LSI Industries Inc.

Greetings. Welcome to the LSI Industries Fiscal 2024 Third Quarter Results 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 during the conference, please press star zero on your telephone keypad. I will now turn the conference over to your host, Jim Gilles, Chief Financial Officer. You may begin.

Welcome, everyone, and thank you for joining. We issued a press release before the market opened this morning detailing our fiscal 24 third quarter results. In addition to this release, we also 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 in 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, for more details. 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, and good morning, all. Thank you for joining us on today's call. It's truly hard to believe, but we're closing out our third quarter of fiscal year 2024 and well into our fourth quarter as we speak today. We are just over two months away from the end of our fiscal year, 2024, and we've just begun developing our operating plans for 2025. Things have been busy, and the LSI team continues to execute well. Working through the second half of the year, we are still facing some ongoing headwinds related to the current pause in our grocery vertical. Despite these challenges, total sales for the third quarter were down only 8% while adjusted net income was up 14% on a year-over-year basis. These results demonstrate and underline the resiliency of the management team to operate the company with a continued focus on execution and earnings while being fully prepared to capitalize on developing opportunities. As you are all well aware, LSI has developed and published our strategic plan to grow the company and its earnings to $800 million in sales and $12.5 million percent in EBITDA in 2028. This plan, which is known as our fast-forward plan, provides insight for our investors, employees, and customers alike to understand our goals and the path we intend to take to reach that $800 million milestone. Late last week, LSI announced the acquisition of EMI Industries. EMI is based out of Tampa, Florida, and they have a long established history as a fixture, display, and food equipment manufacturer in the grocery, convenience store, and restaurant industries. EMI has been in business for more than 40 years, and they serve a well-established customer base ranging in size from regional brands with several hundred site locations to national and international brands operating thousands of sites. This acquisition fits well into our fast-forward plan, and we see a number of opportunities from additional goods and services that we can offer to our customers. A key component of our strategy is identifying and developing a solution set for higher value verticals where our customers recognize the value of our products and services. This approach has served us well over the last several years, and we've advanced our position in multiple verticals. The acquisition of EMI further expands and accelerates this strategy. I mentioned in previous calls published information regarding the significant multi-year planned investment by C-stores, QSR, and grocery industry participants as they target in-store sales growth as a means to increase profitability. An improved image and brand enhances the consumer shopping experience. The acquisition of EMI positions LSI to exploit further growth opportunities in this multi-year investment cycle. As we've discussed before, Company culture and commercial synergies are always an important element to LSI when looking at any type of transaction. Our work with EMI over the last few months has shown a highly experienced management team that plans to stay on board with EMI and LSI well into the future. In terms of commercial synergies, we see a customer base that's about a third, a third, and a third. In other words, about one-third of the combined company customers are new to EMI, About one-third of the combined customers are new to LSI and JSI, and about one-third of the customers are shared. As a result, we've identified substantial cross-selling opportunities across our expanded customer base. In fact, in regards to common customers, we had one customer of a large quick-serve chicken restaurant chain reach out to us already, letting us know they do business with both LSI and EMI, and they look forward to working with us as a combined entity. In his own words, he thought this was a great combination. Aside from these commercial opportunities, we see a number of operational and integration opportunities that will help EMI lower costs, improve production capabilities and product quality, while improving customer service and profits. We see combined technology capabilities and benefits we can offer our customers. We won't get to all these opportunities overnight, But working with the team at EMI, we are confident of our ability to work together, share capabilities, and learn from each other. EMI and JSI today provide adjacent products to our combined customer base. And in fact, they make a perfect combination, whereas EMI and LSI help JSI in metal fabrication and design, and JSI will help EMI in refrigeration and cold fixture business. EMI and JSI both work in the millwork and refrigeration space, and we believe the capabilities and purchasing power will complement each other. Over the next few quarters, we'll explore these opportunities, including having JSI work with EMI in the introduction of an R290 solution, allowing EMI to offer an environmentally friendly refrigerated solution to those customers who value this offering. In the full calendar year 2023, EMI reported total revenues of $87 million and EBITDA performance of $5.5 million. EMI will be immediately accretive to LSI on an adjusted earnings per share basis. LSI has been working with EMI over the last few months as we underwent our full due diligence of the company. Our purchase price of $50 million was fully funded from our existing revolver leaving our net debt at approximately 1.3 times. We will add about 300 employees to LSI in five additional manufacturing locations located in Florida, Georgia, New Jersey, Rhode Island, and Dallas, Texas. This acquisition helps make a meaningful step towards our $800 million goal and provides an expanded set of products, services, and solution in our targeted vertical markets. We have more work to do, Organic growth is an important piece of our plan, and we continue our efforts in securing new customers and experimenting with new vertical markets. New product development and new product introductions remain on a healthy pace at LSI. Our outreach with our agents and partners remains a high priority, and in fact, next month, we will have our agent meeting here in Cincinnati. It's currently slated to be one of our largest attention agent meetings ever. We have a lot of work to do and a lot of opportunities in front of us. We remain committed to reaching our $800 million goal. We're excited about what the future offers. With that, I'll turn the call back over to Jim Gilles for a closer look at our financials. Jim?