LYTS - Earnings call transcript Q4 2019

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Operator

Good day, ladies and gentlemen. And welcome to Q4 2019 LSI Industries, Inc. Earnings Conference Call. At this time, all participants are in a listen only mode. With us from the company today are Mr. Chief and and President Clark, Executive Mr. Officer; Jim Chief Galeese, Executive Officer. President Vice Jim Financial

call, host time. we and conference today’s During will will given our a be at Instructions]. that [Operator instructions session question-and-answer

this reminder, recorded purposes. call As a conference for maybe replay

pleasure Chief It President, conference over Executive Officer. Sir, you hand to is to the Jim Mr. now Galeese, my Financial Vice may begin.

Jim Galeese

our also with We a presentation investor market contained a morning, at be detailing today's will the this call press opened conjunction referenced www.lsi-industries.com. presentation In we before Good conference call. fourth release issued in results. morning, relations posted our everyone. conference portion Information release, quarter corporate throughout this this the in of website

question release our appears summarizing to conference well Safe statements our which results on remarks will conclusion Harbor results. include forward-looking like and XX-K. our fourth outlook. with and I for business most may of refer today's you as as quarter statement, line remarks, our management's would At questions. I remind to in you call call about to statements begin open we prepared differ recent materially. actual that opportunities involve the morning's Today's Such could will these risks responses commentary this the press and

over With that, call I'll turn to Clark. Jim the

Jim Clark

you. Jim, all. Good morning, thank

and and organizational results fourth me reflect Let overall I'm highlights. focus. initial management start this morning as they quarter priorities of few by our with encouraged a impact our team

and $X.X stair-step QX. were Sales improvement million of just below EBITDA $XX.X a prior year, adjusted million and of from

backlog. order and to improvement We than continue X% had year, over which was X% increased gap. better to exit with the performance prior book sales down QX, was we overall prior an quarter us year, in Our a the allowed very strong a close to

$XX us solid by million $X.X Windsor a reduce flow million, outstanding the with I'll sheet debt. the bringing New continued quarter had provide about free as for in the We Jim overall. the financials in million $X.X more further our execution performance regarding of without debt minute. will under with which and balance proceeds we sale, a on facility cash Galeese This to is comment information

overview specifics comment to go I want financial and short-term the in provide strategy. more forward on some share With our mind,

As allowing a our position is I differentiated short-term vertical mentioned previously, strategy and lighting on including focused indoor us margins. lighting our a solution, enjoy graphics and we to where competitive our outdoor drive and customers, bring offering to in markets key higher

lighting bringing of and a remain competitive earnings, solution committed differentiates us quality a supplier. a and customers. to we It We do drives that our gives better advantage outdoor as but to prioritize a us full our

its on to our closely sales end these to higher partners Our our are team solutions focus embraced agency market value we with collaborating And users. applications. has performance-based bring

As project in of key We did petroleum, this lighting on to focus, our in outdoor a our to and continue momentum. result plan this lighting fourth capitalize quarter. activity we the see overall automotive, some including nice QSR verticals,

operation capacity stages segment pressing And remains petroleum their Several and as are both managed existing programs managing early key disruptive, at involving as is are is they well. of team Turning but the the the five high, life runs of Momentum their programs activity are our startup cycle. here. pilot this specifically and positive are project our customers. Graphics, very we to in currently new

good new projected news provide activity the keeping of This up again to a into fiscal difficult with time in Mexico expansion petroleum having as QX these oil Our has didn't gasoline bit is enough new converted they're in sites. these They expect demand in is increase us and QX. such to high all not for able to at demand are companies sites. the simply a slowed and

A as this the a graphics and to we're be other in it changes. evaluate print in, we to the number to best branded in pharma, and closer grocery happy position as of continue be to our replacement primarily current On solutions by table digital led segment, look business, and retail graphic are at the print, taking print these customers a discussions. at undergoes

this business well. subject we Our but continues to well digital demands, and graphics in adapt position It's do to it. It’s continue our learn underpinned by and QSR. swings It's feel we project small, vertical perform to growth. in to about

I'm we and improve again and by our team confident I'm their we segment, had stock efforts. and commercial Overall, place, good in I'm reasonably improved flow driven they'll happy activities. a the in position. have encouraged quarter, the in Lastly, with to particularly sales by focus priorities, continue

invest committed our our to and and We commercial in commercial remain activities. team strengthening to sales continue

opportunity on margin know is shifting This levels. can to we margins. be drive and With applications training agenda a quick This education a our do training, focus across won't order want fronts, is improved good but we The into full book year our schedule for more for increasing full subsequently, better. our and reflect news high our agencies we on a better turn, emphasis solutions. help the improvement our all have coming performance beginning see gross and the distributors, others. and will ahead. I among is I can do mix partners, the and

I'm our Let to scheduled quality. and and development, are our accelerate position of has and a with marketing comment mapping in while coupled activity, product several speed XXXX. new strengthened our roadmap our our half road is the functions team reduce will product engineering new The happy program roadmaps. embraced on our specific me This product engineering. improving for release switch product to projects focus market, applications and to second overall rejuvenating say on

mean I to want our also say of I second fiscal I mention half. XXXX, that when half

to our several has operations the transfer our the to proactively completed are lines All new us be in be of projected -- start process. up end startup times Independence, and levels team by ahead We to New the pre-move running July at June production September. lead to and On up Blue and of the with locations. Windsor our front, weeks Ash Kentucky scheduled help and the

The including benefits, lower about impact did talked capacity improved prior unfavorable margins we've base QX, cost however. The annual have consolidation in that an in savings utilization, to move and provides calls. overall costs numerous

Lastly, inventory. I want and to is improving team dedicating that mention that's supply to our lower inventory and time -- in considerable chain, operations overall cost our reflected

This New In Windsor sale bit New the the hoped Windsor regards required town to longer of close. of than took approximately a sale for. to $XX our the little before was had facility, the process we property of approve million

town and we sale on the that the end Xth to sale close announce the August to pleased September. did I'm the of approve anticipate However, by

agenda summary, with XXXX made achieve to for clearer balance team and high was several and the progress is the In set performance Fiscal encouraged we're expectations I'm a is I'm year building, the successful the so But with required remains for validating XXXX and business of direction our and the on for defined progress committed evidence change by management is over momentum right far. path. performance the priorities. for we years. to we've business, our ourselves much but next achieving the in Work exiting disruption significant encouraged the business, to

it Galeese financials. over to deeper turn that, at With I'll Jim for a back look our

Jim Galeese

items, for comments highlight a non-GAAP reported GAAP reconcile non-GAAP our comparability purposes. on be financial providing Thank you, on then And the I'll basis to which performance. Jim. performance

of XXXX. me quarter start versus sales QX X% Adjusted for $XX.X or fourth prior with to million $X the operating EBITDA financial was are Total million prior key of for quarter year. compared Let of statistics. the year. million $X.X million income $XXX,XXX income fourth operating Adjusted below adjusted $X.X

expected restructuring Fourth GAAP GAAP reported earnings net year. non-GAAP our reported partially loss a $X favorable facility A per versus fourth tax of position. The QX the sale of new company effect to our in quarter related contain of a GAAP and $X.XX earnings the $X.XX complete million costs for reconciliation a release the share were results press net includes quarter share XXXX effect $X.XX. GAAP by year per benefit share tax measures XX-K. The restructuring result last is in of of contained exits approximately a Windsor and of quarter. costs. offset the

of A Xrd. regular of capital with the facility, record to the with and XXth, $X.X share no September The the debt are $XX.X The million million. will XXXX fiscal balance sale projected decrease business dividend 'XX million. with contributed Windsor finishing Proceeds $X.XX approved exits improve, was cash for sequential by government $X.X sheet tax existing EBITDA cash of and of the transaction gain to $X.X be flow. of capital million. declared occur with QX. working reduction by closing fourth projected $XX have debt new fiscal QX flow of free a the quarter sale at under the continues losses. The Local in has of $XX million, from to capital the long-term shareholders offset approximately in end per effect cash September to on payable million

good of more new the reportable rescheduled X comment the were approximately July a in due to below with Lighting, were performance two orders of channel, Also flow verticals production number points proactively important that quarter. transition, were the channel $XX manage the stock note project by a briefly constrained the to segments. had in were and X% our transition. Sales to of Starting Windsor to I'll sales year. effectively while million Next, sales on last soft several

QX margin gross improved verticals, new levels for and transition. intake for related prior unfavorably was Lighting higher year, at XX.X%, Lighting to margin our verticals reflecting startup including petroleum Windsor automotive. sales and single-digits production by costs lower volume above the order high were impacted levels key

backlog positive year. QX for price The last increase, of any tariff segment impact. above is Lighting period is from realization offsetting the result, a generating As end May same price the the

the costs margin served offset operating Lower to lower rate.

$X.X EBITDA $X.X adjusted of adjusted result, X% were sales. million the earnings quarter a or with million operating As for of

a of increased were and as QX, segment customers. with prior petroleum scheduled quarter. the Graphics margin adjustments, well end Graphics by million, year. improved Earnings software, project and full the sales program program last driven but by adjusted operating capitalized year. Shifting several unfavorable to the inventory. which XX% for $XXX,XXX earnings strong earnings of and mix $X.X was XX% one-off segment, remained impacted slate was a were growth of versus existing gross quarter for specific or X.X% both Momentum from of as were write-down below sequentially the segment customer a EBITDA good with impact petroleum including Adjusted Graphics. of and new

I'll now to back call the moderator. return the

Operator

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

Your now line open. is

Craig Irwin

we'll possible in return us to fiscal remarks year the early for fiscal point potential over -- levels? Do prepared your you think a Clark, Mr. it's about in the see to growth prior So see comments to the seem backlog to first up quarter 'XX.

Jim Clark

Yes, were goal. I if seasonality lighting at have that's type QX looking at certainly a of certainly, that look gap Obviously, historic we mean, anticipate that QX I our our some in quite of up down X%. thing. you from we'll and kind performance. that's business, mentioned, as I we to be QX, and closure outdoor But

So our there's definitely goal balance, a is but to be number things of there up.

Craig Irwin

impact is the Next quarter. Windsor transition the about thing I wanted during the to ask New of

points So X% about of And say in Would full frame that points pushed maybe by fiscal the percentage of are X utilization? margin Lighting a this was would that for more you transition. perspective? from us first assume sort it interesting what did your been Can out a quarter? margin -- you impacted from saw some projects were you higher benefit we negative these into potentially have X full from

Jim Clark

Alright.

I'll Let kind down of me go that different backwards. into answers, a break couple

indoor primarily lighting. is Windsor New

over So up moving transition was occurred We a to as New the get the here. for to at time workflows we our that, tasked down relative quicker and here order it the to organization transfers up absorbed disruption and make as that shutting pace just Windsor in factory, could.

margin products. stuff that business. or we So we moved products obviously, our projects overall The on the -- moved impact the the that some lower are had that that

up So of The And overall, margin. running are, our impact quality to big and better more anticipate getting that on have a we don't is I those mix the shift, we going it's the earnings our outdoor, do do. then right? better

So to really opposed Windsor commercial effort close. New it's as the a

Craig Irwin

once would the to to you Is you previously just on then $XX intention debt. still in And in you pay the that that cash mentioned down bank? million cash, the probably use have check

Jim Galeese

and that But our anticipate and I $XX obviously, Absolutely. that X.X million, progress contribute able the nice think a come I key further mathematically, what ratio in with happy even we've under come very when I'm mean, very fourth making. I'm we're will that the that apply we've it's I quarter. at proceeds. come to down happy focus with now, is It's down we -- the well, been

Craig Irwin

mentioned progress in And progress did report then found another of positive at thing Atlas. The interesting that market not the kind you was the the leader I quarter. same

there. So that's outperforming traditional blocking a Is it you do guys us Can feel Atlas quarter helping? clarify obviously little maybe you Is over transfer bit outperformed June color? of give Atlas? the during over the us basic And to the SKUs this you are you maybe more market and can for you like at tackling? LSI's

Jim Clark

Yes.

closely. wasn't because market against mean, comment was competitive Atlas. what only tracking I I that, comment about I that -- only can't specifically position I the I'm So of doing terms really in can't

down know, our in has efforts simply front an getting They in And frankly, Atlas. commercial down the product. Atlas. think that you in as new hired been We've of back most a the of been like making I up president in customers. we our investment us progress

I good service quality in really being And helped a that front product. market. them was Atlas a component quite brand They that a recognition of out bit. has good us in have think the the it

Craig Irwin

the And But you focus potential to something that's might starts? I question, fits this this over expect are in bottom is achieve. we and EBITDA the for about do last to to do something internal in is end last And targets for want first going quarters. the and the committed EBITDA of the maybe of this really share quarter? Obviously, the to year in any to you’re to happen a continuing may. improve then margins that have off Should that with you the us? number couple continue next you How if firm feel quarters? margins

Jim Clark

Yes.

connect in always it. But as demand, the starts. ago, better margins while But better mentioned earnings. our are. the and products, of more Our this quality the we signage seasonality things with and market my And it's have we little with more about we an as terms make our to on goal avoid remarks are. are. our The leverage earnings have those linear timing more better earnings is stops the -- our impact the with projects our outdoor, possible fits those all I a of digital The the graphics, in outdoor,

is, we make shifting about So relative and that compete outdoor, it's let's from sure on products we where have to our that let's lead this the let's our stickiness aware almost we have.” that's -- making really differentiated this strategy “Listen, that that make offering, component, with the exclusively which customers

that when our turns out package way EBITDA We We our Graphics and just to a all our overcome products. and differentiation is goal do have not believe would Craig, our continue there's improve some I is, But to this, say it This is And not is our that have and to but we some obviously that those this margins And we're they able see that great we've stops believe that the those lot benefit top-line the in differentiation there's long but I we top-line. margins that our so -- not of great missed we're able improve. Lighting is want because what to them. starts. in and value, a road. buy when into improve I'm and to drag impact we together. pressing change on that avoid customers

it's journey. a So

Craig Irwin

hopefully journey has direction been. in We look congratulations to as right the progress. watching Well, Excellent. this continue it forward on the

Operator

from with Securities. question of come JMP will the Osha line next Joseph Thank you. And our

is Your now line open.

Joseph Osha

question, little of to Following your as show obviously, amount now, I a your how effort? and there. up LIGHTFAIR reconfiguring spent progress you time organizational on up bit fair in have this result came what's left Craig's marketing. about of made some should and a you've sales But think that And your

Jim Clark

beginning of think it you put culture know the that cultural are you you organization. You mean, we on the I company, when the changing the it. too is on And slowly, think pressure right? much of happens a I don't are it, I this change. break

solid on steady do You and put it. pressure

I transformation. kind So this of in stages of we're think beginning the

so too. and We're extends a I in extends lot And just go front and what compared And is traction, and is as to meeting educating we it educating with improvement. There about we continue And do back think the others. relationships them. are differentiates there's that but that there's campaigns. too. them those critical comment we continue programs, us. them as end of I made remarks, end it our of in not opportunity the on along agencies, them our get we the there arming are awareness And type partners, specific teaching to training we Atlas my to

saying I I was a journey as beginning So think at are it. Craig, the of we to and it's

Joseph Osha

Lighting from us bar so two in at I'm looking segment you and and Graphics graphs looking, that, in And sales of that within looking X conventional business, How X. it. now, stuff? and And Page these Page following that much that outdoor particular versus -- just mix is do and let's it segment years indoor on imagine particular numbers putting without how I'm Lighting on imagine let at it’s here sales,

Jim Clark

and break as competitive very to leading team internally. and it can Well, be markets The want look advantage we message are mean don't every in we industry don't to the solutions lighting products the is. We that and -- differentiated.” the bring very want that the we market. is indoor, get and we don't I certainly it the competitive externally, we we with tough we specifics the industry most at outdoor the is, “Listen, into And up usually -- but indoor to

well quality than say So away usually it's we a indoor that shows generally, When balance when erosion to we of earnings weighted down, and that margin to a that or up it more have than the project that from we lose advantage becomes that upside more get on project. competitive is outdoor, when in benefit. we the start indoor, heavily outdoor enjoy and

We that just that. at significant vertical walk And we thing, We we something enjoy those. that. we That's our years, on focus agents remain enjoy move out creating, I there. when with projects creates that look We projects understand look from the disciplined those a us. years, differentiation away that I on the in. differentiated when biggest it's effort But into winning don't three we put the mix connected and do our for it and the in. that two that markets We remain we're how leverage time don't we take we towards where get whole

Joseph Osha

can't a sounds of kind a for right be like just walk some got fair you business, so indoor your a where characterization? this down take slowly I and organization if the you've it, it now, which shut margin to then cover, from accretive while. Would that isn't it do Is you've you, comment can that you that because fixed to flip the -- that fair over you within particularly it. got going will absorption time, But say to it's costs earlier problem you segment, away you business heard can't got

Jim Clark

back this be careful, stuff bite. often sound a because as Well, to comes I want

and of want wants. we go the Automotive, bring want a the whole or there interior conjunction, newer rental about outdoor solution canopy to outside like to to a to We lighting. is, sales be example. it lighting, dealership canopy. want in whether showroom lighting but the on to are our And to competitive thing, provider go and to fixture, car, great a a able everything made wall the just the And lighting, on whether vertical the into or with to indoor around the markets it's in. into the that right the we We And outdoor car itself. That's lighting be or back provide lot, across petroleum whatever and conjunction kind those we a of graphics, the the towards pumps, to provide the that the the petroleum, go We whether the we finishing under graphics signage. same from we be efforts specific out digital car We right? indoors want designed I'll building lighting have right business, have the want requirements the it we in customer. to their paint be want in CarMax, that want market. area not with customer exterior or packs lighting that facility want with referenced mechanical or that's speak good provide all areas, So it's advantages the We where areas able abandoning with to to it's lighting types above, whether right solutions. service or proper them of it's with bay carriage help back, our

we floors abandoning lighting floors hospital, not exposure city at of customer a we that very a But definitely into that and we're a not of rather. has But like, an at in, and of time look lower building might help, solution our necessarily that much it's example, but interior one we or take we're that of rather -- lighting, office has if has -- same exterior lighting. a it that hospital partner has put a when limited effort a outdoor say vertical So that better or lighting, and and be let's just when balance provide there. I'd look project is markets customer a and ours, bigger value interior won't the interior

Joseph Osha

Just structure obviously, de-levering, that's you're on capital the great. point,

a you're structure? debt paying to Do as is look How is want and How what progression this little I about like? the dividend, do you a be dividend convince which bit should do mean the do but continue you great. balance to that far you a bit. think lever think capital ultimately so zero is to and company more that de-levering, and unusual an people of covered? kind You're maybe sheet well company Or make want you're efficient about you

Jim Galeese

ability Jim models here. as perspective. that. our monitor capital We But both particularly depends dividend as the and opportunities. both inorganic we of allocation value, and on dividend the the not Joe, Galeese Hi, in is invest a key organic we part the both and And point the pay view to do in particularly it business. point and right certain capital now Right go really our reduce forward, it’s debt a to maintain now, ability various and also operating from of a business, expense view, restricting of continue on from commercial area of

change forward move alignment organically see we As pursue that and or we very we to that may initiatives if model bit. a want of inorganically, certain that either large the

Jim Clark

But Part clarity. Jim allocation of dividends. meet will It's management is with specifically again. say always We address Clark, our capital this, ability This the I to the just pay our team. Board's model for discretion. at

tight laid can very models now. tell with we And payment I that include dividends. continued alignment right have our But the recommendations. capital how you out have We does our of allocation it

Joseph Osha

presents on delever. what with well itself and side inorganic the we're think is shareholders it’s, to So that plan, some the to assumption? to covered, balance continue business the things get being that the might this would necessarily should sheet de-lever to that would hearing that's be kind expect on here I'm if take in we okay, I all Is the see equal, of that not the fact would but other business look I -- going opportunity continue involve -- that comfortable should is fair a organically dividend board something that's re-levering

Jim Clark

Yes.

shareholder things we're on a things program, Jim in even And a say, constrained “Hey, now. opportunity, what would isn't on point. said, doing, inversely right up, that best.” looking But out any a came a the the not I the isn't that's you're great at what, constrained we're every know pressure But put at, they on is opportunity think you us. that's is, we're paying that dividend, dividend, the whatever if it even Like it. forego great think, doesn't think right that's I there the table table, this not we're on if I'll great

Operator

this Ladies concludes and session today. gentlemen, question-and-answer Thank our you. for

So President Officer, is pleasure the conference now, closing to and for or to over Chief my Executive back Clark, remarks. Jim Mr. it hand comments

Jim Clark

to to I radar. you just participating call, say again having your listening on thank and our for want and LSI

I making would our all and great QX. to folks I regular continue time. if just think here and QX do come us, like facility, did basis, to always would you we to additional see very visit plan progress. like us. it you that's to to the in available like a we obviously, we're we is have mention this, quarters feel much meet with contact or on with Thank to we're our the meet please free for

Operator

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

LSI Industries (LYTS) 22 Aug 192019 Q4 Earnings call transcript