LSI Industries Inc.

Greetings and welcome to the LSI Industries Fiscal 2027 First Quarter Results Conference Call. At this time, all participants are in a listen-only mode. A brief 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. It is now my pleasure to introduce your host, Mr. Jim Galeese, Chief Financial Officer. Thank you, sir. You may begin.

Welcome, everyone, and thank you for joining today's call. We issued a press release before the market opened this morning detailing our fiscal 27 first 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 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 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.

Thank you, Jim, and good morning, everyone. I appreciate you joining us today. Today, we're reviewing our first quarter results for fiscal 27. as you saw in our earnings release for reported revenue of approximately $226 million, which is an increase of 44% over the prior year, reflecting the addition of Royston to our business. Adjusted EBITDA increased 41% to $22.2 million, and we generated nearly $14 million in free cash flow. Overall, I would characterize the quarter as one where we made good progress on a number of important initiatives. while continuing to work through some challenging marketing conditions. Jim Galeese will cover the financial details in a few minutes. So let me start with Royston. We are now several months into the integration and I'm very pleased with the progress we're making. Royston delivered a solid quarter with sequential sales growth of 8% and 100 basis point improvement in adjusted EBITDA margin. We're beginning to see the benefits of initiatives focused on improving operating efficiency and strengthening commercial execution. As I've said before, we didn't acquire Royston simply to become a larger company. We acquired Royston because it fits directly into our vertical market strategy that we've been executing for the past seven years. Our strategy hasn't changed. What's changed is our ability to serve those markets. With Royston, we've significantly expanded the products, services, and manufacturing capabilities we can bring to our customers. And we're beginning to see the benefits of that expanded platform in the conversations we're having across our customer base. A few weeks ago, we formally introduced our category of one initiative at NACS convention. NACS is the National Association Convenience Store and it's one of our largest trade shows. This was an opportunity to bring together a full scope of LSI's capabilities and present them to many of the largest convenience stores and refueling customers in North America. The response was extremely positive. I think many of our customers are just beginning to appreciate the breadth of what we can now offer. And while these opportunities take time to develop, the conversations we're having today are broader and more strategic than they were just a few years ago. Turning to our vertical markets, refueling and convenience stores continue to perform well. Sales increased approximately 5% during the quarter, supported by activity across several of our largest customers. The 2500 site renovation program we discussed last quarter continues to progress as planned, with activity expected to build through fiscal 27 and into fiscal 2028. We're also working with another major convenience store chain on a potentially significant renovation program, beginning with store concept developments right now. As we've discussed on previous calls, the competitive environment in the convenience store market continues to drive investment in new locations, remodels, and the overall customer experience. We love it. We believe this is a long-term trend and one that aligns very well with our capabilities. Grocery also remains healthy. We're seeing continued investment across broad customer base, and order activity in that vertical increased 12% during the quarter. Across display solutions, overall orders increased 4%, and our pro forma backlog also improved. These are encouraging indicators, particularly given the broader economic environment. QuickServe restaurants remain a more challenging market. We've talked about the uneven investment patterns in QSR over the last several quarters, and those conditions have continued. Some customers are moving forward with their programs, others are delaying investment decisions. The softness has affected both our sales and margin. However, we recently received some very encouraging news from one of our larger QSR customers. They approved a 3,000-store interior renovation program that we've been working on for some time and selected LSI as one of three providers. The program is expected to begin late in our third quarter fiscal 2027 and continue over approximately three years. It's another example of the opportunities developing within our existing customer base, and we're thrilled to be part of it. turning to lighting, the broader market remained soft. Sales for LSI declined approximately 6% during the quarter, reflecting weaker demand across several key commercial and industrial applications. We did see growth in refueling, sports, and banking, but that was offset by weakness in parking, smaller retail, warehousing, and automotive. Despite the lower volume, our lighting team improved gross margin during the quarter reflecting continued discipline around pricing and cost management. Order activity was relatively stable, and we continue to invest in new product development, training, and customer engagement. We've built a very competitive lighting business over the last several years, and I believe we're well positioned when the broader market recovers. I also want to touch briefly on operational efficiency. We spent the last several years building a broader and more capable organization. Now we're focused on bringing those capabilities together and identifying opportunities to operate more efficiently. One example is a consolidation of our Collinwood, Ontario manufacturing operation. We're bringing that into our existing Canada's Best facility near Toronto. We expect to complete that transition through the end of this fiscal year and will generate more than a million dollars in annual savings through this move. This is the type of work we'll continue to pursue across LSI, not simply reducing costs, but improving the way our businesses operate together, making better use of our facilities and our equipment, and creating a more effective organization. Looking ahead, I want to be realistic about our near term. We're seeing positive order activity and a number of encouraging customer developments, but the timing of the opportunities doesn't always align neatly with our fiscal quarters. We're also dealing with continued softness in lighting and QSR, as I just spoke of a minute ago. Inflationary pressures and the normal seasonal slowdown in our retail renovation activity as we move into the holiday period is something else we need to consider. At the end of the day, I feel very good about where we're positioned as a company. Over the past several years, we've been focused on building a broader and more capable organization. through a combination of our organic growth activities and strategic acquisitions, we've assembled a platform that I believe is unique in the market that we serve today. As we look ahead, our focus is increasingly shifting from building that platform to realizing its full potential. That means expanding our share of wallet with existing customers, introducing those new products and capabilities, and continuing to improve the efficiency and profitability of our operations. and importantly, many of these opportunities are within our control. We don't need to rely entirely on improving economy or others to continue to make this progress. We're approaching an important milestone in our strategic planning process. In December, we expect to share our next multi-year strategic plan with the investment community, outlining how we intend to build on the progress we've made under the Fast Forward plan and continue to create long-term shareholder value. We've always placed a great deal of emphasis on our high say-do ratio, setting expectations carefully and delivering against them. That discipline will remain central to how we approach this next chapter. As always, I want to thank our entire team for their continued hard work and commitment. There's a lot going on across LSI right now and I'm pleased with the progress we're making. I'm encouraged by what we see ahead and I'm looking forward to sharing more about our future plans in December. With that, I'm going to turn the call back over to Jim Galeese for a more detailed review of our financial results.