Ladies and gentlemen, greetings and welcome to the LSI Industries Fiscal First Quarter 2023 Results Conference Call. At this time, all participants are in a Listen-O nly 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, James E Galeese, CFO. Please go ahead. Good morning, everyone, and thank you for joining. We issued a press release before the market opened this morning detailing our fiscal first 1/4 results. In conjunction with this release, we also posted a conference call presentation in the investor relations portion of our corporate website at www.lsi-industries.com. 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 first 1/4 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 uncertainties, 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 first 1/4 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, James A. Clark. Thank you, James. Good morning, all. Thank you for joining us today. As you've likely seen from our press release, we had a strong first 1/4, and I'm very pleased with the efforts and the results of the company and our entire team. Sales were up almost 20% at $127 million compared to the same 1/4 last year. Net income doubled and adjusted EBITDA topped 10.5%, all on top of more than $10 million in free cash flow. Again, just a solid performance in a challenging market by a great team of folks across the company. Our Display Solutions segment sales were strong, but they were a bit constrained this 1/4 as we were impacted by both a supply chain issue, specifically one supplier who provides a graphics component, and ongoing permitting issues that continue to occur across the country. Despite those challenges, orders for the first 1/4 were up 12% on the prior year. Our gross margin rate increased 450 basis points, and operating income improved more than 70% as opposed to the same period a year ago. We're engaged in a number of test projects, and we feel good about the opportunities in front of us. Our deployment and installations continue to move forward with a mix of new customers and ongoing projects that continue to line up very well with our vertical market focus and our current product offerings. Moving on to our lighting segment, we had an outstanding 1/4 with strong sales growth and margin improvement. Both our project business and stock and flow business enjoyed a strong order rate, and orders increased by double digits compared to a year ago. Although we have a strong focus on outdoor lighting, we do and always have had a very robust indoor product line. The indoor line enjoyed a particularly strong 1/4 and gained some significant traction, strengthened by a number of new product introductions and our continued effort of introducing our solutions to new and existing customers. These results are a great reflection of our vertical market strategy, whereas we provide an ever-increasing basket of products and services to our customers. Earlier this month, both LSI and JSI jointly attended the National Association of Convenience Stores Conference, NACS, in Las Vegas. The show was extremely well attended, rebounding from COVID. LSI was a true star at the show with the introduction of a number of new products, including one called the ReadyMount. The ReadyMount is a mounting adapter which significantly cuts the installation time of under canopy lighting, while it also provides a quick service, maintenance, and upgrade path in the future. There was extremely strong demand for a solution like this, and we didn't see any competitive products in the market filling this gap. It's a great feeling when you see folks lined up three and four deep outside your conference show booth just to take a look and see at the product. We believe that there are many more opportunities to continue to differentiate ourselves in the lighting category. We continue to find ways to innovate and bring new features and functionality to all our solutions. We're laser focused on finding ways to serve the markets we currently serve, as well as exploring lateral expansion into other vertical markets that fit with our overall strategy. As we put the first 1/4 of the fiscal year behind us and look forward to 2023, we see many opportunities developing despite the uncertainty in the general economy. Although supply chain issues and ongoing permitting issues remain some of our biggest challenges. In most cases, we found a way to work within the constraints and challenges these issues create, and this 1/4's revenue numbers speak to that ability. We're Well-Positioned for a strong second 1/4. Our customer and agent relationships have never been stronger, and we look forward to continued improvement. With that, I'll turn the call back over to James Galeese for a deeper look at our financials. Thank you, James. LSI delivered a strong first 1/4, with all key metrics generating substantially improved performance. Sales growth of 19% represents our sixth consecutive 1/4 of Double-Digit growth. Growth was realized across multiple verticals, as well as both our Lighting and Display Solutions product segments. Margin expansion continued in fiscal Q1, with gross margin improving 430 basis points versus Q1 last year, and strong increases in adjusted operating income, net income, and EBITDA margins as well. Adjusted EBITDA margin improved to 10.5% in Q1, with both segments realizing significant Year-Over-Year improvement. We're encouraged that multiple factors are contributing to our continued margin improvement, led by increased volume leverage, successfully aligning selling prices to ongoing inflation, service execution meeting demanding customer requirements, project mix, and solid cost management. Improved income performance produced earnings per share of $0.25 in the 1/4, approximately double the $0.13 in the prior year 1/4. Free cash flow generation increased substantially in the 1/4, $10.1 million versus cash usage of $8.2 million fiscal Q1 last year. Working capital stabilization has enabled a higher conversion of earnings to free cash flow. Q1 represents the third consecutive 1/4 of positive free cash flow, following several quarters of investing in additional inventory to mitigate supply chain challenges and support sales growth. We expect positive cash flow to continue moving forward. Improved cash flow reduced the ratio of net debt to trailing 12-month EBITDA to 1.7 times. Shifting to segment performance, lighting delivered an excellent 1/4. Compared to last year, sales increased 32%, gross margin of 33% increased 290 basis points, and operating income more than doubled. Strong sales growth was led by high levels of activity in multiple vertical markets, where our sales and marketing efforts continue to strengthen our position. These include refueling C-S tore, parking, automotive, and warehousing. We're also making good progress in other attractive markets, including applications for the institutional and sports lighting markets. Following multiple price increases in fiscal 2022, selling price realization is enabling us to offset the impact of inflation and leverage the favorable impact of improved volume and service capabilities. Overall, we expect pricing to remain stable at current levels for the short term. Order activity for lighting in Q1 remained at a high level, with orders 11% above the prior year 1/4. We enter fiscal Q2 with a continued healthy backlog, 17% above the same period last year. Performance for the Display Solutions segment was also favorable. Sales increased 8%, gross margin improved 450 basis points, and operating income increased 72%. The sales increase was led by continued strong demand in the grocery vertical and Year-Over-Year growth in refueling c-store. Growth in these verticals was driven by increases in both refrigerated and Non-refrigerated food display cases and print graphic solutions. In Q1, we completed initial installations for a global oil company branding change in Puerto Rico, and site install activity will continue throughout Q2. In addition, we have started digital menu board install activity for a QSR customer in Canada. These, combined with our ongoing programs in Mexico, reflect our continued regional expansion driven by our strong customer partnerships. That was covered. Right. The gross margin improvements for Display Solutions was driven by improved pricing on all major programs and project mix. Customer proposal activity across our Display Solutions vertical markets remains at a high level. Orders for the 1/4 were 12% above Q1 of last year, and the backlog entering Q2 is 15% above last year. For LSI looking forward, we expect continued growth in fiscal Q2 compared to the prior year period, and earnings and margin rates favorable to last year as well. We continue to be diligent, focusing on our target verticals, managing costs and capital allocation priorities, which include debt reduction and investments in sales growth initiatives. I'll now turn the call back to the operator for the question and answer session. Thank you. Ladies and gentlemen, at this time, we will be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Our first question is from the line of Richard Fearon from Accretive Capital Partners. Please go ahead. Good morning, James and James, and congratulations on another truly outstanding 1/4. Jim, in particular, for making such significant progress towards your stated goal a couple years ago that LSI would generate $500 million in revenue, $50 million in EBITDA. Here we are with a run rate of exactly that quarterly revenue of $127 million, 1/4ly EBITDA over $13 million. Now net debt standing at 1.7 times EBITDA. These are just very impressive results, and more confirmation that you deliver what you say. Yeah, just, I know you're being very thoughtful about how LSI chooses to grow, both organically and via M&A. My question is, now that it's been about 18 months since the JSI acquisition in May of 2021, are there lessons that this extremely successful business combination have taught us that can be applied to future acquisitions? I guess as a corollary to that, what types of businesses or situations would LSI likely avoid in the future? Well, good morning, Richard. James Clark here. Thank you for the comments, and thank you for participating in today's call. Yeah, I mean, JSI was a great fit for us. As you know, we stated a few years ago that we were gonna be very vertically Market-Oriented. We looked within those markets to either expand the depth of what we can offer those markets or do a lateral expansion, if you will, or horizontal expansion of the vertical markets we're in. In this particular case, you know, we saw grocery. It had a number of reasons we believe that grocery would grow. This goes all the way back to early 2019. It was mostly because of a disruption in the market we saw with Whole Foods and Fresh Market kind of disrupting some of the traditional grocers and a real call or need for a number of the products and services we had. Using that as a kind of a thesis, we looked at companies that could help us in the depth of some of the verticals we're in, and JSI was a natural fit. Not only did we see something that had a lot of momentum behind it, but we saw a cultural fit company with JSI, and it has since proven out. It just fit with the culture that our company had. It didn't require a lot of restructuring in terms of, you know, what it looked like to have a good high say-do ratio and those type of things. JSI fit very well. I think we'll continue to look for businesses like that. You know, growth is very important to us. We wanna continue to grow. We wanna grow both organically and through M&A. You know, M&A, keeping that funnel filled and looking for companies that fit a profile like JSI did are gonna be continually important to us. In terms of companies we would likely avoid, I mean, I think that, you know, things that take us off of our mission. Things that you know, are far left field from where we are, you know, or don't have the potential for the growth or the investment in the segments we're in. Those would be things that we would definitely stay away from. Thanks. That's helpful. Do you feel that you and the team have identified, you know, significant organic drivers within the business today? Or, you know, are you envisioning most of the future growth coming from M&A? I know that the synergies between LSI and JSI have opened up additional avenues, especially within grocery channels and c-stores. Are there other verticals that you know believe represent exciting opportunities at this point? Yeah, I mean, great question, and thanks for it. You know, I mean, we talked about early on, you know, going back again and just having a high Say-Do ratio, just saying what we're gonna do and executing against it. We talked very candidly about the fact that we would have a portion that would be M&A and a portion that would be organic. You know, about 18 months ago, we transacted on JSI, which was obviously the M&A part. Over the last five quarterly we've had Double-Digit organic growth. You know, the balance is there, and we continue to kind of pursue keeping that in balance. When you look at a company like JSI, you know, we saw the opportunity to continue to serve some of the vertical markets we're in, but we also saw an opportunity to share some of the relationships, the trust, the you know prior years of service each of us had with the customer bases that we had. JSI in grocery and LSI in grocery both had a very good presence in there. It just strengthens us that much more. Convenience store is a market that we think we can bring JSI to and in a big way. You know, those type of programs take years to develop. We talked about this, you know, upfront when we did the JSI acquisition. We have a number of test sites and test programs going on right now, and we hope to convert those. We think we have a very compelling story behind it. It fits in line with what a number of our C-store customers say, what the future of service is gonna look like in those environments in those stores. We do have a good product line in both JSI and LSI to kind of serve those markets. It's about balance, and our goal is to continue to have that balance both through M&A and through organic growth. You know, growth in general is important to us. We think scale matters in this business, and we wanna continue to make sure we stay relevant from that standpoint. Sure. I'm sure with, you know, Terry Awalt's sort of thoughts side by side with yours, you guys have been able to approach new verticals that maybe he wasn't really focused on with JSI that, you know, putting the two great minds together, come up with solutions for the c-stores, for example, that, you know, excite your customers. Yeah. So- You know, I'll just say Terry is certainly a very visible leader in JSI, but you know, his brother Mark is also highly involved, and there's a whole team of folks there. I mean, I could think of 10 right off the top of my mind, and I could think of another 20 below that. But it goes to underline exactly what you know, LSI is about, is it's not one person, it's a team of folks. I'm sure if Terry was on this call, he'd say the same thing. We're you know, we're very happy. It's just strong leadership with a good team behind us. Well, you both seem to be very similar leaders, and finding that cultural fit is part of the magic, I know. I guess relating back to that inorganic growth, that might require some additional capital investment, can you share some thoughts about, you know, equity issuances or utilizing stock versus currency for acquisitions? Yeah, I mean, I think this comes down to, you know, sources and uses, right? You know, what are our options in terms of, you know, forward opportunities and how can we invest in them, and what do we have, you know, in our coffers, so to speak, to execute against Go-Forward plans? You know, there comes a big burden with being a public company, obviously. We wanna make sure we serve our shareholders and the people that are confident and invest in us. At the same time, we wanna make sure we're executing against growth that continues to retain those investors, and it keeps the story interesting. You know, my personal preference is always around debt. I think there's, you know, we've talked about it in other calls. We certainly use debt here with JSI, and you see the cash, you know, our free cash flow this 1/4 and our ability to pay down debt and our leverage ratio being at 1.77, you know, below 1.8 right now. We wanna continue to move that stuff down, and we do wanna make sure that, you know, we're responsible with the way we do that. It fits into our strategy, you know, in terms of making sure that we're ready to act with opportunities in front of us. And I think equity is a piece of that, but it, you know, it's not, it's certainly not our First Go-To and it, but it is something that's on the table for us to use. That makes sense. I mean, it's just another, you know, arrow on the quiver, if you will, when it's a fairly priced instrument that kind of gives you some optionality, which kind of gets to my last question, which I know you know what's coming, and I've asked this on conference calls before, but it really. You know, I just look at a stock price that, you know, we consider grossly undervalued, with, you know, trailing twelve-month revenue of $476 million on EBITDA now, you know, on a run rate above 10%, $41 million of trailing EBITDA, both of which have been growing 1/4 after 1/4 and net debt now down to $69 million and declining. You know, it seems almost unfathomable that the enterprise value of this business is only around $300 million and not twice that. This is a story that the public market is still learning about. I think in the microcap space, it's incredibly inefficient. There's just no research coverage. Anyone who invests in small microcaps these days, coming from the wealth management business is doing it through ETFs, which are blind to incredibly compelling stories like this. You know, I guess with the recent board authorization of the 15 million share buyback, what are your current thoughts about activating a 10b5-1 stock repurchase program or I know priority has been reducing debt. Is there sort of an order of events still that you're looking at for that? Well, you know, it's always about total shareholder return, right? We wanna make sure we do what's best for our shareholders and maintain that continuity of the relationship and, you know, be there for, you know, be making smart decisions. You know, as an example, we've remained completely committed to our dividend program. It 's part of our capital allocation model. I've spoken before that, you know, debt is something that we're willing to use, but we wanna be very responsible with it and bring it down to very manageable levels. As you saw, you know, earlier this year, earlier this calendar year, we did authorize a program. The board authorized a program to do a stock buyback. You know, I agree with you. I think that having the opportunity to invest in companies that can grow, you have a big landscape out there. Certainly when we look across that landscape, we look and say, "Well, what's LSI doing? They're pretty impressive." Would we put our money back into LSI? The answer is yes. I will just say this, that it is constantly in our thought. We review it quarterly. You know, we don't do things just for the effect. You know, the fact that we put that program in place certainly says that we're seriously considering it. You know, the best I can say at this point is we're aware of it and we're committed to doing what creates the best shareholder return. You know, if that happens to be it, you can be assured we will execute against it. That's extremely helpful, James. Thank you. I know, you know, as you look at LSI, for example, as the opportunity among the landscape of opportunities, you know, here's a business that trades at, you know, what many of us think is, you know, worth twice what it's trading at. You know, it's also another bite at the JSI apple, which was a fantastic acquisition, full price, fair price, but the synergies were sort of immeasurable and the opportunities it's creating seem very exciting. Then, bringing on the great cultural fit and the team that you mentioned assembled over at JSI, you know, has sort of Off-Balance sheet value that is hard to quantify, but makes the future pretty exciting. I like that way of thinking of, you know, are there opportunities within our own business to own more of it? Thank you again for encouraging your board to authorize the stock repurchase program. Yeah, thanks for the hard work this 1/4 and going forward. Thanks, Richard. Thank you. Our next question comes from the line of Amit Dayal from H.C. Wainwright. Please go ahead. Thank you. Good morning, guys. Congrats on the 1/4, by the way. Just, you know, margin improvements, Jim, could you comment on whether, you know, these are here to stay? You know, any commentary on the stickiness of these improvements and how we should be thinking about, you know, modeling for these going forward? Yeah. I mean, I think that, you know, our mission is to make them sticky. We've done it in a you know, a very responsible way. We're creating the value for our customers that, you know, equate to the margins that we're producing right now. They're comfortable with the pricing. We look for. You know, there's two ways that we're looking to affect that. You know, one is productivity and our ability to kind of convert what comes in in an efficient manner, and we continue to make forward progress on that. I think that we still have a lot of runway left relative to that. You know, the second is our, you know, the products we're delivering and the partners that we are. I think that, you know, over the last couple years, we've certainly been able to demonstrate, again, it's a team of people, but we've certainly been able to demonstrate that value. Between the two of them, I think that, you know, I do believe that we can keep the margins where they are, and I do believe that we still have some runway ahead of us. Okay, thank you. I know the fourth calendar 1/4 is maybe seasonal, you know, given some of, you know, the period in which the grocery segment, et cetera, operate, retail channels operate. How should we think about, you know, the next 1/4 given, you know, the stronger than expected results for the fiscal first 1/4? Yeah, you know, Q1 was a strong 1/4. We're very happy with it. We're coming into Q2, as we said even on our last call. You know, we don't have six months visibility or anything, but we do, you know, we do have 30+, you know, sometimes 60 days of visibility. I'll tell you know, we don't anticipate any slowdown right now. Orders remain strong, inquiries remain strong, our quote activity remains strong, and our backlog remains strong. Frankly, you know, permitting is probably the most frustrating thing we're dealing with right now, and I truly don't understand it. I don't understand how permitting issues and those type of things continue to persist, but they do, which causes general slowdown in construction, which causes some of the lumpiness relative to our forward visibility. You know, we still balance some supply chain issues. You know, I think that you noted in my comments just a few minutes ago, you know, our digital program would have been even that much stronger. I'm very happy where it was, but it would have been even that much stronger hadn't it been for one singular component that is just, you know, jammed up in the supply chain. But with all those things into consideration, we do have some seasonality in our business. You know, cold winter, cold weather does kind of affect some of the outdoor activity. Holidays, you know, starting with Thanksgiving through Christmas affects some of our vertical markets, those type of things. With all of those things factored in though, I still expect us to have a pretty fairly strong Q2. Understood. Thank you. You know, projections or the consensus estimates are calling for, you know, 4%-5% annual growth. You are delivering, you know, 19%-20% Year-Over-Year growth. How should we think about, you know, the rest of the year given sort of the execution is coming in so strong? Yeah, I mean, it's, you know, it's a great question. I think as I was saying, you know, I narrow it down to supply chain and permitting is, you know, the top two. We have 20 things that we're dealing with still today that we didn't deal with, you know, four years ago. Our ability to continue to grow is something that's critically, you know, it's critically important to us. The comps are getting harder. They get more difficult. You know, I mean, we're talking about $125 million 1/4s, where historically we had never broken a $100 million 1/4 ever. You know, I feel confident about our ability to continue to grow. You know, our internal goal is certainly Double-Digit, but you could, you know, we do have to factor in, you know, these quarter-over-quarter, you know, on a comparable basis. You know, we certainly keep raising the bar, that's for sure. You know, one thing on the permitting issues, I know some people don't always understand that, so just take a second to mention that. You know, on large commercial projects and things like that, there's often electrical or building permits, things like that that are usually handled at the state and city level. Those folks, you know, through either staffing or whatever it is, are still working through a massive backlog that, you know, just causes some consternation every once in a while. It just seems to be all across the country. Overall, our vertical markets that we're in remain strong and, you know, we remain optimistic about continuing the growth path we're on. Thank you, James. That's all I have for now. I'll take my other questions offline. Appreciate it. Amit, thank you for the questions, and thank you for calling in. Thank you. Ladies and gentlemen, we have reached the end of the question and answer session, and I would like to turn the conference to Mr. James A. Clark, President and CEO, for closing comments. Yeah, I would just. I think we covered a lot of ground here today. I would just say that, you know, on behalf of the team, we're very happy with the results of the first 1/4. We remain very optimistic about the second 1/4. We're very focused on growth. Everybody in the company understands that it's a unique opportunity right now. We've got a lot of momentum behind the company and what we can do to continue to grow and, you know, achieve these results all under the guidance of, you know, making sure we're very good to our shareholders and create that return is critically important to us. With that, I just wanna say thank you for calling in. It's a little early, but Happy Holidays to everyone online, and we'll look forward to our next call. Take care. Thank you. The conference of LSI Industries has now concluded. Thank you for your participation. You may now disconnect your line.