LSI Industries Inc.

Greetings and welcome to the LSI Industries Fiscal Third Quarter 2020 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. On the call today are Jim Clark, President and Chief Executive Officer, and Jim Galeese, Chief Financial Officer. It is now my pleasure to introduce your host, Jim Galeese. Thank you, sir. You may begin.

Good morning, everyone. We issued a press release before the market opened this morning detailing our fiscal third quarter results. In conjunction with this release, we also posted a conference call presentation in the investor relations portion of our corporate website. at www.lsi-industries.com. Information contained in this presentation will be referenced throughout today's conference call. I would like to remind you that management's commentary and responses to today's conference call may include forward-looking statements about our business outlook. 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, as well as our most recent 10-K and 10-Q. Today's call will begin with remarks summarizing our fiscal third 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.

Thank you, Jim. Good morning, all, and thank you for taking the time to join us today. As I start today's call, I would like to address three items right up front that might help frame things up. First, I would like to acknowledge that we're in strange times. The challenges that we're facing as a global community is of unprecedented nature. Few of us could have imagined two months ago that we would be in the middle of a global pandemic. With that in mind, I want to wish you and all your families safety from this challenge and on behalf of LSI, I want to give thanks to the men and women that are on the front lines fighting through this. Number two, I want to acknowledge the efforts of the folks at LSI that have worked tirelessly to keep our employees safe, maintain business continuity and continue to deliver much needed solutions to our customers. LSI was categorized as the central services group early on. We proactively reached out to various resources to assure we could provide a safe environment for our employees and to confirm with various government agencies that we were working in a safe manner and one that was consistent with changing stay-at-home orders. Throughout this trial, we have provided a number of services and products that directly address some of the challenges associated with this fight, including lighting products for temporary and permanent medical facilities and COVID-related graphics and signage for a number of our customers, including grocery, farmer, petroleum, and we've even engaged our electronics fabrication facility in the manufacture of an experimental patient monitoring device that could prove to be a valuable tool for our medical community in the future. Lastly, and number three, I want to acknowledge and respect the situation we're in and the uncertainty of the future. We, like everyone else, have limited insight into the timing of the recovery and what those days will look like. I'm happy to say that we have a diverse set of solutions that we can offer our customers, and I believe that those solutions may create some opportunities for LSI as we move forward. I do not know whether we will experience a V, U, or L-shaped recovery. What I would like to say is that we are working with real-time data and we adjust our plans as needed. We have multiple paths prepared, and we are ready to go whether we experience a delay in orders or a surge in business. None of us wishes to be in this situation, but we are ready to respond. Now, jumping into the last quarter. As reported earlier today, we experienced slightly lower sales in Q3. The sales decline came from our lighting business, and it reflects our shift in strategy as we continue to move away from lower margin commoditized solutions the higher quality, higher value solutions. This effort to move our business realized 170 basis point improvement margin for Q3, and we believe this demonstrates our ability to move the business and that we still have room as we balance this transition. Last quarter, we introduced a half a dozen new lighting products balanced between indoor and outdoor. These new products filled in various gaps in our solution set, and worked across some of our most popular product families. In Q4, we will continue to introduce another six or so products, including our low-cost controls platform to help augment our existing higher-end control solution. We've been working on this platform for some time, and we believe that it could prove to be a differentiator by creating more value in our solution. On the graphics side of the business, I'm happy to say that we just passed our 10th consecutive quarter of growth, and sales for this segment increased 10% for the quarter. Our backlog in graphics remains very strong, and although it is anchored in our petroleum vertical, we have celebrated a number of wins in grocery farmer and QSR sales, including the recent win of $100 million multi-year project in digital graphics. This award demonstrates the confidence folks have in our solution, coupled with our ability to manage the logistics of a large project, including on-time delivery, installation, commissioning, and post-sales support. This post-sales support continues to demonstrate our ability to create a recurring revenue model, and we are looking for more and more ways to expand this. We spent the last 18 months optimizing our operational footprint and decreasing our overhead. This time last year, we exited and sold our New York facility while at the same time we increased our space in Texas as we overhauled and optimized our graphics business in that location. Earlier this year, we completed the sale of our North Canton facility, which supports our printed graphics and digital graphics solutions. We are actively in the process of moving to a new location just down the road, which will allow us to retain our existing workforce while optimizing our production footprint. At this point, our timing and schedule related to this move has not been impacted, and we expect to be fully moved into our new facility and operational by the end of June. Our focus moving into Q4 and into 21 is a sharpened point on our commercial activities and lighting. I'm happy to say that our new commercial leader, Jeff Davis, joined in January, and his influence can already be felt across the organization. Jeff, along with our field sales reps and agents, have really pressed on the accelerator, and the whole organization is responding to his engagement and processes that he's putting in place. Changes in the sales process did not take place overnight, but I'm happy at the progress I see to this point, and I'm encouraged moving into the future. In January, we had our national sales meeting, which served as a halfway point on our fiscal year. Mike Prachar, our CMO, led the meeting along with Jeff and other members of the company. The professionalism and engagement were first-rate, and I know much of that energy and training are coming to good use now. As we move forward, our company is much improved, and our commercial group is building a list of opportunities in front of them. Our balance sheet's strong, our debt is a fraction of what it was a year ago, and our liquidity will allow us to pursue opportunities we have been eager to explore. We are not blind to the potential challenges ahead. Markets can change, but we are energized by the work we've done and the possibilities that lie ahead. With that, I'll turn it over to Jim Galeese for comments on our financials.