LSI Industries Inc. (NASDAQ: LYTS, “LSI” or the “Company”) a
leading U.S. based manufacturer of display solutions and
indoor/outdoor lighting, today reported fiscal third quarter
financial results for the three months ended March 31, 2023.
FISCAL 2023 THIRD
QUARTER
- Net Sales +7% y/y to $117.5 million
- Net Income +29% y/y to $4.7 million; Adjusted Net Income of
$5.5 million
- Diluted EPS of $0.16; Adjusted EPS of $0.19
- EBITDA of $10.2 million; Adjusted EBITDA $11.2 million
- Strong Free Cash Flow of $11.7 million
- Net debt declined to $48.2 million, or 1.0x TTM Adjusted
EBITDA
LSI generated significant year-over year growth in sales and
profitability in the fiscal third quarter, driven by continued
demand strength within the Lighting segment, margin management and
consistent operational execution. The Company continued its focus
on balancing short-term performance with investments in future
growth initiatives.
The Company reported fiscal third quarter sales of $117.5
million, an increase of 7% versus the prior year period, as growth
within the Lighting segment more than offset a small decline
year-over-year in the Display Solutions segment.
Reported net income was $4.7 million, or $0.16 per diluted
share, versus $3.6 million, or $0.13 per diluted share in the
prior-year period. Adjusted net income was $5.5 million or $0.19
per diluted share in the third quarter, compared to $4.2 million,
or $0.15 per diluted share last year.
LSI recorded Adjusted EBITDA of $11.2 million for the fiscal
third quarter, an increase of 32% versus the prior-year period. The
Adjusted EBITDA margin rate was 9.6% for the quarter, or 190 bps
above the prior year quarter, driven by volume growth, price
realization, disciplined cost management and a favorable sales
mix.
The Company generated free cash flow of $11.7 million in the
fiscal third quarter, driven by increased profitability and further
working capital optimization. Improved cash flow conversion
resulted in a corresponding reduction in the ratio of net debt to
trailing twelve-month adjusted EBITDA, which declined to 1.0x at
the end of the fiscal third quarter, versus 2.7x in the prior-year
period. LSI has reduced net debt by more than $35 million during
this twelve-month period.
The Company declared a regular cash dividend of $0.05 per share
payable on May 16, 2023, to shareholders of record on May 8,
2023.
MANAGEMENT COMMENTARY
“Our team delivered another solid quarter, achieving
year-over-year growth in sales and profitability, exceeding a very
strong prior year comparison,” stated James A. Clark, President and
Chief Executive Officer of LSI. “It was an active quarter on many
fronts. We continue to make good progress in the market, coupled
with a strong focus on margin expansion, all while working on the
initiatives which position us for future profitable growth. With
$11.7 million in free cash flow generation in the third quarter, we
were able to reduce our debt outstanding, with net leverage
declining to 1.0x at quarter-end, consistent with our focus on
continued balance sheet discipline and optionality.
“Within our Lighting Segment, sales increased 17% in the fiscal
third quarter, driven by continued growth in both indoor and
outdoor applications, across multiple verticals. Lighting operating
income increased 31% in the period, with the gross margin rate
improving 120 basis points versus last year. The contractor and
distribution market remains an area of strength for us, highlighted
by accelerating demand for our Advantage Series family of products.
The Advantage Series provides our commercial customers with
contractor grade products of superior quality, design, and
functionality. We introduced the family nearly two years ago and
have steadily expanded the product portfolio in response to growing
demand from commercial end-markets.
“In early April, we booked a multi-million dollar lighting order
for a large automotive components company. The order, referenced in
a separate press release last week, includes the delivery of 15,000
fixtures for installation in a new state of-the-art EV Battery
manufacturing plant. We expect shipments will begin in late August
2023 and continue through the end of the calendar year. Winning an
order of this size in the Industrial vertical while satisfying
demanding customer requirements demonstrates our progress with
large accounts who value our unique, integrated suite of
solutions.
“Project quotation activity for Lighting remains high, however,
the quote-to-order conversion period has lengthened over the last
several months, and as a result, the number and value of
outstanding quotes has grown. While overall business activity is
expected to remain favorable, timing of realized sales may
fluctuate somewhat until the conversion period returns to a more
historic cadence.
“Within our Display Solutions segment, we experienced a modest
year-over-year sales decline driven by the timing and transition of
several large digital signage programs. Importantly, operating
income increased 23% on a year-over-year basis, and a 250-basis
point improvement in operating margin.
“Our refrigerated and non-refrigerated mobile display solutions
continue to do very well. Last month we leased additional
manufacturing space to meet ongoing demand and introduce some new
technology. Additional capacity is required to support steadily
increasing customer demand in the grocery market, our expansion
within the c-store vertical, and the planned launch of
next-generation refrigerant products scheduled in fiscal 2024.
Using R-290 (a propane-based refrigerant) we will begin offering
our customers a natural, non-toxic refrigerant solution that is
free of ozone-depleting properties. R-290 has a low Global Warming
Potential (GWP) and is currently one of the most climate-friendly
and cost-effective solutions available. This incremental
manufacturing capacity is expected to be operational by late third
quarter of the calendar year.
“Last month we had a very productive meeting with a large
regional, multi-banner, quick-serve restaurant chain. After
visiting several LSI locations, the customer was duly impressed
with our digital menu board solution set, together with the
comprehensive range of products, installation, and other services
LSI provides. We received our first order and pilot site activity
will begin next month.
“In the refueling vertical, a $4.5 million order was recently
received from a large oil company to retrofit the display graphics
for 450 sites in a large, regional metropolitan area. Shipment and
installation will begin in the fiscal fourth quarter, with all
sites scheduled for completion in four months. Design and proposal
work for numerous programs remain ongoing, including a brand
conversion for a large regional refueling/c-store company.
“In March 2023, we introduced an updated five-year strategic
plan that highlighted our financial targets through fiscal 2028,”
continued Clark. “Our “Fast Forward” plan works to expand our
share-of-wallet within both new and existing vertical markets
through the introduction of additional, customer-driven solutions,
while continuing to migrate higher on the value-chain. Over the
next five years, we intend to deliver organic and inorganic sales
growth of more than 60%; greater than 100% Adjusted EBITDA growth;
and at least 250 basis points of Adjusted EBITDA margin expansion.
I encourage you to visit the investor section of our website for
more details.”
Clark concluded, “I am pleased with the progress the LSI
leadership team has achieved, demonstrated by the continued
execution on a multi-year plan to drive long-term value creation.
We will continue to advance our vertical market strategy with a
focus on new products and integrated solutions; build our
relationships across sales channels and customers; and pursue
opportunistic investments in complementary assets. Over the last
several years, we’ve built a strong foundation that will position
us to scale our business profitably, while executing on our new
five-year plan, consistent with our commitments to all our key
stakeholders.”
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:
1-844-825-9789
Call Replay:
1-844-512-2921
Replay Passcode:
10177414
A replay of the conference call will be available between April
27, 2023, and May 11, 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 Cincinnati, LSI Industries (Nasdaq: LYTS)
specializes in the creation of advanced lighting, graphics, and
display solutions. The company’s American-made products, which
include lighting, print graphics, digital graphics, refrigerated
and custom displays, aim to help businesses stand out in a
competitive market. With a workforce of nearly 1,600 employees and
11 facilities throughout North America, LSI is dedicated to
providing top-quality solutions to its clients. 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 March
31
Nine Months Ended March
31
(Unaudited)
2023
2022
% Change
(In thousands, except per
share data)
2023
2022
% Change
$
117,470
$
110,111
7
%
Net sales
$
373,343
$
327,651
14
%
7,732
5,161
50
%
Operating income as reported
26,791
14,027
91
%
968
780
24
%
Long-Term Performance Based Compensation
2,521
2,466
2
%
-
21
NM
Acquisition costs
-
361
NM
-
5
NM
Severance costs
46
5
NM
75
-
NM
Consulting expense: Commercial Growth Initiatives
864
-
NM
$
8,775
$
5,967
47
%
Operating income as adjusted
$
30,222
$
16,859
79
%
$
4,669
$
3,618
29
%
Net income as reported
$
17,347
$
9,856
76
%
$
5,497
$
4,214
30
%
Net income as adjusted
$
20,200
$
11,995
68
%
$
0.16
$
0.13
21
%
Earnings per share (diluted) as reported
$
0.60
$
0.35
71
%
$
0.19
$
0.15
24
%
Earnings per share (diluted) as adjusted
$
0.70
$
0.43
62
%
(amounts in thousands)
March 31
June 30,
2023
2022
Working capital
$
79,785
$
84,298
Total assets
$
291,019
$
311,080
Long-term debt
$
46,002
$
76,025
Other long-term liabilities
$
11,237
$
12,668
Shareholders' equity
$
167,743
$
147,769
Three Months Ended March 31, 2023,
Results
Net sales for the three months ended March 31, 2023, were $117.5
million, up 7% from the three months ended March 31, 2022, net
sales of $110.1 million. Lighting Segment net sales of $66.7
million increased 17% and Display Solutions Segment net sales of
$50.8 million decreased 4% from last year’s third quarter net
sales. Net income for the three months ended March 31, 2023, was
$4.7 million, or $0.16 per share, compared to $3.6 million or $0.13
per share for the three months ended March 31, 2022. Earnings per
share represents diluted earnings per share.
Nine Months Ended March 31, 2023,
Results
Net sales for the nine months ended March 31, 2023, were $373.3
million, up 14% from the nine months ended March 31, 2022, net
sales of $327.7 million. Lighting Segment net sales of $201.1
million increased 21% and Display Solutions Segment net sales of
$172.3 million increased 6% from last year’s net sales. Net income
for the nine months ended March 31, 2023, was $17.3 million, or
$0.60 per share, compared to $9.9 million or $0.35 per share for
the nine months ended March 31, 2022. Earnings per share represents
diluted earnings per share.
Balance Sheet
The balance sheet at March 31, 2023, included current assets of
$145.8 million, current liabilities of $66.0 million and working
capital of $79.8 million, which includes cash of $1.4 million. The
current ratio was 2.21 to 1. The balance sheet also included
shareholders’ equity of $167.7 million and long-term debt of $46.0
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 third quarter of
fiscal 2023, payable May 16, 2023, to shareholders of record as of
the close of business on May 8, 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 nine
months ended March 31, 2023, and 2022. Operating income, net
income, and earnings per share, which exclude the impact of
long-term performance based compensation expense, commercial growth
opportunity expense, acquisition costs, 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),
Net Debt to 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
Nine Months Ended
March 31
March 31
2023
2022
(In thousands, except per
share data)
2023
2022
Diluted EPS
Diluted EPS
Diluted EPS
Diluted EPS
Reconciliation of net income
to adjusted net income
$
4,669
$
0.16
$
3,618
$
0.13
Net income as reported
$
17,347
$
0.60
$
9,856
$
0.35
769
0.03
576
0.02
Long-Term Performance Based Compensation
2,107
0.08
1,850
0.07
-
-
16
-
Acquisition costs
-
-
285
0.01
-
-
4
-
Severance costs
38
-
4
-
59
-
-
-
Consulting expense: Commercial Growth Initiatives
708
0.02
-
-
$
5,497
$
0.19
$
4,214
$
0.15
Net income adjusted
$
20,200
$
0.70
$
11,995
$
0.43
Three Months Ended March
31
(Unaudited; In
thousands)
Nine Months Ended March
31
Net Income to Adjusted
EBITDA
2023
2022
% Change
2023
2022
% Change
4,669
3,618
29
%
Net income as reported
17,347
9,856
76
%
2,257
1,074
Income Tax
6,434
2,851
877
524
Interest expense, net
2,924
1,287
(71
)
(55
)
Other expense (income)
86
33
$
7,732
$
5,161
50
%
Operating Income as reported
$
26,791
$
14,027
91
%
2,455
2,531
Depreciation and amortization
7,295
7,632
$
10,187
$
7,692
32
%
EBITDA
$
34,086
$
21,659
57
%
968
780
Long-Term Performance Based Compensation
2,521
2,466
-
21
Acquisition costs
-
361
-
5
Severance costs
46
5
75
-
Consulting expense: Commercial Growth Initiatives
864
-
$
11,230
$
8,498
32
%
Adjusted EBITDA
$
37,517
$
24,491
53
%
9.6
%
7.7
%
Adjusted EBITDA as a percentage of Sales
10.0
%
7.5
%
Three Months Ended March
31
(Unaudited; In
thousands)
Nine Months Ended March
31
Free Cash Flow
2023
2022
% Change
2023
2022
% Change
$
12,486
$
3,875
NM
Cash flow from operations
$
32,548
$
(12,668
)
NM
(759
)
(531
)
43
%
Capital expenditures
(1,754
)
(1,276
)
37
%
$
11,727
$
3,344
NM
Free cash flow
$
30,794
$
(13,944
)
NM
(amounts in thousands)
Net Debt to Adjusted EBITDA Ratio
March 31
March 31
(amounts in thousands)
2023
2022
Current Maturity of Debt
$
3,571
$
3,571
Long-Term Debt
46,002
81,387
Total Debt
$
49,573
$
84,958
Less: Cash
(1,350
)
(1,248
)
Net Debt
$
48,223
$
83,710
Adjusted EBITDA - Trailing Twelve Months
$
48,117
$
31,309
Net Debt to Adjusted EBITDA Ratio
1.0
2.7
(amounts in thousands) March 31 June 30,
2022
2022
Current assets
$
145,822
$
158,917
Property, plant and equipment, net
25,264
27,158
Other assets
119,933
125,005
Total assets
$
291,019
$
311,080
Current maturities of long-term debt
$
3,571
$
3,571
Other current liabilities
62,466
71,047
Long-term debt
46,002
76,025
Other long-term liabilities
11,237
12,668
Shareholders' equity
167,743
147,769
$
291,019
$
311,080
Three Months Ended March
31
Nine Months Ended March
31
(Unaudited)
2023
2022
(In thousands, except per
share data)
2023
2022
$
117,470
$
110,111
Net sales
$
373,343
$
327,651
85,266
83,318
Cost of products sold
272,230
250,900
-
Severance costs
31
-
32,204
26,793
Gross profit
101,082
76,751
24,397
21,606
Selling and administrative costs
73,412
62,358
-
5
Severance costs
15
5
75
-
Consulting expense: Commercial Growth Initiatives
864
-
-
21
Acquisition costs
-
361
7,732
5,161
Operating Income
26,791
14,027
(71
)
(55
)
Other expense (income)
86
33
877
524
Interest expense, net
2,924
1,287
6,926
4,692
Income before taxes
23,781
12,707
2,257
1,074
Income tax
6,434
2,851
$
4,669
$
3,618
Net income
$
17,347
$
9,856
Weighted Average Common Shares
Outstanding
28,306
27,378
Basic
28,012
27,220
29,611
28,083
Diluted
29,055
27,945
Earnings Per Share
$
0.16
$
0.13
Basic
$
0.62
$
0.36
$
0.16
$
0.13
Diluted
$
0.60
$
0.35
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230427005124/en/
INVESTOR & MEDIA CONTACT Noel Ryan, IRC 720.778.2415
LYTS@vallumadvisors.com
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