Earnings call transcript Q2 2023

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Operator

Greetings and welcome to the LSI Industries Fiscal Second Quarter 2023 Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jim Galeese, Chief Financial Officer. Thank you, Jim.

You may begin.

Jim Galeese

thank joining. and everyone morning, you for Good We this quarter morning, press release results. market opened before the detailing issued a our fiscal second call at www.lsicorp.com. In posted Relations release, this of presentation conference portion website conjunction Investor in corporate we our the with a also

to certain this operating are press results. morning’s involve appears GAAP will opportunities reconciliation results. Such risks second about begin line our measures contained A call today’s in At the XX-Q. throughout release outlook. could and press fiscal conference we transparency Please may and Harbor of and note and XX-Q. conference commentary summarizing the questions quarter differ is and prepared will our will call complete release quarter statement, and presentation Information well for contained non-GAAP with recent referenced questions. statements improved be in forward-looking XX-K results remarks for today’s remarks, most management’s open included which our call non-GAAP these as refer our Today’s in our our include this statements actual Safe to as you results materially. conclusion I of of business that second responses on

turn will Clark. Chief Executive to the Officer, I that, LSI With Jim over call President and

Jim Clark

Jim you, call. joining and today’s Thank good on morning for all. you us Thank

‘XX. press our from in had fiscal we seen QX likely release, another have you As our quarter strong

LSI the partners. our seventh My consecutive chain general given with off supply is construction and of economy, In accomplishment the in the agents team the It’s entire hats and our fact, of an disruptions market. challenges at to organic headwinds along this quarter double-digit growth. ongoing quite ongoing

performance up ratio. $XX X.Xx were debt I XX% up around and sits net free for over am million, flow cash more income a net which than Sales We leverage to happy our had the say strong XXX%. net year-over-year, quarter is

of minutes. half the Jim will the a few going Galeese dive in spot good the We provide year a into second a are of in deeper and financials

markets our growth. pay Our and around to is vertical dividends strategy continues reflected in

market the to no of that against and that While markets our with current have hedge recession-proof, is do of good recession-resistant, has a outpaced headwinds swath provided creating some growth the proven various economy. believe performance be us the general opportunities vertical we

Our refueling market to continues perform well.

represents Puerto In recovery in in site developed we substantially complete a other XXX without demonstrates in processes, in expectations, our to that quarter, approximately for in we offsetting continues our us major are Mexico. lag opportunities first Although major of the Mexico completed blip. oil locations allowed to Rico our delayed projects Rico have project this This second our project re-branding in Puerto major and a new project and retailer. a the substantially strength which systems market

types for will We and opportunities of expand to look continue accordingly. those

our As regards long a does weeks opportunities underlining of A a to opportunity in way a savings solar go caution release various investment. locations can let many of retailer first impact for step period unused and our of petroleum the into a in customers, oil space expanding alone Texas operating project products as this environmental into initial a to markets. and services related energy year. everyone the you the and of this have installation the few press few completed running back seen, an we we both last we this system months clean Austin, production. energy for want it of to that in but possibilities we turn and good real is example us midyear issued Canopy retail the most untapped the numbers is provide see and a some can simply the to center were and a able at I interesting an we vertical payback how offer We regarding profit

last grocery awarded and to In units grocery provide deliver expectations. the above of chains we non-refrigerated quarter, approximately and nation’s to which were deliver retail fiscal will store largest refrigerated continues another X,XXX store to one year. by display of major vertical we X,XXX substantially this Our this solutions, of project the end complete by

hope We we of with some experimenting and to continue wide customers you news can to share interesting to market. solutions to with group offer goods regarding grocery we these provide various to print other next services are a and lighting some this our and I efforts quarter. have

our sales to of number NADA good external team continuing sales, Despite and week, Association advance Trade of several Dealers, team automotive and attending growing will in market of car a of opportunities continues position market. Our projects. number this continues the be to and a engagement new Show This market factors used show show our automotive our solid affecting in this new activity. to Automotive National

been has a with number recently. along of moving wins larger Lastly, our court nicely market sports

do that spoken have sales we our in of a solutions, seasonality built of our activities QX outsmart winter, weather year cold winter, our to very normal QX quarter before, have it this our construction As section With good been sales robust realities lighting record-setting although the very our year. have months. does during outdoor a with and and third a means exposed not fortunate company into cycle. on last represent winter expect has us focus slower slowed some are months. we normally QX I And to

every assured momentum be for will opportunity that looking can to You going. keep be we

Next we Meeting hosting be week, our Annual Sales National will in Cincinnati.

resources agenda. development full our all very meetings, sales, together these product For we engineering marketing, and a for bring

with This of investment tech our big and for introductions our learned learned historically best a our sales to done meeting. with the and national combination along and move and excited is this sales marketing will investment last have past, we forward training, a we we sales that from folks. new year. workshops, product dividends have following partner lessons over hosting are has product sales Sharing make big virtual we and practices national meeting. in Immediately our annual be training meeting, this and the As paid will meeting, sales third agent

into activity quota remains all across Going sectors our strong. QX,

still headwinds, of opportunities We both our some are line our ahead significant line. improve many believe and more top to bottom us are and but facing working we we

that, With call I Jim at Galeese for will turn the financials. look over deeper a to our

Jim Galeese

at improved levels both our in reportable share earnings growth, Thank margins, you, The business throughout and and segments and in per demand continued continued sales high strong level. operational and earnings operating period cash our momentum across Jim. Positive generating QX, double-digit expansion significantly healthy continued flow. gross a saw execution

with XX% quarter, attaining double-digit Sales growth, for both Display reportable the XX%. and segments increasing Lighting year-over-year XX% increased Solutions

advance market position to with in potential. continue position We identified our in verticals position profitable and leverage where a strong growth have we our verticals

operating share earnings XX%. margin $X.XX net income rate compares of increased of quarter our of share double Reported year. above the and and and and million, respectively second consecutive to year XX% EBITDA per our adjusted exceeding per earnings $X.XX. prior were year reported XX.X%, $X.XX was prior to with $XX $X.XX diluted quarter This margin adjusted Adjusted last EBITDA

solid business free flow. to The generate continued cash

half approximately of million the $X increased for Second quarter cash of cash first million. to the $XX flow fiscal year flow

reduce from organic generation initiatives. in in X.Xx. XX-month net $XX This cash reduction remains year priority growth the served first fiscal year ratio both EBITDA to net trailing of debt period. a the and reduced half $XX million prior capital flexibility provides inorganic Debt the to pursue and the to debt, adjusted of Our million strong over allocation to and investments

income segment on comments few adjusted broad-based. operating in Lighting performance. increased a Now, sales segment remains the Momentum XX%. improved Demand as XX% and continued

growth in independent network Our the with quarter. several national our provided sales continued customers and expand, account significant to direct from new received orders year-over-year sales

serving in substantial reflecting release to remained the complete in for for margin continued prices and indoor key growth set quarter moderate. press providing for noted earnings vertical a quarter. responsible in the the the expansion increase our and average We Selling was growth, sales solution the size. order progress specific in the with commodity This, stable combined improved application, volume for costs to markets,

Project sequentially further lighting inventory chain forward Lighting opportunities exit customer inventory product a year. with levels ensuring high to second and quarter we in ongoing projected the above while reduced steady in the reflecting at remains level DIO remained and quotation QX quarter, demand. reduce historical meet backlog X% last levels moving have availability to We identified somewhat mid above stabilization. supply been single-digits

refueling points increased improved driven the and Moving by program Solutions, schedule this highly gross C-store, and basis and permitting leverage, adjusted to point to rate out our customized issues mix. changes oil projects XX% program for level $X and across display customer The the million. operating mentioned company. margin to volume and performance installation Display Rico XXX Jim increased want verticals Puerto large service grocery of branding continue. large, and other on favorable as doubled pricing program a I QSR sales fulfillment approximately income high

pivot Concept new market. the over pilot remains capability progress. and teams in meet design with with for the and proposals a in changes. XX the new to customer collaborating existing customers active programs for Our This the continues successfully in requested for to differentiator quickly Display LSI work prospective be very segment

by To summarize, the it performance. quarter was strong solid and financial business, highlighted a for operational

identify to both effectively support We growth. short sales expenses to and programs in investing and continue profitable while manage long-term

with normal activity healthy seasonality. order sales QX quote forward, Looking remain is to expected in reflecting

the to for the I session. will call return back question-and-answer moderator now the

Operator

Thank from you. proceed [Operator Instructions] your question is Please with question. George Gianarikas Genuity. Canaccord first Our with

George Gianarikas

my everyone. morning, questions, and excellent for continued on taking good execution. Hey, Thanks congratulations

if about with maybe I – strategy. could question a off So start just

seems You’ve levels. it like now down your brought to debt reasonable

going is business cash, generating You’re well.

balance to think positioning you company months, and growth? if XX, next accelerate as you how the of you. So your sheet plan of to think XX, you Thank how do use and kind the reposition just the XX potentially about about

Jim Clark

thanks last performance for the the to for over thanks question joining, Hey, the complements George, the and relative and quarter.

not has strategy fundamentally Our changed.

across We our vertical to committed organization. very market strategy the are

recession-proof, we that continue We those XX us. think believe create there recession-resistant and but opportunities are have for show X, that to X, that is businesses to out meaning we legs, opportunity for are something growth did as years long assisting looking growth businesses will structural

two through able But So grow, seven and be remain very committed being portfolio and of right? that we’ve kind to reposition market paying important The debt add to grown we’re strengthening in, that acquisitions going last is and sheet particularly solutions down we above-market there of it’s going we’re we’ve to for the ways with verticals the always terms aligned growth. that to ourselves, organic quarters, customers, out of of our said our balance to our growth. in our to

going to that. we’re continuing against execute to So keep

of pipeline. down to to add try to And being matter a look for a just the opportunity to it’s and is continues relative keep I us aligning we a it very debt, then right market open position coinciding just the active to and we execute. something think be opportunity, us pay we And portfolio. as opportunities the will else the up with in to ready the growth to

George Gianarikas

And you’re science [Technical in revenue EBITDA. advanced rocket the it and you’ve came Thanks. it to $XX for million of necessarily I student best when above guidance doesn’t mathematics, in matrix but in XXXX $XXX algebra a and take outlined wasn’t Difficulty] well what terms million

am what we company? you kind margin structure sort your sort help is a understand should to few structure, curious So look what of business I you if to when revenue years, capable the us can what – out of of, look understand of

Jim Clark

there me I well, – this. start let is think with

of concentration kind that if and revisit of of This by our a both the are lot just markets of the the end year, that First share fiscal wildly cost and top vertical left us sales on all, cost in very to We for of and confidence share runway end high the sooner. we’ve see that, greater sooner, to if and the get looking customer year, and in always in the update hope bottom on the customer. a basic believe that opportunity, not definitely not which to us. prices and growth to what wallet, what allows about we’re still are. a are we this executing We relationship we what we very line. We do to of see the with our We customers, get the we the line by make sure create is make do any are company of pay the pays commitments targets quarter well. of goals to talked we need

the sure relative our we and we ability is if time, that products Our say/do ratio making quite and to still the add go services customer, additional cost an confidence that, and if in of remains And that. it environment high of with are that some the our continue trust with a very has. and that what services ongoing order, products can both is where initial the look execute the do remain in customer committed like believe interfacing confidence cylinders deliver that. can can offerings, firing We’ve to dealing and all on to along But them. into the been we to at continue they on our for that whether we or we’re maintain then or combination we orders, customers, executing to we

well few JSI, acquisition. our you we were length, to refrigeration the – up. company, with the we guard few when and product years there the paired what growth but product have benefit in a So We how back, we a look into and from people that I one caught see we’re LSI do at – off JSI our We with opportunities, as know lines can synergies. customers. going team, don’t both solution to in selling those there, on across across expound one as great But

look growth in both And the in go As in, growth, be a make we we to commercial to market better with a at managing managing the we some activities, stool on and our leverage forward, verticals it at our that become we that. right much sure as by want long three-legged growth profitability. organic through to margin more, we look picking runway have we think meaning we that

regard. out out of that of in not we’re not ideas, opportunities We’re

we add focused some lastly, we were we’re QX there of inorganic was to revamp pretty what there in like from to, lofty our We then I’d of kind And a brought in of can of also I and those down market kind lot and we XXXX. or things out. on, three We It’s an that we plan say targets. acquisition? December sat down that penned actually when of goals them it And the said, skepticism. XXXX. sat

So healthy deliver. sure able also need that ourselves a make to we’re we we’re that in pushing but way, to

those So and on think a we’re and the EBITDA. runway are lot now, the double-digit $XXX we we of past things working million have

George Gianarikas

Great.

plan and is message, we a So more soon? company still you’re hear growth the that will about

Jim Clark

Yes.

still and growth company, runway. don’t any – We’re we’ve a extinguishing that we got see

George Gianarikas

channel you’re sounds the been say. And like the into some accurate it. there M&A characterization proposed Got maybe just it I And but lastly, in of in the – supermarket marketplace the it’s disruption, channel? M&A, there was for should the in something is turned that was the opposite. potential or seeing an activity that that’s Is that particular

Jim Clark

at But saying to we’ve underlines And we’ve ball, what differentiation. very the but It looked certainly anticipated agree it opportunity. at to at going an as sessions, we’re I’d space continue things you we didn’t We good at to delivering turning, we’ve planning had competitive it an our we’re with matter. don’t a we is what this but have get crystal that as some is and if this always going were seen looked it we way which opportunity. is what it little time, that’s delivering. are good And that about talked always turn for and

a good at think promote is to our brand the promote we customers, there of left grocery. and our We’re differentiation runway helping specific of of helping lot customers the and

George Gianarikas

back get in will queue. Great. I Thanks, guys.

Jim Clark

Alright. George, thank you.

Operator

Thank you.

Aaron your question Our question. Please with is with next Craig-Hallum. from Spychalla proceed

Aaron Spychalla

Good for Yes. Aaron Jim, Spychalla. morning, it’s questions. Thanks the taking Jim and

cycles of to about the a In more kind getting? and the some just the projects First half the visibility of talk increased past, for you’ve can little bit second me, commentary compressing. multi-site refresh talked maybe your good see about outlook, on you you’re

as to with balance the trying of Just kind of with puts that and some seasonality takes to we outlook look XQ?

Jim Clark

Yes. that seasonality talked a Well, we’ve is bit. quite always about something

our We they product have – just outdoor in are that our see. forecast focus in of can’t we ways a or lot and don’t we is affected

momentum anticipate, a expect The very, unforeseeable QX. events with QX into trend very it And QX, and a a with in I backed year construction seasonality. down But remove snowstorm as time bit QX. that we we this we’re very the that It year like some strong that things sometimes Obviously, strong timing. don’t last or affect get growth. and or they Q, any we large So the you project our activity and think that X some structurally happened slows backing have if affects a for our snow that. they week it down slows a of

bit weather And have had I bit in is do robust QX been business again, like said, fact that a big I the obviously. as – of indoor exceptional underline was very has was is you outdoor. QX very been can a our if you have slowing. We you type it this affected But little a said, of some of always when last little read. more thing, – like general, will. that guys to year strong just and and anticipate But variability of a outdoor then an obviously QX and we them, year kind part So QX

project – projects kind many the our large years. to of work these large month things activity, periods, sometimes On tend over

with projects. or they commitment of come of of the between a up of go And things And X a fact, we always down generation, the of to fresh really keep if X refresh we’ve which so or of now look in in we’re ago, trending larger invest average in ago, that are years say, are August don’t customers live X to went their and comments they we way X things We any we that is and the XX kind continuing cycle March an I faster. it’s see today, these attention of engaged occurs much just They that is pace really dealing within and will those was the X that the under a given And many September. down X it lower years. emotions years. the keeping their properties or the new projects we seeing are in saw to starting to of bouncing you specifically and those create solidly – the type is we the just environment closer fast was at to a don’t to years offerings, attracting cycle much. that customers their month years to, say moving saw are to refresh and years. or looking which the where one showing consumer, to the affect cycle projects. see to they as think lot the will, And are pace, but in image length that been that just speaks events, back February you back a of we we’re capture we that’s refresh and an if buying kind If made, all And are customers X we habits or what the just and of lot TikTok

So we for it positive very business. obviously see a trend as our

Aaron Spychalla

of the years? you for helped know then of maybe And there. going of some Thanks. some of forward? the of you have I areas kind products focused indoor you new over couple last are that on you this some can talk quarter. that’s kind Can Great. just have about how the completely and verticals called about you the and color talk you refreshed maybe launched of Thanks kind just out that

Jim Clark

our on they plus have XX just by our making time, are back it lines. as products saying remember the continue in kept them me and better, much that go changers, incrementally the we wrong. pace technology year. and to not launched core going products I ourselves were If since But as serve not markets. customers to around better call product And they the and – of years getting products I products necessarily game-changing to existing vertical Don’t us do We are tweaking are get we we is those the have as core a way. have particularly orient that almost X taking game new ago,

of we we to a that talked which changers, have And install applied a time in install introduced We least one to game installer and our but each serve quarter, into install, very I We incorporate is really And products makes easy it variations will towards XX REDiMount. lot normally we the can being lighting, that or the that, to or install on fixture, we will in a to per down installer geared whether markets. that significantly. that a vertical about markets, never an of because REDiMount products year. that for turn easier last and our introduce might the it’s products. the for at quicker I makes go continue a variety installation service have we to and the pace things think our about the forward use and aspects it learnings But a in walk through REDiMount products cycle, minimum cuts away of be X-hour installers to products, opportunities more the lowers it terms controls And talk to throw term, It number in by maintain ability this to easier install like that these to of embedded exceed And simple these from refresh away balanced. are a try a our is new a it some customers year, and has click. teams longer time. the cost reducing where it markets,

that and way use how are our how in at them the products, innovation you And would REDiMount, and haven’t aspects that them thing. go the install in of technical encourage website, we and you to just isn’t to innovating. it. up It’s type I look they If our just people at but kind that looked another of of

Aaron Spychalla

kind we and of you Grocery there. little more of elaborate continue wallet cross-selling an you. share in. that Thank or And anything Right. have if stand That’s and could at the maybe sneak of to contribution the award those just been where then on Can just more Saw one color. I a update expand opportunities from kind potentially? timeline on on JSI? some Maybe looking else good

Jim Clark

on I before And other absolutely. let one me Yes, that, hit thing. add

a It’s to We to about because materials lighting bit. in talking new quite and that. products. an combination designs and years. of we tend you ink things printing help with because past different like wouldn’t are and of to are our are I years we push to we materials, just talk some that years customers. looking add are going everything to of different the that, X partnership give capture, that’s hold them But and want also this X them of use to color X of print canopy aspect about that will our metallic, it are and our the will for variety us What and to some this this color inks good suppliers. that I understanding like you update composite for, you it materials, you And things our in a want but in those years, articulate anticipating materials years X ongoing X

we to intend know they something putting understanding our with listen, and be in the image, have discussions may of less long-term changes life of the look the all short-term with how decision for made time. So, with they hey, years. X in we has this a materials a decisions then to conversations and make selection say, affect we we period that the them. we if make want customers kind If are we X the to they this the that on time, longer customers useful and years, it then a than that of on go it And both those update that has because apply stay

JSI. in So, And is the say last that are new those thing I will product. the specifically also

the We are space. refrigerated in

ozone impact We have impact are that. constantly as as we and the versus at natural things like operating refrigerants well and and cost and impact. environmental both depleting use refrigerants refrigerants looking the They

So, simultaneously. those are that things on going all are

that. or at are JSI us into about or are Now LSI brought to services boundary at so our whether the folks or conversation exactly so and or whether opportunity our time. we graphics flip sure that lighting articulate how group, about the just you or the it’s to we discipline all it’s with to lighting question that’s a it’s time once a to and are selling constant with hard are is that brought happens It’s that look you us underlining are folk one process that into we product a our will that customer But I underline which we that all constantly here, entry the a we is, it portfolio, making talking occurrence regardless sales – and that with time. of this in of in any full was in your call point what customer, is are – and that that established we and talking

be some next quote. to time numbers our don’t covering to You month. specific it we have talking things to at can one incumbent assured, will I the any sometimes maybe But upcoming continue they you are meeting are be of be tend take to because taking And sales projects mature making that and promising. an say just will These a change. about I

the we graphics giving small idea And newer we oftentimes having is look this there at also test in of terms where way kind a we the if of materials whole the using program. you introducing a So, and technology, will, and small pilot everything. are continuity program, are we of are

buyers new have come that We into the earn situation, need we to and trust.

the wins continue as will to we been we I have pace with unhappy move see you not that moving, am forward. of I so And think that and out

Aaron Spychalla

all I the Thanks. color. queue back over. the it Good. and hop turn will in Appreciate

Jim Clark

you, Thank Aaron.

Operator

Thank you.

question. is your Amit question H.C. next with from with Please proceed Our Dayal Wainwright.

Amit Dayal

morning guys. you. Thank Good

quarter, Solid congratulations.

provide you or Just could to larger from? pricing on maybe efforts Jim, improvements side? maybe better you. would some granularity some be auditors the on operating That the begin leverage helpful. with, cost or coming where just if Thank it are Is

Jim Clark

lot changes the which we is these for really we our paper contribute wants because thanks I comments. are the It’s to of. and one do can runway call of we clip over against lot I offer. But of know whole that scope things. kind of I have execution all have leveraging that that identify always it joining small And just it that that that for the left And – improvements. those incremental the it’s thanks of underline I Amit a we Yes. advantage that everybody we taking is to are – think think across I whole things. really things those continued or always a of often effect, improvement all

are at by means XXX% efficiency. We no operating

And that so a those front recognize team look opportunities still at we team, and that – of I of are as us. as individually every a in time kind –

we been we that with So, our operating element. that that price an when be of is It’s type and waste. price delivery, delivery that efficiently important to for along comes have means we reliability disciplined thing. error and less and on-time customers, to something have And on-time that have very need And about. margin we

which And opportunity. so creates we work on those things,

and a about demonstrating the business. go. against kind aggregated can’t elements still it’s And to really we think think quite that And I gain you executing us have talked so enough, to all that. we been of the ways at we And underline just it’s of is look an have it I

us. are still front So, in those of opportunities

Amit Dayal

executed share in And share and you are both Lighting benefiting Jim. perspective, from is you players, years? other an segments how more story have you, are Display market you LSI revenue Thank over expansion in other the last given or then from maybe a market taking X the growth this that winning is words, or from, Understood.

Jim Clark

think definitely share, I market it’s right. a

we have broad-based you seven have above-market the consecutive growth quarterly aren’t there for we now companies, think too double-digit growth. had particularly many are experiencing of If quarters, with solutions that type

market in. rate, So although the the the at grow there not are opportunities that at that – verticals know are that is we and anticipate to that we particularly when we rate, look growing for market you at

but sit work have rates, not these Number ratio, high they commitment. we it’s market verticals. So, that’s that customers, make it right. to be make more is And all general turning our a alignment a that us are filling of there, our garnering and and healthy us I we ratio the taking say/do they two sitting We economic share the favor, that commitment at out we they and to front providing which be – growing are to and then from in is lot pressures. of the general deliver are think we competitors. are resistant I double-digit pressures, said, with may to about a we talk our orders, often, are Like sure say/do hard we exceedingly right

So, that’s happening. is what I think

of above-market We in taking for generally but we lot growth, for also by market it’s accounting are fact that a most that’s healthy are markets just our and part. the underpinned share the

Amit Dayal

Thank you, I That’s all Jim. have.

Operator

comments. Thank for I you. at time. the back to questions There closing management are this to turn any like would no further floor over

Jim Clark

for and everybody again follows to and want thank say us listens. just that’s I in in, you called dialed Well,

I story think front here. a in have that we of great us

still an a through can we grow As we extraordinary have believe front of in this. we effort by is of opportunity here. underlined It believe of us, lot we like Q&A we to a team folks the here and continue today,

to I agents to whole to partners, and want So, thank say customers. underline our just you the and team and

continue We to deliver. will

for to call. continue look I opportunities. And growth will next forward We our look Take care. to those

Operator

This concludes today’s conference.

your your disconnect you You lines this participation. time. may for Thank at

LSI Industries (LYTS) 26 Jan 232023 Q2 Earnings call transcript