisitions and investments.

Revolving Credit Agreement

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.

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 December 31, 2025, the Company had approximately $58.0 million of outstanding borrowings under the Credit Agreement, which accrued interest at a weighted average rate of 5.14%.

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. At December 31, 2025, the Company was in compliance with its covenants under the Credit Agreement and $43.0 million was available to borrow under the revolving credit facility.

The obligations of the Company under the Credit Agreement are secured 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.

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 and 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 which may be pursued by the Company as part of its "buy-and-build" growth strategy.

Inflation

Inflation did not have a significant effect on the Company's results during any of the reported periods. However, the Company faces risks relating to inflation and other price increases (including due to the imposition of tariffs), 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 and any such increase may have an adverse impact on the market for the Company's products and services.

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 those 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 $126,000 and $118,000 during the six months ended December 31, 2025 and 2024, respectively, and $63,000 and $61,000 during the three months ended December 31, 2025 and 2024, 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 $240,000 during each of the six months ended December 31, 2025 and 2024, and approximately $120,000 during each of the three months ended December 31, 2025 and 2024, respectively.

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 first year of the renewal term was $12,500 per month. Base rent for the second year of the renewal term was $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 $77,000 and $76,000 during the six months ended December 31, 2025 and 2024, respectively, and approximately $39,000 and $38,000 during the three months ended December 31, 2025 and 2024.

Critical Accounting Estimates

In connection with the preparation of its financial statements, the Company makes estimates and assumptions, including those that affect the reported amounts of assets and liabilities, contingent assets and liabilities, and 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 policies that the Company has identified as critical to its business operations and to an understanding of the Company's financial statements remain unchanged from those described in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section of the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2025.