Release Date: November 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Sales increased by 12% year over year, driven by robust project activity in the refueling C-store space and increased activity in the grocery market.
- EBITDA for the quarter exceeded $13 million, with free cash flow over $11 million, indicating strong financial performance.
- The company's book-to-bill ratio was 1.3 times in the first quarter, reflecting strong demand and successful project execution.
- Integration of the recent acquisition, EM, is progressing well, with record performance levels achieved in its first quarter as part of LSI Industries Inc (LYTS, Financial).
- The company has a healthy balance sheet with net debt under one times at 0.8, providing financial stability and flexibility for future growth.
Negative Points
- Order timing remains choppy, with large project activity experiencing delays, affecting revenue recognition.
- The grocery segment is under a partial cloud of uncertainty due to ongoing court hearings, impacting order consistency.
- Lighting segment has faced headwinds with large projects experiencing timing delays, affecting sales in this vertical.
- Gross margin was lower compared to the prior quarter, attributed to product mix and ramp-up costs in the grocery segment.
- The automotive vertical is experiencing flat to slightly down performance, indicating potential challenges in this market.
Q & A Highlights
Q: Can you provide an update on the rollout of larger programs in the C-store segment and the overall pipeline given industry dynamics?
A: James Clark, CEO, explained that the backlog from 2024 orders will carry through fiscal 2025, with additional projects added. The company has the capacity to handle more due to prior planning, and the current backlog is expected to sustain them for 12 to 18 months.
Q: How are the pilots for refrigerated and non-refrigerated displays in C-stores and QSRs progressing?
A: James Clark, CEO, stated that the pilots have been successful, particularly with the transition to R 290 refrigerants. The feedback has been positive, and the company is prepared to fully transition to R 290 by January 1st. The acceptance of their products in multiple C-store chains is promising for future growth.
Q: Can you discuss the commercial and cost synergies realized from the EMI acquisition?
A: James Clark, CEO, highlighted that the integration with EMI has been smooth, with strong commercial synergies due to strategic customer relationships. Operationally, improvements in layout and procurement are yielding benefits, and there are years of synergies to harvest.
Q: What are the varying trends in demand across different vertical markets?
A: James Clark, CEO, noted that larger projects are experiencing timing delays across verticals. While warehousing is down, C-store and grocery are performing well. Automotive is flat, and lighting is affected by large project delays, though smaller projects remain steady.
Q: With a strong balance sheet and free cash flow, are there organic growth opportunities being accelerated?
A: James Clark, CEO, confirmed that the company is leveraging its resources for organic growth, particularly in expanding vertical markets and enhancing product offerings. The integration of EMI's closed-door refrigeration capabilities with LSI's open-air expertise is a key focus.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
