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 its fiscal 2023
fourth quarter and full year ended June 30, 2023.
FISCAL 2023 FOURTH
QUARTER
- Net Sales $123.6 million; Lighting sales +5% y/y
- Net Income +63% y/y to $8.4 million, $0.28 per diluted
share
- Adjusted Net Income +46% y/y of $8.8 million, $0.30 per diluted
share
- EBITDA of $12.6million; Adjusted EBITDA $14.1 million or
11.4%/sales
- Free Cash Flow +94% y/y to $15.6 million
- Ratio of net debt to TTM Adjusted EBITDA of 0.7x as of June 30,
2023
FISCAL 2023 FULL YEAR
- Net Sales +9% y/y to $497.0 million
- Net Income +71% y/y to $25.8 million, $0.88 per diluted
share
- Adjusted Net Income +61%% y/y to $29.0 million, $0.99 per
diluted share
- EBITDA of $46.7 million; Adjusted EBITDA +47% y/y to $51.6
million or 10.4%/sales
- Free Cash Flow of $46.4 million
- Reduced net debt more than 50% to $33.4 million
During the fiscal fourth quarter, LSI benefitted from a
combination of favorable demand conditions across its vertical
markets, accelerated adoption of recently introduced products and
services, sustained price discipline, a higher-value sales mix, and
strong operational execution, all contributing to significant
year-over-year growth in margin rate realization, Adjusted EBITDA,
free cash flow, and profitability.
In the fiscal fourth quarter, LSI reported net income of $8.4
million, or $0.28 per diluted share, on net sales of $123.6
million, while adjusted net income was $8.8 million, or $0.30 per
diluted share. The Company generated Adjusted EBITDA of $14.1
million in the fourth quarter, an increase of 33% versus the prior
year period, with Adjusted EBITDA margin increasing more than 300
basis points to 11.4%.
Free cash flow increased to $15.6 million in the fiscal fourth
quarter, with free cash flow conversion exceeding 100% in the
period. Year-over-year growth in free cash flow was driven by
improved profitability and working capital efficiency.
For the twelve months ended June 30, 2023, LSI reported record
sales of $497.0 million, an increase of 9% versus the full year
fiscal 2022. Net income was $25.8 million, or $0.88 per diluted
share, versus net income of $15.0 million or $0.54 per share in the
prior year. The Company reported adjusted net income of $29.0
million, or $0.99 per diluted share in fiscal 2023, versus $18.0
million, or $0.64 per share in fiscal 2022. Adjusted EBITDA was
$51.6 million in fiscal 2023, versus $35.1 million in the prior
year. A reconciliation of GAAP and non-GAAP financial results is
included in this press release.
Free cash flow for the fiscal year was $46.4 million, with the
fourth quarter the highest cash generative quarter of the fiscal
year. During fiscal 2023, the Company reduced net debt outstanding
by $44 million, resulting in a corresponding reduction in its net
leverage ratio to 0.7x, or the lowest level achieved since prior to
its acquisition of JSI Store Fixtures in May 2021. As of June 30,
2023, LSI had approximately $60 million of cash and availability
under its existing credit facility.
The Company declared a regular cash dividend of $0.05 per share
payable on September 5, 2023, to shareholders of record on August
28, 2023.
MANAGEMENT COMMENTARY
“Our solid fourth quarter performance completes a successful
fiscal 2023 for LSI. We demonstrated substantial progress across
all key performance indicators, consistent with the strategic
priorities detailed in our Fast Forward value creation plan,”
stated James A. Clark, President and CEO of LSI. “We achieved
record sales of $497 million on more than 9% growth, significantly
increased earnings with net income improving 71%, delivered more
than $50 million of adjusted EBITDA, expanded EBITDA margin by 270
basis points, generated cash flow of over $46 million, and exited
the year having reduced net debt by over 50%.”
“Furthermore, the business is positioned for success moving
forward as we strengthened our share position in key vertical
markets, launched numerous new products and solutions, utilized
service and product availability as a differentiator, and advanced
relationships with partners and customers. Our employees executed
exceptionally well in a dynamic operating environment, and I am
proud of the LSI team for achieving this high level of
performance.
“Our supply chain began to normalize early in fiscal 2023 and
improved as the year progressed,” continued Clark. “As supply
conditions stabilized, we prudently reduced inventories, while
continuing to maintain product availability at levels that support
our commitment to an exceptional level of service. Improved working
capital efficiency resulted in increased free cash flow conversion,
and a corresponding reduction in our outstanding debt. We exited
the year with a net leverage ratio of 0.7x, representing our lowest
leverage profile since before we acquired JSI store fixtures in
2021. We enter fiscal 2024 with increased balance sheet strength to
support our capital allocation priorities, which include both
organic and inorganic growth opportunities.
“Customer activity levels remained healthy across our primary
vertical markets during the fiscal fourth quarter. In the Lighting
segment, sales increased 5% versus the prior-year period, and
increased 7% sequentially versus the third quarter. Lighting demand
was driven by increased order activity in multiple verticals across
both indoor and outdoor applications. Lighting adjusted gross
margin rate was more than 33% for the quarter, an increase of 220
bps versus the prior year, and operating income improved 31% to
$9.3 million. For the full fiscal year 2023, Lighting sales
increased 17% versus the prior year, driven by balanced growth
across multiple market verticals, product lines, and sales
channels.
“Lighting project quotation activity remains at an elevated
level exiting the fourth quarter. Our quote-to-order conversion
period has lengthened, consistent with the trend evidenced in the
fiscal third quarter, as many projects are incurring increasing
levels of design changes intended to meet budgetary requirements,
financing timelines and other factors. While order timing will vary
from quarter to quarter, fourth quarter orders exceeded shipments,
resulting in a book-to-bill ratio above 1.0.
“As previously disclosed in April 2023, LSI announced a
multi-million lighting order for installation in a new
state-of-the-art EV Battery manufacturing plant. Shipment activity
began in July and continues into the fiscal second quarter. There
have been additional change orders increasing the size of the total
project, and Phase II of the manufacturing complex is currently in
the quotation stage. We believe LSI is in a strong position to win
the Phase II order, which would be larger than the number of
fixtures required for the initial site. Shipment activity would
begin late in the fiscal second quarter 2024 and continue
throughout the fiscal third quarter 2024.
“On a full-year fiscal 2023 basis, our Display Solutions segment
sales increased 1% versus the prior year. As expected, this year’s
growth was tempered by a fourth quarter sales decline, which saw
the winding down of a $100 million multi-year QSR digital menu
board program. Excluding the impact of that specific digital menu
board program, segment sales increased a robust 13% for fiscal
2023, highlighting the ongoing strength and investment occurring in
the grocery, refueling/c-store, and QSR market verticals. We
continue to receive many inquiries from major brands considering
image refresh programs for their existing locations, with a
significant focus on cross selling display case solutions into the
c-store vertical. We currently have multiple customer pilot
programs in-process, as well as several new c-store products in
development.”
“At this time, our Display Solutions segment remains focused on
two primary growth initiatives, both of which remain on schedule.
The first initiative involves increasing the display case
manufacturing capacity for our JSI business, with plans to bring
additional capacity online beginning in late September 2023. This
new capacity will enable us to meet the growing demand for both
refrigerated and non-refrigerated mobile display case products. The
second initiative involves the design and development of our new
refrigerant product line utilizing R-290 technology, which remains
on track for market launch in the second half of fiscal 2024. R-290
is a natural, non-toxic refrigerant that is environmentally
friendly, possessing no ozone depleting qualities. We continue to
receive significant customer interest and advance requests for this
new product line, as customers further gravitate toward energy
transition technologies,” continued Clark.
“In fiscal 2023, we delivered our third consecutive year of
sales growth and our fifth consecutive year of net income growth.
Our performance over the last five years has put our company on an
accelerated pace to exceed the 2025 targets we introduced in 2020.
Given our track record of continuous improvement, we raised the bar
further earlier this year, introducing an updated five-year
strategic plan with financial targets through fiscal 2028. During
the next five years, we plan to deliver total sales growth of more
than 60%, adjusted EBITDA growth of 100%, and at least 250 basis
points of Adjusted EBITDA margin rate expansion. The next step in
our path to sustained growth in sales and profitability begins with
fiscal 2024, and the LSI leadership team is confident in its
ability to achieve these goals and create additional value for our
customers, employees, and investors," concluded Clark.
FISCAL 2023 FOURTH 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.
Details of the conference call are as follows:
Domestic Live: 877-407-4018 International Live:
201-689-8471
To listen to a replay of the teleconference, which subsequently
will be available through August 31, 2023:
Domestic Replay: 844-512-2921 International
Replay: 412-317-6671 Conference ID: 13740065
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 EndedJune 30 Twelve Months EndedJune 30
(Unaudited)
2023
2022
% Change
(In thousands, except per share data)
2023
2022
% Change
$ 123,636
$ 127,470
-3
%
Net sales
$ 496,979
$ 455,120
9
%
10,237
7,175
43
%
Operating income as reported
37,028
21,201
75
%
1,477
822
80
%
Long-Term Performance Based Compensation
3,998
3,288
22
%
-
112
NM
Acquisition costs
-
473
NM
20
6
233
%
Severance costs
66
11
500
%
-
-
NM
Consulting expense: Commercial Growth Initiatives
864
-
NM
$ 11,734
$ 8,115
45
%
Operating income as adjusted
$ 41,956
$ 24,973
68
%
$ 8,415
$ 5,176
63
%
Net income as reported
$ 25,762
$ 15,032
71
%
$ 8,797
$ 6,008
46
%
Net income as adjusted
$ 28,997
$ 18,003
61
%
$ 0.28
$ 0.18
58
%
Earnings per share (diluted) as reported
$ 0.88
$ 0.54
63
%
$ 0.30
$ 0.21
41
%
Earnings per share (diluted) as adjusted
$ 0.99
$ 0.64
55
%
(amounts in thousands)
June 30,
June 30,
2023
2022
Working capital
$
75,543
$
84,298
Total assets
$
296,150
$
311,080
Long-term debt
$
31,629
$
76,025
Other long-term liabilities
$
12,610
$
12,667
Shareholders' equity
$
177,578
$
147,769
Three Months Ended June 30, 2023,
Results
Net sales for the three months ended June 30, 2023, were $123.6
million, down 3% from the three months ended June 30, 2022,
reported net sales of $127.5 million. Lighting Segment net sales of
$71.4 million increased 5% and Display Solutions Segment net sales
of $52.3 million decreased 12% from last year’s fourth quarter net
sales. Net income for the three months ended June 30, 2023, was
$8.4 million, or $0.28 per share, compared to $5.2 million or $0.18
per share for the three months ended June 30, 2022. Earnings per
share represents diluted earnings per share.
Twelve Months Ended June 30, 2023,
Results
Net sales for the twelve months ended June 30, 2023, were $497.0
million, up 9% from the twelve months ended June 30, 2022, reported
net sales of $455.1 million. Lighting Segment net sales of $272.5
million increased 17% and Display Solutions Segment net sales of
$224.5 million increased 1% from last year’s net sales. Net income
for the twelve months ended June 30, 2023, was $25.8 million, or
$0.88 per share, compared to $15.0 million or $0.54 per share for
the twelve months ended June 30, 2022. Earnings per share
represents diluted earnings per share.
Balance Sheet
The balance sheet on June 30, 2023, included current assets of
$149.9 million, current liabilities of $74.3 million and working
capital of $75.5 million, which includes cash of $1.8 million. The
current ratio was 2.0 to 1. The balance sheet also included
shareholders’ equity of $177.6 million and long-term debt of $31.6
million. It is the Company’s priority to continuously generate
sufficient cash flow, coupled with our credit facility, to
adequately fund operations.
Cash Dividend Actions
The Board of Directors declared a regular cash dividend of $0.05
per share for the fourth quarter of fiscal 2023, payable September
5, 2023, to shareholders of record as of the close of business on
August 28, 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 twelve
months ended June 30, 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 Twelve Months Ended June 30
June 30
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
$
8,415
$
0.28
$
5,176
$
0.18
Net income as reported
$
25,762
$
0.88
$
15,032
$
0.54
771
0.03
744
0.03
Long-Term Performance Based Compensation
2,879
0.10
2,594
0.09
-
-
88
-
Acquisition costs
-
373
0.01
13
-
-
-
Severance costs
51
-
4
-
-
-
-
-
Consulting expense: Commercial Growth Initiatives
708
0.02
-
-
(402
)
(0.01
)
-
-
Net Tax impact due to the Distribution of Shares from the
Company's Long-Term Performance Based Compensation Plan
(402
)
(0.01
)
-
-
$
8,797
$
0.30
$
6,008
$
0.21
Net income adjusted
$
28,997
$
0.99
$
18,003
$
0.64
Three Months Ended June
30
(Unaudited; In thousands)
Twelve Months Ended June
30
Net Income to Adjusted EBITDA
2023
2022
% Change
2023
2022
% Change
8,415
5,176
63
%
Net income as reported
25,762
15,032
71
%
1,130
1,202
Income Tax
7,564
4,053
764
682
Interest expense, net
3,687
1,968
(72
)
115
Other expense (income)
15
148
$ 10,237
$ 7,175
43
%
Operating Income as reported
$ 37,028
$ 21,201
75
%
2,369
2,485
Depreciation and amortization
9,664
10,118
$ 12,606
$ 9,660
30
%
EBITDA
$ 46,692
$ 31,319
49
%
1,477
822
Long-Term Performance Based Compensation
3,998
3,288
-
112
Acquisition costs
-
473
20
6
Severance costs
66
11
-
-
Consulting expense: Commercial Growth Initiatives
864
-
$ 14,103
$ 10,600
33
%
Adjusted EBITDA
$ 51,620
$ 35,091
47
%
11.4
%
8.3
%
Adjusted EBITDA as a Percentage of Sales
10.4
%
7.7
%
Three Months EndedJune 30 (Unaudited; In thousands)
Twelve Months EndedJune 30 Free Cash Flow
2023
2022
% Change
2023
2022
% Change
$ 17,040
$ 8,975
90
%
Cash flow from operations
$ 49,588
$ (3,693
)
-1443
%
(1,454
)
(955
)
Capital expenditures
(3,208
)
(2,231
)
$ 15,586
$ 8,020
94
%
Free cash flow
$ 46,380
$ (5,924
)
-883
%
Net Debt to Adjusted EBITDA Ratio
June 30,
(amounts in thousands)
2023
2022
Current Maturity of Debt
$
3,571
$
3,571
Long-Term Debt
31,629
76,025
Total Debt
$
35,200
$
79,596
Less: Cash
(1,828
)
(2,462
)
Net Debt
$
33,372
$
77,134
Adjusted EBITDA - Trailing Twelve Months
$
51,620
$
35,091
Net Debt to Adjusted EBITDA Ratio
0.65
2.20
(amounts in thousands)
June 30,
June 30,
2023
2022
Current assets
$
149,876
$
158,917
Property, plant and equipment, net
25,430
27,158
Other assets
120,844
125,005
Total assets
$
296,150
$
311,080
Current maturities of long-term debt
$
3,571
$
3,571
Other current liabilities
70,762
71,048
Long-term debt
31,629
76,025
Other long-term liabilities
12,610
12,667
Shareholders' equity
177,578
147,769
$
296,150
$
311,080
Three Months EndedJune 30 Twelve Months EndedJune
30 (Unaudited)
2023
2022
(In thousands, except per share data)
2023
2022
$ 123,636
$ 127,470
Net sales
$ 496,979
$ 455,120
87,773
95,012
Cost of products sold
360,003
345,912
-
-
Severance costs
31
-
35,863
32,458
Gross profit
136,945
109,208
25,606
25,163
Selling and administrative costs
99,018
87,522
20
8
Severance costs
35
12
-
-
Consulting expense: Commercial Growth Initiatives
864
-
-
112
Acquisition costs
-
473
10,237
7,175
Operating Income
37,028
#
21,201
(72
)
115
Other (income) expense
15
148
764
682
Interest expense, net
3,687
1,968
9,545
6,378
Income before taxes
33,326
19,085
1,130
1,202
Income tax
7,564
4,053
$ 8,415
$ 5,176
Net income
$ 25,762
$ 15,032
Weighted
Average Common Shares Outstanding
28,471
27,485
Basic
28,127
27,286
29,680
28,146
Diluted
29,316
27,993
Earnings Per Share
$ 0.30
$ 0.19
Basic
$ 0.92
$ 0.55
$ 0.28
$ 0.18
Diluted
$ 0.88
$ 0.54
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230817809262/en/
INVESTOR & MEDIA CONTACT Noel Ryan, IRC 720.778.2415
LYTS@vallumadvisors.com
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