LYTS - Earnings call transcript Q3 2019

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Operator

Good day, ladies and gentlemen, and welcome to the LSI Industries, Inc.

Third Quarter 2019 Earnings Conference Call. Currently, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] Also as a reminder, this conference call is being recorded. like Mr. the I’d your over time, to host this to call turn to At Chief Officer Clark, Jim Executive and President. Please go ahead.

Jim Clark

Operator, you for a high us morning, results, but and time seen quickly. review you Good I join at will of call. on thank to today’s our many have level I taking you. the know thank

$X.X of For million, operating million or $XX.X the sales net of adjusted debt a quarter third with an below coupled of last QX reduction reported loss million. and fiscal of XXXX, we $X.X year X% of

were them process. to change results total move are these surprise not be, a our with Although where we like not continue forward to would either we as they

change. mentioned our As LSI I is transformational in call, last going a through

solution On us impact To joined group momentum season. this wins last outdoor few the was and differentiated the partner for can had business, we months, these where our over additions to of channel. LSI broad just focus, years, operational a through supplier flow to few this. Seth last stock focus on our several our from markets as we’ve not team adopted the help it’s the Atlas strengthening X, help in This and a to right and commercial commodity organization. top has President number The refocused of as which to Atlas April Walters change, strengthen move LSI the and our distribution as strong as work profitability key a into vertical market made our bring away and changes, approach over supplier on is a we customers. having drive our surprisingly, line Moving

CMO. senior our alignment and we to positions product recently better These do us sales reporting and positions satisfy of the to development vertical new management marketing our marketing the the with critical the for marketing On need organization in model. two filled side, product

will and the new expand accelerate products area in focus focus. market-driven and of solutions to us vertical help this Continued development our

targeted and throughout specific competencies, of our to and of and positions our our Expansion understand provide number partners right team a added a their is sales have sales and relationship individuals. ability country. The different of the dedicated hired designed the also visiting positions that the with I’m we’ve confident We which value-add benefit further deepening considerable visibility with requirements customers, strengthen to us. I time both solutions, require incredibly constructive. was effort to me. in it clear Many openness, for a appreciation joint need to the partners meant number that a our with met the and gathering commitment lot making to and feedback to lot of years them. CEO do I a our become had and meant just to success better as can better reaffirming made a partner. to what we suppliers’ it Their and quarter, transparency not

our stepped partner elevate to for next A and Philadelphia. This and communications. the in folks to also one a back, month many our partners these industry’s first has date few weeks is seeing relationships our of to shows have the up We those actions key all sent our business to planned future. summarizing near taken I note just LIGHTFAIR, trade look in step of a largest I plan our forward at

for and his President towards has contract be quarter. track, retired. in we joined by of of remains a completed million million project our and had our have on Windsor the operations schedule sale of able back production who to and well. on and transfer fourth initiatives, as by into The end and of previously several progress. Mike fiscal replacing Mike in $XX team’s facility LSI Turning savings excited pace annual I Beck Palmer purchase as announced facility operations, proceeding our is that $X definitive I’m call will been Tom last The New the mentioned closure project dig excess Operations Vice the of Senior and

that The offered the of the City of New program Kentucky of small the transfer and will investment Kentucky the June. has we’re in end the added By our our and Kentucky state state-funded expect to from by in operations Independence of of the Kentucky Independence this We City move that, welcome close and facility. a us. investment Windsor benefiting that

we them facility, add and puts the and domestically space petroleum vertical, addition In a new XX,XXX our leases, ongoing in approximately growth house to Mexico. feet and provides two our our work capacity off-site agreement in at Houston expansion of the back to square finalized This in manage lease continued in both our consolidates it into Kentucky the facility. to Graphics

Now more let sales insight into third Lighting performance. by me our several a quarter bit impacted was decline factors. give

the sales changes First, and the short-term. the a realign no causing are priorities to question, in organization the our to disruption market efforts

our March cost. However, end products to elected others order take programs the April is appreciated a the we our run focused structure fulfill cost Coupling our any realization, quarter market. and were These supply abnormal of the was from We the in facility to fiscal promotional flexibility programs, all. backlog referenced normally materials positive into and manage we provides consolidation to we the types in the an to more both From to support chain with of not requires demand quarter normal our our serve and increasing actions and want continue and achieving our also to successful to push to patterns perspective, by internal and measured progress growth Atlas closely elected distribution sales. market improved, to made, broad generating approach, to profitable and for our I mention previously it we price price that and goal this I orders. believe disrupt input simply being book quarter. as our is enter much fourth

quarter, loss for but operating an activity Graphics quarter. over segment the had with the our plan increasing Lastly, occurring generating in XX% significant sales

explain. new petroleum quarter in in double-digit me generated The Let sales customer. successful securing third large was the vertical growth and another

early lower large petroleum are which these concentration work low as margin, schedules. mix as spike programs and cycle stages will their sales generated two over the to high are balanced. these improve life cycle, in better represented of the programs, of result, of balance is, and a early-stage margins is life for the we news the Margins the change graphics programs a good As the quarter. programs the throughout for typically the the XX% of The

rate overall with expansion petroleum remained in Our and our contributing petroleum partners and company Lighting. both Graphics strong, growth Mexico into continues, oil to market the

delivery impacting side the graphics graphics many dynamics business, as our other Graphics traditional featuring our customers. shopping or is changing incurring the graphics On many of online entrants branded retail market and print of is new

addition, In rates adoption digital pace. accelerated of continues solutions at an

I’ll profitable enable that and in your of I mix. the a you capacity will thoughts begun change, do XX% a the combination develops investments more strong graphics our Concurrent plan framework we the traditional While quarter. growth, and print believe requirements say opportunities less we aspirations the had digital to sales and the largest This for success. executed position lie throughout decline activities increased a management felt Digital market LSI these quarters. changing formal confidence to asset how digital SOAR just systems additional before the more in will and the formalizing on sustainable our Jim and with process coming are and for where With Graphics our for and The the strategic the company, on Galeese developing I to to and the The the team onetime I of LSI. the customers this the us. committed and forward impact some continued it the and sharing pressure, turn for sales coming capabilities than year. be to over with for defensible goals look the asset-intensive we’ve of all comments for solutions also result win management align want quarter. for print coupled costs operations select over is quarter. business certain many in as our print applications thank to segment for that, technology, have path are to mentioned,

Jim Galeese

and everyone. morning, you, good Thank Jim,

financial non-GAAP items press XX-K about could in our differ then results basis which release today’s most comments reminder, include outlook. business our may you which be purposes materially. on XX-Q. performance. GAAP and actual well this our a As statements Such performance appears reconcile on non-GAAP safe a for I’ll forward-looking to and the our as I reported to statement, highlight statements discussion and refer involve recent opportunities comparability providing and risks harbor morning’s as

were $XXX,XXX QX QX fiscal year. $XX sales Total me operating $X.XX million diluted loss Adjusted XXXX. The prior compares with key adjusted X% share earnings per statistics. or QX $X.XX sales. start prior earnings $X.X of share financial of adjusted third company below of QX for quarter compared of of operating a was the to income Let X% $XXX,XXX loss for of million to for was EBITDA of per or year.

reported results contain was quarter, transfer New GAAP Moving facility and of production The majority reported to a the for the the GAAP A reported $XXX,XXX $X.X QX to million restructuring related of results. of net EPS was GAAP loss loss $X.XX. for Windsor charges project.

required position reconciliation benefit a XXXX, to XX-Q. A compliance expense projects a GAAP to in company quarter. benefit. be tax accounting a in the contained is release in report the tax quarter non-GAAP of our Although QX The and and with standards measures press tax recorded fiscal is projected fourth federal complete

formal of of balance the structurally available million in level and earlier sheet, our million the was working QX, reducing A the sequentially and $X.X line from in quarter results to QX. initiated from inventory quarter to in our serving credit. increase debt already with $X.X reduction a Regarding capital realized reduce decreased prior program assisting

reductions Additional QX. for projected are

the announced of Windsor the to We expected project June we addition, XX. be $XX on New approximately the on a transaction. sale a million. will facility, before of for the close or long-term the definitive sale Proceeds with gain agreement sale capital In

for capital company long-term and new majority the related tax year. projected for QX loss carryforward. tooling $XXX,XXX investments or a $XXX,XXX below programs and no prior expenditures other to products. were is production were The Therefore, Capital and of has the transfer However, the to investments have effect. transaction productivity the quarter

driven this to activity, of or quarter. segment, I’ll the Shifting customer Sales lower year. Next, on our the were cost-reduction described influenced process, QX. Graphics the in on entered by million, Lighting. in tariff dollar realizing This growth increase. costs, customer. ratio million both was $X Lighting We served XX% quarters. of over efforts below gross XX% operating in related. our performance price was rate key of two in with segments. to in A the will new programs business XXXX. commentary. are two decline declined, petroleum $X the by price Starting verticals the the quarter, increased were changes $X.X for sales. a as multiple project were Lighting which impact of Sales reportable generating increased the Jim million including sales be $XX programs the several October and with China material with in several We’ve to for points the The realization backlog market briefly margins XXXX securing next offset increased the for which million Graphics. of and effective last input successful we factors was design Lighting positive year. were successful volume comment in book-to-bill Sales another effective X% quarter adjusted last September were earnings over of with positive his versus late EBITDA which XX% of

expansion an accelerated Our Mexico continues into at pace.

stage early cost at combination for digital future being of XX% combination increased the over decisions. in business. graphic several completed There outlook operating third, These now projects, with spread customers. Digital the have impact All and here over in performance unfavorable XXX business sites growth. We remains and include in the investment cost the margins for of turnkey installation startup decline petroleum profitable across growth with investments traditional several graphics large quarter the of in product applications. reflects onetime the projects XXX forward in positive. continued positioning the And petroleum print a impact solutions. and a decrease The sales for

to now prior the the As a in operating result, $X.X moderator. XXX,XXX certain priority the back for quarter. call we cost of balance decreased loss to incurred with expense quarter driven investments parts compared I’ll LSI Total the graphics in of efforts as in areas. the operating return the reflecting productivity in organization other million year, management

Operator

Thank you, sir. [Operator from Please comes Irwin Craig go Capital first question Instructions] Our ahead. ROTH from Partners.

Craig Irwin

my questions. morning, good and taking for thanks Hi

So first walk progress fiscal then closure and to at sale? on with to be left $XX the is how quarter there. you into the the through facility I layer Windsor done likely then early ask about New next execute wanted is to fiscal and what’s million thing, maybe year? the us to Can that fourth And your savings

Jim Clark

and morning, Good the thanks This for Craig. Jim is Clark, question.

Let me break two into pieces. that

just wholly out, done. made of of moving we’re the progress terms In we’ve –

We goals midmonth of have going of as There the definitive sale. anticipate the I more building. new contract us with that a only meet their owner. don’t of person type that of alignment have and the is the coming neither formality need contingency buyer city’s that problems, terms and the building with then in then market May activity In we cleanup of thing. month of of any transfer material owner Windsor or by It’s new there the building, through of a is excess a some into close City on city, liquidation of plans That a use we anticipate owners up the the the walk-through the will a new how sale to final respect – coming in bring does and for marketing weekend, the side. project. they and – new to the auction on the the have Council into a doing city for the we’ll it to the of terms sale we in their be of this ready for the

all closed XXXX be quarter in will that anticipate, this June. would So in fourth don’t or second first the of all things the going like to first recognized expect of we be of fiscal the have that. starting or in anything week though, expected, by – will – We things XXXX of July. impact – terms quarter any savings in That our there

Craig Irwin

for Thank Great. that. you

side? next your Are a very difficult SKUs pretty quarter. about So quarter, in markets Atlas to Lighting any that outperform? Did as outperformed the contribution then relative saw should this the and our ask March I significantly particularly quarter. from Atlas is the question growth know I much maybe or there underperformed lighting that core possibly LSI we wanted everyone specific in monitor from

Jim Clark

break of of the that project whole two Yes, in and Generally, to no meaning terms and shipments, more order our have we February well, the two but it was out, side, impacted question comment for exactly – be or specials and be and months in much disruptive there whole on a any bookings run pieces first break did they very us didn’t off, which it, for out more also sales better. to don’t any Lighting. too. to on normally increased That’s any I’ll we them been Atlas, where it year-over-year, the in side, programs expected to there Lighting and would us. that on January were wasn’t into benefit March March on LSI we I but but tends we had make year, volume last – than Specific had that on LSI a strong April kind March where improved,

any conscious a made we so to run those specials. of decision not And

might strong it as it quarter comparison a month quarter. on although strong, year-over-year not third good so had still for was pretty a a the pretty And have Atlas been and

Craig Irwin

Great.

the see couple do payment It’s sheet that million of of further? of it over months debt And know improving Is management allows see million $XX.X of balance the more course other And other coming So sometimes room may this else possible than a I the you’re out balance down be that, $X.X the that squeeze is consolidation capacity? but that. get to there see expecting it’s million million, this helps tight to then, the there anything $XX debt is next great that great to you couple position, than that the the to sheet. quarter? over

Jim Clark

continue we to wouldn’t debt, be we the Well, incremental in have the that there expenses but fourth have. will traditionally on focus that things some quarter may some also small

in example, back we typically next here, done coming meeting an up QX. As week. sales in have fact would’ve national that our We it’s

– small in that year-over-year So may might will June that on like on how July recorded but just things the – here on depending happen a comparison, those there in expenses, may sale the or be closeout are of little works. actually The contribution that. building get

meaningfully right to And thing is have to side, in we We that on the debt. the do anything the that performance down. that going that’s that we say continue is now – have can works take plan impact can’t think we the best I long-term

Craig Irwin

then over And aware in to million readdress few could I might that in months, go segment. million been of maybe Great. $XX the hasn’t of available a want have around the potential valuation to on capital you become the they capital Graphics we’ve as last back private specifically kicked previously. that of could firm are put may, lot I question, some to last in heard this range that business, equity $XX a if issues Numbers interest, these and give Chicago where have

a that here, serious is there but said or would core, is any for to materialize? graphics one offer only if always you You’ve evolution graphics consider was

Jim Clark

familiar sale we in I graphics very our the We pieces share bit. branded are petroleum two of digital – look or which that digital petroleum Graphics. graphics or well, looking be base. up be I mean, look equity, at would kind more graphics, don’t which specific picking are you’d three doing itself, not graphics same at well. our the – Well, CVS the but at pieces our our Graphics comment there’s that, customer and any really The have the would Walgreens, a – graphics, branded private to then petroleum-based and graphics on we some The graphics, something are SOAR, quite digital quick-serve retail if

short-term. and branded from that. associated with there cost just through some a some have I to change, through transition we’re don’t our move I all digital process. think graphics about – to move good going feel And we changes in that into any there and experience three was is I adjusting we’re components, typically they what and But graphics, as is the make plans that any as

Craig Irwin

a a more LSI the there potential business? aggressive for graphics, of decisions to is towards except interesting that business, pivot profitability make maybe the when make But of discretionary and given that growth profile consistent Understood. you for

Jim Clark

of look we appeals It we’re kind both the customer is spot. to more. differentiated and on to businesses those margin performance them, it’s can manage where when really we and competition. a puts the a it’s compelling Yes, – we to just base really two that combine our driving win said of commitment. same segment I’ve the we And that before, like in there us it at passion where with certainly look in reduces just and combined And want even segments, ways really our

Craig Irwin

again Great. my execution decent Thanks in for market. what’s difficult Congratulations for questions. taking obviously

Jim Clark

comments questions. Well, and I appreciate thank you. the the

Operator

at no the the to the further Thank [Operator for call questions remarks. closing I I’d President Instructions] to CEO Jim and queue time. Clark, like turn Mr. you. back show in

Jim Clark

the with number going the I been and of a like winning. a thoughts. not I’d of are certainly, there’s is have market the that The a but you. number soon. are on lighting also just that anywhere leave time companies in Operator, phone impacted, hear companies market lighting industry of about there everyone a thank to couple any lot

market quite market We remain and remain winning this this XX-year have time. of history we competitive to and for and some in a competing intend in

control Again, and show field creating Our unique our price margin operations the some of and to competitive of and I back win to order our you can continue operational us that to situation, realization. appreciate we for our the with and still into LSI, March on you good many volume that graphics the of good and the – prove to soon move The afternoon. opportunities the combination puts reward efforts is you, results we are efforts have from lighting coming our aside which out in. hope April we us This in that back going good thank increased of a at market show within that price and in out strategies. intend confidence results a in leverage. we

Operator

program. you, and today’s Thank gentlemen, attending ladies for conference. the concludes This

may all You Good day. disconnect.

LSI Industries (LYTS) 26 Apr 192019 Q3 Earnings call transcript