LSI Industries (NASDAQ:LYTS) Q1 2027 Earnings Call

0:00 Greetings and welcome to the LSI Industries Fiscal 2027 First Quarter Results Conference Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Jim Galeese, Chief Financial Officer. Thank you, sir. You may begin.

0:31 Welcome, everyone, and thank you for joining today's call. We issued a press release before the market opened this morning detailing our fiscal 27 first quarter results. In addition to this release, we posted a conference call presentation in the investor relations section of our corporate website. Information contained in this presentation will be referenced throughout today's conference call. Included are certain non-GAAP measures for improved transparency of our operating results. A complete reconciliation of GAAP and non-GAAP results is contained in our press release and 10-Q. Please note that management's commentary and responses to questions on today's conference call may include forward-looking statements about our business outlook.

1:21 Such statements involve risks and opportunities, and actual results could differ materially. I refer you to our safe harbor statement which appears in this morning's press release for more details. Today's call will begin with remarks summarizing our fiscal first quarter results. At the conclusion of these prepared remarks, we will open the line for questions. With that, I'll turn the call over to LSI President and Chief Executive Officer, Jim Clark.

1:52 Thank you, Jim, and good morning, everyone. I appreciate you joining us today. Today, we're reviewing our first quarter results for fiscal 27. as you saw in our earnings release for reported revenue of approximately $226 million, which is an increase of 44% over the prior year, reflecting the addition of Royston to our business. Adjusted EBITDA increased 41% to $22.2 million, and we generated nearly $14 million in free cash flow. Overall, I would characterize the quarter as one where we made good progress on a number of important initiatives. while continuing to work through some challenging marketing conditions. Jim Galeese will cover the financial details in a few minutes.

2:37 So let me start with Royston. We are now several months into the integration and I'm very pleased with the progress we're making. Royston delivered a solid quarter with sequential sales growth of 8% and 100 basis point improvement in adjusted EBITDA margin. We're beginning to see the benefits of initiatives focused on improving operating efficiency and strengthening commercial execution. As I've said before, we didn't acquire Royston simply to become a larger company. We acquired Royston because it fits directly into our vertical market strategy that we've been executing for the past seven years. Our strategy hasn't changed. What's changed is our ability to serve those markets.

3:22 With Royston, we've significantly expanded the products, services, and manufacturing capabilities we can bring to our customers. And we're beginning to see the benefits of that expanded platform in the conversations we're having across our customer base. A few weeks ago, we formally introduced our category of one initiative at NACS convention. NACS is the National Association Convenience Store and it's one of our largest trade shows. This was an opportunity to bring together a full scope of LSI's capabilities and present them to many of the largest convenience stores and refueling customers in North America. The response was extremely positive. I think many of our customers are just beginning to appreciate the breadth of what we can now offer.

4:10 And while these opportunities take time to develop, the conversations we're having today are broader and more strategic than they were just a few years ago. Turning to our vertical markets, refueling and convenience stores continue to perform well. Sales increased approximately 5% during the quarter, supported by activity across several of our largest customers. The 2500 site renovation program we discussed last quarter continues to progress as planned, with activity expected to build through fiscal 27 and into fiscal 2028. We're also working with another major convenience store chain on a potentially significant renovation program, beginning with store concept developments right now.

4:59 As we've discussed on previous calls, the competitive environment in the convenience store market continues to drive investment in new locations, remodels, and the overall customer experience. We love it. We believe this is a long-term trend and one that aligns very well with our capabilities. Grocery also remains healthy. We're seeing continued investment across broad customer base, and order activity in that vertical increased 12% during the quarter. Across display solutions, overall orders increased 4%, and our pro forma backlog also improved. These are encouraging indicators, particularly given the broader economic environment.

5:44 QuickServe restaurants remain a more challenging market. We've talked about the uneven investment patterns in QSR over the last several quarters, and those conditions have continued. Some customers are moving forward with their programs, others are delaying investment decisions. The softness has affected both our sales and margin. However, we recently received some very encouraging news from one of our larger QSR customers. They approved a 3,000-store interior renovation program that we've been working on for some time and selected LSI as one of three providers. The program is expected to begin late in our third quarter fiscal 2027 and continue over approximately three years.

6:31 It's another example of the opportunities developing within our existing customer base, and we're thrilled to be part of it. turning to lighting, the broader market remained soft. Sales for LSI declined approximately 6% during the quarter, reflecting weaker demand across several key commercial and industrial applications. We did see growth in refueling, sports, and banking, but that was offset by weakness in parking, smaller retail, warehousing, and automotive. Despite the lower volume, our lighting team improved gross margin during the quarter reflecting continued discipline around pricing and cost management. Order activity was relatively stable, and we continue to invest in new product development, training, and customer engagement.

7:21 We've built a very competitive lighting business over the last several years, and I believe we're well positioned when the broader market recovers. I also want to touch briefly on operational efficiency. We spent the last several years building a broader and more capable organization. Now we're focused on bringing those capabilities together and identifying opportunities to operate more efficiently. One example is a consolidation of our Collinwood, Ontario manufacturing operation. We're bringing that into our existing Canada's Best facility near Toronto. We expect to complete that transition through the end of this fiscal year and will generate more than a million dollars in annual savings through this move.

8:07 This is the type of work we'll continue to pursue across LSI, not simply reducing costs, but improving the way our businesses operate together, making better use of our facilities and our equipment, and creating a more effective organization. Looking ahead, I want to be realistic about our near term. We're seeing positive order activity and a number of encouraging customer developments, but the timing of the opportunities doesn't always align neatly with our fiscal quarters. We're also dealing with continued softness in lighting and QSR, as I just spoke of a minute ago. Inflationary pressures and the normal seasonal slowdown in our retail renovation activity as we move into the holiday period is something else we need to consider.

8:55 At the end of the day, I feel very good about where we're positioned as a company. Over the past several years, we've been focused on building a broader and more capable organization. through a combination of our organic growth activities and strategic acquisitions, we've assembled a platform that I believe is unique in the market that we serve today. As we look ahead, our focus is increasingly shifting from building that platform to realizing its full potential. That means expanding our share of wallet with existing customers, introducing those new products and capabilities, and continuing to improve the efficiency and profitability of our operations. and importantly, many of these opportunities are within our control.

9:40 We don't need to rely entirely on improving economy or others to continue to make this progress. We're approaching an important milestone in our strategic planning process. In December, we expect to share our next multi-year strategic plan with the investment community, outlining how we intend to build on the progress we've made under the Fast Forward plan and continue to create long-term shareholder value. We've always placed a great deal of emphasis on our high say-do ratio, setting expectations carefully and delivering against them. That discipline will remain central to how we approach this next chapter. As always, I want to thank our entire team for their continued hard work and commitment.

10:26 There's a lot going on across LSI right now and I'm pleased with the progress we're making. I'm encouraged by what we see ahead and I'm looking forward to sharing more about our future plans in December. With that, I'm going to turn the call back over to Jim Galeese for a more detailed review of our financial results.

10:46 Good morning, all. LSI delivered $226 million in sales, over $22 million in adjusted EBITDA, and just under $14 million in cash flow in Q1. And I'll comment on all three areas. Starting with sales, the year-to-year 44% increase was led by display solution segment, which includes the incremental impact of the Royston acquisition. Excluding the acquisition, display solution sales increased 1% versus prior year, with significant fluctuation realized across key vertical markets. For display, both C-store and grocery generated mid-single-digit growth rates, sustaining a high level of customer project activity, while QSR and banking were soft. both down double digits.

11:36 In C-Store, our largest customer generated double-digit growth in the quarter as we completed renovation work on additional pilot sites. The multi-year renovation program proposed by this customer has different renovation package options depending on the site, and we're working closely with their team on finalizing content and overall project planning. also in the quarter, we began renovation work for the 2500 site award we announced last quarter in the refueling vertical. The initial award did not include Royston, but now includes signage, representing an early cross-selling win. For grocery, demand also remains favorable, led by sales to large chains.

12:23 Notably, the nation's largest retailer completed their line reviews for the next calendar year and the result is LSI will be awarded additional share of product. As projected, the QSR vertical remains very soft as chains respond to inflation-driven lower consumer traffic. However, as Jim mentioned, a large QSR chain selected LSI as a supplier for renovation of 3,000 stores over the next three plus years. Separately, we continue to make progress on the Royston acquisition. Sales improved sequentially, and all three businesses realized pro forma sales growth versus the prior year quarter.

13:08 Looking forward, display segment orders and backlog both increased 4% compared to the prior year quarter, as project release activity continues in our two largest verticals. The operating environment has become more challenging. with the number of customer schedule changes and pushouts increasing. Reschedules range from several weeks to several months. There's multiple reasons driving this, one being the status of project budgets as we near the end of the calendar year. Another is job sites lagging behind schedule. And skilled labor availability is also an issue. We continue to collaborate closely with customers on scheduling particularly as we enter the slower seasonality period as customers limit renovation activity ahead of the holiday, high sales, and consumer traffic period.

14:04 Shifting to the lighting segment, lighting sales were 6% below prior year, the result of ongoing softness in the broader commercial and industrial market. While the near-term outlook remains soft, we remain focused on margin management. where alignment of selling price to current cost supported a 10 basis point improvement in the year-to-year gross margin rate. Lighting quote activity continues to exceed orders, with quotes for the last three months increasing 5% over last year, while orders increased 1%, reflecting the ongoing delayed quote-to-order conversion process. Next, several comments on adjusted EBITDA.

14:49 LSI generated adjusted EBITDA of $22 million in the first quarter, or 41% above prior year. To summarize, EBITDA and EBITDA margin was favorably impacted by the incremental impact of Royston and C-Store and grocery volumes, while being unfavorably impacted by lower volume in lighting and vertical customer mix and display solutions and the continued cycling through the lower margin backlog and the sign resource business. Progress was achieved in multiple margin improvement initiatives in the quarter. Royston EBITDA margin, which is accretive to LSI, increased 100 basis points sequentially from the fourth quarter.

15:35 All three brands realized improved margins, including the sign resource business. We expect sign resource margin improvements to continue, targeting a 200 plus basis point increase for fiscal Q2 over Q1. In addition, processes have been implemented to ensure pricing on all Royston project quotes and orders are aligned with current costs and provide for changes in key commodity costs. Further, we remain focused on identifying and implementing synergy savings across the business. We have already identified and in process of implementing and Michael Prachar, Mike Burcham. of $13.8 million, serving to reduce net debt by $14 million.

16:51 In the six months since the acquisition of Royston, LSI has reduced net debt by over $23 million, resulting in a net debt to pro forma TTM adjusted EBITDA of 2.6 times. To conclude, we are encouraged by the increasing level of program interactions with our customers as well as the progress on our key performance improvement initiatives. While we may continue to incur timing fluctuations in our projects and markets, we are confident in our direction and path and will accelerate our execution throughout fiscal 2027. I will now turn the call back to the moderator for the question and answer session.

17:38 Thank you. We'll now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for your questions. Our first question comes from the line of Aaron Spichala with Craig Hallam. Please proceed with your question.

18:13 Yeah, good morning, Jim and Jim. Thanks for taking the questions. You know, maybe first for us on the C-Store vertical, you know, in the release you mentioned a pilot program with an existing customer kind of early in a large-scale renovation. and then earlier on the call I heard about, you know, kind of store concept developments with another chain. So just want to kind of confirm or just understand are those, you know, one and the same or those two separate and then just any other color on kind of timing or size potential for number of sites and pull through on the Royston side of things as you look to expand wallet share with those opportunities.

18:54 Yeah, good morning, Aaron. And so, first of all, just to answer your question, the 3000 store is a program we've been awarded. And, you know, and that'll bridge out through the third quarter, late third quarter, early Q4 of 27 here, and then go into 2028. As you remember with some of our other programs, this isn't unusual for us to come in where there's multiple suppliers, but we've been very effective at capturing a bigger share of the initial award as we go forward, and we're hopeful we'll be able to do the same here. The development is another separate customer, and we're in the early stages of that right now, but it's very encouraging, and we've just moved on.

19:47 through some actual field deployments. So it's always an encouraging sign because it usually indicates a final decision and a go forward. And then lastly, separate, but we still have the 2,500 site program that we talked about last quarter. And this is on top of our normal rhythm of business. So these are kind of newer projects that are rolling in and ones that we thought were worth mentioning.

20:17 Understood. Thanks for that. And then can you just provide a little bit more detail on some of the significant opportunities to drive operating leverage? You talked a little bit about the facility consolidation, you know, some on procurement, but just any other details there as you kind of balance that with just some of the other kind of macro issues that you're navigating as well?

20:40 Yeah, I mean, I look at them as, you know, all as opportunities, right? We've got 23 facilities spread out across the US right now. There are locations where, you know, where we could consolidate some things, we could make better utilization of equipment in time we have. So we're looking at all of those things. We've always said we were going to kind of come back and do this. And I think this is really all about that focus to getting, you know, do our 12.5% EBITDA. This is where this efficiency comes from. Better asset utilization. If we're using a piece of equipment right now on a single shift, eight hours a day, we've got 16 hours we could be using that piece of equipment, or at least a portion of that. Those are all opportunities for us.

21:27 We've got We're moving a product between one or two facilities, partial here, partial there, to get a completed product. If we can get that all under one roof, that creates a tremendous opportunity for us. I think over the next two years, you're going to see us really invest in that. The Collinwood facility is a good example. Taking that and creating a center of excellence for Canada, in Canada, has always been our idea. and Michael Prachar. and our effectiveness in running the company.

22:30 Aaron, I would, Jim Galeese here, I would just add to Jim's comments. As you know, we've talked before, you know, quality of earnings is very important, you know, to LSI for a number of reasons. And so we take both our business improvement initiatives and synergies, you know, associated with the acquisition very seriously. And we have, you know, quite a roadmap of items to build on. Jim mentioned a few, and I'll just mention a couple more. I think I mentioned in my comments how we've identified and in the process of implementing, you know, million dollars of procurement savings in key commodity areas. You know, and that's just a start. And our alignment, our ability to continue to align selling price to current cost is continuing to get better. That's something LSI has always had a pretty good competency in, and we're expanding that into the Royston product areas. And you're seeing that, and Jim commented on it, and I did as well, you know, the sequential improvement we've seen there and the sequential improvement we continue to see. expect moving forward and will realize moving forward. So quality of earnings and margin management, margin realization is a high priority for us, Aaron.

23:54 You know, last quarter we talked about a little bit of softness and margin around some of the sign resources projects that rolled forward after the acquisition. We've already been able to go in there and make significant improvement. I mean, we've still got a ways to go. We said that it would take us through the remainder of the calendar year to kind of get us on par. But I'm very happy with the progress we've made there and the team has done. And that's just that pricing discipline that we've always been very good at.

24:26 Good. Thanks for the call there. And then maybe one last one, if I could sneak in just on the balance sheet. Can you talk about the timeline and kind of confidence in continued EBITDA-free cash flow conversion to get that leverage down below? I think the target has been two times.

24:45 Yeah, I think we've been very clear about our timetable in terms of driving our leverage ratio to two times and lower and we expect that we continue to expect that to happen within the next 12 to 18 months. We see no reason that our free cash flow will continue the pattern that it is and in fact should improve once we see a little more uplift and release on some of these larger releases on some of these programs.

25:20 Understood. Thanks for taking the questions. I'll turn it over. Thanks, Sherry. Thank you. Our next question comes from the line of Brent Stillman with Oppenheimer. Please proceed with your question.

25:33 Hey, thanks. Good morning, Jim and Jim. I guess first question, there was a comment just around customer discussions becoming more kind of broader and more strategic than a few years ago. Jim, if you wouldn't mind just expanding upon that and what degree did that give you visibility here, even as it seems like we're working through kind of a dynamic macro right now.

25:55 I never want to get the cart before the horse, but NACS is a big trade show for us. It's probably the biggest, and it's a concentration of very large customers, both from a Royston perspective and from LSI, and that's been historical. I think that there was an epiphany, a realization, a kind of a finger snap of, I get it now from a customer perspective. and I just felt like there was a lot of energy about that realization. And that, you know, it still takes time to mature because in every one of these cases, our customers are currently buying, you know, from some incumbent. And, you know, we're gonna make the assumption that incumbent is doing a good job for them. We need to continue to articulate that the benefits that we're bringing, the category of one we're developing under one roof as the manufacturer and as the integration partner to help our customers get it installed has real value.

27:00 And what I was commenting to is coming off of NACS where you get a high density of customers in one location in a short amount of time, you get a lot of input rapidly. And in the realization of I get it, that connection with what we can do across their stores, was clear and apparent, and the energy level was very high. And so I just come off of that whole trade show very kind of excited. It's nice to see the program, the dream that we've kind of built and sketched out, connect with these customers. And now it's just realizing that forward momentum and creating it into something that we are able to capture more of that wallet share. and we are able to move from two or three solutions to five or six solutions.

27:52 And I feel like there was a lot of connection at this show about that capability. And in individual conversations, I just mentioning that when you're there for three days and you can connect it one after another, it really creates some energy.

28:10 Appreciate that, Jim. I guess as a follow-up, on lighting, are you seeing a market that's starting to stabilize? I don't think it's been especially good for you in the last few quarters. Or is some of what you're seeing in the quarter suggest it's getting a little bit worse?

28:32 Well, I think that, you know, if you looked at it from an industry perspective, I think we've been outpacing, you know, in lighting for, you know, multiple quarters, particularly if you go back, you know, two, three quarters. We were consistently outpacing the market. We were showing that growth. Most of our lighting, as I said, we've got high activity in some segments and we've got lower activity in others. And I think that lower is just a little bit more advanced than the higher stuff right now.

29:00 So you're seeing that decline, that 6% decline.

29:04 With that said, though, I mean, all these customers we're talking to, and it's kind of segment driven, are talking about projects they have in the queue, but they're just being pushed out. They're being pushed in. We usually see a little bit of accelerated activity. We actually call this our lighting season, the time right before the fall hits. People start recognizing, oh, I've got to get this building lighting done. I've got maintenance work to do. We want to button things up before the cold weather hits. There's a little bit of activity, a little bit of increased activity that didn't occur this year. And I think some of that is where capital budgets, dollars associated with things that were improvements in putting budgets at the beginning of the year. Some of the companies are saying, wait a minute, hold on, we're going to roll that into the beginning of next year.

29:58 So I don't see any of the projects going away, but I do see an increased amount of customers kicking things down the road. And that's what we're experiencing.

30:09 You know, Brett, the proof point on that is, you know, in my comments where I said, you know, in the last three months, you know, our quote activity is actually up 5%, right? But yet our, you know, our sales and our orders up one. So that shows then that, you know, the delayed order, quote to order conversion cycle. It's very frustrating, you know, but when we get into it, there's reasons for that. And a lot of it is around what you just said. you know, how things are rolling up and how things are rolling up to their budgets. And if they're over, then they have to go in and look and make some changes, reengineer some things, and not just lighting, by the way, but, you know, other finishing elements as well. So that's just created an elongated, you know, cycle.

30:56 But that pipeline, you know, it's there. It's just backing up.

31:03 Understood. I'll pass it on. Thanks. Thank you, Brent. Thank you. Our next question comes from the line of Min Cho with Texas Capital Securities. Please proceed with your question.

31:16 Great. Thank you, Jim and Jim. Congratulations on your QSR award. Jim, you did mention that you were one of three on this award and that you had gained some share. Just wanted to know if this included, if this contract included some Royston products and are the other two vendors, are they providing products that you cannot provide or is this just a diversification strategy, you know, by the customer? And then a final question on that, are you providing the project management on this contract?

31:49 Okay, Min, thanks for the question. This is an LSI project. This is not, doesn't include any Royston at this point. And a lot of that is because I think we've been involved in this project almost three years. We've talked before about the way these cycles work. You sit down. You have design discussions. You do material selection. What's your objective? How much do you want to do this? You put the designs to the materials. You show samples. There's adjustments made. So we're just at that point where we went out and did some actual test stores, the customer kind of committed a direction, but this was all way in advance of the Royston project coming on board with LSI.

32:42 So this is an LSI-only project. Because it's an LSI-only project, our competitive forces are a little bit more stable and mature. and so those competitors, those other people that are providing it, they provide the same category that we do. They don't provide anything else that we don't. In fact, we provide more than they do. It's just that this project doesn't require that yet. We are providing project management resources and it's yet to be seen, but it's not uncommon for us to walk into a project like this with a third of the project, but take more of it as we move along. and that's all based on our execution capability. So I'm encouraged. I'm happy with what we've got and I want more and hopefully we'll get more as we move through the project.

33:37 Excellent. Something that you highlighted, Jim, during your Royston tour in October was the importance of your ADAPT services kind of leading, you know, with the program management and such. Can you provide just a little more information around that? Like how large is this, how large is the opportunity, and what does it really provide you in terms of the actual project rollouts?

34:01 Yeah, I mean, I always talk about it like it's ketchup for our fries, right? It doesn't necessarily independently drive business, but it does help quite a bit add to the desire for us to provide more services. and that having that very discussion is germane to our whole thesis, right? Which is one stop, you can come in and we can really offload that customer from, you know, the burdens and the capability, you know, our capabilities really shine through there. So if you go back, you know, three years ago, it was, you know, $10 million business. Today, it's a $30 million plus business. But it really enables kind of the sales that we do, and that becomes even more important as we bring Royston in. And I would also mention that Royston has a similar service capability in their business, not quite as mature as LSIs, but we've already started the work of integrating those two and leveraging off of a couple things they do that we don't, and then leveraging off of more things that we do that they don't.

35:11 And just for clarity, those services are not, we don't dispatch trucks to a location. And a lot of that is because, you know, if you think of, I'll just take electrical licenses, for example. State by state, they vary quite a bit. So if you're in Ohio and you're in Indiana, you've got to have an electrical license in Ohio. You've got to have an electrical license in Indiana. And then county by county, the rules and the standards can vary. And even by city by city. So local resources are important to us. What we provide is the overall management of those resources, the permitting, the insurance discussions, the scheduling, all of that. That's what our ADAPT Services Group provides.

35:58 Great. Thank you. And then just finally, any update in terms of progress that you're making on your partnership with Carter? Is there anything in backlog yet?

36:08 There is a lot of, you know, there's transfer work that Carter already had in the works. There have been a lot of discussions bringing them into, you know, bringing Carter and the services into what LSI has right now in our customer base. I would say that we're still in the early stages of that. When we signed the agreement with Carter, you know, we explained that, again, this is project cycle timing, and that project cycle is usually 12 to 18 months. So I think I'm encouraged by what we're doing. We've had some great wins already where we've been able to differentiate ourselves in our installation capabilities and coordinated schedules better, and the customers have seen that. And I'm encouraged by the conversations we're in, but I wouldn't say there's any tangible momentum in new business quite yet.

37:08 Got it. Thank you very much. Thank you, Min. Thank you. Our next question comes from the line of Amit Dayal with HC Wainwright. Please proceed with your question.

37:20 Thank you. Good morning, everyone. So, Jim, just from, you know, all the recent acquisitions, et cetera, and the size of the company now, how much risk to quarterly variance is there from any customer scheduling changes or push-outs?

37:36 I mean, I think that that's, you know, and we've been dealing with this since COVID. I mean, if, you know, we're speaking, you know, historically, I think that we've talked about this before, that that disruption in schedule and timing, and there's a lot of things that have driven it. You know, coming out of COVID, I remember just getting permits, you know, through local offices, city offices, and things like that were a major impact. Today, I think it's budgets. It is almost 100% budgeting. and you know where they went in an initial budget said hey we're going to have a hundred grand for each store and we're going to do 10 stores and we're going to spend a million all of a sudden you know by August or September time frame they're saying wait a minute we're still going to spend a million but we may only get seven stores done and so we're going to push these other three stores down the road because we don't have the budget for it but The good news there is that usually when you're doing one of these rebranding programs, that work is not going away. They're not going to rebrand, you know, 10 of their stores and leave 40 of them in the old format.

38:46 So I don't really have a lot of concern about the business being there in their commitment to getting the business done. but that inflationary pressure on a whole build-out and broadly across an organization is just putting pressure on their ability to meet their original commitments. So I'll just use that kind of 10 stores as an example. They're just not able to get 10 stores across the finish line with the same budget. Most of the businesses aren't making additional capital available, so they adjust. We push these projects down the road a bit. and we're pretty confident that they're going to come back around.

39:27 Understood. Thank you. And then, you know, with all the focus on integration and trying to create these synergies, does that take away any resources from product development in the near term?

39:39 It's certainly not product development. Product development, for the most part, is a dedicated, committed team across our organization. We've always, you know, and one of my marketing folks kind of hit me up the other day on it and said, Jim, you don't talk about new products as much as you used to on the calls. And I would like to just take a moment to say our commitment to new products is a vital part of our strategy going forward. And we're still very committed to it and we're still releasing 20 plus new products a year in lighting. We're looking for all kinds of new materials and new ways of doing things in our display solutions. We have technology upgrades and efficiencies we've been able to put into our refrigerated products.

40:24 All of that activity is still going on. The integration activities, does it slow it a bit? I'd say lighting is pretty much untouched. Lighting continues at the same pace it always has. I'd say some of the display solutions, minimal impact. maybe a little bit more on the refrigerated product side because we're making big decisions with Southern Case Arts and JSI and EMI's refrigerated products. And we might have a greater slowdown there because we need to make sure we're making the right decision that spreads across all of them. But I would also say that our speed and our commitment and our focus on getting some of this operational benefits out of the organization is definitely increased as of late. We've brought on Royston.

41:17 I think we've got a good rhythm going with Royston. Now we're taking our operations teams and we're saying, okay, let's focus on this efficiency. How do we get more out of this equipment? You know, like I was saying earlier, you know, having a great piece of equipment that we're only running eight hours a day There's a huge opportunity there, right? How do we bring more in-house where we might be subcontracting some work, you know, through an external partner? How do we move that in-house? Because we know we can improve the margins. We have better control of our whole supply chain. So all of those activities are things we've been working on over the last, you know, I'd say in earnest over the last three months by program more than a year. So we've already identified where we want to work.

42:07 That work was done a year ago. I talked about our July meeting. We really kind of put a finer point on things. And then by September, we were really starting to execute. And Collinwood is kind of a first visible piece of that. But there's other activities we're doing. And I'm very encouraged by them because I think that that's the last part of the equation on getting us to that 12 and a half under that, you know, fast-forward 2028 plan.

42:38 Understood. That's all I have, Tim. Thank you. Thank you. We have reached the end of our question and answer session. I'd like to turn the call back over to Jim Clark for any closing remarks.

42:51 You know, I want to just say that I'm encouraged by a lot of what's ahead of us, right? We're dealing with an inflationary environment, you know, macro trends in the economic environment. and I think that as a team, as a company, we're doing a very good job of kind of adjusting. I mentioned in my comments that I wish everything fell into a 90-day cycle and I think you're seeing some of that exposure right now where we're not able to control some of the things we're not able to control. We've got good plans going forward to go back and get this operational efficiency. We've put together all the pieces, all the ingredients for this opportunity that's in front of us. Now it's going about measuring things out correctly and making sure we're mixing them correctly to get that recipe just right.

43:40 And I'm encouraged by the work that we're doing. It was a smaller piece of my comments, but we are going to roll out an updated, you know, fast forward plan. We'll be doing that. We will be sure to give everybody notice, but it will be, you know, kind of mid-December, let's say, 12, 15, 16, somewhere in that bracket. And we will give plenty of notice to everybody. And it's not an abandonment of our 2028 plan. It's just a fine point on it. And it extends it out to 2032. And I'm encouraged by that. We have in front of us the plans to get there. We have in front of us the opportunities to get there. And, you know, the overall economic environment can be a headwind or a tailwind for us, but it's not going to stop us from getting there.

44:31 You know, the most encouraging thing is a lot of these activities we'll do are under our control. So there are things that we're able to do internal in the business. And so they should be a little bit more resistant to the economic swings. But obviously, you know, there's things we need to do that still rely on an economy that's moving forward. but we have a little bit more control over it. So I feel encouraged by our ability to kind of execute against those things. There's still a lot of good runway left in front of us. I still feel like we're in the early innings of this whole story. And I see a clarity and an acceptance by our customer base and an execution by our team that continues to just gain momentum. And I'm very encouraged by what we have in front of us.

45:23 So with that, I'll just say thank you for joining us. And I know it's a little early, but we may not have an opportunity to talk too much directly. Happy holidays to all of you and your families. So take care. Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.