LSI Industries Inc. (NASDAQ: LYTS, or the “Company”), a leading
U.S. based manufacturer of indoor/outdoor lighting and graphics
solutions, today announced results for the first quarter fiscal
2021.
Fiscal First Quarter Financial Summary: Net Income of
$2.0 million; EPS of $0.07
- Increased Adjusted Net Income, EPS, Cash Flow versus
Prior Year
- Orders rebounded in Q1; backlog increased 10% entering
Q2
- Gross Margin rate improvement continues, driven by
higher-value business focus
- Cash balance
increases to $9.5 million,
total liquidity position now $84 million
- Approved investments for three commercial growth
programs
LSI reported improved first quarter adjusted earnings, EPS,
gross margin rate, and lower operating costs, while realizing the
initial recovery in construction markets and re-building project
backlogs. The Company reported net income of $2.0 million, or $0.07
per diluted share in the fiscal first quarter, versus net income of
$4.5 million, or $0.17 per diluted share in the prior-year period.
LSI reported adjusted net income of $2.1 million, or $0.08 per
diluted share, in the fiscal first quarter, versus $1.6 million, or
$0.06 per share in the first quarter last year. Prior year first
quarter results include a non-recurring pre-tax gain of $4.8
million resulting from sale of the New Windsor, NY facility.
LSI generated free cash flow of $7.2 million, an increase of 20%
versus prior year when excluding cash proceeds from the facility
sale. The Company exits the fiscal first quarter with a total cash
balance of $9.5 million, and $75 million availability on the
Company’s credit facility. The Company has no long-term debt at the
end of the first quarter, having reduced its outstanding debt by
$23 million on a trailing twelve-month basis.
During the fiscal first quarter, LSI incurred approximately $0.5
million in restructuring and other non-GAAP expenses. A schedule
reconciling GAAP and non-GAAP financial results is included later
in the release.
The Company declared a regular cash dividend of $0.05 per share
payable November 17, 2020 to shareholders of record on November 9,
2020.
Management Commentary
James A. Clark, President and Chief Executive Officer commented,
“Our first quarter performance reflects continued execution of our
business transformation strategy. This is evidenced by our
increased adjusted earnings, ongoing gross margin expansion,
strengthening cash flow, improved liquidity and growing project
backlogs.
There was measurable change in market activity throughout the
fiscal first quarter. The COVID driven slowdown in the fourth
quarter of fiscal 2020 was followed by improving quote and order
activity, with orders increasing sequentially each month of the
first quarter, resulting in an increased backlog as we enter the
fiscal second quarter. While our markets are improving, the
recovery is uneven across geographies and applications, reflected
in continued project interruptions and delays. Conversely, we are
seeing increased demand for short lead-time opportunities as
delayed projects are released. Our U.S. based manufacturing model
has allowed us to successfully capitalize on these requests.
As we manage fluctuations in the ongoing market recovery, we
continue to drive critical initiatives which benefit both the short
and longer-term profitable growth of our business. We are investing
in multiple commercial initiatives, including new market verticals,
deeper penetration in current market verticals, and strengthening
our channel engagement and direct customer relationships. We
continue to accelerate our product development plans, following a
record year of products introduced in 2020 with an even larger
launch plan scheduled for fiscal 2021. Several significant
manufacturing and supply chain improvements are also in-process or
near completion.
Our Graphics segment rebounded quickly in the first quarter,
with sales approaching pre-pandemic sales levels. Sales were 4%
below prior year, as project installation activity accelerated as
the quarter progressed. Order activity for the previously announced
three-year $100 million Quick Service Restaurant (QSR) program
award has more than doubled since July, while the six other large,
multi-year programs with petroleum-store companies remain
in-process and largely unchanged. New business development activity
remains healthy, with several additional opportunities on the
horizon. Adjusted operating income increased significantly for the
Graphics segment, with first quarter income of $1.9 million versus
$1.1 million prior year.
Also of note, we were awarded a multi-million dollar integration
services contract from a major petroleum retailer in the first
quarter, to be produced and shipped in the second quarter to over
11,000 locations. I highlight this award as it demonstrates our
growing capability as a broader solutions provider. The petroleum
company, along with LSI, has developed a new innovative pay at the
pump solution for its customers. The program will enable expanded
and enhanced transaction options on mobile devices using a “digital
wallet,” bringing contactless payment technology to the pump. The
broad program integration services utilizes LSI digital print
technology and logistics capabilities to ensure site specific NFC
and QR code deployment, installation and project management
responsibilities.
Within our Lighting segment, a pandemic-related slowdown exiting
the fiscal fourth quarter resulted in a year-over-year decline in
sales in the fiscal first quarter. Quotation and order activity
steadily increased throughout the first quarter, resulting in
double-digit growth in backlog entering the second quarter.
Distributor stock and flow activity also improved significantly
from the fiscal fourth quarter, evidence that distributor
de-stocking has stabilized and market activity is improving. The
gross margin rate expansion continues in Lighting, increasing 290
basis points to 30.5%, reflecting the ongoing impact of our focus
on higher-value market applications, new products, design cost
reductions and manufacturing efficiencies.
Recently introduced new lighting products enable us to further
improve our competitive position in several key market applications
and verticals including: warehousing and aviation, sports court
lighting, petroleum, automotive and various architectural
applications served by our Abolite product offering. Our Air Link
Blue Control solution continues to gain traction and is an example
of our customer focused approach to innovation, developed for
applications with a target defined of coverage and specific
functionality requirements, allowing ease of use for our
installation partners and end users. We have received a number of
inquiries and orders are steadily increasing. This value-centric
solution suite differentiates us from the more complex and
expensive control solutions in the market.
In Warehousing, we completed two large outdoor projects for the
world’s largest e-retailer. This is an exciting start to what could
be a much broader relationship. Within the automotive vertical, we
are working with multiple brands on new comprehensive lighting
programs to be launched beginning in the first quarter of calendar
year 2021. These programs include the complete dealership,
including indoor showroom, service area and outdoor new/pre-owned
vehicle lots. These programs further demonstrate our ability to
provide customer-centric solutions that build upon established
concepts and designs.
As we move forward though fiscal 2021, we remain committed to
executing on our near-term objectives while continuing to position
the business for sustained, profitable growth over the
long-term.”
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 in order to register, download, and install
any necessary audio software.
Details of the conference call are as follows:
Call
Dial-In: |
877-407-4018 |
Conference ID: |
13711711 |
|
|
Call Replay: |
844-512-2921 |
Replay Passcode: |
13711711 |
A replay of the conference call will be available between
October 29, 2020 and November 12, 2020. 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 Blue Ash, Ohio (Greater Cincinnati), LSI
Industries is a leading producer of high-performance, American-made
lighting solutions. The Company’s strength in outdoor lighting
applications creates opportunities for it to introduce additional
solutions to its valued customers. LSI’s indoor and outdoor
products and services, including its digital and print graphics
capabilities, are valued by architects, engineers, distributors and
contractors for their quality, reliability and innovation. The
Company’s products are used extensively in automotive dealerships,
petroleum stations, quick service restaurants, grocery stores and
pharmacies, retail establishments, sports complexes, parking lots
and garages, and commercial and industrial buildings. LSI has
approximately 1,100 employees at seven manufacturing plants in the
United States, including its corporate headquarters. Additional
information about LSI is available at www.lsicorp.com.
FORWARD-LOOKING STATEMENTS
This press release contains forward-looking statements.
Forward-looking statements may be identified by words such as
“estimates,” “anticipates,” “encourage,” “projects,” “plans,”
“expects,” “can,” “intends,” “believes,” “seeks,” “may,” “will,”
“should,” or the negative versions of those words and similar
expressions and by the context in which they are used. 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.
INVESTOR CONTACT
Noel Ryan, IRC720.778.2415LYTS@vallumadvisors.com
MEDIA CONTACT
Mike Wallner513.372.3417mike.wallner@lsicorp.com
Financial Highlights
|
|
Three Months EndedSeptember
30 |
(Unaudited) |
|
(In thousands, except per share data) |
|
|
2020 |
|
|
2019 |
|
|
% Change |
Net Sales |
|
$ |
70,006 |
|
$ |
88,701 |
|
|
-21 |
% |
|
|
|
|
|
|
|
Operating Income as reported |
|
|
2,202 |
|
|
6,839 |
|
|
-68 |
% |
|
|
|
|
|
|
|
Restructuring and plant closure costs (gains) |
|
|
3 |
|
|
(4,588 |
) |
|
|
Stock compensation expense |
|
|
505 |
|
|
398 |
|
|
|
|
|
|
|
|
|
|
Operating Income as adjusted |
|
$ |
2,710 |
|
$ |
2,649 |
|
|
2 |
% |
|
|
|
|
|
|
|
Net Income as reported |
|
$ |
1,990 |
|
$ |
4,475 |
|
|
-56 |
% |
|
|
|
|
|
|
|
Net Income as adjusted |
|
$ |
2,075 |
|
$ |
1,603 |
|
|
29 |
% |
|
|
|
|
|
|
|
Earnings per share (diluted) as reported |
|
$ |
0.07 |
|
$ |
0.17 |
|
|
-57 |
% |
|
|
|
|
|
|
|
Earnings per share (diluted) as adjusted |
|
$ |
0.08 |
|
$ |
0.06 |
|
|
33 |
% |
|
|
(amounts in thousands) |
|
|
September 30, |
|
June 30, |
|
|
2020 |
|
2020 |
Working Capital |
|
$ |
55,084 |
|
$ |
51,209 |
Total
Assets |
|
$ |
181,795 |
|
$ |
172,263 |
Long-Term
Debt |
|
$ |
- |
|
$ |
- |
Other Long-Term
Liabilities |
|
$ |
11,496 |
|
$ |
11,914 |
Shareholders' Equity |
|
$ |
127,440 |
|
$ |
125,700 |
Three Months Ended September 30, 2020
Results
Net sales for the three months ended September 30, 2020 were
$70.0 million, down 21% from the three months ended September 30,
2019 net sales of $88.7 million. Lighting Segment net sales of
$45.4 million decreased 28% and Graphics Segment net sales of $24.6
million decreased 4% from last year’s first quarter net sales. Net
income for the three months ended September 30, 2020 was $2.0
million, or $0.07 per share, compared to $4.5 million or $0.17 per
share for the three months ended September 30, 2019. Earnings per
share represents diluted earnings per share.
Balance
Sheet The
balance sheet at September 30, 2020 included current assets of
$97.9 million, current liabilities of $42.8 million and working
capital of $55.1 million, which includes cash of $9.5 million. The
current ratio was 2.3 to 1. The balance sheet also included
shareholders’ equity of $127.4 million and no long-term debt. 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 fiscal first
quarter of fiscal 2021 payable November 17, 2020 to shareholders of
record as of the close of business on November 9, 2020. 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 months
ended September 30, 2020 and 2019. Operating income, net income and
earnings per share, which exclude the impact of restructuring and
plant closure (gains) costs and stock compensation expense are
non-GAAP financial measures. We exclude these items because we
believe they are not representative of the ongoing results of
operations of our 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 the net income and earnings per share reported for the
periods indicated along with the calculation of EBITDA, Adjusted
EBITDA and Free Cash Flow.
|
|
|
|
|
Three Months Ended |
|
|
September 30 |
(In thousands, except per share data) |
|
|
2020 |
|
|
|
|
2019 |
|
|
|
|
|
Diluted EPS |
|
|
Diluted EPS |
Reconciliation of net income to adjusted net
income |
|
|
|
|
Net Income as reported |
|
$ |
1,990 |
|
$ |
0.07 |
|
|
$ |
4,475 |
|
$ |
0.17 |
|
|
|
|
|
|
|
|
Restructuring and plant closure costs (gains) |
|
|
2 |
|
|
- |
|
|
|
(3,446 |
) |
|
(0.13 |
) |
|
|
|
|
|
|
|
Stock compensation expense |
|
|
380 |
|
|
0.01 |
|
|
|
299 |
|
|
0.01 |
|
|
|
|
|
|
|
|
Tax impact due to the change in the estimated annual tax
rate used for GAAP reporting purposes |
|
|
(297 |
) |
|
(0.01 |
) |
|
|
275 |
|
|
0.01 |
|
|
|
|
|
|
|
|
Net Income adjusted |
|
$ |
2,075 |
|
$ |
0.08 |
|
|
$ |
1,603 |
|
$ |
0.06 |
|
NOTE: All adjustments are net of tax except for the
adjustment of the tax impact from the change in the estimated
annual tax rate |
|
(Unaudited; In thousands) |
|
Three Months EndedSeptember
30 |
EBITDA and Adjusted EBITDA |
|
|
|
2020 |
|
|
|
2019 |
|
|
% Change |
Operating Income as reported |
|
$ |
2,202 |
|
|
$ |
6,839 |
|
|
-68 |
% |
|
|
|
|
|
|
|
Depreciation and Amortization |
|
|
2,033 |
|
|
|
2,399 |
|
|
|
EBITDA |
|
$ |
4,235 |
|
|
$ |
9,238 |
|
|
-54 |
% |
|
|
|
|
|
|
|
Restructuring and plant closure costs (gains) |
|
|
3 |
|
|
|
(4,588 |
) |
|
|
Stock compensation expense |
|
|
505 |
|
|
|
398 |
|
|
|
Adjusted EBITDA |
|
$ |
4,743 |
|
|
$ |
5,048 |
|
|
-6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited; In thousands) |
|
Three Months EndedSeptember
30 |
Free Cash Flow |
|
|
|
2020 |
|
|
|
2019 |
|
|
% Change |
Cash Flow From Operations |
|
$ |
7,639 |
|
|
$ |
6,359 |
|
|
20 |
% |
|
|
|
|
|
|
|
Proceeds from Sale of Fixed Assets |
|
|
- |
|
|
|
12,332 |
|
|
|
|
|
|
|
|
|
|
Capital Expenditures |
|
|
(405 |
) |
|
|
(355 |
) |
|
|
Free Cash Flow |
|
$ |
7,234 |
|
|
$ |
18,336 |
|
|
-61 |
% |
Condensed Consolidated Statement of
Operations
|
|
Three Months Ended September
30 |
(Unaudited) |
|
(In thousands, except per share data) |
|
|
2020 |
|
|
|
2019 |
|
|
Net Sales |
|
$ |
70,006 |
|
|
$ |
88,701 |
|
|
|
|
|
|
|
|
Cost of Products Sold |
|
|
51,731 |
|
|
|
66,588 |
|
|
Restructuring Costs |
|
|
3 |
|
|
|
258 |
|
|
|
|
|
|
|
|
Gross Profit |
|
|
18,272 |
|
|
|
21,855 |
|
|
|
|
|
|
|
|
Selling and Administrative Costs |
|
|
16,070 |
|
|
|
19,862 |
|
|
Restructuring Costs (Gains) |
|
|
- |
|
|
|
(4,846 |
) |
|
|
|
|
|
|
|
Operating Income |
|
|
2,202 |
|
|
|
6,839 |
|
|
|
|
|
|
|
|
Other (Income) Expense |
|
|
(105 |
) |
|
|
82 |
|
|
Interest Expense, net |
|
|
57 |
|
|
|
431 |
|
|
|
|
|
|
|
|
Income Before Taxes |
|
|
2,250 |
|
|
|
6,326 |
|
|
|
|
|
|
|
|
Income Tax |
|
|
260 |
|
|
|
1,851 |
|
|
|
|
|
|
|
|
Net Income |
|
$ |
1,990 |
|
|
$ |
4,475 |
|
|
|
|
|
|
|
|
Weighted Average Common Shares Outstanding |
|
|
|
|
|
Basic |
|
|
26,520 |
|
|
|
26,236 |
|
|
Diluted |
|
|
26,968 |
|
|
|
26,293 |
|
|
|
|
|
|
|
|
Earnings Per Share |
|
|
|
|
|
Basic |
|
$ |
0.08 |
|
|
$ |
0.17 |
|
|
Diluted |
|
$ |
0.07 |
|
|
$ |
0.17 |
|
|
Condensed Balance Sheet
|
|
(amounts in thousands) |
|
|
September 30, |
|
June 30, |
|
|
2020 |
|
2020 |
Current Assets |
|
$ |
97,943 |
|
$ |
85,858 |
Property, Plant and
Equipment, net |
|
|
25,602 |
|
|
26,535 |
Other
Assets |
|
|
58,250 |
|
|
59,870 |
Total Assets |
|
$ |
181,795 |
|
$ |
172,263 |
|
|
|
|
|
Current
Liabilities |
|
$ |
42,859 |
|
$ |
34,649 |
Long-Term
Debt |
|
|
- |
|
|
- |
Other Long-Term
Liabilities |
|
|
11,496 |
|
|
11,914 |
Shareholders'
Equity |
|
|
127,440 |
|
|
125,700 |
|
|
$ |
181,795 |
|
$ |
172,263 |
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