LSI Industries Inc.

Greetings and welcome to the LSI Industries Fiscal 2026 Second 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, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Jim Gilles, Chief Financial Officer.

Please go ahead. Welcome, everyone. and thank you for joining today's call. We issued a press release before the market opened this morning detailing our fiscal 26 second 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 and 10-Q. 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 second 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, everyone. I appreciate you joining us today. This morning, we'll be reviewing our second quarter results for fiscal 2026. As you likely saw in our earnings release, we delivered a solid second quarter with results that were in line with our expectations. Revenue was essentially flat year over year at $147 million, while profitability and free cash flow improved. Given the strength of the prior year comparisons, particularly within display solutions, I'm pleased how this quarter performed and how our teams executed throughout the quarter. Jim Gilles will walk through the financial details in a few minutes, but I wanted to spend some time on a few areas that I think were important as we move into the second half of the year. As we've discussed previously, the second quarter of last year benefited from unusually strong event-driven demand, most notably in the grocery vertical, following the resolution of a failed merger between two large grocery chains. The release of pent-up demand drove exceptional growth of 100% in our display solution segments, with 50% of that being organic growth in Q2 of last year. This demand pattern in groceries have returned to a more normalized level. And against that backdrop, flat consolidated sales and improved margin represent solid execution. More importantly, we continue to see healthy customer engagement active planning discussions, and increasing order trends as we exit the quarter. Lighting delivered another strong quarter with sales growth of 15% year-over-year and meaningful margin expansion. This follows 18% growth in the first quarter and we're encouraged by the consistency of performance across multiple end markets. Several factors have contributed to the strength in lighting, including the addition of aluminum poles to our steel pole product line, an increase in large project shipments, continued momentum in our national account strategy, and solid traction from recent product introductions as we remain focused on product vitality. As we exit the second quarter, lighting orders were up approximately 10% year over year, resulting in book to bill above one. This gives us continued confidence as we look ahead. In display solutions, we maintained a high level of execution, across several large multi-year customer programs, particularly in the refueling area, convenience store, quick serve retail, and casual dining restaurant verticals. While revenues declined slightly year-over-year due to the prior year comparisons, orders improved sequentially and were up year-over-year, supporting an improved backlog entering into the third quarter. What's particularly encouraging is how the opportunity set within Display Solutions continues to evolve. Historically, much of our growth in food services has come from quick-serve restaurant customers. These programs often involve large number of sites, sometimes hundreds at a time, with individual product values ranging from $20,000 to $40,000 per location. This work remains an important and durable part of our business, and we continue to win and execute well in that space. While at the same time, we are now seeing meaningful traction beyond traditional QSR into the casual dining space and premium food services. With these programs, they typically involve fewer locations, and the value per site is significantly higher, often ranging from $250,000 or $1 million per location. These opportunities align well with our capabilities in custom fabrication, integrated design, and program execution, and they represent a natural extension of the platform we've built over the past several years. We're also encouraged by improving activity in the international market, particularly in Mexico and the islands, where conditions strengthened during the quarter after several softer periods. Based on what we're seeing today, we expected activity to remain elevated into fiscal and calendar year 2027. Over the last two quarters, I've emphasized that our focus for 2026 and what will continue into 2027 will be our people. that commitment remains unwavering. Talent management through thoughtful role design, succession planning, and deeper cross-team integration are not just priorities, they're essential to creating a single unified organization as we continue to bring JSI and EMI together under the LSI umbrella. While there will be opportunities for operational consolidation in the future, the greatest return on our investment will continue to come from empowering our people. aligning them around shared goals, and enabling them to collaborate more seamlessly. The core objective of this integration is to unlock meaningful cross-selling opportunities by breaking down silos, improving transparency, and ensuring our teams are working as one cohesive commercial engine. A few months ago, we brought on a senior sales leader within our display solutions group specifically targeted to enhance visibility into our current sales activities pipeline development, and near-term conversion opportunities. Just as importantly, this role is helping us to strengthen alignment between sales, operations, and execution, ensuring that we are not only identifying opportunities across brands, but we act on them quickly, consistently, and with unified customer experience. Next week, we will take another important step forward as we host our national sales meeting here in Cincinnati. bringing together nearly 120 sales employees and marketing professionals from across the organization. We will be spending several days together, including time over the weekend, focused on collaboration, alignment, and building the relationship that makes true cross-selling and coordinated execution possible. This time together is not just about strategy and planning. It's about reinforcing our shared purpose, our culture, and continuing to work on becoming one integrated team, moving forward as one organization. From a customer perspective, we continue to see increasing engagement from large, sophisticated organizations that place a premium on supplier scale, geographic coverage, and manufacturing depth. In several cases, customers have specifically cited our ability to design, fabricate, and deliver across multiple regions as a key differentiator. This capability continues to elevate the types of programs we're invited to pursue. Profitability and cash generation were highlights of the quarter. Adjusted EBITDA increased year-over-year to $13.4 million, and margin performance benefited from discipline, project pricing, productivity improvements, and effective cost management, which together helped offset ongoing cost inflations. Free cash flow was strong at 23 million, driven by profitability and continued working capital discipline. We used that cash flow to reduce our total debt by 22.7 million during the quarter, ending with a net leverage ratio of 0.4. The balance sheet strength supports our fast-forward strategy, allowing us to invest in our organic growth, pursue operational improvements, and maintain optionality around future acquisition opportunities all while continuing to return capital to our shareholders through our dividends and other programs. Execution across the organization continues to reflect LSI's high say-do ratio and culture. Our team stays focused during a quarter that required careful management of mix, margin, and timing, and I'm proud of how they delivered. The collaboration between sales, operation, design, and supply chain continues to be strong and that alignment is showing up both in execution and in customer confidence. Looking ahead to the second half of fiscal 26, we expect continued progress on our goals supported by improving order trends and backlog. We remain confident in the secular growth outlook across our key vertical markets and in our ability to grow above market through differentiated solutions-based approach. In closing, I want to thank you for your continued support in LSI. We're executing well. We're financially strong. We remain focused on building long-term value through disciplined growth and operational excellence. With that, I'll turn the call back over to Jim Gilles for a more detailed review of our financial results.