LSI Industries Inc. (NASDAQ: LYTS, “LSI” or the “Company”) a
leading U.S. based manufacturer of display solutions and
indoor/outdoor lighting, today reported financial results for its
fiscal 2023 first quarter.
FISCAL 2023 FIRST
QUARTER
- Net Sales +19% y/y to $127.1 million
- Net Income +100% y/y to $6.3 million; Adjusted Net Income of
$7.1 million
- Diluted EPS of $0.22; Adjusted EPS of $0.25
- EBITDA of $12.4 million; Adjusted EBITDA $13.3 million or
10.5%/sales
- Free Cash Flow of $10.1 million
- Debt net leverage decline of 32% y/y to 1.7x
For the fiscal first quarter 2023, LSI delivered significant
year-over-year growth in net sales, driven by strong demand in the
Company’s key vertical markets for both Lighting and Display
Solution products. Operating Income, net income, and adjusted
EBITDA each increased substantially on a year-over-year basis in
the first quarter, driven by a combination of higher net sales and
strong margin realization.
The Company reported fiscal first quarter net sales of $127.1
million, an increase of 19% versus the prior-year period. Reported
net income was $6.3 million, or $0.22 per diluted share, versus
$3.1 million, or $0.11 per diluted share in the prior-year period.
Adjusted net income was $7.1 million, or $0.25 per diluted share in
the fiscal first quarter, compared to $3.5 million, or $0.13 per
diluted share last year.
The Company reported adjusted EBITDA of $13.3 million in the
fiscal first quarter, an increase of 76% versus the prior-year
period. LSI reported an adjusted EBITDA margin rate of 10.5% in the
first quarter, versus 7.1% in the first quarter last year, 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 $10.1 million in the fiscal
first quarter, driven by year-over-year growth in operating cash
flow, together with improved non-cash working capital management.
Improved cash flow conversion resulted in a corresponding reduction
in the ratio of net debt to trailing twelve-month adjusted EBITDA
to 1.7x, LSI’s lowest level in nearly two years.
The Company declared a regular cash dividend of $0.05 per share
payable on November 22, 2022, to shareholders of record on November
14, 2022.
MANAGEMENT COMMENTARY
“During a period of broader market volatility, LSI delivered
strong first quarter results, highlighted by substantial growth in
net sales, margin rate, and profitability,” stated James A. Clark,
President, and Chief Executive Officer of LSI. “These strong
results reflect continued execution of our vertical market
strategy, which prioritizes resource allocation toward those
highest-return opportunities where LSI is uniquely positioned to
win. Our bundled solutions, technical expertise and
customer-centric service model remain key areas of competitive
differentiation for us, positioning us to drive margin expansion.
Despite widely recognized inflationary headwinds, we achieved an
adjusted EBITDA margin rate of 10.5% in the first quarter, LSI’s
highest in over ten years, a testament to the efforts of our entire
team.
“We generated strong year-over-year growth in free cash flow
during the first quarter, resulting in a further reduction in our
net leverage to 1.7x, or the lowest in nearly two years,” continued
Clark. “With supply chains continuing to stabilize, we have reduced
the pace of investment in new inventory to ensure product
availability, leading to a corresponding improvement in non-cash
working capital efficiency. We expect that, for the full-year
fiscal 2023, we are on-track to deliver significant year-over-year
improvement in free cash flow and debt reduction, the combination
of which will enable the company to pursue opportunistic organic
and inorganic growth investments.
“During the fiscal first quarter, we continued to see quote and
order activity across our vertical markets outpace growth rates
within the broader, domestic non-residential construction market,”
continued Clark. “Total first quarter orders were 12% above the
prior-year period, with both the Lighting and Display Solutions
segments achieving double digit growth, building upon solid prior
year results.
“At this year’s annual National Association of Convenience
Stores (NACS) conference, we had one of our most successful trade
shows in years, with strong interest from customers and partners,”
noted Clark. “At the trade show we launched our REDiMount™ product,
revolutionary lighting solution for refueling station/convenience
store canopies that reduces installation time by more than 50%.
This product is an excellent example of our collaborative,
customer-centric approach to product innovation, an approach that
facilitates rapid adoption our products as they come to market.
“Our Lighting segment had an outstanding quarter with sales
increasing over 30%, gross margin rate improving 290 bps, and
operating income increasing 109% compared to the same quarter last
year. Demand for our products was strong across all channels,
including double-digit sales growth in both project business and
shipments to distributor stock.
“Our efforts over the last two years to strengthen our lighting
offering for select vertical market applications continues to
position LSI to win additional business. While sales for both
indoor and outdoor products increased significantly, first quarter
sales for key indoor applications increased by more than doubled
versus the prior year, driven primarily by new product
introductions. We continue meet the demanding delivery/service
requirements of the market, capitalizing on our supply chain
capabilities, and recently reduced lead-times for certain key
products. First quarter Lighting orders increased 11% compared to
the prior year period, and we exited the quarter with a healthy
backlog.
“Our Display Solutions segment continued to experience solid
sales growth, led by the grocery and refueling/convenience-store
verticals,” continued Clark. “The Display Solution gross margin
rate increased 450 bps compared to the prior year-period,
reflecting improved pricing on all major project programs, together
with favorable project mix. As a result, operating income improved
more than 70% versus the year-ago period. Inquiries and design work
for prospective new programs continue at a healthy level in our
largest vertical markets, which include Grocery, Refueling/C-Store
and QSR (Quick Serve Restaurants). Display Solutions orders for the
first quarter were 12% above prior year. We have strong,
well-established positions with both companies in the recently
announced combination of two of the nation’s largest grocery store
chains and are excited about future growth opportunities.
“Total Display Solution sales were constrained during the first
quarter, as shipments of digital menu board systems to quick-serve
restaurant (QSR) customers were delayed due to site installation
scheduling changes and temporary component availability issues.
We’ve balanced both the site scheduling and component supply chain
challenges for the last eighteen months and expect availability
will correct over the near-term, allowing menu-board shipment
activity to increase in the fiscal second quarter. In addition, we
completed initial turnkey installations of display products for a
re-branding program with a global oil company for re-fueling sites
in Puerto Rico. The majority of installations for this $10+ million
program are scheduled for completion in the fiscal second quarter
of 2023.
“LSI enters the fiscal second quarter with continued momentum
and is well-positioned to build on the success of the last two
years,” concluded Clark. “We continue to win additional business in
both new and existing market verticals as evidenced by a growing
backlog of activity. Relationships with our partners and customers
have never been stronger, as they increasingly recognize the value
of our solutions and our on-going commitment to satisfy their
unique requirements.”
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 audio software.
Details of the conference call are as follows:
Call Dial-In: 1-877-407-4018 Conference ID:
13733404
Call Replay: 1-844-512-2921 Replay Passcode:
13733404
A replay of the conference call will be available between
November 2, 2022, and November 16, 2022. 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 outdoor 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 about 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 EndedSeptember 30 (Unaudited) (In thousands, except per share
data)
2022
2021
% Change
Net sales
$
127,069
$
106,397
19
%
Operating income as reported
10,021
4,444
125
%
Stock compensation expense
551
556
Consulting expense: Commercial Growth Initiatives
303
-
Severance costs
12
-
Operating income as adjusted
$
10,887
$
5,000
118
%
Net income as reported
$
6,262
$
3,133
100
%
Net income as adjusted
$
7,077
$
3,540
100
%
Earnings per share (diluted) as reported
$
0.22
$
0.11
100
%
Earnings per share (diluted) as adjusted
$
0.25
$
0.13
92
%
(amounts in thousands) September 30, June 30,
2022
2022
Working capital
$
90,473
$
84,298
Total assets
$
319,501
$
311,080
Long-term debt
$
73,975
$
76,025
Other long-term liabilities
$
11,862
$
12,667
Shareholders' equity
$
153,729
$
147,769
Three Months Ended September 30, 2022,
Results
Net sales for the three months ended September 30, 2022, were
$127.1 million, up 19% from the three months ended September 30,
2021, net sales of $106.4 million. Lighting Segment net sales of
$67.5 million increased 32% and Display Solutions Segment net sales
of $59.6 million increased 8% from last year’s first quarter net
sales. Net income for the three months ended September 30, 2022,
was $6.3 million, or $0.22 per share, compared to $3.1 million or
$0.11 per share for the three months ended September 30, 2021.
Earnings per share represents diluted earnings per share.
Balance Sheet
The balance sheet at September 30, 2022, included current assets
of $170.4 million, current liabilities of $79.9 million and working
capital of $90.5 million, which includes cash of $9.0 million. The
current ratio was 2.1 to 1. The balance sheet included
shareholders’ equity of $153.7 million and long-term debt of $74.0
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 first quarter of
fiscal 2023, payable November 22, 2022, to shareholders of record
as of the close of business on November 14, 2022. 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, 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 September 30 (In thousands,
except per share data)
2022
2021
Diluted
EPS
Diluted
EPS
Reconciliation of net income to adjusted net income Net
income as reported
$
6,262
$
0.22
$
3,133
$
0.11
Stock compensation expense
420
0.01
407
0.02
Consulting expense: Commercial Growth Initiatives
226
0.01
-
-
Severance costs
9
-
-
-
Tax rate difference between reported and adjustednet
income
160
0.01
-
-
Net income adjusted
$
7,077
$
0.25
$
3,540
$
0.13
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
2022
2021
% Change
Operating Income as reported
$
10,021
$
4,444
125
%
Depreciation and amortization
2,421
2,563
EBITDA
$
12,442
$
7,007
78
%
Stock compensation expense
551
556
Consulting expense: Commercial Growth Initiatives
303
-
Severance costs
12
-
Adjusted EBITDA
$
13,308
$
7,563
76
%
(Unaudited; In thousands) Three Months
EndedSeptember 30 Free Cash Flow
2022
2021
% Change Cash flow from operations
$
10,583
$
(7,889
)
NM
Capital expenditures
(434
)
(297
)
Free cash flow
$
10,149
$
(8,186
)
NM
Net Debt to Adjusted EBITDA Ratio September 30,
(amounts in thousands)
2022
2021
Current Maturity of Debt
$
3,571
$
3,571
Long-Term Debt
73,975
76,025
Total Debt
$
77,546
$
79,596
Less: Cash
(9,028
)
(2,570
)
Net Debt
$
68,518
$
77,026
Adjusted EBITDA - Trailing Twelve Months
$
40,836
$
30,907
Net Debt to Adjusted EBITDA Ratio
1.7
2.5
Three Months EndedSeptember 30 (Unaudited) (In thousands, except per share
data)
2022
2021
Net sales
$
127,069
$
106,397
Cost of products sold
92,319
81,887
Severance costs
12
-
Gross profit
34,738
24,510
Selling and administrative costs
24,717
20,066
Operating Income
10,021
4,444
Other (income) expense
213
79
Interest expense, net
788
234
Income before taxes
9,020
4,131
Income tax
2,758
998
Net income
$
6,262
$
3,133
Weighted
Average Common Shares Outstanding
Basic
27,641
26,996
Diluted
28,664
27,743
Earnings Per Share
Basic
$
0.23
$
0.12
Diluted
$
0.22
$
0.11
(amounts in thousands) September 30, June 30,
2022
2022
Current assets
$
170,407
$
158,917
Property, plant and equipment, net
26,277
27,158
Other assets
122,817
125,005
Total assets
$
319,501
$
311,080
Current maturities of long-term debt
$
3,571
$
3,571
Other current liabilities
76,364
71,048
Long-term debt
73,975
76,025
Other long-term liabilities
11,862
12,667
Shareholders' equity
153,729
147,769
$
319,501
$
311,080
View source
version on businesswire.com: https://www.businesswire.com/news/home/20221102005063/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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