LSI Industries (LYTS) 25 Jan 242024 Q2 Earnings call transcript

Greetings, and welcome to LSI Industries Fiscal Second Quarter 2024 Results Conference Call. [Operator Instructions].

As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Jim Galeese. Thank you.

begin. may You

and press everyone, detailing for We joining. fiscal Good before thank the a results. release second morning, market issued 'XX morning, quarter you opened our this

fiscal in involve a With transparency as actual begin addition materially. questions. on and included non-GAAP and of conference XX-K Relations In our are statements most and Officer, open of for press with line Such appears website. operating results LSI remarks our commentary harbor complete opportunities summarizing well and will certain A XX-Q. results over this note corporate release refer and forward-looking our measures contained of call our I release, today's the up be the contained to Today's we this this Please will we statement, risks as Jim second quarter referenced our section reconciliation differ of call prepared in throughout the call to presentation Investor in in and presentation business improved Information include release non-GAAP and is GAAP safe about which to responses you for call Executive remarks, today's results. recent posted conference that these President At XX-Q. press I'll could morning's will turn conclusion that, may Chief our statements the management's results. to conference questions Clark. our call outlook.

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

to our our segment, for year-over-year vertical. in were are well to even to earlier environment. performance, issued continued general temporary In our on a meaningfully headwinds our challenging and X% and in As today, grocery press This release year in some the margin noted and our comparison manage in improved share in down quarter while with XX%. both we line ability despite continues reflects sales gross prior perform expectations business margin the sales, sales while Lighting take LSI in business

order and from remains quote XX% up almost last our quote sales Our high, extended year, activity but conversion while remains stable. rate to from

displays broader the finding struggled maintain competitors growth, creating momentum, headwinds the broader and had vertical opportunities more LSI to impact successful Display momentum impact in products. is This segment. to line top of many been challenged the lighting when have have market Solutions apparent our has While stand-alone have In as and our and on sales. segment, focused grocery we in our lighting in in for our profitable they refrigerated remain graphics, compared

few X,XXX with As our year. years recently This another project we awarded longer. we sites in in Display noted win group than include to will span sites X,XXX locations that award a will more span the a averaging XXX Solutions and set significant were refueling considerably to months back, X,XXX X space per

of in vertical flow refueling very space overall the robust and normal Our right now. this business feels

refrigerated product recent customers engaged our of a are we in X with In currently project major addition multisite C-store these to number who wins, locations. testing are

In engaging accompany Gas offered approach Wall the station with in investment and titled well. article opportunity, The higher-margin by segment by pizza, LSI in our underlying the very is gas goes in-store fact, continued recent Street the a in this of a the published month's underlines traditional sales. of and that article it thesis solutions last a sign fits growth Journal to sales

note grocery of the chains process has a a would this the Addressing high-quality in review and been a We that entire of sector in merger. and temporary results across are engaged in grocery like the changes grocery landscape. I vertical vertical slowdown and regulatory the space slowdown merger confident possible the companies X review will This has as experienced await as and an caused solution within recognized we to we're federal the currently the proposed to under provider, the competitive wins. extended the have U.S. continued very are notable in largest specifically, the

future merger Although anticipate it's impossible hold there this approval will continued the associated be forward. pent-up will the to demand moves and timing in and process, see as what the with we space that growth the process

move very be our prepared believe and and fit are disappointed well generate and opportunity will likely retain taking, this this whether engage we to with business customers or help and and the fails we These evolve continues LSI While merger into products the as market that is additional significant future. time serve for the changes to the process occurs customers forward, the landscape services offers, to change. with that will we now it

the and earlier of this has certified very high, their On these of say is with the of Interest anticipate to this proud in UL product on front, Staying new last solutions XXX was Department and I'm with R-XXX innovation. product already the store our years. our new environmentally shipped in continued continues in product LSI products each pace revisions set article X that Energy the product sustainable growth XX-plus customers. to or to first own as environment. and customers bar introductions month, new effectiveness product or new refrigerated our introductions approved one DOE and of test our we

lighting including and which in We is properties outdoor lighting XX-degree a XXX rotated customers our our our products, series, recently X modular and lens solution lighting our Bay expand not their Light, our a allow High new lighting fixed light business. product includes but agents their unique in to products access introduced that and completely engine solutions product linear to showcase segment. peak that new that be rotatable set, broad can increments. only degrees These Turning

meet, to and development company, I debate works be will sales has feel the real an offset coming in our and our to discuss, headwinds, majority our the those of momentum of could always quite LSI gain and create this is This engineering opportunities. opportunities conference. meeting vertical doing, teams entirety provides for no elevated us. pivoted causing team experience off week, conclusion. national There marketing, we're lot but way annual possible feel of Next hosting we form our grocery effectively I learning a tailwinds process and we to the have sales, conference. product is and is we work the of the some the headwinds, impact front across proud a of This is question experience about as and this a I'm of enthusiastic its our team for team

back capabilities respond, possibilities over we're business Jim turn and the that for about to a ongoing the at our With improvements to to We and look ahead. excited capacity the I'll our Jim? lie have that, the and deeper Galeese overall the financial call performance.

Thank you, Jim.

to product year managing ongoing These vertical quality expected margin second and markets, the point while strong efforts in price XXX successfully prior the resulted half and and million in quarter quarter, of sales. The the second the demand per basis year reflect EBITDA of the adjusted over reducing lower lowered TTM equal for in maintained $X fiscal execution managing Net fiscal year-over-year $X.XX quarter earnings, generated generated business $XX million We of improvement to results now half. an in the This margin XX.X% a on debt cost. Debt further selling adjusted disruption earnings ratio per in adjusted prior free first of under focus for temporary gross the of vertical. cash EBITDA the steadfast to X.Xx. $X.XX including flow on of and to grocery again share earnings year, first share key Our equal were a

sheet future and investments. flow support position debt for capital Our balance the optionality allocation cash and priorities our provides

Investments priorities lighting productivity. in capital profitable solutions included display were the new operating of over throughput in Investment the machinery those products, and support half tooling $X investing fiscal of million One spent includes both across capacity, and and to growth. first increased organic and was key for programs critical year.

driving remain share paid to shareholders XX we quarterly $X.XX February approach balanced February be to cash committed on of per of addition, value, announcing In a dividend a X. for record shareholder for

Momentum of year-over-year increased Operating Now year. continues X% last below a in income comments our sales or XX% on segment million performance. few on $XX Lighting segment.

year, we market. prior key manufacturing gross Lighting were items above and QX. as enter remains to Quote backlog for stable contributing multiple continue We further our position. lighting rate improving The with significantly, share the rates as market, nonresi our pricing, improved rate than engineering input activity increasing the increasing XX%, XX% Items value the activity margin broader value outperform cost, to higher lower broader generate verticals include the the to mix, material to points higher expansion. basis orders continue XXX favorable quarter construction productivity. a moderately fiscal

cycle, Our the constructing demand the team timing effective and done patterns. an fluctuating variability conversion for our chain managing supply planning production in has job to allow quote-to-order

We to half expect in second momentum line the of fiscal the continue year.

to Solutions. Display Moving

Second vertical. in grocery throughout reflects quarter the the project disruption activity performance

in We the with on continue release. to prepare on and new position to environmentally with return we projects demand period activity. as Relocation on work Jim to new received turnkey disruption operational. the customers refrigeration of large use case. closely facility And is normal project several waiting our We friendly display production timing UL this our mentioned, complete and final start-up for approval R-XXX

shipped unit customer first The last week.

for We're solutions of increase be turnkey QX, significantly last a C-Store in solution turnkey several The capabilities. Our oil is for the company in LSI comprehensive the to In provider trend refresh awarded backlog customers installation. vertical recognize in in through large seeing program brand over increased or program planning refueling the an programs value quarters. fiscal LSI, has requiring structured the requesting locations. X,XXX our for as site the responsible

sales programs. increasing Solutions begins activity strong will remain year by is Looking on 'XX. forward, throughout several calendar site and to QX Pursuing refueling vertical 'XX as from expect major modestly Performance with vary to graphics projected we levels. increase release Display QX activity

prior sales is fourth release to from project the project below occur, As into increase QX, grocery QX 'XX. begins somewhat sequentially but accelerate remained activity activity Grocery fiscal and will in to expected quarter year. in

to remain and QX call the markets our we're business our initiatives, debt trends the same: back cash effectively allocation. for The underlying the for moving disciplined for positive, question-and-answer now confident moderator and growth our managing target advancing and the session. I'll remain priorities and plans Our in exhibit forward. smart, execution strategic turn focus capital

[Operator Instructions].

question Craig-Hallum from with Group. First Capital comes Spychalla Aaron

in just initial progress the opportunity look for then Can you that move you to of a being appreciate and just talk the about could you mention big Can how refresh commentary maybe years couple if separately some site X.X the there talk we industry before. years instead award, cross-selling. just there. saw the And that details just about out X,XXX fresh started I on as on and foods a more on that of I years? project And of be has shortening yet? X.X that cycles

grocery, to the in to being display qualify We don't solutions it opportunity by of the with dollars. our to a know in opportunity that retail, set to measure, in have commitment X markets player in a it know the the very to see we're time I it challenges that Not quick-serve graphics, project factoring some aggregate, take customers' And a refrigerated just how And of going are market and a locations. there's the us be the refresh done larger as I'll is cycle that. others, is in expansion challenges and in span. of bigger on X-year cross-selling, aggregated And than the them of be I is dollars. the a the than in which there excess that is the will and few X,XXX of again, second just environment in sites talking firm about C-store over still in and with quantify lighting, X.X projects; and likely of specifically. it's the a year. terms but every that X,XXX that, scheduled, material it's a we think XXX realistically goalpost project, location we've years, it to don't say, combination are that of display the solution There We big. terms that for is to that goal it's on particularly projects or X,XXX own is and except to quantify some in how second a but is over player. annually get we the small offer, -- big. necessarily trying billions it There mention billions which won, a a we're very of

X we we'll of have we're the think current requires a excess all can But and annually it we'll cooperation existing project, more double X of quarters, sites the done. and us puts the ability maybe existing a updates to so our of think And customer move available within our as couple the that to customer's feel easily better and But years in for forward. We to or the number again, in footprint of system. to I get things. get within it type those the in be

So it's good news.

we'll find that terms timing move think forward. we I more of as out in the

of And grocery, but the flight little part XXXX. increased X activity this of accelerating And is starting customers coming much in to then just recover? the thoughts bit as big Can XQ on maybe the about recovery? your just are just from how quarter, you just talk versus the a this on how commentary large then new on into R-XXX overall third offering in a

let competing slowdown will. one, reason we're FTC-related this newly review isn't related that talk number temporary -- vertical, known competing who against the grocery broad see I a exiting? as than this X location believe buying one likely continue you about across we momentum or cetera customers. on, serve. It's to you we invest stores? drag against? entire in It's believe the broader against on competing the segment the will should impact to the have that Are the to or of that will X is they compete specifically standpoint, will a new me who drive market a the against will from compete headwinds et Are they're customers. really It your competing my And or uncertainty the how they're you where And competition if the much the So that against competitor Are who being possibly segment X against facing just to be in competitor? I to them? looks think you completely? location or Are merged and the exit where and I you to sector. I to So -- entity you impact this across X a have just are

demand quarter We're continue With are there that those is opportunity. right strictly they see is the is the that in, a the regardless progress now, this, be of pent-up though, we're but ends up things delays believe So disrupted. for fourth us, and move regulatory hopeful forward already loose said, we that which progress have crystal that there and third timing shake the to related just whether Any we where the on certainly don't pent-up don't, will the quarter. of here, on to whether that ball happening. that things in on could things into or

anticipate R-XXX rate we part In And products. But the change There's we we've in expect everything that take solution. on the high of solutions, now. that traditional are now, Any these terms the interest going that versus traditional the them. right over adoption certainly our R-XXX could is of better conversations year. are to on based shipped

to the will I see experiment take this feedback to it think in put the forward to it process, I will. performs very it how move then out expectations will look into they'll customers the and most that perform and that. in product, think we're a to. that sure and provide But make performs, of field confident they'll We're marketing our with slowly solid to it continue that

more momentum that we of forward. calendar supplying year this over suspect wouldn't shift, In we're we be as will that to a any be of our but talking move more product calls, year, big XXXX. going I and So about this

with from comes Amit Wainwright. question Next Dayal H.C.

this C-store this investments in upgrades? these required will in and already And to working of upgrades Or Jim, respect products type anticipating, we With you cycle investments be will meet something of meet that on what place is insight are do you on? demand? offerings to the be any potential have to

and have do to the experience it. the certainly capacity, skill We the

other course As calls, our business. about of normal we've talked on is this

at X anywhere putting and plans move uncommon and these it's and only going from or for we XX what of look up like. be on XX to us delivered scale we actual a from changes the very confident were have getting well to very not going to of systems what a feel opportunities, X as and that they're but also award contract of sites. fit they'll months to to production XX XX we of looking the typically longer to to anywhere are preplanning have is back We When are XX forth involved. project additional not test schedule, We to capabilities be We to products forward. our that months current depending into number given,

The we current beyond these infrastructure, made our right X have in the the was another allows normal the excessively on capacity our which what it, and only handle capital-intensive we more have to within facility another, some plan, are is large have that to a XX,XXX, to So square we change now accommodate in Jim? opportunity, us are plus not And expansion. this up plans, we scale customers that. we that or feet, provide to for XX,XXX we projects took

Yes.

we could to just had. little feet, have within bit the more that room, give square XX,XXX a done us running but we space it

you in by the like you already from in investments It like future? are your seeing benefiting cetera? already of you segments type QSRs, some Are et customers this your maybe other of will these looks or

from in these that the competitive forces. going market, the absolutely on benefiting we're are Yes, changes

a transaction on to sector; up in displays, And being in my that QSR the in about article strong Street expansion grocery sectors sign the pizza. entire month. just it believe a just grocery very offering last that displays, not published These earlier talked C-store we've in-store to requirements. space, elements December we have, Wall lighting, margin and space. we key are space, talks called great across comments talked improvement the about graphics. our are XX, digital deliver set the petroleum Journal about the it's in, in bit a how Gas those with stand-alone well I As customers, It refrigerated the of driving about and one for often, traffics, we're little the it we're sector, expands that really all that but

we we is and feel is temporary of boom all to a us thesis temporarily underline, forward. and disrupted now, not our it right It's to it. Although be And to. this still with plans believe structural the we if to original pause. respond be market, we grocery capabilities going to we need a capacity to have able could want really sound additional to the respond be to it's have I to And able anything

earnings here Last you for question other marketing scale this depending The these me. on develop your you how sales do that Or needs variance levels from the overhead to from you improvement forward, quality as going is and stay? to some of front, on expect businesses?

You folks have lot for been on following a this while. us who people the a call have for while. been A us following of

will would opportunities. out general calls We've just continue environmentally we define get have continues environmentally workforce lot have to able of to that well. us. there's has been continued that been Stable this control, had lot always plans prior We've talked incremental very control, us. a that and able of us. business. advantages in that's improve to about And benefit We our as the of But to outside we to it benefit from have front going to labor a but left our that and still out on still saying that manage runway improvements continue to as supply of extract to. I the we've of chain of

slows lot deferred in said for customer to Our have remember, We improvement been runway continued our And the left projects those hold EBITDA for on our think was we're are seasons. benefit that affected in continue I of a call, have that efficiencies like thing, some slower or our XX.X% down. slower on have able last through by the margins. us. we do that we quarter's will cold gain remodel QX seasons. peak and of and seasons slow construction to QX weather type down, seasonally It weather, versus quarter, general,

those So slower But can our margin you QX bit we're improvements. here, manage extract into in able see QX, ability now, a efficiency QX, our that impacted. but we're QX extract and to opportunities and is our even quarters still little -- more to

a us. there's front lot left of runway I think still of in

Amit, Jim Galeese here.

not lever. a as Jim item, What us is is driven improvement Just one there's operational well commercial by confidence certain on from being contributing gives the but to what multiple lever as build factors said. both the where design in labor projects. impact starting to then And and ability costs, material play with productivity. of a sourcing operationally, with our secondly, price savings, chain we input new supply from our mention Commercially, then effectively products, the manage

track we of of very closely. all a And green. lot So there's those

we're us for and confidence on have which some it that quite ability levers in confident to the improving our So been contributing the because that of time, build sustain gives multiple that improvement. to improvements, now our quarter-on-quarter

answers. You all guys appreciate Thank you. the

Hayden next with is Leanne Our from Canaccord Genuity. question

This for Gianarikas. is Leanne on George Hayden

any the bottlenecks supply permitting of be see or Just you potential you questions for a like or seeing? Can in just example, any me. chain, couple you bottlenecks equipment discuss might might from transformers

we where the right uncomfortable the that of in that. so just disrupt chain other and this spot. I will switchgear doesn't understand comfortably predictable, And I is say still much should to sure like permits are of and follow just predictable still for them. there. timing Issues there's or exist variable call None we're projects; nobody now suppliers cancel say. very has us I on are that markets those challenges the industrial speak, become and I'm they out now more supply things around like that think

of more now. Although the the we would they're much stable business those I disruptions say still and pace of they're have occur, reflective more

a but that I very that there project that surprise. them don't had So a we're in I doesn't longer now. disrupt customers' comfortable say doesn't couldn't massive the it and want result It's past, to in just that give to any like to somebody the as moving environment, it impact from it want would schedules isn't protracted commitment say I But to and us environment, within forward. to don't say disruption

believe briefly this how changed in M&A touched And parameters transcript. was or on your could at around then the But at? on in thoughts target that update looking the great. Any share I all? pipeline and us updates you Have accretion your is realm would be

disclose at It's of value to about perspective, that terms frustrating business involved. looked cultural want a any talking make I looking a that are We here or anything and this, of at We've obviously, number good we're which as to acquisition. close perspective, in in fit sure or they me can't to an highly we're a we projects. from in we categorize I engaged that type But are everything we of thing. very came actively or would that it of

We are good in position very a financially.

ratio X.X. now As leverage a you probably all noted, in there. We're is our position good very

if our that very needed do have And access. plans, partners. good we we have to We discussed we and something have current required financial beyond

more So I the feel opportunities. right active lining market all things general, In of terms in those now up. are of potential is

still will. to willing paid better as if buyers the lot Financial normalized, multiples the of things accelerate a competition expectations you like the that fierce. think sellers the is They very is are still I that. are and from still out But there. pricing,

that in engaged ourselves now. but find competitive very find we we're in process, more a we So opportunities

I not we're advance encouraged net, So I'm net be something we'll hopeful next very would sooner. very on and the to certainly able year, say within if that

Rick is Accretive Our question Capital Partners. from with next Fearon

in and quarter. Yes, easily. your know improvement impressive of on doesn't Congrats just I a that come margin solid uptick another gross really scale

hearing this So side? the in have especially on just lighting interested to increase, the what levers achieve some of been

relative pulling, them. room some a think able that levers those the we've talked But the of pull. to about them to efficiency. giving try things in levers suppliers. suppliers Supply it's being very still manufacturing good our picture, that stay supply improvements supply pricing. pulled I forecast we're that, and quarter team chain. reliable are just way. you to not past our And expediting about efficiency still in X/X things. ongoing them good chiefly, of that about if We us, to do the manufacturing on When longer no paint to the got a you're And the they've we're It's a partners and we've it's have were being of chain, we've I improvements been way, we in predictable, the

not the You're lever contingencies. pulling for

You to disrupting of basic think there's say that. team is within process is to we levers I expensive. that want your a good not well-grounded at still are manufacturing levers have we simple doing business. pull levers running and just good that And our room And the we're pulling.

their LSI's just Group. next about And announced over Restaurant Carrols also King long-standing remodeling the X,XXX over X the largest franchisee, And know announcement, in customer of acquisition stores aware, they well you're as the Burger talked I years. franchise

interested think that opportunity might on QSR can't there's some there. on And but horizon. just I as any activity help the as well this in I so your was other perspective be really I

we're structure potential partnership. become of with I very the think of customers they're them. which a high out making or some what congratulations think And dealing say think number and and say very We're real with transaction, not expect. that up what we're I why the they We super and it's of within other they going I ours, that. aware changes and gotten and We to their they fits down in such of realistic it. very great responding We it sure respect value plans attracts matches partners value run don't conversations I because business, that being that's that our I'm customers I'm know and execution newer to changes will overcommit. customers able with that flow well their partners We earned and pace to because a ratio. real make And strong that of do have have from in the we've that I of it, I in we're solutions that will at their to they business that. space. normal flashy, do. out their the disrupting them. a we've have environment will given of say The the the those do of it's are. we And deliver and to them sit gotten really benefit we well that and we've our very potentially it. number that exact hard mind the and benefit although customer reputation way without we is with. system, will within of And well very safe think to That it's not come from thing same

I'm we're what that I will excited there And So there. would process. happen right in planning very suspect that

on really, question the other only to balance strong My of one questions other sheet. follow-up your relates

reproduced the work front. great methodical again once debt with You've reduction and on that

market if I with what with more color than seeing. sure, across And it And so we it here valuations? It wondered that any a of opportunities the like if you hirer's some, desk. could on I'm been, that's just exciting consistent but are curious is you're coming yes, are has provide sounds

I'm not it. on sure I'm

proud perspective, now. market, properties that best on like saying, valuations, environment. That due think much that or of but individually like They're are people willing much to They're the get fit. They're but their market. to still sale, they would that's is, sit for they're things in cultural corporate more to or is estate conversations. more also. what more are know, remain much as and businesses inflation the in we is whatever much still and accomplishments encouraged we for final, I a element, would say. know, value I And are by were differently. agents up where down that were had, be that although is are well a the we back, that future enjoy in, And the the a they've and I sale, of if A of talk value feel home currently not great you And financially in for most plan, of call aware “Submit the much of is. meaningful. just to support all very the business But meaningful The bids highly analog years no business more we are We the inspection, the much why can in it and p.m.†valuations X more owned the couple in or your where course give changed thing. good see our real Obviously, of also buyer's to It's we best they're business M&A future-oriented. there the You’ve what conversations opportunities conversations fit jump we and maximum There in know that balanced. not valuations has businesses those differently. has might hit type involved like we're the whether completely are realize change feel or we want just about this owned we have independently it. things it key a respect it us. bit. We there's value, We but fit. that pricing business, go they're and on Overall and value for

So it's door. little funny-shaped a

look we and we horizon do in We continue there at. But are us. for the think to what excited, that on opportunity be we is very disciplined

to remarks. of for to have session. the over I'd We turn Jim now back concluding reached end the like call question-and-answer Clark the

don't think question. I there's any

headwinds, our the be for hold. have exceptional done read If we those headwinds job future prepared and and you our but press certainly you some our be going ready think challenge that of demonstrating heard an is ability to I what to facing we're comments, release,

Our regardless with of some expectation is, a of with us opportunity great FTC of of reviews what customers, current our some happens in there's are out either things that direction. front and the

that covered lot core believe grow. And with left businesses, call. Margin to we also demonstrate a have of We we're we thesis. able our manage lot We our that on runway today's that. to to and believe performance, investment we a just still have room room in these platform, headwinds, even our

is our on just And see couple trends way excited opportunities looks excited it's or the other about these I'd And manage but business. we anything. causes movement have that systemic see and about it the We're run historically We're for front. challenges, terms about excited forward slower or of long-term we combine what in saying the everybody to excited any and anything we don't future. QX of QX and call that Our like you see we're the the are in We disproportional, We're the market. in potential concern you about on not. M&A of leave quarters. type a

excited and time bit a off little company. thank goodbye. say appreciate few next come this and us the that, after we and I'll that, about for ones learn with So With minutes you to the all the spend and more take a of quarter, you, we the

This concludes today's conference.

You time, may we and participation. lines you for disconnect this at your thank your