LYTS - Earnings call transcript Q4 2018

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Operator

Good day, ladies and gentlemen, and welcome to the Q4 2018 LSI Industries’ Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode.

Following managements prepared remarks, we will host a question answer session and our instructions will be given at that time. [Operator Instructions] As a reminder, this conference call may be recorded. pleasure Executive the Officer. my Ron over now Chief Brown, is to conference turn to It Sir, may you begin.

Ron Brown

with LSI Good morning. April my call on pleased this to since I’m Ron Brown first and year. earnings CEO the Interim as I’m participate investors in joining conference

to forward XX going Our Jim days as I comment after as for LSI our few open would look at and like But joining to results, before that, you the call. remarks we’ll me LSI CFO, Jim talking year-end ask on do quarter on about to me forward. questions. Jim? call I is fourth I Galeese to and my a first up well then the by

James Galeese

performance want includes statements results today’s Harbor to remind press as Ron, our appears you you and most and I Thank you as refer in forward-looking well this outlook. our Such about to XX-K I and presentation financial comments XX quarter our involve business risks differ year. materially. recent actual opportunities to points. Safe and good could everyone. release which the statements that million flat statement, GAAP morning’s items reconcile improving basis morning be a non-GAAP purposes, operating providing then Adjusted on increased with non-GAAP which our for sales highlight the fiscal income margin Total operating were XX-Q. fourth performance. reported and with basis $XX.X I’ll prior comparability or on X%

prior interest reflecting tax and the net For $XX,XXX net a expense. quarter, adjusted in increase was year income below

with QX, per diluted share As QX a $X.XX for earnings result, flat were XXXX. adjusted

refer increase earnings adjusted XX% year, $X.XX $XXX adjusted versus XXXX. to million million. EBTIDA flow to per Full $X.XX, and XXXX Cash fiscal $X.X sales adjusted X% or For an and were were above share investment fiscal earnings $XX.X the debt line of increased level credit year availability. XXXX further and increased million prior full increased operating capital year QX comments. was serving key Working of my to in initiatives later related for year investments to our I in increase positive several in to will in and QX reduce our which

the in Moving results quarter. CEO earlier fourth $X.X QX GAAP to the million reported transition and related charge the the announced to GAAP reflect results, operating

primarily points XXXX. a the reported for of $X.X our In release loss both year per million GAAP business prior provide margin new result, of $X.XX. for customer As for impacted of volume of fourth of share initial our mix we Gross the and and margins pilot a lower below was the income for by reported several a XXXX QX reconciliation quarter net runs measures a and for products solutions. XXX and year-to-date loss and unfavorable of the non-GAAP basis fourth detailed quarter were on earnings press

these improve out XXX points expect We phase lower the pilot Decreased margins offset to of shift as normal expenses production. margin. of basis we to the operating

C&I segments, Next, or let $XX.X segments, comment with realized general where of petroleum the two of Lighting, sales sluggish. in our last performance conditions me remain decreases year starting reportable million X% on with both market for and below briefly

are to of result products broad As our and million specific QX where XXXX. on significant time customer spent in opportunities operating the bring a lower requirements. segment $X.X profiling versus were earnings million Lighting C&I $X.X We and solutions resources investments value volume, the and focusing

of QX with rate year. equipped lighting a fixtures wireless versus generated controls XXX% example, last growth For in

increasing for canopy the product schedule In adoption are strong, remains other introduced with addition, recently we parking our and our products. pleased rates outdoor new launch and area

represents fixture LED total QX, XX% of For sales.

prior earnings prior to or an of X% sales X% lighting were year. year, $XX.X at For above million, finished increase the $XXX.X million year. Operating full

increase above measurably solid increasing to quarter graphics million margins $X.X and The prior year. operating to was of shipment The while with graphics. operating projects, performance petroleum by The XX% strong was shift a which to activity improved points. delivered business multiple basis led income in growth million, XXX both increased initial by domestic increased XX% me sales Sales driven into and over XX% counts Let the earnings with c-store Mexico. prior $XX year. segment sales

Our growth oil are Mexico with the result expansion plans. company key and of assist are pursuing we a customers opportunities their to the industry, deregulation well-positioned of as petroleum

across were a last Mexico technology preparing year. be Operating for income to year. in supplier We of QX the they and are additional above initial previously. QSR investment Full as digital significant graphic restaurant aligned $XX.X SOAR, as we national XX% and Both sales Products to service working brand. schedule. their initiative the million Our image digital XX% strong million pilot branded were signage by a prior or quick above generate chain program acquired implement with business, capital $X.X year continues in recently shipped QX renovation to the or interest. selected million major accelerate their was mentioned production $X.X size

Orders an we momentum for QX, XXXX. fiscal enter a backlog graphic positive QX, increased generating outpaced We’re book-to-bill as segment. positive the seeing for sales ratio and

a conclude real the but on it's and products in QX, effective announced in changes will be much Regarding we select XXX price will realize of mid-June status steel realized. tariffs had the cost tariffs, increase how lighting section of to price aluminum the are effect. the no but in effect on We too early with This QX. covering increase some business quotations,

is manageable to take manufacturers many along in requirements. leadtimes important continue point, turn strong proactive Availability components. now and process global demand increased savings actions certain This, inventory China increase continue ensure delivery domestic select We I'll back at initiatives on also levels have and with commodity causing continued to is that, Ron. The we offset to to increases. tariffs With we the customer to surrounding to this discussion is shortages. cost meet uncertainty driving

Ron Brown

Jim. you, Thank

saw had attend LightFair, as lighting team and Lipsey I center and largest many April after the Crawford both there, we aware, the in joined sales action. arriving, late to are of in still held in probably you our McCormick at our well competitors opportunity LSI in as top-notch it’s North America As we Chicago shortly

for in Over a the met not This towards months markets must is is signage place control of the wait and innovation. taking permanent lighting to employees are putting move deserve take to changes enables us to capabilities put a is necessary group our we that we serve and an place digital but level progressing. that facilities customers extremely are serve, to IoT In to with emerging enables critical, anyone available new everyone technologies the better LSI move. professionals committed advantage not of certainly And to sales company potential has graphics, and The and LSI. search technologies grow doing a team can solutions our aligning incredible customers CEO a combination dedicated much existing jobs, in else talented to shareholders strength, country. be company with leadership them are forward, the who As ingredients need feel with have why Board's But assure company what to board and leaders the our high committed move LSI we LSI manufacturing our technologies full we provide your of reps maximize that of structure order growing anything? and of business to in in decision of than to and team to on the sit many before It for across we Having engaged on our market change right way next want successful place do organization company. to the the well decided combine are in of past and the in a and CEO with To key right for aware, the of doing market only capitalize lot their they a the opportunities is, performance well. us several opportunities making so I you going great the LSI, number we sounds to back and like customers. innovative and and to forward. the April a the a LSI. the few part that it is new LSI members very you we’re to company; we

and been six three We services we've needless probably operating of being that separate own say, With realized, could organization packaging a the providing operating have businesses different one Each the was the our on sales were providing best organizations. was along not I incubator completely and argue and being one as with include marketing actually structure customers. businesses. have many this their of own come products for as silos fully operating their efficiencies we including as the solution, businesses, which integrated focused if not scope organization value also capabilities LSI’s full specific that as realized. to been

into we we organizing value we And them. the the can are so, one understand experts serve, we to LSI, customers and our where markets are an now in full LSI can bring

help on two transformation. Croskey at the saw for created organizations and which Commercial is market LSI leading products, One lead you technologies Chief Officer. Officer channels As is services. all morning's this new LSI’s Commercial sales of our for have senior and responsible positions, announcement, will we Jeff Chief

earning graphic all XX%. LSI’s customers service leading of we to his enable team segment year, our provide professional and And innovative overall. President LSI resources look forward teams sales growth solutions to LSI’s stronger Jeff XX% for grew sales As and customer to last with

and experiences LSI and of President President officer. product other including as and marketing under prior John product in The development. is and Senior development with Marketing demands be will LSI’s technologies. ability as these his His he for valuable is critical together new all Atlas to and of responsibilities. product as in understanding Chief search of all meantime, market is product the for a served marketing several past LSI’s Prior in Bagwell functions. well Chief LSI’s businesses. A recently are oversee this will need to COO LSI development that, development. John's currently Marketing most Vice to customer Lighting. technology being and become leadership that new will A conducted product function our leadership Lipsey Chief Atlas Officer Marketing responsibilities of leading John roles key Crawford position manage of the Officer companies his efforts, led feel management bring LSI’s We

where Additionally, solutions sales our markets key approach are teams integrated funding organizing customers will to we our around successful. be LSI’s for

VP been with development for channel LSI Hood the be LSI for of of petroleum served the responsibility Markets known President XX For who have all throughout Spychala, LSI’s be and will market. for and leaders for and lighting other Niche over business petroleum industry Robin sales all respected Strategic now the responsible example, a is markets. as for of has and for customer Vice several was years Markets key LSI Jordan will products

key is Croskey’s Joanna highly of vertical sales legacy these our automotive the and regarded these for for development One others several automotive all leadership LSI products of sales markets important is are Ducker market. services. and all plus channel Technologies now And part by customers Jeff this will lead team. individuals who of

other are to doing to the responsibilities the trends. to our a business market changing around At and a responsive structure more we become we market-driven areas are lot time, moving same So sales forward organization. to streamline of

being LSI. material and Sylvia For This to Senior Sylvia intend LSI leadership through of where within despite sourcing who customers market else LSI’s procurement, to been value a stronger trade we under logistics all spread look in the more has organized been example, effectively have leadership now anyone of organization. functions has logistics Astrop, within businesses been to promoted VP a successful costs, sourcing move forward bringing together responsibilities than Sourcing. one to company procurement managing industry. areas Global forward company, multiple is and all We in for Sylvia’s the LSI in and pressures, and being our in under

like call sitting I returns questions. needs call interest to still would the time, done, that for team I LSI you are like still. also commitment think thank open at work our for of for this thank would that better your not of up LSI. their shareholders. on like serving everyone to to Operator to see I our lot a and can we we’d in providing entire be certainly for the the customers While

Operator

come will ROTH [Operator Thank Irwin of first Instructions] line Capital you, sir. And Craig Partners. question our from the of

line now Your open. is

Craig Irwin

good Hi, and for questions. morning thanks my taking

place at the getting I first some that of that LSI skeptical more appreciate I and was it done. investors as So lacks And any question of as Ron, silos you really just on my accountability, in incentivize or lines for you history in Historically, excuse how but cynical one LSI? collapsing good the organization. and going that is sort changes of a How that philosophy. communication, as the accountability fully and internal see accountability organizational of looked forward perception of and to putting the cross investors in your you're and should say maybe maybe the was accountability you, the at of company of can improvement people speak you motivate and work choose driving

Ron Brown

accountability The and our most in customer market. it’s to important key objectives with the selling this align and main thing is case, servicing

have that margins standpoint revenue all the way Jim of the we of the and and the that terms be won't line, and -- are resources, we So for the a it's with driving incentives that responsible each to be are associated We business. down businesses. that the certainly part these to markets but from the tracking going with because are accountability we verticals, of financial it understand those we that to that sharing aligned earnings for strategic support speak by important those there in will and Galeese revenue can other bottom this are

I has with objectives. number That's our accountability market. it’s that’s to with mean most be one revenue important earnings respect team and our to So the

focus. part So that's a big of the

Craig Irwin

Thank you that. for

the your point too. there one September commodity margin back do seen tariffs some impacting know approximation these put price believe aluminum. that much be their pricing maybe to about that is, mind the of we've the through market over you Second the you being of the you're commodities XXX capture and the able math around couple Can question, guess, the put with the OEMs know give your And us last of very I with – you of quarters solve faces My an from I its envelope investors able quarter days runs that's inefficiencies to steel significant really how focused to in is volatility. you'll basis headwinds you're looking I the through large managing of recently? problem in and the on move from aggressively P&Ls? most same some

Ron Brown

that another In increase hold, terms the we of are X% forward. considering price here and about increase going seeing of price we're

surprised you're the point track some these are this -- shortfall major of tariffs of seen we are we talking not not increases the referred though In that about, I'm and terms – of material seeing increases. the to. of to our some, you even but have but are magnitude the the impact cost near in magnitude margins we keeping seeing of we're material At cost, the

James Galeese

Jim Craig, Hi, here.

Craig Irwin

Jim. Thanks

James Galeese

Comment from my side.

gains. commodities. QX did not the we via a as protected impact mentioned well of a in hedging and As steel aluminum have result were We

but in that as we that. do offset tariff of We will multitude increase activities to see not It place result an a of to level activity, have QX. announced the be in this will of

aluminum So actually outs and seeing the electronics is and/or steel of aluminum cost then substitution weight have design. in for that. of we're to and And our electronics costs to cost, just out And component either continue the respect projects materials categories off, we first largest number several not with and relative there where decrease, steel and place design of are. of product

to have we to situation. optimize lastly, continue and supplier Third alternatives all this look order best in we at

realization increase certainly of We the with So want in quotations June. managing that of price have certainly with some pricing. we're to middle effective the

as on select really the we we're products going just to to tell of it's announced. particularly Craig much how LED So realize that to early too

you'll for remaining will on get that certainly We legacy sure. products our

Craig Irwin

Great. Thanks…

James Galeese

Sorry, I interrupted Ron, you.

Ron Brown

own. saw I probably think second inclined to our you follow we activity And certainly are announced price increase. with

Craig Irwin

something excellent. to Excellent, do a would some talk about be XX% sort company margin targets, of at the to good that's likely several the couple sort the continue margin sourcing take incremental that can of few an this mix XX% Or deliver of over in your achievable the quarters products to about we this initiatives is looking reasonable to of horizon. feel Then or likely if Is next point. you target movement the over time historically that next towards and gross is quarters was achieve? goal at level margin How achieve quarters? to just

Ron Brown

assets as the margins. and returns investments to On continually the on on increasing necessarily setting making, targets we're oppose

that focus get of don't the is but on the right to achieve would that as organization XX% targets in the right be I to of we're to see net our major investments increasing looking Although margins, each more sort not achieve. – we trying higher returns now our verticals. now Long-term, we on want

Craig Irwin

last may. Great. And question then if I

Any production You financial mentioned us new or low you in what's quarter. also producing And production a from have you for when remarks not in for prepared fixtures. impact the can launched? year? I number approximate over far the a the quarter? Can the quantify saw us color impact the next from hundreds. in as It's the initial guess of or as standpoint. SKUs around the fair that start revenue knows that you your the And inefficiencies release, maybe those then cost for everybody of potential ideal headwind tens you margin expectation you in

James Galeese

In initiatives, Thanks, we heavily first as again. more weighted pilot major Craig, Mexico for the QX had petroleum Jim activity was initiative. to here The graphics. two impact

new petroleum base but opportunity a we know certainly along our required activities domestic have language the a and was differential. you Mexico relationship strong As solutions customers, design with

design, initial nine And with similarly been the QSR a going pilots pilot developing relative is customer, then and the getting new period; type of we've markups, activity initiatives and our for solution of the improve factors result QSR of over great how the and was the to to and having complete there an cost this was customer, working where those experience with involving initiatives and that's gestation shipment customer. them opportunity just and consumer that associated and design showing products. with activity a differentiating the lengthy approved production months So this the reviews for of these quite some those effort disruption run

into of developing the So of in our factories enclosures, in our that installation. digital turnkey the has signage been significant course solution embedded involves structures The a type are and effort those. structures, then those

of impact the the the and range so XXX business experienced lighting the had terms products the forth. in [Indiscernible] under had graphics to QX. with canopy outdoor new our on garage with side of impact this in the areas, of degree a lot So the probably we we're light, and point a more activity but type basis involving lesser of To

graphics. so Hope but less margin saw we QX So helps. we lighting didn't that there, in in in the have challenge as

Craig Irwin

taking That's Thanks great. I'll again my the in for hop queue. back questions.

Ron Brown

add that would one to our Senior in the its their Product VP we benefit product if we thinking I that. just launch long – a product a of think and making and it terms process from design John process streamline much was our Bagwell that and can was it into of Development. of of went benefits ways And

Operator

from And our Thank with question you. will Elsen Instructions] Greg Research. [Operator next Singular come

is open. line Your now

Greg Elsen

were were quoting yet down XX%, Thanks the lines is the sources single-digit legacy LED the good in is press an morning. this environment it In lighting percent. release, you XX%. down And in that up the you're release sales your call and product about mid quoted lighting from industry where press yes, product

sales, that in to good. talk continue legacy parts exiting trying legacy drag line the mean, the related about does understand essentially? after and sounds zero pretty to a the is your in from going to and lighting darn in growth from and the of XX% you I'm lighting going and LED segment the drag what Could moving are that what's forward the going next to essentially the I So work product to lighting when the quarter segment sales overall lines the quarter business

James Galeese

Jim Greg. start. I'll here. Thanks Yes.

sales. the press of in now LED our As release represents XX% we lighting noted fixture

sales really legacy several select national account We activity. just remaining represent prefer that. Our still

solutions key just of but few indoor now. make So our more where really and to remaining is be look a With legacy to as are getting – products they difference. product, support point to valued to right a where almost focus end the provide on accounts in with regards remaining they fully national so about, opportunities Outdoor challenges, our on literally continue is we're of for them that will activity tail applications converted. transition, continue it's your some near LED LED to the The going our customers. providing we

gain. the guide, So that's now we're volume our not necessarily

to and emphasis which on specific and our in add? where Our to want also at very then and value value they have provide solutions to custom have focused will mind ourselves. respond customers the those provide anything Do we good are ability you applications,

Ron Brown

That's well said.

Greg Elsen

put Okay, of okay. and your like about a looking round going the increases from Well, again of possibly. price for price of looking round response at sales and the questions second going you prior increases at increases you're such, sounds one it the tariff price materials to in forward, from

Is you increase sales think that that go that up is So when forward price be X% it doesn't just to – from say if price reasonable from about fair price about increases mean the just X% those I increase growth increases how quarter? price top call feathers we your line going won't could expectation of automatically the the that assume. how Trying price understand it your overtime to implement increases? a because come next in you in much

Ron Brown

the some would you that expecting. to price The going we lighting areas key that were be of opportunities but earlier we've opportunity growth the That to is not opportunity, given that. and should certainly we opportunity the the had mean are for lighting lot over top of that revenue over award sites so necessarily actually see It's well for new year opportunity, be the mid-single these that that side this is good with revenue focused digit which to right is a growth more coming most growth are combined Jim gives markets particularly an be growth – the introducing or as line. automotive number increase on significant XXXX markets, of entire conversion and the coming it’s more that out the project for the not large seeing is year. where other now. -- business, give in that the mentioned us outdoor conversion QSR products than petroleum which Some confidence line this on about we line be a in primarily price going top possible of We price it's really is of don't opportunities the able a The terms through mid-single from of coming is as but growth I feel increases. laid we're those specific digit guidance, that impact a

Greg Elsen

incubated disclose it to estimate lines? percent talk up year. product even something the show Understood, gross top Early might margin drag which lines, could operating either product significantly? margin three product could that you say, from therefore don't upon incubation call you have The six be that line in lines mentioned margin in that you it the even lines Is in the and product you called that Is understood. or really possible embedded the about? based those you

Ron Brown

that investments No. would and of we what development we're really really consider making. it's its R&D part product

necessarily the our is kind continue what that businesses. in on drag determine invest So of don't margin necessarily business we we and to

James Galeese

margin Greg, Jim, so us incubated optimize separate here. there was -- sales it opportunities, a The having drag, right. its to them allowing businesses, the not more is growth

in having us verticals a sales having example, separate accelerate. control way lighting to optimize not with sales for integrated right? So going marketplace, organizations lighting, to us think align controls that with really is placements best dedicated I to allow was our just force So the now these

So acceleration activity. of it's about versus margin more growth type any

Ron Brown

channels these technologies we're Greg, new But continue an some we forward number new a will can that into technology -- and were going there channels their to really for period and going market incubation -- unleashed accelerate and will in -- we invest new the continue of them businesses sales felt the but them Yes. put of IoT to like we're maybe these technologies incubation. into to invest technologies in market, be but they We that really ready the commercialized. where for growth,

investing that but in future the margins. -- that as on drag So a not we as view

Greg Elsen

someone Okay. very much. you I'll go. Thank let else

Operator

I'm further you. in at no showing And the Thank questions queue this time.

it's the pleasure back closing Brown, now, to So and my Ron conference over hand Officer comments to some for Executive remarks. Chief

Ron Brown

you. thank Well,

concludes industry, our where us very while than the anyone accelerating First thank interest more my Appreciate company on done, we're participate stronger move That questions I'd our LSI growth. still Thank and to all you ask of those LSI. in there else to that call. customers be all, much. value of remarks. like your and is a a the a certainly in lot forward We work intend to to company, be

Operator

wonderful Ladies This thank all day. and you may program. on gentlemen, conference. disconnect. participation you And does Everybody a today's your conclude for our have

LSI Industries (LYTS) 16 Aug 182018 Q4 Earnings call transcript