LSI Industries Inc.

Greetings, ladies and gentlemen, and welcome to LSI Industries Fiscal Third Quarter 2021 Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. It is now my pleasure to introduce your host, Mr. Jim Gilles. Thank you. You may begin.

Good morning, everyone, and thank you for joining. 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.lsicorp.com. Information contained in this presentation will be referenced throughout today's conference call. Included are certain non-GAAP measures for improved transparency of our operating results. A complete reconciliation of third quarter GAAP and non-GAAP results is contained in our press release and 10-Q. Please note that management's commentary and responses to today's questions on the 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.

Thanks, Jim, and good morning, all. Thank you for joining us on today's call. Let me start by saying I'm very pleased with the continued progress of the LSI team in what still seems to be very uncertain market conditions. COVID and its restrictions continue to decrease on a daily basis. However, its effects on project timing, labor, and supply chains are all still very present. Despite these challenges, I'm happy to report that we experienced positive year-over-year growth in net sales for the quarter and prior year. In addition, gross margins, adjusted net income, operating cash flow, and adjusted EBITDA all improved compared to last year. Typically, our third quarter is our slowest quarter as weather conditions across the country affect our outdoor installation activities. Starting out in January and into the first part of February, conditions were a bit sluggish. However, we experienced an exponential increase in sales and order activity in the second half of the quarter, and I fully expect this momentum to continue into the fourth quarter. Although lighting sales were down approximately 7% when compared to the prior year, our quote levels continue to increase measurably, and the sales gap versus prior year continues to narrow with sequential improvements each quarter. Lighting segment adjusted gross margins for the quarter were 31%, showing a 530 basis point improvement over prior year with adjusted operating income for lighting more than tripled prior year levels in the third quarter. The introduction of more than 20 new LSI lighting products throughout the year have allowed our agents, partners, and sales team to offer multiple solutions and price points while increasing our close rates, margins, and profitability. As I spoke of last quarter, we've been focusing on our sales force and sales force effectiveness. As part of the study, our sales leader, Pablo Aguina, has spent most of the quarter executing a reorganization of our national accounts team in an effort to develop more organic sales leads and opportunities for our agents, our partners, and our company. Early results are very encouraging, and we will continue to focus on creating more value from our direct Salesforce efforts. Turning to our stock and flow business, Atlas introduced an entirely new product line in March called Origins. This product line allows them to have multiple price points in the market. Origin will continue to roll out over Q4, but it will allow us to capture more of the value segment of the market. We're very excited about this. In addition, I would also like to mention that Atlas introduced an entirely new product category called the Wallpack Witness in Q3. This product takes a traditional Atlas wallpack and embeds a security camera into the unit, allowing customers the ability to review activity through a phone or tablet application, all for a price point only slightly higher than the original classic Wallpac product line. On the graphics front, sales increased by more than 20% versus Q3 of last year. Our digital graphic programs continue to gain momentum with a growing list of customers, and our project with one of the world's largest QSR companies continues to be on track in delivering excellent results to the customer and to LSI. We expect that this project will continue its current pace for at least the next 12 months, at which point we plan to transition to the already committed indoor phase. I expect that overall this project will extend well into calendar year 2023. As I noted in our press release, we've also been working on a new secure digital kiosk solution for a nationwide pharmacy retailer, in addition to prototyping a number of possible solutions for the growing grocery store segment of pickup and delivery. Switching gears, petroleum graphics continues to remain strong with activity now expanding in Mexico as COVID restrictions ease. The group did experience a bit of a challenge last quarter as we lost six workdays to the Texas snowstorm and resulting power outages. No orders were lost, but rescheduling and timing has put pressure on the entire graphics team to make up for the lost ground. Lastly, I'd like to mention our ADAPT group. This is the group that handles our installation and project management, and they've been key to our expansion in integrated lighting and graphics projects. ADAPT continues to grow in both its capabilities and importance in LSI's value proposition. Fiscal year-to-date revenue has increased almost 50% when compared to last year. In the last quarter alone, we engaged in several new projects, including a site assessment project for one of the world's largest convenience store chains. If this project continues to develop as we expect it will, it will create significant opportunity for LSOI well into the future. Overall, I'm pleased with our results in the third quarter, and I'm confident that we will continue to execute in the fourth quarter. We are working well as a team and continuing to look for organic growth and M&A opportunities. I know these efforts will benefit our employees, customers, and shareholders alike. With that, I will turn it back over to Jim Gilles for a deeper look at our financial performance for the quarter. Jim?