LSI Industries Inc.

Greetings and welcome to the LSI Industries Fiscal First Quarter 2021 Earnings 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.

Good morning, everyone. We issued a press release before the market opened this morning detailing our fiscal first 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.lsicorp.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 questions on 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 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.

Thank you, Jim. Good morning, all, and thank you for joining today's call. As you have likely seen from our press release issued earlier today, we have several things to talk about, and I'd like to jump right in and give you some additional details. Let me first note that despite uncertainty around the general marketplace, and others. In overall market activity, which has been hampered by COVID, we have found a number of ways to adjust to the conditions while remaining competitive and committed to the transformation and ongoing improvements of our business. Employee safety remains at the forefront of our plans and actions. Although COVID is no longer new, it is something we continue to deal with daily. We remain committed to assuring a safe environment for our employees, our partners, customers and suppliers and in finding ways to continue to be effective and adaptable. Now jumping into the business. Although lighting sales were down for the quarter, I'm encouraged that we have seen little to no project cancellations. Construction activity continues to fluctuate depending on the region and various COVID blur-ups, which has caused some delays in our committed project book, but again, no notable cancellations. On the other side of that coin, we've seen a market increase in requests for short lead time projects and competitive conversions. Our U.S.-based manufacturing and our previous work in diversifying our supply chain over the last year is allowing us to respond to a number of these short lead time inquiries, and we're working hard to convert and accommodate as many of these opportunities as possible. I'd also like to note that our average daily quote activity continues to increase along with a month-over-month and Michael Prachar. We're continuing to see that pace improve in the second quarter. As we've mentioned now for some time, we made a purposeful decision over a year ago to move away from price sensitive, highly commoditized business and focus instead on markets where we can differentiate ourselves and our products. This commitment to higher value, market-based approach is demonstrated in a 290 basis point gross margin improvement for the quarter bringing our lighting margins to our highest level in years. We've been laser focused on key vertical markets, including petroleum, automotive, grocery farmer, QSR, warehousing, transportation, and sports court lighting. We celebrated some notable wins in lighting in the last quarter, including two outdoor projects for the world's largest e-retailer and several early stage projects in our automotive vertical. Our automotive projects are focused on whole site approach. We're providing the complete lighting of solution from lot to showroom, showroom to service area, and everything in between. In many cases, we are working directly with the auto manufacturers to develop specifications, which are then rolled out to the individual dealers, ensuring consistency and uniformity in their lighting. We're excited by the momentum we're gaining here and the possibilities ahead. In our stock and flow business, primarily through Atlas, we've seen a strong recovery in Q1. Distributors that had been destocking in the fourth quarter and through part of the first quarter have come back strong. We are encouraged at the improved order rate and inquiries. Atlas is in the process of rolling out two additional brands of products, creating a new opportunity on the value side of the business, and we're excited to see where that will go. From a commercial activity standpoint, and in the absence of trade shows and in-person customer and agent engagement, we are investing in a number of sales and marketing-related activities to develop leads for our partners and our agents and increase the overall awareness of our solutions in our target vertical markets. Just last month, we introduced a new website and populated it with a slew of case studies and collateral material for our partners. We are investing in increased advertising in our focused vertical markets and we remain committed to the introduction of new products. In 2020, we added 20 new products and in 2021, we intend to introduce even more. Our product marketing team along with our engineering team has in fact shortened our standard development time by more than 30%. In the design of new products, they're assuring ease of manufacturing, maintaining quality and looking for ease of installation and service. This is a real win for our customers, partners, and for our overall competitiveness in the marketplace. It underlines the investments we're making in the business to compete on an entirely different level. Turning our attention to graphics, I'm happy to say we are near pre-pandemic levels with sales and graphics just 4% below prior year. Our pipeline remains strong on the petroleum side with several new projects in various stages of development. Our business in Mexico is recovering nicely as installation and government approvals continue to increase. We are showing growth in our grocery and farmer space, including a couple rebranding projects and new store openings for two large grocery chains. This business makes good use of our facilities and operational improvements in both Houston, Texas and Akron, Ohio. I've talked previously about expanding our share of Wallet and our existing verticals, and I'd like to comment on a project we are working on this quarter. Recently, we were awarded a multi-million dollar product and services contract from one of the world's largest petroleum retailers. In Q2, we will produce, ship and manage the installation of a digital wallet contactless pay-at-the-pump solution for approximately 11,000 US locations. This project utilizes LSI's digital print technology Logistics and Project Management capabilities to install an innovative near-field communication and QR code solution, allowing customers to use their smartphones to pay at the pump in a contactless fashion. This project's been in the works for some time, and we're proud to have been selected as the right partner for this program. Lastly, I want to talk about our strategy going forward. Our goal is to be a $500 million company with double-digit EBITDA in 2025. Our path forward is designed around four elements. Number one, expand or increase our vertical market presence. We do better and deliver higher value when we focus. Number two, change our customer engagement. That means creating a higher level of commercial awareness of our products, services, and solutions and developing more qualified leads for our agents and our partners. Number three, build our services business. We have a great opportunity here, and we'll have more success stories to share around that. And number four, accelerate our growth through acquisitions. This path forward is outlined in greater detail in our investor deck, which can be found on our website under the investor section. If you've not seen it, I encourage you to go take a look. Despite the challenges of the current environment, I'm encouraged by the momentum and energy we've been able to develop. We're in a strong financial position with nearly $85 million of immediate liquidity available. We remain focused on improving and growing our business both organically and through M&A, and I'm confident our best days are ahead of us. Thank you again for your time and interest in LSI. With that, I'll turn the call over to Jim Galeese for comments on our financial performance. Jim?