LSI Industries Inc.

Greetings and welcome to LSI Industries' fiscal second quarter 2024 results 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, 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 24 second quarter results. In addition to this release, we posted a conference call presentation in the investor relations section of our corporate website. 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 GAAP and non-GAAP results is contained in our press release and 10Q. Please note 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 second quarter results. At the conclusion of these prepared remarks, we will open up the line for questions. With that, I'll turn the call over to LSI President and Chief Executive Officer Jim Clark.

Thank you, Jim, and good morning, all. Thank you for joining us on today's call. As noted in our press release issued earlier today, LSI continues to perform well and in line with our expectations despite some temporary headwinds in our grocery vertical. In our lighting segment, sales were down 3% for the quarter on prior year sales while gross margin improved meaningfully to 35%. This performance both in sales and margin reflects our continued ability to manage the business and take share, even while we are in a challenging year-over-year comparison and general business environment. Our quote and order activity remains high, up almost 10% from last year, while our conversion rate from quote to sales remains extended but stable. While the broader lighting market and many of our competitors have struggled to maintain top-line momentum, LSI has been successful in finding and creating opportunities for growth, and we remain focused on profitable sales. In our display solution segment, the headwinds in the grocery vertical have had broader impact as they have challenged momentum in our graphics, standalone displays, and refrigerated products. This impact is more apparent when compared to our lighting segment. As we noted a few months back, we were recently awarded a significant win in our display solutions group in the refueling space, with 1,325 sites set to span three years and another award that will include more than 7,000 locations, averaging 700 to 1,000 sites per year. This project will span considerably longer. Our normal flow of business in this space and the overall refueling vertical feels very robust right now. In addition to these recent project wins, we are currently engaged with two major C-Store customers who are multi-site testing our refrigerated product in a number of locations. In fact, a recent article published in last month's Wall Street Journal underlines our thesis of continued growth in this segment, and the solutions approach offered by LSI fits very well. The article is titled, Gas with a Side of Pizza, and it goes to underline the opportunity, the investment, and the higher margin sales that accompany a traditional gas station by engaging in-store sales. We are very experienced and recognized in this space as a high-quality solution provider, and we're confident we will have continued notable wins. Addressing the slowdown in the grocery vertical specifically, I would like to note that two of the largest grocery chains in the US are currently engaged in a proposed merger. This merger has been under an extended federal regulatory review process and has caused a temporary slowdown across the entire grocery vertical as companies within the sector await the results of the review and the possible changes to the competitive landscape. Although it's impossible to see what the future will hold in this space and the timing associated with the approval process, we anticipate that there will be continued growth and pent-up demand as the merger process moves forward. While we are disappointed with the time this process is taking, We believe that whether the merger occurs or fails to move forward, it will likely generate significant opportunity for additional business as the landscape continues to evolve and change. These changes that help our customers engage and retain customers fit very well with the products and services LSI offers, and we will be prepared to serve this market now and into the future. On the new products front, LSI continues to set the bar in new product introductions and innovation. Staying on pace with our 20 plus new product introductions or product revisions each of the last five years, I'm proud to say that our new R290 environmentally sustainable refrigerated product was DOE or Department of Energy certified and UL approved earlier this month and our first article has already shipped to one of our customers. Interest in this product is very high and we anticipate continued growth with these solutions as customers test the effectiveness of R290 in their own store environment. Turning to our lighting segment, we recently introduced two completely new lighting products, including our Linear Outdoor Lighting product and our new Peak Series High Bay Light, which is a modular product that includes a rotatable light engine and lens that can be rotated 180 degrees in fixed 30 degree increments. These products not only expand our broad solution set, but allow our customers and agents to access unique lighting solutions that showcase their properties and their business. Next week, LSI will be hosting our National Sales Conference. This annual meeting provides an elevated forum for our sales, marketing, engineering, and product development teams to meet, discuss, debate, and create opportunities. This is a real learning experience for our team and our company, and we always gain momentum coming off of this conference. I'm proud of the work the team is doing, and I feel we have a lot of opportunities in front of us. There is no question the impact across the entirety of our grocery vertical is causing some headwinds, but I feel the team has pivoted quite effectively to offset a majority of those headwinds, and we're enthusiastic about the possible tailwinds we could experience as this process works its way to conclusion. We have the capabilities and the capacity to respond, and we're excited about the ongoing improvements to our business and the possibilities that lie ahead. With that, I'll turn the call back over to Jim Gilles for a deeper look at our overall financial performance.