LSI Industries Inc. (Nasdaq: LYTS, “LSI” or the “Company”) a
leading U.S. based manufacturer of commercial lighting and display
solutions, today reported financial results for the fiscal 2025
first quarter ended September 30, 2024.
FISCAL 2025 FIRST QUARTER
RESULTS
- Net Sales of $138.1 million, +12% y/y
- Net Income of $6.7 million, or $0.22 per diluted share
- Adjusted Net Income of $8.0 million, or $0.26 per diluted
share
- EBITDA of $12.1 million; Adjusted EBITDA $13.4 million
- Free Cash Flow of $11.1 million
- Ratio of net debt to TTM Adjusted EBITDA of 0.8x
- Display Solutions Backlog strong; Grocery vertical orders
increased 90% y/y
LSI demonstrated strong commercial and operational execution
during the fiscal 2025 first quarter, a performance highlighted by
consistent profitability, solid free cash flow generation,
disciplined balance sheet management, and successful integration of
EMI Industries, which LSI acquired on April 18, 2024.
The Company reported first quarter sales of $138.1 million, an
increase of 12% versus the prior-year period, including $26.2
million sales contribution from the acquisition of EMI. On a
comparable basis, revenue was below the prior-year period, driven
by the timing of customer orders within the grocery vertical,
together with lower large project activity within the Lighting
segment. Total orders and backlog increased for the quarter, driven
in part by a recovery in orders within the grocery vertical.
LSI reported net income of $6.7 million and $0.22 per diluted
share for the quarter, while adjusted net income was $8.0 million
and $0.26 per share. EBITDA was $12.1 million for the quarter and
adjusted EBITDA $13.4 million.
LSI’s acquisition activity has increased in recent years, and
inorganic growth is part of our long-term growth strategy, as
outlined in our Fast Forward plan. Management believes in providing
increased transparency to our core operating results, therefore
beginning with the fiscal first quarter 2025, LSI will include
amortization expense related to acquired intangible assets as an
add-back to its non-GAAP reconciliation. A complete reconciliation
of GAAP and non-GAAP results, together with a comparison of current
and prior year calculations, is included in this release.
The Company generated free cash flow of $11.1 million in the
first quarter, driven by earnings and working capital efficiency.
LSI ended the first quarter with approximately $49.0 million in
cash and available liquidity, and a ratio of net debt to trailing
twelve-month adjusted EBITDA of 0.8x.
The Company declared a regular cash dividend of $0.05 per share
payable on November 26, 2024, to shareholders of record on November
18, 2024.
MANAGEMENT COMMENTARY
“During a period of fluctuating demand levels within our
vertical markets, LSI continues to build leading positions across
our key markets during the first quarter, though a combination of
new business wins, together with the recent, successful integration
of EMI Industries,” stated James A. Clark, President, and Chief
Executive Officer of LSI.
“We continued to execute on large, multi-year customer programs
within our refueling/c-store vertical during the quarter, while
order rates within our grocery vertical increased materially versus
the prior-year period,” continued Clark. “Overall order rates
increased versus prior year, resulting in a 12% increase in backlog
entering the second quarter.
“The durability of our operating model was on display during the
first quarter, as our diverse end-markets, long-term customer base,
deep solutions portfolio, and unique value proposition supported a
solid financial performance, highlighted by sustained profitability
and free cash flow generation.
“Within our Display Solutions segment, we continued to execute
on an elevated backlog of refueling/c-store program wins awarded in
fiscal 2024, which partially offset slower scheduled project
activity within the grocery vertical,” continued Clark.
“Importantly, order rates within our grocery vertical increased 90%
in the first quarter and remain strong early into the second
quarter, as both deferred maintenance and planned investments begin
to rebound. Our grocery vertical book-to-bill was 1.3x in the first
quarter, driven by the adoption of the new R290 refrigerant
solution and increased demand for non-refrigerated display case
products. As grocery vertical demand resumes, with our new products
and increased production capacity, LSI is positioned to support the
requirements of our customer base.
“EMI delivered a near record performance in its first full
quarter as an LSI company, driven by improved customer activity
within the C-Store and Quick Serve Restaurant (“QSR”) verticals,”
continued Clark. “Entering the fiscal second quarter, EMI continues
to realize strong project quotation activity supported by a broad
base of c-store, grocery and restaurant customer brands. Our
integration of EMI is performing ahead of plan, with the
collaboration with other divisions of LSI generating considerable
cross-selling synergy opportunities across our comprehensive
product and solution offerings.
“We forecast positive activity to continue for Display Solutions
in the fiscal second quarter with comparable sales expected to
increase year-over-year, and backlog continuing to improve,” stated
Clark. “Our second half fiscal 2025 is developing favorably, as
much of the recent order activity is scheduled to commence after
the holiday season, when store renovation activity is limited.
“Within our Lighting segment, net sales declined year-over year
due to lower levels of large project activity,” continued Clark.
“While smaller project activity remains healthy, supported by a
stable quote-to-order conversion period, we’ve seen a lengthening
in the conversion period for large projects, particularly within
the warehouse vertical, where construction starts have slowed.
Conversely, we’ve continued to experience demand growth in select
verticals, including refueling and sport court applications. We
anticipate that our Lighting Segment performance will improve in
the second quarter, when compared to the year-ago period, and
larger known projects, many of which are on hold pending final
approval, are released to move forward in the first half of
calendar year 2025. Selling prices and material input costs remain
stable across all verticals and applications.
“Our Lighting go-to-market model is led by our strong portfolio
of outdoor solutions,” stated Clark. “Our area lighting offering is
considered one of the best in the industry, led by our Mirada
series of products. In the first quarter we formally launched an
innovative family of area lights to complement our Mirada range,
representing our largest lighting product launch in seven years.
The V-LOCITY™ series fixtures offer a sleek, streamlined aesthetic
design, and many distinct features providing numerous benefits to
end users. Highlighting the benefits is the modular and
configurable optical distribution options, customizable to specific
applications. Ease and speed of installation is also a major
differentiator, providing a unique, simplified solution to the
challenging installation process. The interchangeable mounting
system along with a lighter weight fixture is expected to generate
a 45% reduction in installation time, representing a significant
savings to the contractor and end-user.
Clark concluded, “We have built a stronger, more capable
business during the last several years, a durable platform equipped
to deliver profitable growth, consistent with the financial targets
outlined in our Fast Forward plan. We see significant opportunities
for both organic and inorganic growth over the coming years as we
capitalize on the favorable, long-term secular tailwinds evident
across our key vertical markets. We remain committed to a balanced,
disciplined approach to capital allocation, maximizing the balance
of economic returns, ongoing investment, and shareholder
value.”
FISCAL 2024 FIRST QUARTER 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.
Domestic Live:
844-826-3035
International Live:
412-317-5195
To listen to a replay of the teleconference, which subsequently
will be available through November 21, 2024
Domestic Replay:
844-512-2921
International Replay:
412-317-6671
Conference ID:
10193820
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, millwork, metal
and refrigerated products, and custom displays, are engineered to
elevate brands in competitive markets. With a workforce of
approximately 1,900 employees and 16 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 September
30
(Unaudited) (In thousands,
except per share data)
2024
2023
Net sales
$
138,095
$
123,441
Cost of products sold
104,343
86,505
Expense on step-up basis of acquired lease
67
-
Severance costs and restructuring costs
38
347
Gross profit
33,647
36,589
Severance costs and restructuring costs
22
6
Amortization expense of acquired intangible assets
1,408
-
Acquisition costs
48
-
Consulting expense: commercial growth initiatives
-
19
Selling and administrative costs
23,038
25,536
Operating income
9,131
11,028
Other (income) expense
(61
)
96
Interest expense, net
875
566
Income before taxes
8,317
10,366
Income tax
1,635
2,338
Net income
$
6,682
$
8,028
Weighted Average Common Shares
Outstanding Basic
29,593
28,757
Diluted
30,530
29,955
Earnings Per Share
Basic
$
0.23
$
0.28
Diluted
$
0.22
$
0.27
(amounts in thousands)
September 30,
June 30,
2024
2024
Current assets
$
166,890
$
162,499
Property, plant and equipment, net
32,221
32,959
Other assets
150,391
153,342
Total assets
$
349,502
$
348,800
Current maturities of long-term debt
$
3,571
$
3,571
Other current liabilities
76,497
75,636
Long-term debt
44,118
50,658
Other long-term liabilities
14,133
14,580
Shareholders' equity
211,183
204,355
$
349,502
$
348,800
Three Months Ended September 30, 2024
Results
Net sales for the three months ended September 30, 2024 of
$138.1 million increased 12% from the three months ended September
30, 2023 net sales of $123.4 million. Lighting Segment net sales of
$58.4 million decreased 14% from prior year’s first quarter net
sales of 67.6 million while Display Solutions Segment net sales of
$79.7 million increased 43% from prior year’s first quarter net
sales of $55.8 million. Net income for the three months ended
September 30, 2024 was $6.7 million, or $0.22 per share, compared
to $8.0 million or $0.27 per share for the three months ended
September 30, 2023. Earnings per share represents diluted earnings
per share.
Balance Sheet
The balance sheet at September 30, 2024 included current assets
of $166.9 million, current liabilities of $80.1 million and working
capital of $86.8 million, which includes cash of $7.0 million. The
current ratio was 2.1 to 1. The balance sheet included
shareholders’ equity of $211.2 million and long-term debt of $44.1
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 2025, payable November 26, 2024, to shareholders of record
as of the close of business on November 18, 2024. 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, 2024 and 2023. Operating income, net income,
and earnings per share, which exclude the impact of long-term
performance based compensation expense, the amortization expense of
acquired intangible assets, commercial growth opportunity expense,
acquisition costs, the lease expense on the step-up basis of
acquired leases, and restructuring and severance costs, are
non-GAAP financial measures. We further note that while the
amortization expense of acquired intangible assets is excluded from
the non-GAAP financial measures, the revenue of the acquired
companies is included in the measures and the acquired assets
contribute to the generation of revenue. We believe these non-GAAP
measures will provide increased transparency to our core operating
performance 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 September
30
(Unaudited) (In thousands,
except per share data)
2024
2023
% Change
Net sales
$
138,095
$
123,441
12
%
Operating income as reported
9,131
11,028
-17
%
Long-term performance based compensation
1,184
1,325
Amortization expense of acquired intangible assets
1,408
1,190
Acquisition costs
48
-
Lease expense on the step-up basis of acquired leases
67
-
Consulting expense: commercial growth initiatives
-
19
Severance costs and restructuring costs
60
353
Operating income as adjusted
$
11,898
$
13,915
-14
%
Net income as reported
$
6,682
$
8,028
-17
%
Net income as adjusted
$
7,981
$
9,610
-17
%
Earnings per share (diluted) as reported
$
0.22
$
0.27
-19
%
Earnings per share (diluted) as adjusted
$
0.26
$
0.32
-19
%
Three Months Ended
September 30
(In thousands, except per share data)
2024
2023
Diluted EPS
Diluted EPS
Reconciliation of net income to adjusted net income
Net income as reported
$
6,682
$
0.22
$
8,028
$
0.27
Long-term performance based compensation
881
0.03
974
0.03
Amortization expense of acquired intangible assets
1,042
0.03
870
0.03
Acquisition costs
36
-
-
-
Lease expense on the step-up basis of acquired leases
50
-
-
-
Consulting expense: commercial growth initiatives
-
-
13
-
Severance costs and restructuring costs
45
-
256
0.01
Tax rate difference between reported and adjustednet income
(755
)
(0.02
)
(531
)
(0.02
)
Net income adjusted
$
7,981
$
0.26
$
9,610
$
0.32
(Unaudited; In thousands)
Three Months Ended September
30
Net Income to Adjusted EBITDA
2024
2023
% Change
Net Income as reported
$
6,682
$
8,028
Income tax
1,635
2,338
Interest expense, net
875
566
Other expense (income)
(61
)
96
Operating income as reported
$
9,131
$
11,028
-17
%
Depreciation and amortization
2,940
2,371
EBITDA
$
12,071
$
13,399
-10
%
Long-term performance based compensation
1,184
1,325
Acquisition costs
48
-
Lease expense on the step-up basis of acquired leases
67
-
Consulting expense: commercial growth initiatives
-
19
Severance costs and restructuring costs
60
353
Adjusted EBITDA
$
13,430
$
15,096
-11
%
Adjusted EBITDA as a percentage of sales
9.7
%
12.2
%
(Unaudited; In thousands)
Three Months Ended September
30
Free Cash Flow
2024
2023
% Change
Cash flow from operations
$
11,846
$
10,592
12
%
Capital expenditures
(759
)
(1,393
)
Free cash flow
$
11,087
$
9,199
21
%
Net Debt to Adjusted EBITDA Ratio
September 30,
(amounts in thousands)
2024
2023
Current maturity of long-term debt
$
3,571
$
3,571
Long-term debt
44,118
25,098
Total debt
$
47,689
$
28,669
Less: cash
(6,969
)
(3,533
)
Net debt
$
40,720
$
25,136
Adjusted EBITDA - trailing twelve months
$
49,770
$
53,408
Net debt to adjusted EBITDA ratio
0.8
0.5
Reconciliation of net income to adjusted net
income - five quarter view FY 2024
Diluted EPS
Diluted EPS
Q1 2024
Q2 2024
Net Income Reported
$
8,028
$
0.27
$
5,906
$
0.20
Consulting expense: commercial growth initiatives
13
-
-
-
Amortization expense of acquired intangible assets
870
0.03
885
0.03
Severance costs/Restructuring costs
256
0.01
34
-
Long-term performance based compensation
974
0.03
625
0.02
Tax rate difference between reported and adjusted net income
(531
)
(0.02
)
(201
)
(0.01
)
Net Income Adjusted
$
9,610
$
0.32
$
7,249
$
0.24
Adjusted Net Income %
7.8
%
6.7
%
FY 2024
Diluted EPS
Diluted EPS
Q3 2024
Q4 2024
Net Income Reported
$
5,375
$
0.18
$
5,668
$
0.19
Acquisition costs
-
-
722
0.02
Amortization expense of acquired intangible assets
888
0.03
1,028
0.04
Severance costs/Restructuring costs
101
-
5
-
Long-term performance based compensation
767
0.03
906
0.03
Tax rate difference between reported and adjusted net income
-
(25
)
-
Net Income Adjusted
$
7,131
$
0.24
$
8,304
$
0.28
Adjusted Net Income %
6.6
%
6.4
%
FY 2025
Diluted EPS
Q1 2025
Net Income Reported
$
6,682
$
0.22
Acquisition costs
$
36
$
-
Amortization expense of acquired intangible assets
1,042
0.03
Lease expense on the step-up basis of acquired leases
50
-
Severance costs/Restructuring costs
45
-
Long-term performance based compensation
881
0.03
Tax rate difference between reported and adjusted net income
(755
)
(0.02
)
Net Income Adjusted
$
7,981
$
0.26
Adjusted Net Income %
5.8
%
Effective in the first quarter of fiscal 2025, LSI will include
the amortization expense related to acquired intangible assets as
an add-back to its non-GAAP reconciliation. Prior quarter non-GAAP
reconciliations have been adjusted accordingly.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20241107886924/en/
INVESTOR & MEDIA CONTACT Noel Ryan, IRC 720.778.2415
LYTS@vallumadvisors.com
LSI Industries (NASDAQ:LYTS)
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