EVI INDUSTRIES, INC.

Previous wording

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; 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, including the current inflationary trend, and the impact of inflation on the Company’s costs and its ability to increase the price of its products and services to offset such costs, and on the market 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, including supply chain constraints and inflationary trends; 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 conne…

Excerpt shortened here; the source contains the full paragraph.

Current wording

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 and results; the potential of a recession; 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, including the current inflationary trend, and other price increases (including due to the imposition of tariffs), and their impact on the Company’s 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, including supply chain constraints and inflationary trends; the Company’s ability to implement its business and growth strategies and plans, including changes ther…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

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; 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 the impact it may have 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 and optimization initiatives, expenses associated with the Company’s implementation of its enterprise resource planning system, and other investments, initiatives and expenses, may not result in the benefits anticipated; risks related to the soundness of financial institutions and 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, 2024. 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 …

Excerpt shortened here; the source contains the full paragraph.

Current wording

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 to the extent anticipated, or at all; 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; 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 the impact it may have 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 and optimization initiatives, expenses associated with the Company’s implementation of its enterprise resource planning system, and other investments, initiatives and expenses, may not result in the benefits anticipated; risks related to the soundness of financial institutions and 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 Com…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

During 2015, the Company implemented 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 Company generally seeks to structure acquisitions to include both cash and stock consideration. Acquisitions are effected through a wholly-owned subsidiary which acquires the business or assets of the acquired company, whether by an asset purchase or merger, and operates the acquired business following the transaction. In connection with each transaction, the Company, indirectly through its applicable wholly-owned 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 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 July 1, 2024, the Company acquired Florida-based Laundry Pro of Florida, Inc. (“LPF”) for total consideration of $5.9 million in cash and, on November 1, 2024, the Company acquired Indiana-based O’Dell Equipment & Supply, Inc. (“ODL”) for total consideration of $4.6 million in cash. The financial position, including assets and liabilities, of LPF and ODL are included in the Company’s consolidated balance sheet as of December 31, 2024 and the results of operations of LPF and ODL since the respective closing dates of the acquisitions of such companies are included in the Company’s consolidated financial statements for the six and three months ended December 31, 2024. On February 1, 2025, the Company acquired Illinois-based Haiges Machinery, Inc. for total consideration of $2.0 million in cash. The financial position, including assets and liabilities, and results of operations of Haiges Machinery, Inc. following the February 1, 2025 closing date of the acquisition will be included in the Company’s consolidated financial statements commencing in the quarter ending March 31, 2025.

Current wording

During 2015, the Company implemented 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 Company generally seeks to structure acquisitions to include both cash and stock consideration. Acquisitions are effected through a wholly-owned subsidiary which acquires the business or assets of the acquired company, whether by an asset purchase or merger, and operates the acquired business following the transaction. In connection with each transaction, the Company, indirectly through its applicable wholly-owned 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 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, (i) on July 1, 2024, the Company acquired Florida-based Laundry Pro of Florida, Inc. (“LPF”) for total consideration of $5.9 million in cash, (ii) on November 1, 2024, the Company acquired Indiana-based O’Dell Equipment & Supply, Inc. (“ODL”) for total consideration of $4.6 million in cash, and (iii) on February 1, 2025, the Company acquired Illinois-based Haiges Machinery, Inc. (“HMI”) for total consideration of $2.0 million in cash. The financial position, including assets and liabilities, of LPF, ODL, and HMI are included in the Company’s consolidated balance sheet as of March 31, 2025 and the results of operations of LPF, ODL, and HMI since the respective closing dates of the acquisitions of such companies are included in the Company’s consolidated financial statements for the nine and three months ended March 31, 2025. In addition, on April 1, 2025, the Company acquired Wisconsin-based Girbau North America, Inc. (“GNA”) for total consideration of approximately $40.0 million in cash. The financial position, including assets and liabilities, and results of operations of Girbau North America, Inc. following the April 1, 2025 closing date of the acquisition will be included in the Company’s consolidated financial statements commencing in the quarter ending June 30, 2025.

Previous wording

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 as a result of any business acquisitions, the sale or lease of complementary products, and 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. Despite the potential for 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.

Current wording

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 as a result of any business acquisitions, the sale or lease of complementary products, and any expansion of 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. Despite the potential for 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.

Previous wording

Revenues for the six and three-month periods ended December 31, 2024 increased $6.9 million, or 4%, and $1.3 million, or 1%, respectively, compared to the same periods of the prior fiscal year. The increases in revenue were primarily attributable to 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, as well as the revenues generated by the businesses acquired by the Company during fiscal 2023 and the six-month period ended December 31, 2024.

Current wording

Revenues for the nine and three-month periods ended March 31, 2025 increased $16.5 million, or 6%, and $9.6 million, or 11%, respectively, compared to the same periods of the prior fiscal year. The increase in revenues for the nine and three-month periods is primarily attributable to 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, large industrial jobs during the three-month period ended March 31, 2025, and revenues generated by companies acquired during the nine and three-month periods ended March 31, 2025.

Previous wording

Gross profit for the six and three-month periods ended December 31, 2024 increased $4.3 million, or 8%, and $1.1 million, or 4%, respectively, compared to the same periods of the prior fiscal year. The increases were primarily the result of the increased revenues described above. Gross margins slightly increased from 29.0% for the six-month period ended December 31, 2023 to 30.3% for the six-month period ended December 31, 2024 and from 28.9% for the three-month period ended December 31, 2023 to 29.7% for the three-month period ended December 31, 2024, primarily due to more favorable product and customer mix in the current periods.

Current wording

Gross profit for the nine and three-month periods ended March 31, 2025 increased $6.5 million, or 8%, and $2.3 million, or 9%, respectively, compared to the same periods of the prior fiscal year. The increase in gross profit for the nine and three-month periods is primarily attributable to the increase in revenues described above. Margins slightly increased from 29.6% for the nine-month period ended March 31, 2024 to 30.2% for the nine-month period ended March 31, 2025, and slightly decreased from 30.7% for the three-month period ended March 31, 2024 to 30.0% for the three-month period ended March 31, 2025, in each case primarily due to changes in product and customer mix. In addition, margins for the three-month period ended March 31, 2025 were impacted by large industrial projects completed during the quarter, which generally have a lower margin as compared to other projects.

Previous wording

Operating expenses increased $2.5 million, or 5%, and $1.7 million, or 7%, for the six and three-month periods ended December 31, 2024, respectively, compared to the same periods of the prior fiscal year. The increases were 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 commissionable revenues during the current periods, and (c) increases in other expenses such as technology costs, insurance costs, and professional fees.

Current wording

Operating expenses increased $4.9 million, or 7%, and $2.4 million, or 10%, for the nine and three-month periods ended March 31, 2025, respectively, compared to the same periods of the prior fiscal year. The increases were 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 salary, rent, technology costs, professional fees, and insurance costs to support the Company’s growth, and (c) fees and expenses, consisting primarily of legal and other professional fees, related to the acquisitions during the nine and three-month periods ended March 31, 2025, and the acquisition of GNA which was completed on April 1, 2025.

Previous wording

Interest expense for the six and three-month periods ended December 31, 2024 was $1.2 million and $670,000, respectively, compared to $1.6 million and $823,000 for the six and three-month periods ended December 31, 2023, respectively. The decreases in interest expense were attributable primarily to decreases in the average outstanding balance and the effective interest rate incurred on outstanding borrowings.

Current wording

Interest expense for the nine and three-month periods ended March 31, 2025 was $1.7 million and $0.6 million, respectively, compared to $2.3 million and $0.7 million for the nine and three-month periods ended March 31, 2024, respectively. The decreases in interest expense were attributable primarily to decreases in the average outstanding balance and the effective interest rate incurred on outstanding borrowings.

Previous wording

The Company’s effective tax rate was 30.0% and 34.4% for the six and three-month periods ended December 31, 2024, respectively, compared to 34.0% and 37.0% for the six and three-month periods ended December 31, 2023, respectively. The decreases in the effective tax rate are attributable to a decrease in the net impact of permanent book-tax differences resulting primarily from nondeductible compensation.

Current wording

The Company’s effective tax rate was 32.0% and 39.1% for the nine and three-month periods ended March 31, 2025, respectively, compared to 37.3% and 44.8% for the nine and three-month periods ended March 31, 2024, respectively. The decreases in the effective tax rate are attributable to a decrease in the net impact of permanent book-tax differences resulting primarily from nondeductible compensation.

Previous wording

Net income for the six and three-month periods ended December 31, 2024 was $4.4 million and $1.1 million, respectively, compared to net income of $2.6 million and $1.3 million for the six and three-month periods ended December 31, 2023, respectively. The increase in net income for the six months ended December 31, 2024 was attributable to the increases in revenue and gross profit, partially offset by increased operating expenses, while the decrease in net income for the three months ended December 31, 2024 was attributable to increases in operating expenses, partially offset by higher gross profit, all as described in further detail above.

Current wording

Net income for the nine and three-months ended March 31, 2025 was $5.4 million and $1.0 million, respectively, compared to net income of $3.6 million and $1.0 million for the nine and three-month periods ended March 31, 2024, respectively. The increases in net income were attributable primarily to the increases in revenue and gross profit, offset in part by the increases in operating expenses as described above.

Previous wording

The Company’s total assets increased from $230.7 million at June 30, 2024 to $248.8 million at December 31, 2024. The increase in total assets was primarily attributable to an increase in current assets, including inventory, other current assets, vendor deposits, and accounts receivable, as described under “Liquidity and Capital Resources - Working Capital” below. The increase in total assets was also attributable to an increase in intangible assets and goodwill resulting from acquisitions during the six months ended December 31, 2024. The Company’s total liabilities increased from $94.1 million at June 30, 2024 to $110.8 million at December 31, 2024, which was primarily attributable to an increase in long-term debt.

Current wording

The Company’s total assets increased from $230.7 million at June 30, 2024 to $251.8 million at March 31, 2025. The increase in total assets was primarily attributable to an increase in current assets, including inventory, accounts receivable, and vendor deposits, as described under “Liquidity and Capital Resources - Working Capital” below, and increases in intangible assets and goodwill attributable to companies acquired during the period. The Company’s total liabilities increased from $94.1 million at June 30, 2024 to $111.6 million at March 31, 2025, which was primarily attributable to an increase in accounts payable and long-term debt.

Previous wording

For the six-month period ended December 31, 2024, cash decreased by approximately $0.7 million compared to a decrease of approximately $1.7 million during the six-month period ended December 31, 2023. The Company’s primary sources of cash are sales 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.

Current wording

For the nine-month period ended March 31, 2025, cash increased by approximately $1.4 million compared to a decrease of approximately $2.6 million during the nine-month period ended March 31, 2024. The Company’s primary sources of cash are sales 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.

Previous wording

Working capital increased from $32.1 million at June 30, 2024 to $41.4 million at December 31, 2024, primarily reflecting increases in accounts receivable related to increased sales and the timing of customer payments, increases in inventory primarily due to the inventory of acquired businesses, increases in vendor deposits for future sales, and increases in prepaid expenses, such as insurance, partially offset by increases in customer deposits related to future sales.

Current wording

Working capital increased from $32.1 million at June 30, 2024 to $38.9 million at March 31, 2025, primarily due to the inventory of acquired businesses, increases in vendor deposits for future sales, and increases in accounts receivable related to higher sales, partially offset by increases in accounts payable.

Previous wording

The following table summarizes the Company’s cash flow activity for the six months ended December 31, 2024 and 2023 (in thousands):

Current wording

The following table summarizes the Company’s cash flow activity for the nine months ended March 31, 2025 and 2024 (in thousands):

Previous wording

For the six months ended December 31, 2024, operating activities provided cash of $2.2 million compared to $10.9 million of cash provided by operating activities during the six months ended December 31, 2023. This $8.7 million decrease in cash provided by operating activities was primarily attributable to changes in working capital partially offset by an increase in net income. The changes in working capital include decreases in cash provided by operating activities from changes in operating assets such as accounts receivable, inventories, contract assets, prepaid expenses, and vendor deposits, partially offset by increases to the cash provided by operating activities from changes in accounts payable, contract assets, and customer deposits.

Current wording

For the nine months ended March 31, 2025, operating activities provided cash of $11.3 million compared to $20.3 million of cash provided by operating activities during the nine months ended March 31, 2024. This $9.0 million decrease in cash provided by operating activities was primarily attributable to changes in working capital partially offset by an increase in net income. The changes in working capital include increases in cash used by operating activities from changes in operating assets and liabilities such as increases in accounts receivable, inventories, vendor deposits, and deferred costs, and a decrease in customer deposits, partially offset by increases to the cash provided by operating activities from an increase in accounts payable.

Previous wording

Net cash used in investing activities increased $9.2 million to $12.6 million during the six months ended December 31, 2024 compared to $3.4 million during the six months ended December 31, 2023. Cash paid for acquisitions increased $9.5 million and capital expenditures decreased $252,000 during the six months ended December 31, 2024 compared to the six months ended December 31, 2023.

Current wording

Net cash used in investing activities increased $11.1 million to $15.7 million during the nine months ended March 31, 2025, compared to $4.6 million during the nine months ended March 31, 2024. Cash paid for acquisitions increased $11.6 million and capital expenditures decreased $0.5 million during the nine months ended March 31, 2025 compared to the nine months ended March 31, 2024.

Previous wording

For the six months ended December 31, 2024, financing activities provided cash of $9.8 million compared to $9.2 million of cash used by financing activities during the six months ended December 31, 2023. This $19.0 million increase in cash provided by financing activities was primarily attributable to an increase in debt borrowings of $9.5 million and a decrease in debt payments of $9.5 million during the six months ended December 31, 2024 compared to the six months ended December 31, 2023.

Current wording

For the nine months ended March 31, 2025, financing activities provided cash of $5.8 million compared to $18.3 million of cash used by financing activities during the nine months ended March 31, 2024. This $24.1 million increase in cash provided by financing activities was primarily attributable to increased borrowings at the end of the 2025 period to provide cash for acquisitions as well as borrowings to fund working capital increases during the nine months ended March 31, 2025.

Previous wording

The Company is party, as borrower, to a syndicated credit agreement (the “Credit Agreement”) which allows for borrowings in the maximum aggregate principal amount of up to $100 million, with an accordion feature to increase the revolving credit facility by up to $40 million for a total of $140 million. A portion of the revolving credit facility is available for swingline loans of up to a sublimit of $5 million and for the issuance of standby letters of credit of up to a sublimit of $10 million. Pursuant to the terms of the Credit Agreement, in connection with the discontinuation of the Bloomberg Short-Term Bank Yield Index rate (the “BSBY rate”), during October 2024, the BSBY rate was replaced as the reference rate under the Credit Agreement by the Secured Overnight Financing Rate (“SOFR”) plus a SOFR adjustment ranging from a minimum of 0.11% to a maximum of 0.43%. As a result, borrowings (other than swingline loans) under the Credit Agreement now bear interest, at a rate, at the Company’s election at the time of borrowing, equal to (a) 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. The maturity date of the Credit Agreement is May 6, 2027.

Current wording

Pursuant to the terms of the Credit Agreement, in connection with the discontinuation of the Bloomberg Short-Term Bank Yield Index rate (the “BSBY rate”), during October 2024, the BSBY rate was replaced as the reference rate under the Credit Agreement by the Secured Overnight Financing Rate (“SOFR”) plus a SOFR adjustment ranging from a minimum of 0.11% to a maximum of 0.43%. As a result, borrowings (other than swingline loans) under the Credit Agreement now bear interest, at a rate, at the Company’s election at the time of borrowing, equal to (a) 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.

Previous wording

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, 2024, the Company was in compliance with its covenants under the Credit Agreement and $58.4 million was available to borrow under the revolving credit facility.

Current wording

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 March 31, 2025, the Company was in compliance with its covenants under the Credit Agreement and $64.0 million was available to borrow under the revolving credit facility.

Previous wording

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, including the current inflationary trend, 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.

Current wording

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, including the current inflationary trend, 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.

Previous wording

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. Monthly base rental payments were $12,000 during the initial term of the lease. The Company exercised its option to renew the lease for the first three-year renewal term, which commenced in October 2021. Base rent for the first renewal term was $19,000 per month. The Company also exercised its option to renew the lease for the second three-year renewal term, which commenced in October 2024. 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 the lease totaled approximately $118,000 and $114,000 during the six months ended December 31, 2024 and 2023, respectively, and $61,000 and $57,000 during the three months ended December 31, 2024 and 2023, respectively.

Current wording

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. Monthly base rental payments were $12,000 during the initial term of the lease. The Company exercised its option to renew the lease for the first three-year renewal term, which commenced in October 2021. Base rent for the first renewal term was $19,000 per month. The Company also exercised its option to renew for the second three-year renewal term, which commenced in October 2024. 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 the lease totaled approximately $181,000 and $195,000 during the nine months ended March 31, 2025 and 2024, respectively, and $63,000 and $81,000 during the three months ended March 31, 2025 and 2024, respectively.

Previous wording

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. Monthly base rental payments under this lease were $26,000 initially. Pursuant to the lease agreement, on January 1, 2019, the lease expanded to cover additional warehouse space and, in connection therewith, monthly base rental payments under this lease increased to $36,000. In addition to base rent, AAdvantage is responsible under the lease for costs related to real estate taxes, utilities, maintenance, repairs and insurance. 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 first renewal term is $40,000 per month. Payments under the lease totaled approximately $240,000 and $224,000 during the six months ended December 31, 2024 and 2023, respectively, and $120,000 and $116,000 during the three months ended December 31, 2024 and 2023, respectively.

Current wording

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. Monthly base rental payments under this lease were $26,000 initially. Pursuant to the lease agreement, on January 1, 2019, the lease expanded to cover additional warehouse space and, in connection therewith, monthly base rental payments under this lease increased to $36,000. In addition to base rent, AAdvantage is responsible under the lease for costs related to real estate taxes, utilities, maintenance, repairs and insurance. 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 first renewal term is $40,000 per month. Payments under the lease totaled approximately $360,000 and $344,000 during the nine months ended March 31, 2025 and 2024, respectively, and $120,000 during each of the three months ended March 31, 2025 and 2024.

Previous wording

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. Monthly base rental payments were $11,000 during the initial term of the lease. 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. 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 is $12,750 per month. Payments under this lease totaled approximately $76,000 and $74,000 during the six months ended December 31, 2024 and 2023, respectively, and $38,000 and $36,000 during the three months ended December 31, 2024 and 2023, respectively.

Current wording

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. Monthly base rental payments were $11,000 during the initial term of the lease. 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. 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 is $12,750 per month. Payments under this lease totaled approximately $114,000 and $112,000 during the nine months ended March 31, 2025 and 2024, respectively, and $38,000 and $39,000 during the three months ended March 31, 2025 and 2024, respectively.