LSI Industries Inc. (Nasdaq: LYTS, or the “Company”), a leading
U.S. based manufacturer of display solutions and indoor/outdoor
lighting, today reported fiscal second quarter financial results
for the three months ended December 31, 2022.
Fiscal 2023 Second Quarter
- Net Sales +16% y/y to $128.8 million
- Net Income +107% y/y to $6.4 million; Adjusted Net Income of
$7.6 million
- Diluted EPS of $0.22; Adjusted EPS of $0.26
- EBITDA of $11.5 million; Adjusted EBITDA $13.0 million or
10.1%/sales
- Free Cash Flow of $8.9 million
- Net debt declines to $60.1 million, or 1.3x TTM Adjusted
EBITDA
LSI delivered strong year-over-year increases in both sales and
profitability in the fiscal second quarter, driven by broad-based
commercial demand across both the lighting and display solutions
businesses, continued price discipline and a more profitable sales
mix.
The Company reported net sales of $128.8 million in the fiscal
second quarter, an increase of 16% versus the prior-year period.
LSI reported net income of $6.4 million, or $0.22 per diluted share
in the fiscal second quarter, versus $3.1 million, or $0.11 per
diluted share in the prior-year period. Adjusted net income for the
fiscal second quarter was $7.6 million, or $0.26 per diluted share,
compared to $4.2 million, or $0.15 per diluted share last year.
LSI reported Adjusted EBITDA of $13.0 million for the fiscal
second quarter, or an increase of 54% versus the prior-year period.
The company reported an Adjusted EBITDA margin rate of 10.1%, an
increase of 250 bps versus the prior year period. The improved
margin rate was driven by a combination of volume growth, improved
price realization, disciplined cost management and a more favorable
sales mix. A reconciliation of GAAP to non-GAAP financial results
is included in the attached press release schedules.
LSI generated free cash flow of $8.9 million in the fiscal
second quarter, increasing free cash flow for the first half of
fiscal 2023 to $19.0 million. Net debt decreased from $77.1 million
entering the fiscal year to $60.1 million at the end of the fiscal
second quarter, reducing the ratio of net debt to trailing
twelve-month adjusted EBITDA to 1.3x from 2.2x last fiscal
year.
The Company declared a regular cash dividend of $0.05 per share
payable on February 14, 2023, to shareholders of record on February
6, 2023.
Management Commentary
“LSI delivered strong second quarter results, highlighted by
substantial year-over-year growth in sales and profitability, along
with improvements to other key operating metrics,” stated James A.
Clark, President, and Chief Executive Officer of LSI. “Our
performance reflects balanced sales and margin performance attained
across our two reportable segments, while continuing to
successfully navigate a demanding operating environment.
“During the second quarter, our Lighting and Display Solutions
segments each achieved double-digit sales growth and margin
expansion, versus the prior year period,” continued Clark. “Total
Adjusted EBITDA increased 54% year-over-year in the quarter, while
Adjusted EBITDA margin exceeded 10% for another consecutive
quarter. We continue to grow our share-of-wallet within key
verticals markets, building upon a growing base of loyal customers,
while demonstrating the value of our one-stop, integrated lighting,
display and merchandising solutions within underserved and emerging
growth applications.”
“As expected, our business continues to generate strong cash
flow from operations,” continued Clark. “With trailing twelve-month
free cash flow conversion approaching 70%, we’ve continued to
direct capital toward debt reduction, consistent with our current
allocation priorities. During the last year, we’ve reduced net debt
by more than $25 million and ended the second quarter with net
leverage at 1.3x. We anticipate continued, positive free cash flow
generation as we enter the second half of our fiscal year,
positioning us to further reduce debt levels while increasing
availability under our existing credit facility.
“In the second quarter, we successfully completed a $12+ million
rebranding project involving approximately 200 refueling sites in
Puerto Rico for a major oil company. Most of these sites were
rebranded during the second quarter, as we successfully delivered
on the demanding scheduling requirements of the customer. Following
the successful completion of this project, which was our first ever
project in Puerto Rico, we continue to evaluate additional
early-stage international market opportunities that could represent
exciting new entry points for our business.
“Also in the second quarter, one of the nation’s largest grocery
chains awarded LSI a major display case expansion and replacement
project, committing to purchase more than $12 million of
refrigerated and non-refrigerated displays during the next nine
months. The award follows the successful completion of an earlier
project with the same customer, which represented a similar number
of stores and revenue profile. Our grocery customers continue to
invest in programs to enhance the customer shopping experience and
generate incremental sales,” noted Clark. “LSI is well positioned
to capitalize on these opportunities, partnering with a number of
grocery chains on their specific branding and technological
requirements.
“The Lighting segment continued its strong momentum during the
second quarter, generating year-over-year sales growth of 17%,
while operating earnings improved 45% versus prior year. Sales
growth was broad-based, with significant increases in all vertical
market applications. Our new product development activity the last
two years prioritized improving and expanding our indoor product
range for select vertical markets which, when combined with our
widely accepted outdoor portfolio, creates a powerful, value-add
solution set. Indoor sales continue to accelerate, achieving second
quarter sales growth of 32%. Our enhanced offering has increased
the number of orders containing both indoor and outdoor products,
serving to increase our average order size.
“Display Solutions segment sales increased 15% versus the prior
year second quarter, reflecting volume growth across a number of
our key verticals. Our order fulfillment and service execution for
these made-to-order custom specification projects have been
excellent, meeting or exceeding demanding delivery requirements
despite ongoing delays and changes to customer installation
schedules, permitting and component availability. The Display
Solutions segment gross margin improved 620 bps year-over-year,
given favorable program pricing and improved sales mix. Operating
income margin improved to 12.8% compared to 7.4% in the fiscal
second quarter last year.
Clark concluded, “We delivered a solid second quarter and we
exit the fiscal first half with continued momentum across our
business. Demand levels in key vertical markets remain favorable,
our backlog is healthy, customers increasingly recognize the value
of our solutions, manufacturing and supply chain execution remain
on-point, and positive cash flow and debt reduction are expected to
continue. Looking ahead, despite ongoing pressures on the general
economy, we remain optimistic about the second half of the fiscal
year and the long-term prospects of our markets. We’ll continue our
emphasis on balancing short-term execution with long-term
investments to build the business and achieve profitable growth in
the years ahead.”
Conference Call
A conference call will be held today at 11:00 A.M. ET to review
the Company’s financial results and conduct a question-and-answer
session.
A webcast of the conference call and accompanying presentation
materials will be available in the Investor Relations section of
LSI Industries’ website at www.lsicorp.com. Individuals can also
participate by teleconference dial-in. To listen to a live
broadcast, go to the site at least 15 minutes prior to the
scheduled start time to register, download and install any
necessary software.
Details of the conference call are as follows:
Call Dial-In: 1-877-407-4018 Conference ID:
13735537
Call Replay: 1-844-512-2921 Replay Passcode:
13735537
A replay of the conference call will be available between
January 26, 2023, and February 9, 2023. To listen to a replay of
the teleconference via webcast, please visit the Investor Relations
section of LSI Industries’ website at www.lsicorp.com.
About LSI Industries
Headquartered in Greater Cincinnati, LSI is a publicly held
company traded over the NASDAQ Stock Exchange under the symbol
LYTS. The company manufactures non-residential lighting and retail
display solutions. Non-residential lighting consists of
high-performance, American-made lighting solutions. The Company’s
strength in lighting applications creates opportunities to
introduce additional solutions to its valued customers. Retail
display solutions consist of graphics solutions, digital signage
and technically advanced food display equipment for strategic
vertical markets. LSI’s team of internal specialists also provide
comprehensive project management services in support of large-scale
product rollouts. The company employs approximately 1,400 people at
11 manufacturing plants in the U.S. and Canada. Additional
information about LSI is available at www.lsicorp.com.
Forward-Looking Statements
For details on the uncertainties that may cause our actual
results to be materially different than those expressed in our
forward-looking statements, visit https://investors.lsicorp.com as
well as our Annual Reports on Form 10-K and Quarterly Reports on
Form 10-Q which contain risk factors.
Three Months Ended December
31
Six Months Ended December
31
(Unaudited)
2022
2021
% Change
(In thousands, except per
share data)
2022
2021
% Change
$
128,804
$
111,143
16%
Net sales
$
255,873
$
217,540
18%
9,038
4,422
104%
Operating income as reported
19,059
8,866
115%
1,002
1,130
-11%
Stock compensation expense
1,553
1,686
-8%
-
340
NM
Acquisition costs
-
340
NM
33
-
NM
Severance costs
46
-
NM
486
-
NM
Consulting expense: Commercial Growth Initiatives
789
-
NM
$
10,559
$
5,892
79%
Operating income as adjusted
$
21,447
$
10,892
97%
$
6,417
$
3,105
107%
Net income as reported
$
12,678
$
6,238
103%
$
7,627
$
4,241
80%
Net income as adjusted
$
14,704
$
7,781
89%
$
0.22
$
0.11
100%
Earnings per share (diluted) as reported
$
0.44
$
0.22
100%
$
0.26
$
0.15
73%
Earnings per share (diluted) as adjusted
$
0.51
$
0.28
82%
(amounts in thousands)
December 31,
June 30,
2022
2022
Working capital
$
84,891
$
84,298
Total assets
$
296,283
$
311,080
Long-term debt
$
59,250
$
76,025
Other long-term liabilities
$
11,583
$
12,667
Shareholders' equity
$
161,316
$
147,769
Three Months Ended December 31, 2022, Results
Net sales for the three months ended December 31, 2022, were
$128.8 million, up 16% from the three months ended December 31,
2021, net sales of $111.1 million. Lighting Segment net sales of
$66.8 million increased 17% and Display Solutions Segment net sales
of $62.0 million increased 15% from last year’s second quarter net
sales. Net income for the three months ended December 31, 2022, was
$6.4 million, or $0.22 per share, compared to $3.1 million or $0.11
per share for the three months ended December 31, 2021. Earnings
per share represents diluted earnings per share.
Six Months Ended December 31, 2022, Results
Net sales for the six months ended December 31, 2022, were
$255.9 million, up 18% from the six months ended December 31, 2021,
net sales of $217.5 million. Lighting Segment net sales of $134.4
million increased 24% and Display Solutions Segment net sales of
$121.5 million increased 11% from last year’s net sales. Net income
for the six months ended December 31, 2022 was $12.7 million, or
$0.44 per share, compared to $6.2 million or $0.22 per share for
the six months ended December 31, 2021. Earnings per share
represents diluted earnings per share.
Balance Sheet
The balance sheet at December 31, 2022, included current assets
of $149.0 million, current liabilities of $64.1 million and working
capital of $84.9 million, which includes cash of $2.8 million. The
current ratio was 2.3 to 1. The balance sheet also included
shareholders’ equity of $161.3 million and long-term debt of $59.3
million. It is the Company’s priority to continuously generate
sufficient cash flow, coupled with an approved credit facility, to
adequately fund operations.
Cash Dividend Actions
The Board of Directors declared a regular quarterly cash
dividend of $0.05 per share in connection with the second quarter
of fiscal 2023, payable February 14, 2023, to shareholders of
record as of the close of business on February 6, 2023. The
indicated annual cash dividend rate is $0.20 per share. The Board
of Directors has adopted a policy regarding dividends which
provides that dividends will be determined by the Board of
Directors in its discretion based upon its evaluation of earnings
both on a GAAP and non-GAAP basis, cash flow requirements,
financial condition, debt levels, stock repurchases, future
business developments and opportunities, and other factors deemed
relevant by the Board.
Non-GAAP Financial Measures
This press release includes adjustments to GAAP operating
income, net income, and earnings per share for the three and six
months ended December 31, 2022, and 2021. Operating income, net
income, and earnings per share, which exclude the impact of stock
compensation expense, commercial growth opportunity expense, and
severance costs, are non-GAAP financial measures. We exclude these
items because we believe they are not representative of the ongoing
results of operations of the business. Also included in this press
release are non-GAAP financial measures, including Earnings Before
Interest, Taxes, Depreciation and Amortization (EBITDA and Adjusted
EBITDA), and Free Cash Flow. We believe that these are useful as
supplemental measures in assessing the operating performance of our
business. These measures are used by our management, including our
chief operating decision maker, to evaluate business results, and
are frequently referenced by those who follow the Company. These
non-GAAP measures may be different from non-GAAP measures used by
other companies. In addition, the non-GAAP measures are not based
on any comprehensive set of accounting rules or principles.
Non-GAAP measures have limitations, in that they do not reflect all
amounts associated with our results as determined in accordance
with U.S. GAAP. Therefore, these measures should be used only to
evaluate our results in conjunction with corresponding GAAP
measures. Below is a reconciliation of these non-GAAP measures to
net income and earnings per share reported for the periods
indicated along with the calculation of EBITDA, Adjusted EBITDA,
Free Cash Flow, and Net Debt to Adjusted EBITDA.
Three Months Ended
Six Months Ended
December 31
December 31
2022
2021
(In thousands, except per
share data)
2022
2021
Diluted EPS
Diluted EPS
Diluted EPS
Diluted EPS
Reconciliation of net income
to adjusted net income
$
6,417
$
0.22
$
3,105
$
0.11
Net income as reported
$
12,678
$
0.44
$
6,238
$
0.22
785
0.03
867
0.03
Stock compensation expense
1,341
0.05
1,274
0.05
-
-
269
0.01
Acquisition costs
-
-
269
0.01
26
-
-
-
Severance costs
38
-
-
-
399
0.01
-
-
Consulting expense: Commercial Growth Initiatives
647
0.02
-
-
$
7,627
$
0.26
$
4,241
$
0.15
Net income adjusted
$
14,704
$
0.51
$
7,781
$
0.28
Three Months Ended December
31
(Unaudited; In
thousands)
Six Months Ended December
31
EBITDA and Adjusted
EBITDA
2022
2021
% Change
2022
2021
% Change
$
9,038
$
4,422
104
%
Operating Income as reported
$
19,059
$
8,866
115
%
2,419
2,538
Depreciation and amortization
4,840
5,101
$
11,457
$
6,960
65
%
EBITDA
$
23,899
$
13,967
71
%
1,002
1,130
Stock compensation expense
1,553
1,686
-
340
Acquisition costs
-
340
33
-
Severance costs
46
-
486
-
Consulting expense: Commercial Growth Initiatives
789
-
$
12,978
$
8,430
54
%
Adjusted EBITDA
$
26,287
$
15,993
64
%
Three Months Ended December
31
(Unaudited; In
thousands)
Six Months Ended December
31
Free Cash Flow
2022
2021
% Change
2022
2021
% Change
$
9,481
$
(8,654
)
n/m
Cash flow from operations
$
20,064
$
(16,543
)
NM
(561
)
(448
)
25
%
Capital expenditures
(994
)
(745
)
33
%
$
8,920
$
(9,102
)
n/m
Free cash flow
$
19,070
$
(17,288
)
NM
(amounts in thousands)
Net Debt to Adjusted EBITDA Ratio
December 31,
June 30,
(amounts in thousands)
2022
2022
Current Maturity of Debt
$
3,571
$
3,571
Long-Term Debt
59,250
76,025
Total Debt
$
62,821
$
79,596
Less: Cash
(2,765
)
(2,462
)
Net Debt
$
60,056
$
77,134
Adjusted EBITDA - Trailing Twelve Months
$
45,387
$
35,091
Net Debt to Adjusted EBITDA Ratio
1.3
2.2
Three Months Ended December
31
Six Months Ended December
31
(Unaudited)
2022
2021
(In thousands, except per
share data)
2022
2021
$
128,804
$
111,143
Net sales
$
255,873
$
217,540
94,646
85,695
Cost of products sold
186,964
167,582
18
-
Severance costs
31
-
34,140
25,448
Gross profit
68,878
49,958
24,600
20,687
Selling and administrative costs
49,015
40,752
15
-
Severance costs
15
-
486
-
Consulting expense: Commercial Growth Initiatives
789
-
-
339
Acquisition costs
-
340
9,039
4,422
Operating Income
19,059
8,866
(54
)
9
Other expense (income)
158
88
1,258
529
Interest expense, net
2,046
763
7,835
3,884
Income before taxes
16,855
8,015
1,418
779
Income tax
4,177
1,777
$
6,417
$
3,105
Net income
$
12,678
$
6,238
Weighted
Average Common Shares Outstanding
28,078
27,292
Basic
27,874
27,144
29,204
28,067
Diluted
28,766
27,895
Earnings Per Share
$
0.23
$
0.11
Basic
$
0.45
$
0.23
$
0.22
$
0.11
Diluted
$
0.44
$
0.22
(amounts in thousands)
December 31,
June 30,
2021
2022
Current assets
$
149,025
$
158,917
Property, plant and equipment, net
25,786
27,158
Other assets
121,472
125,005
Total assets
$
296,283
$
311,080
Current maturities of long-term debt
$
3,571
$
3,571
Other current liabilities
60,563
71,048
Long-term debt
59,250
76,025
Other long-term liabilities
11,583
12,667
Shareholders' equity
161,316
147,769
$
296,283
$
311,080
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230126005059/en/
Investor Contact Noel Ryan, IRC 720.778.2415
LYTS@vallumadvisors.com
Media Contact Cliff Spurlock Marketing Communications
Manager 513.372.3143
LSI Industries (NASDAQ:LYTS)
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