LSI Industries Reports Fiscal 2023 Second Quarter Results and Declares Quarterly Cash Dividend

About this update from Lsi Industries Inc.

CINCINNATI --(BUSINESS WIRE)-- LSI Industries Inc. (Nasdaq: LYTS, or the “Company”), a leading U.S. based manufacturer of display solutions and indoor/outdoor lighting, today reported fiscal second quarter financial results for the three months ended December 31, 2022 . Fiscal 2023 Second Quarter Net Sales +16% y/y to $128.8 million Net Income +107% y/y to $6.4 million ; Adjusted Net Income of $7.6 million Diluted EPS of $0.22 ; Adjusted EPS of $0.26 EBITDA of $11.5 million ; Adjusted EBITDA $13.0 million or 10.1%/sales Free Cash Flow of $8.9 million Net debt declines to $60.1 million , or 1.3x TTM Adjusted EBITDA LSI delivered strong year-over-year increases in both sales and profitability in the fiscal second quarter, driven by broad-based commercial demand across both the lighting and display solutions businesses, continued price discipline and a more profitable sales mix. The Company reported net sales of $128.8 million in the fiscal second quarter, an increase of 16% versus the prior-year period. LSI reported net income of $6.4 million , or $0.22 per diluted share in the fiscal second quarter, versus $3.1 million , or $0.11 per diluted share in the prior-year period. Adjusted net income for the fiscal second quarter was $7.6 million , or $0.26 per diluted share, compared to $4.2 million , or $0.15 per diluted share last year. LSI reported Adjusted EBITDA of $13.0 million for the fiscal second quarter, or an increase of 54% versus the prior-year period. The company reported an Adjusted EBITDA margin rate of 10.1%, an increase of 250 bps versus the prior year period. The improved margin rate was 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 $8.9 million in the fiscal second quarter, increasing free cash flow for the first half of fiscal 2023 to $19.0 million . Net debt decreased from $77.1 million entering the fiscal year to $60.1 million at the end of the fiscal second quarter, reducing the ratio of net debt to trailing twelve-month adjusted EBITDA to 1.3x from 2.2x last fiscal year. The Company declared a regular cash dividend of $0.05 per share payable on February 14, 2023 , to shareholders of record on February 6, 2023 . Management Commentary “LSI delivered strong second quarter results, highlighted by substantial year-over-year growth in sales and profitability, along with improvements to other key operating metrics,” stated James A. Clark , President, and Chief Executive Officer of LSI. “Our performance reflects balanced sales and margin performance attained across our two reportable segments, while continuing to successfully navigate a demanding operating environment. “During the second quarter, our Lighting and Display Solutions segments each achieved double-digit sales growth and margin expansion, versus the prior year period,” continued Clark. “Total Adjusted EBITDA increased 54% year-over-year in the quarter, while Adjusted EBITDA margin exceeded 10% for another consecutive quarter. We continue to grow our share-of-wallet within key verticals markets, building upon a growing base of loyal customers, while demonstrating the value of our one-stop, integrated lighting, display and merchandising solutions within underserved and emerging growth applications.” “As expected, our business continues to generate strong cash flow from operations,” continued Clark. “With trailing twelve-month free cash flow conversion approaching 70%, we’ve continued to direct capital toward debt reduction, consistent with our current allocation priorities. During the last year, we’ve reduced net debt by more than $25 million and ended the second quarter with net leverage at 1.3x. We anticipate continued, positive free cash flow generation as we enter the second half of our fiscal year, positioning us to further reduce debt levels while increasing availability under our existing credit facility. “In the second quarter, we successfully completed a $12+ million rebranding project involving approximately 200 refueling sites in Puerto Rico for a major oil company. Most of these sites were rebranded during the second quarter, as we successfully delivered on the demanding scheduling requirements of the customer. Following the successful completion of this project, which was our first ever project in Puerto Rico , we continue to evaluate additional early-stage international market opportunities that could represent exciting new entry points for our business. “Also in the second quarter, one of the nation’s largest grocery chains awarded LSI a major display case expansion and replacement project, committing to purchase more than $12 million of refrigerated and non-refrigerated displays during the next nine months. The award follows the successful completion of an earlier project with the same customer, which represented a similar number of stores and revenue profile. Our grocery customers continue to invest in programs to enhance the customer shopping experience and generate incremental sales,” noted Clark. “LSI is well positioned to capitalize on these opportunities, partnering with a number of grocery chains on their specific branding and technological requirements. “The Lighting segment continued its strong momentum during the second quarter, generating year-over-year sales growth of 17%, while operating earnings improved 45% versus prior year. Sales growth was broad-based, with significant increases in all vertical market applications. Our new product development activity the last two years prioritized improving and expanding our indoor product range for select vertical markets which, when combined with our widely accepted outdoor portfolio, creates a powerful, value-add solution set. Indoor sales continue to accelerate, achieving second quarter sales growth of 32%. Our enhanced offering has increased the number of orders containing both indoor and outdoor products, serving to increase our average order size. “Display Solutions segment sales increased 15% versus the prior year second quarter, reflecting volume growth across a number of our key verticals. Our order fulfillment and service execution for these made-to-order custom specification projects have been excellent, meeting or exceeding demanding delivery requirements despite ongoing delays and changes to customer installation schedules, permitting and component availability. The Display Solutions segment gross margin improved 620 bps year-over-year, given favorable program pricing and improved sales mix. Operating income margin improved to 12.8% compared to 7.4% in the fiscal second quarter last year. Clark concluded, “We delivered a solid second quarter and we exit the fiscal first half with continued momentum across our business. Demand levels in key vertical markets remain favorable, our backlog is healthy, customers increasingly recognize the value of our solutions, manufacturing and supply chain execution remain on-point, and positive cash flow and debt reduction are expected to continue. Looking ahead, despite ongoing pressures on the general economy, we remain optimistic about the second half of the fiscal year and the long-term prospects of our markets. We’ll continue our emphasis on balancing short-term execution with long-term investments to build the business and achieve profitable growth in the years ahead.” Conference Call A conference call will be held today at 11:00 A.M. ET to review the Company’s financial results and conduct a question-and-answer session. A webcast of the conference call and accompanying presentation materials will be available in the Investor Relations section of LSI Industries’ website at www.lsicorp.com . Individuals can also participate by teleconference dial-in. To listen to a live broadcast, go to the site at least 15 minutes prior to the scheduled start time to register, download and install any necessary software. Details of the conference call are as follows: Call Dial-In: 1-877-407-4018 Conference ID: 13735537 Call Replay: 1-844-512-2921 Replay Passcode: 13735537 A replay of the conference call will be available between January 26, 2023 , and February 9, 2023 . To listen to a replay of the teleconference via webcast, please visit the Investor Relations section of LSI Industries’ website at www.lsicorp.com . About LSI Industries Headquartered in 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 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 approximately 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 Ended December 31 Six Months Ended December 31 (Unaudited) 2022 2021 % Change (In thousands, except per share data) 2022 2021 % Change $ 128,804 $ 111,143 16% Net sales $ 255,873 $ 217,540 18% 9,038 4,422 104% Operating income as reported 19,059 8,866 115% 1,002 1,130 -11% Stock compensation expense 1,553 1,686 -8% - 340 NM Acquisition costs - 340 NM 33 - NM Severance costs 46 - NM 486 - NM Consulting expense: Commercial Growth Initiatives 789 - NM $ 10,559 $ 5,892 79% Operating income as adjusted $ 21,447 $ 10,892 97% $ 6,417 $ 3,105 107% Net income as reported $ 12,678 $ 6,238 103% $ 7,627 $ 4,241 80% Net income as adjusted $ 14,704 $ 7,781 89% $ 0.22 $ 0.11 100% Earnings per share (diluted) as reported $ 0.44 $ 0.22 100% $ 0.26 $ 0.15 73% Earnings per share (diluted) as adjusted $ 0.51 $ 0.28 82% (amounts in thousands) December 31 , June 30 , 2022 2022 Working capital $ 84,891 $ 84,298 Total assets $ 296,283 $ 311,080 Long-term debt $ 59,250 $ 76,025 Other long-term liabilities $ 11,583 $ 12,667 Shareholders' equity $ 161,316 $ 147,769 Three Months Ended December 31, 2022 , Results Net sales for the three months ended December 31, 2022 , were $128.8 million , up 16% from the three months ended December 31, 2021 , net sales of $111.1 million . Lighting Segment net sales of $66.8 million increased 17% and Display Solutions Segment net sales of $62.0 million increased 15% from last year’s second quarter net sales. Net income for the three months ended December 31, 2022 , was $6.4 million , or $0.22 per share, compared to $3.1 million or $0.11 per share for the three months ended December 31, 2021 . Earnings per share represents diluted earnings per share. Six Months Ended December 31, 2022 , Results Net sales for the six months ended December 31, 2022 , were $255.9 million , up 18% from the six months ended December 31, 2021 , net sales of $217.5 million . Lighting Segment net sales of $134.4 million increased 24% and Display Solutions Segment net sales of $121.5 million increased 11% from last year’s net sales. Net income for the six months ended December 31, 2022 was $12.7 million , or $0.44 per share, compared to $6.2 million or $0.22 per share for the six months ended December 31, 2021 . Earnings per share represents diluted earnings per share. Balance Sheet The balance sheet at December 31, 2022 , included current assets of $149.0 million , current liabilities of $64.1 million and working capital of $84.9 million , which includes cash of $2.8 million . The current ratio was 2.3 to 1. The balance sheet also included shareholders’ equity of $161.3 million and long-term debt of $59.3 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 second quarter of fiscal 2023, payable February 14, 2023 , to shareholders of record as of the close of business on February 6, 2023 . The indicated annual cash dividend rate is $0.20 per share. The Board of Directors has adopted a policy regarding dividends which provides that dividends will be determined by the Board of Directors in its discretion based upon its evaluation of earnings both on a GAAP and non-GAAP basis, cash flow requirements, financial condition, debt levels, stock repurchases, future business developments and opportunities, and other factors deemed relevant by the Board. Non-GAAP Financial Measures This press release includes adjustments to GAAP operating income, net income, and earnings per share for the three and six months ended December 31, 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 Six Months Ended December 31 December 31 2022 2021 (In thousands, except per share data) 2022 2021 Diluted EPS Diluted EPS Diluted EPS Diluted EPS Reconciliation of net income to adjusted net income $ 6,417 $ 0.22 $ 3,105 $ 0.11 Net income as reported $ 12,678 $ 0.44 $ 6,238 $ 0.22 785 0.03 867 0.03 Stock compensation expense 1,341 0.05 1,274 0.05 - - 269 0.01 Acquisition costs - - 269 0.01 26 - - - Severance costs 38 - - - 399 0.01 - - Consulting expense: Commercial Growth Initiatives 647 0.02 - - $ 7,627 $ 0.26 $ 4,241 $ 0.15 Net income adjusted $ 14,704 $ 0.51 $ 7,781 $ 0.28 Three Months Ended December 31 (Unaudited; In thousands) Six Months Ended December 31 EBITDA and Adjusted EBITDA 2022 2021 % Change 2022 2021 % Change $ 9,038 $ 4,422 104 % Operating Income as reported $ 19,059 $ 8,866 115 % 2,419 2,538 Depreciation and amortization 4,840 5,101 $ 11,457 $ 6,960 65 % EBITDA $ 23,899 $ 13,967 71 % 1,002 1,130 Stock compensation expense 1,553 1,686 - 340 Acquisition costs - 340 33 - Severance costs 46 - 486 - Consulting expense: Commercial Growth Initiatives 789 - $ 12,978 $ 8,430 54 % Adjusted EBITDA $ 26,287 $ 15,993 64 % Three Months Ended December 31 (Unaudited; In thousands) Six Months Ended December 31 Free Cash Flow 2022 2021 % Change 2022 2021 % Change $ 9,481 $ (8,654 ) n/m Cash flow from operations $ 20,064 $ (16,543 ) NM (561 ) (448 ) 25 % Capital expenditures (994 ) (745 ) 33 % $ 8,920 $ (9,102 ) n/m Free cash flow $ 19,070 $ (17,288 ) NM (amounts in thousands) Net Debt to Adjusted EBITDA Ratio December 31 , June 30 , (amounts in thousands) 2022 2022 Current Maturity of Debt $ 3,571 $ 3,571 Long-Term Debt 59,250 76,025 Total Debt $ 62,821 $ 79,596 Less: Cash (2,765 ) (2,462 ) Net Debt $ 60,056 $ 77,134 Adjusted EBITDA - Trailing Twelve Months $ 45,387 $ 35,091 Net Debt to Adjusted EBITDA Ratio 1.3 2.2 Three Months Ended December 31 Six Months Ended December 31 (Unaudited) 2022 2021 (In thousands, except per share data) 2022 2021 $ 128,804 $ 111,143 Net sales $ 255,873 $ 217,540 94,646 85,695 Cost of products sold 186,964 167,582 18 - Severance costs 31 - 34,140 25,448 Gross profit 68,878 49,958 24,600 20,687 Selling and administrative costs 49,015 40,752 15 - Severance costs 15 - 486 - Consulting expense: Commercial Growth Initiatives 789 - - 339 Acquisition costs - 340 9,039 4,422 Operating Income 19,059 8,866 (54 ) 9 Other expense (income) 158 88 1,258 529 Interest expense, net 2,046 763 7,835 3,884 Income before taxes 16,855 8,015 1,418 779 Income tax 4,177 1,777 $ 6,417 $ 3,105 Net income $ 12,678 $ 6,238 Weighted Average Common Shares Outstanding 28,078 27,292 Basic 27,874 27,144 29,204 28,067 Diluted 28,766 27,895 Earnings Per Share $ 0.23 $ 0.11 Basic $ 0.45 $ 0.23 $ 0.22 $ 0.11 Diluted $ 0.44 $ 0.22 (amounts in thousands) December 31 , June 30 , 2021 2022 Current assets $ 149,025 $ 158,917 Property, plant and equipment, net 25,786 27,158 Other assets 121,472 125,005 Total assets $ 296,283 $ 311,080 Current maturities of long-term debt $ 3,571 $ 3,571 Other current liabilities 60,563 71,048 Long-term debt 59,250 76,025 Other long-term liabilities 11,583 12,667 Shareholders' equity 161,316 147,769 $ 296,283 $ 311,080 View source version on businesswire.com : https://www.businesswire.com/news/home/20230126005059/en/ Investor Contact Noel Ryan , IRC 720.778.2415 [email protected] Media Contact Cliff Spurlock Marketing Communications Manager 513.372.3143 Source: LSI Industries Inc.

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