LSI Industries Inc.

Greetings and welcome to LSI Industries Fiscal First Quarter 2022 Earnings Conference Call. At this time, all participants are on a listen-only mode. A 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. I would now like to turn the conference over to your host today, Jim Calise, the CFO. Please proceed.

Good morning, everyone, and thank you for joining. 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. Included are certain non-GAAP measures for improved transparency of our operating results. A complete reconciliation of first quarter GAAP and non-GAAP results is contained in our press release and 10-Q. Please note that management's commentary in 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.

Thanks, Jim. Good morning, all, and thank you for joining us on today's call. I'm happy to say LSI continues to make great progress on our strategic plan and vertical market focus as we move through the first part of our new fiscal year. In the first quarter of 2022, sales exceeded $106 million, representing year-over-year sales growth of 52% versus prior year. Sales excluding contributions by JSI increased almost 20%. This is the first time in the company's history that we've exceeded 100 million in sales in a single quarter, and you can be assured we'd be looking to make this a regular event. Quote activity and orders remain strong across all segments, driven by continuing execution of our plan to focus on vertical markets where we can differentiate ourselves, add value to our customers and agents, capture a greater share of wallet in each opportunity. Adjusted EBITDA increased nearly 60% versus the first quarter last year, while adjusted EBITDA margins improved both on a sequential basis and a year-over-year basis. Lighting gross margins finished above 30%, improving 100 basis sequentially from our fourth quarter. LSI has continued to lead the market with high availability of products And our decision and investments a few years back to diversify our supply chain have been a tremendous benefit throughout the pandemic. In addition to our supply chain diversity and sourcing efforts, we've strategically been building inventory of key components to further minimize potential supply chain disruption. Now, this is not to say that we've not had any supply chain challenges, but simply to underline that we're continuing to find ways to work within the dynamic nature of of the current environment, and our company and our customers are benefiting from our great customer service and product visibility. All of these improvements have been driven by our employees. The team has maintained competitive pricing discipline from sourcing, operations, and through sales, and we've worked quickly to adjust prices that reflect increasing material and transportation costs. Although no customer is happy to hear about a price increase, We've been pleasantly surprised by the understanding, acceptance, and collaborative nature of many of our customers. As I mentioned earlier, quote and order activity have remained strong through the first quarter and all indications are that it will remain strong into the second quarter. But we're not taking any of this for granted. Two years ago, we initiated a commercial plan to expand and strengthen our collaboration and relationships with our end-use customers. This effort is making a difference. contributing to sales increases across multiple sales channels in the first quarter, including significant increase in our national account and other end-user accounts. In the first quarter of 2022, our entire executive management team spread out across the country and visited multiple customer sites, looking for ways in which we can continue to improve our value to our customers. We have also had a marked increase in customer visits to our factory in Blue Ash, in addition to increased training classes and agent visits. Our work around new product introductions over the last few years, great customer service and high product availability, were consistently underlined in the meetings we've had as a true differentiator for LSI. Just last month, a large oil retailer that had been working with us on graphics and imaging projects awarded LSI a $3.2 million lighting order. This customer had been using a competitor's product for some time, but our high quality product, our persistence, and our availability ultimately ended up winning out. We believe that in the latter half of this calendar year and into next year, that opportunities will be driven as much by availability and reliability as a supplier and partner as they will be by price. And I've talked a lot about the supply chain, but I also want to mention our people. Labor, particularly manufacturing labor, has been a challenge over the last year. LSI has worked throughout the year to keep our employees well-informed and protected. We provided bonuses to our workforce and have worked hard to align benefits with workers' needs. Even in the height of the pandemic, we did not lay off a single worker in the company. This year, during our healthcare open enrollment period in November, I'm proud to say our employees will have a $0 increase in their healthcare coverage costs while maintaining the same benefits as they previously had. In addition, beginning in January, we'll implement an employee stock purchase program to further align the efforts of our employees with the performance of our company. I cannot say enough about our people, our team, and their desire to win, and I wanted to take a minute just to say thank you to the entire team. Now, while I focus much of this call on the benefits of our actions to the company, our customers, and our financial performance during our first quarter, I'd like to underline that these actions are all in alignment with LSI's long-term efforts around sustainability and our ESG initiatives. As you may know, many of our products at LSI Designs and Manufacturers have a direct impact on energy usage in the environment. We work hard to assure that our products perform to the higher standards, and we constantly push ourselves to improve even further. But we often talk about the diversification of our supply chain in terms of availability, it's also allowed us to shift parts of our material sourcing to regions and companies that respect sustainability environmental efforts and work in ways to promote the long-term health of our planet. LSI's commitment to our employees is always front and center to our actions also. The concept of a living wage and a work environment that's safe, inclusive, accepts and promotes diversity is important, and it's one that we're committed to. If you have not had an opportunity to look at LSI's commitments to these principles, I'd encourage you to visit our website and view our ESG statement and the work we're doing within the company. In closing, I'd like to mention that JSI's performance is above our expectations, and we're excited by the opportunities that lie ahead with them. Throughout the first quarter, we've made many improvements across the entire company. We have the talent and resources to build upon the operating strength we've developed over the last few years, and we're strategically positioned to win as a company. As we look forward, we know that we have opportunities in front of us, and we've demonstrated the ability to both build and acquire business. We expect to continue to build upon our momentum, and we feel great about our future. With that said, I'll turn the call back over to Jim Gilles for a look at our financial performance.