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

About this update from Lsi Industries Inc.

CINCINNATI --(BUSINESS WIRE)-- LSI Industries Inc. (NASDAQ: LYTS, “LSI” or the “Company”) a leading U.S. based manufacturer of display solutions and indoor/outdoor lighting, today reported fiscal third quarter financial results for the three months ended March 31, 2023 . FISCAL 2023 THIRD QUARTER Net Sales +7% y/y to $117.5 million Net Income +29% y/y to $4.7 million ; Adjusted Net Income of $5.5 million Diluted EPS of $0.16 ; Adjusted EPS of $0.19 EBITDA of $10.2 million ; Adjusted EBITDA $11.2 million Strong Free Cash Flow of $11.7 million Net debt declined to $48.2 million , or 1.0x TTM Adjusted EBITDA LSI generated significant year-over year growth in sales and profitability in the fiscal third quarter, driven by continued demand strength within the Lighting segment, margin management and consistent operational execution. The Company continued its focus on balancing short-term performance with investments in future growth initiatives. The Company reported fiscal third quarter sales of $117.5 million , an increase of 7% versus the prior year period, as growth within the Lighting segment more than offset a small decline year-over-year in the Display Solutions segment. Reported net income was $4.7 million , or $0.16 per diluted share, versus $3.6 million , or $0.13 per diluted share in the prior-year period. Adjusted net income was $5.5 million or $0.19 per diluted share in the third quarter, compared to $4.2 million , or $0.15 per diluted share last year. LSI recorded Adjusted EBITDA of $11.2 million for the fiscal third quarter, an increase of 32% versus the prior-year period. The Adjusted EBITDA margin rate was 9.6% for the quarter, or 190 bps above the prior year quarter, driven by volume growth, price realization, disciplined cost management and a favorable sales mix. The Company generated free cash flow of $11.7 million in the fiscal third quarter, driven by increased profitability and further working capital optimization. Improved cash flow conversion resulted in a corresponding reduction in the ratio of net debt to trailing twelve-month adjusted EBITDA, which declined to 1.0x at the end of the fiscal third quarter, versus 2.7x in the prior-year period. LSI has reduced net debt by more than $35 million during this twelve-month period. The Company declared a regular cash dividend of $0.05 per share payable on May 16, 2023 , to shareholders of record on May 8, 2023 . MANAGEMENT COMMENTARY “Our team delivered another solid quarter, achieving year-over-year growth in sales and profitability, exceeding a very strong prior year comparison,” stated James A. Clark , President and Chief Executive Officer of LSI. “It was an active quarter on many fronts. We continue to make good progress in the market, coupled with a strong focus on margin expansion, all while working on the initiatives which position us for future profitable growth. With $11.7 million in free cash flow generation in the third quarter, we were able to reduce our debt outstanding, with net leverage declining to 1.0x at quarter-end, consistent with our focus on continued balance sheet discipline and optionality. “Within our Lighting Segment, sales increased 17% in the fiscal third quarter, driven by continued growth in both indoor and outdoor applications, across multiple verticals. Lighting operating income increased 31% in the period, with the gross margin rate improving 120 basis points versus last year. The contractor and distribution market remains an area of strength for us, highlighted by accelerating demand for our Advantage Series family of products. The Advantage Series provides our commercial customers with contractor grade products of superior quality, design, and functionality. We introduced the family nearly two years ago and have steadily expanded the product portfolio in response to growing demand from commercial end-markets. “In early April, we booked a multi-million dollar lighting order for a large automotive components company. The order, referenced in a separate press release last week, includes the delivery of 15,000 fixtures for installation in a new state of-the-art EV Battery manufacturing plant. We expect shipments will begin in late August 2023 and continue through the end of the calendar year. Winning an order of this size in the Industrial vertical while satisfying demanding customer requirements demonstrates our progress with large accounts who value our unique, integrated suite of solutions. “Project quotation activity for Lighting remains high, however, the quote-to-order conversion period has lengthened over the last several months, and as a result, the number and value of outstanding quotes has grown. While overall business activity is expected to remain favorable, timing of realized sales may fluctuate somewhat until the conversion period returns to a more historic cadence. “Within our Display Solutions segment, we experienced a modest year-over-year sales decline driven by the timing and transition of several large digital signage programs. Importantly, operating income increased 23% on a year-over-year basis, and a 250-basis point improvement in operating margin. “Our refrigerated and non-refrigerated mobile display solutions continue to do very well. Last month we leased additional manufacturing space to meet ongoing demand and introduce some new technology. Additional capacity is required to support steadily increasing customer demand in the grocery market, our expansion within the c-store vertical, and the planned launch of next-generation refrigerant products scheduled in fiscal 2024. Using R-290 (a propane-based refrigerant) we will begin offering our customers a natural, non-toxic refrigerant solution that is free of ozone-depleting properties. R-290 has a low Global Warming Potential (GWP) and is currently one of the most climate-friendly and cost-effective solutions available. This incremental manufacturing capacity is expected to be operational by late third quarter of the calendar year. “Last month we had a very productive meeting with a large regional, multi-banner, quick-serve restaurant chain. After visiting several LSI locations, the customer was duly impressed with our digital menu board solution set, together with the comprehensive range of products, installation, and other services LSI provides. We received our first order and pilot site activity will begin next month. “In the refueling vertical, a $4.5 million order was recently received from a large oil company to retrofit the display graphics for 450 sites in a large, regional metropolitan area. Shipment and installation will begin in the fiscal fourth quarter, with all sites scheduled for completion in four months. Design and proposal work for numerous programs remain ongoing, including a brand conversion for a large regional refueling/c-store company. “In March 2023 , we introduced an updated five-year strategic plan that highlighted our financial targets through fiscal 2028,” continued Clark. “Our “Fast Forward” plan works to expand our share-of-wallet within both new and existing vertical markets through the introduction of additional, customer-driven solutions, while continuing to migrate higher on the value-chain. Over the next five years, we intend to deliver organic and inorganic sales growth of more than 60%; greater than 100% Adjusted EBITDA growth; and at least 250 basis points of Adjusted EBITDA margin expansion. I encourage you to visit the investor section of our website for more details.” Clark concluded, “I am pleased with the progress the LSI leadership team has achieved, demonstrated by the continued execution on a multi-year plan to drive long-term value creation. We will continue to advance our vertical market strategy with a focus on new products and integrated solutions; build our relationships across sales channels and customers; and pursue opportunistic investments in complementary assets. Over the last several years, we’ve built a strong foundation that will position us to scale our business profitably, while executing on our new five-year plan, consistent with our commitments to all our key stakeholders.” 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: 1-844-825-9789 Call Replay: 1-844-512-2921 Replay Passcode: 10177414 A replay of the conference call will be available between April 27, 2023 , and May 11, 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 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, refrigerated and custom displays, aim to help businesses stand out in a competitive market. With a workforce of nearly 1,600 employees and 11 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 March 31 Nine Months Ended March 31 (Unaudited) 2023 2022 % Change (In thousands, except per share data) 2023 2022 % Change $ 117,470 $ 110,111 7 % Net sales $ 373,343 $ 327,651 14 % 7,732 5,161 50 % Operating income as reported 26,791 14,027 91 % 968 780 24 % Long-Term Performance Based Compensation 2,521 2,466 2 % - 21 NM Acquisition costs - 361 NM - 5 NM Severance costs 46 5 NM 75 - NM Consulting expense: Commercial Growth Initiatives 864 - NM $ 8,775 $ 5,967 47 % Operating income as adjusted $ 30,222 $ 16,859 79 % $ 4,669 $ 3,618 29 % Net income as reported $ 17,347 $ 9,856 76 % $ 5,497 $ 4,214 30 % Net income as adjusted $ 20,200 $ 11,995 68 % $ 0.16 $ 0.13 21 % Earnings per share (diluted) as reported $ 0.60 $ 0.35 71 % $ 0.19 $ 0.15 24 % Earnings per share (diluted) as adjusted $ 0.70 $ 0.43 62 % (amounts in thousands) March 31 June 30 , 2023 2022 Working capital $ 79,785 $ 84,298 Total assets $ 291,019 $ 311,080 Long-term debt $ 46,002 $ 76,025 Other long-term liabilities $ 11,237 $ 12,668 Shareholders' equity $ 167,743 $ 147,769 Three Months Ended March 31, 2023 , Results Net sales for the three months ended March 31, 2023 , were $117.5 million , up 7% from the three months ended March 31, 2022 , net sales of $110.1 million . Lighting Segment net sales of $66.7 million increased 17% and Display Solutions Segment net sales of $50.8 million decreased 4% from last year’s third quarter net sales. Net income for the three months ended March 31, 2023 , was $4.7 million , or $0.16 per share, compared to $3.6 million or $0.13 per share for the three months ended March 31, 2022 . Earnings per share represents diluted earnings per share. Nine Months Ended March 31, 2023 , Results Net sales for the nine months ended March 31, 2023 , were $373.3 million , up 14% from the nine months ended March 31, 2022 , net sales of $327.7 million . Lighting Segment net sales of $201.1 million increased 21% and Display Solutions Segment net sales of $172.3 million increased 6% from last year’s net sales. Net income for the nine months ended March 31, 2023 , was $17.3 million , or $0.60 per share, compared to $9.9 million or $0.35 per share for the nine months ended March 31, 2022 . Earnings per share represents diluted earnings per share. Balance Sheet The balance sheet at March 31, 2023 , included current assets of $145.8 million , current liabilities of $66.0 million and working capital of $79.8 million , which includes cash of $1.4 million . The current ratio was 2.21 to 1. The balance sheet also included shareholders’ equity of $167.7 million and long-term debt of $46.0 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 third quarter of fiscal 2023, payable May 16, 2023 , to shareholders of record as of the close of business on May 8, 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 nine months ended March 31, 2023 , and 2022. Operating income, net income, and earnings per share, which exclude the impact of long-term performance based compensation expense, commercial growth opportunity expense, acquisition costs, 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), 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 Nine Months Ended March 31 March 31 2023 2022 (In thousands, except per share data) 2023 2022 Diluted EPS Diluted EPS Diluted EPS Diluted EPS Reconciliation of net income to adjusted net income $ 4,669 $ 0.16 $ 3,618 $ 0.13 Net income as reported $ 17,347 $ 0.60 $ 9,856 $ 0.35 769 0.03 576 0.02 Long-Term Performance Based Compensation 2,107 0.08 1,850 0.07 - - 16 - Acquisition costs - - 285 0.01 - - 4 - Severance costs 38 - 4 - 59 - - - Consulting expense: Commercial Growth Initiatives 708 0.02 - - $ 5,497 $ 0.19 $ 4,214 $ 0.15 Net income adjusted $ 20,200 $ 0.70 $ 11,995 $ 0.43 Three Months Ended March 31 (Unaudited; In thousands) Nine Months Ended March 31 Net Income to Adjusted EBITDA 2023 2022 % Change 2023 2022 % Change 4,669 3,618 29 % Net income as reported 17,347 9,856 76 % 2,257 1,074 Income Tax 6,434 2,851 877 524 Interest expense, net 2,924 1,287 (71 ) (55 ) Other expense (income) 86 33 $ 7,732 $ 5,161 50 % Operating Income as reported $ 26,791 $ 14,027 91 % 2,455 2,531 Depreciation and amortization 7,295 7,632 $ 10,187 $ 7,692 32 % EBITDA $ 34,086 $ 21,659 57 % 968 780 Long-Term Performance Based Compensation 2,521 2,466 - 21 Acquisition costs - 361 - 5 Severance costs 46 5 75 - Consulting expense: Commercial Growth Initiatives 864 - $ 11,230 $ 8,498 32 % Adjusted EBITDA $ 37,517 $ 24,491 53 % 9.6 % 7.7 % Adjusted EBITDA as a percentage of Sales 10.0 % 7.5 % Three Months Ended March 31 (Unaudited; In thousands) Nine Months Ended March 31 Free Cash Flow 2023 2022 % Change 2023 2022 % Change $ 12,486 $ 3,875 NM Cash flow from operations $ 32,548 $ (12,668 ) NM (759 ) (531 ) 43 % Capital expenditures (1,754 ) (1,276 ) 37 % $ 11,727 $ 3,344 NM Free cash flow $ 30,794 $ (13,944 ) NM (amounts in thousands) Net Debt to Adjusted EBITDA Ratio March 31 March 31 (amounts in thousands) 2023 2022 Current Maturity of Debt $ 3,571 $ 3,571 Long-Term Debt 46,002 81,387 Total Debt $ 49,573 $ 84,958 Less: Cash (1,350 ) (1,248 ) Net Debt $ 48,223 $ 83,710 Adjusted EBITDA - Trailing Twelve Months $ 48,117 $ 31,309 Net Debt to Adjusted EBITDA Ratio 1.0 2.7 (amounts in thousands) March 31 June 30 , 2022 2022 Current assets $ 145,822 $ 158,917 Property, plant and equipment, net 25,264 27,158 Other assets 119,933 125,005 Total assets $ 291,019 $ 311,080 Current maturities of long-term debt $ 3,571 $ 3,571 Other current liabilities 62,466 71,047 Long-term debt 46,002 76,025 Other long-term liabilities 11,237 12,668 Shareholders' equity 167,743 147,769 $ 291,019 $ 311,080 Three Months Ended March 31 Nine Months Ended March 31 (Unaudited) 2023 2022 (In thousands, except per share data) 2023 2022 $ 117,470 $ 110,111 Net sales $ 373,343 $ 327,651 85,266 83,318 Cost of products sold 272,230 250,900 - Severance costs 31 - 32,204 26,793 Gross profit 101,082 76,751 24,397 21,606 Selling and administrative costs 73,412 62,358 - 5 Severance costs 15 5 75 - Consulting expense: Commercial Growth Initiatives 864 - - 21 Acquisition costs - 361 7,732 5,161 Operating Income 26,791 14,027 (71 ) (55 ) Other expense (income) 86 33 877 524 Interest expense, net 2,924 1,287 6,926 4,692 Income before taxes 23,781 12,707 2,257 1,074 Income tax 6,434 2,851 $ 4,669 $ 3,618 Net income $ 17,347 $ 9,856 Weighted Average Common Shares Outstanding 28,306 27,378 Basic 28,012 27,220 29,611 28,083 Diluted 29,055 27,945 Earnings Per Share $ 0.16 $ 0.13 Basic $ 0.62 $ 0.36 $ 0.16 $ 0.13 Diluted $ 0.60 $ 0.35 View source version on businesswire.com : https://www.businesswire.com/news/home/20230427005124/en/ INVESTOR & MEDIA CONTACT Noel Ryan , IRC 720.778.2415 [email protected] Source: LSI Industries Inc.

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