Announces $15 Million Share Repurchase Program

Declares Quarterly Cash Dividend

LSI Industries Inc. (NASDAQ:LYTS, "LSI" or the "Company"))) a leading U.S. based manufacturer of indoor/outdoor lighting and display solutions, today announced results for the third quarter of fiscal year 2022.

FISCAL THIRD QUARTER 2022

Net sales +53% y/y to $110.1 million, organic net sales +12% y/y
Lighting sales +25% y/y; Display Solutions sales +100% y/y
Net Income +146% y/y to $3.6 million, or $0.13 per diluted share
Adjusted net income +130% y/y to $4.2 million, or $0.15 per diluted share
Adjusted EBITDA +92% y/y to $8.5 million
Announces $15 million share repurchase authorization

LSI achieved strong year-over-year increases in both net sales and profitability in the fiscal third quarter, driven by broad-based commercial demand across both the lighting and display solutions businesses, increased price realization, and contributions from the JSI Store Fixtures acquisition ("JSI") completed in May 2021.

The Company reported third quarter net sales of $110.1 million, an increase of 53% versus the prior year period. Net sales excluding contributions from the JSI acquisition, increased 12% versus fiscal third quarter of 2021.

LSI reported net income of $3.6 million, or $0.13 per diluted share in the third quarter, versus $1.5 million, or $0.05 per diluted share, in the prior-year period. Adjusted net income was $4.2 million, or $0.15 per diluted share for the third quarter of fiscal 2022, compared to $1.8 million, or $0.07 per diluted share, last year.

The Company reported Adjusted EBITDA of $8.5 million in the fiscal third quarter, an increase of 92% versus the prior-year period. A reconciliation of GAAP and non-GAAP financial results is included in this press release.

LSI generated free cash flow of $3.3 million in the quarter, including $6.4 million of discretionary investments in additional inventory intended to support existing elevated backlog levels and order rates. At the end of the third quarter, the Company's ratio of net debt to trailing twelve month Adjusted EBITDA declined to 2.6x, compared to 2.8x at the end the fiscal second quarter 2022.

The Company declared a regular quarterly cash dividend of $0.05 per share payable May 17, 2022 to shareholders of record on May 9, 2022.

MANAGEMENT COMMENTARY

"The LSI team delivered exceptional fiscal third quarter performance highlighted by significant year-over-year growth in revenue and profitability, accomplished in an ongoing challenging operating environment," stated James A. Clark, President, and Chief Executive Officer of LSI. "Sales exceeded $100 million for the third consecutive quarter, contributing to operating income, net income, and diluted earnings per share all more than double prior year results. Our adjusted operating margin improved 190 bps, while our adjusted EBITDA margin expanded 160 bps."

"Throughout the last year, we deliberately grew inventory levels to ensure product availability during a period of prolonged global supply chain disruption," continued Clark. "As order rates and backlog levels accelerated, LSI was well equipped to support rising demand with additional inventory coupled with US based manufacturing capabilities. Last quarter, we continued to secure new business wins by taking advantage of short-lead time project opportunities. For example, LSI was successful in securing interior lighting for a considerable number of locations for one of the nation's largest warehouse retailers, as an existing supplier could not meet specified delivery requirements. As the existing provider of exterior lighting to this customer, we capitalized on this service gap, while demonstrating the benefit of our fully integrated vertical market solutions. Product availability has been an advantage for LSI during a period of increased market demand and tight construction installation schedules."

"Sales and order activity increased across most of our major vertical markets during the third quarter," continued Clark. "Within the grocery sector, we continued to service the $17 million order for refrigerated display fixtures to one of the nation's largest grocery store chains, shipping to approximately 200 locations. To date, we have already received $12 million in additional orders from the same grocery customer, for shipment scheduled in fiscal 2023. Within the c-store market, customer inquiries for introduction to JSI display products is growing rapidly, with an initial pilot with a large c-store chain planned to commence in the fiscal fourth quarter."

"In the fiscal third quarter, LSI won an important contract in the quick serve restaurant (QSR) market with a large brand focused on the chicken segment," continued Clark. "Under the terms of the contract, LSI will provide exterior drive-thru digital menu board systems and interior digital signage to this customer, who currently operates more than 2,500 restaurants worldwide. In addition, we were recently awarded an extension to our existing large QSR program, expanding the program to provide menu board solutions to the customer's Canadian locations. Revenue from this large existing QSR program is now expected to extend into fiscal 2024."

"Within our Lighting segment, sales increased 25% in the third quarter, representing the fourth consecutive quarter of double-digit growth, when compared to prior year. Sales growth was broad based, with all key vertical markets reporting year-over-year improvement. Our new and feature/function enhanced products, including our own controls platform, are having a significant impact. Customers embrace not only the products designed for specific applications, but also the multiple price point offerings positioned to meet diverse project budget requirements. The Lighting gross margin rate of 29.2% for the third quarter was consistent sequentially with the second quarter, reflecting our ability to effectively align price to input and transit cost inflation.

"Within our Display Solutions segment, sales grew 100% compared to the prior year, including contributions from the JSI acquisition. Inquiry and quote activity is high in each of the three major product categories within this segment, including conventional graphics, digital signage, and display fixtures. Similar to Lighting, we are experiencing growth in our target vertical markets including Grocery and QSR. The Display Solution gross margin rate improved 430 bps, reflecting both the accretion effect of JSI and improvements to core business margins.

"In addition, we announced today that our Board of Directors authorized a $15 million share repurchase program, consistent with our balanced approach toward capital allocation and commitment to shareholder value creation. This authorization reflects our continued confidence in both the underlying strength of our end-markets, together with the significant profitable growth opportunities for LSI moving forward.

"In summary, our business is in a strong position as we look to the fourth quarter and year ahead," stated Clark. "Third quarter order rate was strong, achieving a book-to-bill ratio over 1.0. As a result, our backlog entering the fiscal fourth quarter increased sequentially from the third quarter, while being significantly above prior year levels. Market indicators remain favorable and quote levels remain at a high level. On balance, recent market share gains with new and existing customers, together with effective and consistent operational execution, supported by improved demand fundamentals across our end markets, position us to drive sustained growth for the balance of the year and into fiscal 2023."

CONFERENCE CALL

A conference call will be held today at 11:00 a.m. ET to review the Company's financial results and conduct a question-and-answer session.

A webcast of the conference call and accompanying presentation materials will be available in the Investor Relations section of LSI Industries' website at www.lsicorp.com. Individuals can also participate by teleconference dial-in. To listen to a live broadcast, go to the site at least 15 minutes prior to the scheduled start time in order to register, download and install any necessary audio software.

Details of the conference call are as follows:

Call Dial-In:		1-877-407-4018
Conference ID:		13728792

Call Replay:		1-844-512-2921
Replay Passcode:		13728792

A replay of the conference call will be available between April 28, 2022 and May 12, 2022. To listen to a replay of the teleconference via webcast, please visit the Investor Relations section of LSI's website at www.lsicorp.com.

ABOUT LSI INDUSTRIES

Headquartered in Greater Cincinnati, LSI is a publicly held company with shares listed on the NASDAQ Stock Market under the symbol LYTS. The Company manufactures non-residential lighting and display solutions. Non-residential lighting consists of high-performance, American-made lighting solutions. The Company's strength in outdoor lighting applications creates opportunities to introduce additional solutions to its valued customers. Display solutions consist of graphics solutions, digital signage, and technically advanced food display equipment for strategic vertical markets. LSI's team of internal specialists also provide comprehensive project management services in support of large-scale product rollouts. The Company employs about 1,400 people at 11 manufacturing plants in the U.S. and Canada. Additional information about LSI is available at www.lsicorp.com.

FORWARD-LOOKING STATEMENTS

This press release contains forward-looking statements. Forward-looking statements may be identified by words such as "estimates," "anticipates," "encourage," "projects," "plans," "expects," "can," "intends," "believes," "seeks," "may," "will," "should," or the negative versions of those words and similar expressions and by the context in which they are used. For details on the uncertainties that may cause our actual results to be materially different than those expressed in our forward-looking statements, visit https://investors.lsicorp.com as well as our Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q which contain risk factors.

Financial Highlights

Three Months Ended March 31							Nine Months Ended March 31
Three Months Ended March 31						(Unaudited)	Nine Months Ended March 31
2022		2021		% Change		(In thousands, except per share data)	2022		2021		% Change
$	110,111	$	72,204	53	%	Net sales	$	327,651	$	218,597	50	%

	5,161		2,096	146	%	Operating income as reported		14,027		6,984	101	%

	780		415	88	%	Stock compensation expense		2,466		1,317	87	%
	21		-	NM		Acquisition costs		361		-	NM
	5		-	NM		Severance costs		5		21	-76	%
	-		-	NM		Restructuring costs		-		3	-100	%

$	5,967	$	2,511	138	%	Operating income as adjusted	$	16,859	$	8,325	103	%

$	3,618	$	1,472	146	%	Net income as reported	$	9,856	$	5,670	74	%

$	4,214	$	1,830	130	%	Net income as adjusted	$	11,995	$	6,447	86	%

$	0.13	$	0.05	160	%	Earnings per share (diluted) as reported	$	0.35	$	0.21	67	%

$	0.15	$	0.07	114	%	Earnings per share (diluted) as adjusted	$	0.43	$	0.24	79	%

	(amounts in thousands)
	March 31,		June 30,
	2022		2021
Working capital	$	83,387	$	54,113
Total assets	$	312,555	$	286,821
Long-term debt	$	81,387	$	68,178
Other long-term liabilities	$	13,452	$	16,578
Shareholders' equity	$	142,545	$	131,170

Three Months Ended March 31, 2022 Results

Net sales for the three months ended March 31, 2022 were $110.1 million, up 53% from the three months ended March 31, 2021 reported net sales of $72.2 million. Lighting Segment net sales of $57.1 million increased 25% and Display Solutions Segment net sales of $53.0 million increased 100% from last year's third quarter net sales. Net income for the three months ended March 31, 2022 was $3.6 million, or $0.13 per share, compared to $1.5 million or $0.05 per share for the three months ended March 31, 2021. Earnings per share represents diluted earnings per share.

Nine Months Ended March 31, 2022 Results

Net sales for the nine months ended March 31, 2022 were $327.7 million, up 50% from the nine months ended March 31, 2021 reported net sales of $218.6 million. Lighting Segment net sales of $165.7 million increased 22% and Display Solutions Segment net sales of $162.0 million increased 97% from last year's net sales. Net income for the nine months ended March 31, 2022 was $9.9 million, or $0.35 per share, compared to $5.7 million or $0.21 per share for the nine months ended March 31, 2021. Earnings per share represents diluted earnings per share.

Balance Sheet

The balance sheet at March 31, 2022 included current assets of $158.6 million, current liabilities of $75.2 million and working capital of $83.4 million, which includes cash of $1.2 million. The current ratio was 2.1 to 1. The balance sheet also included shareholders' equity of $142.5 million and long-term debt of $81.4 million. It is the Company's priority to continuously generate sufficient cash flow, coupled with our credit facility, to adequately fund operations.

Cash Dividend Actions

The Board of Directors declared a regular cash dividend of $0.05 per share for the third quarter of fiscal 2022, payable May 17, 2022 to shareholders of record as of the close of business on May 9, 2022. The indicated annual cash dividend rate is $0.20 per share. The Board of Directors has adopted a policy regarding dividends which provides that dividends will be determined by the Board of Directors in its discretion based upon its evaluation of earnings both on a GAAP and non-GAAP basis, cash flow requirements, financial condition, debt levels, stock repurchases, future business developments and opportunities, and other factors deemed relevant by the Board.

Non-GAAP Financial Measures

This press release includes adjustments to GAAP operating income, net income and earnings per share for the three and nine months ended March 31, 2022 and 2021. Operating income, net income and earnings per share, which exclude the impact of stock compensation expense, acquisition costs, severance costs and restructuring costs, are non-GAAP financial measures. We exclude these items because we believe they are not representative of the ongoing results of operations of the business. Also included in this press release are non-GAAP financial measures, including Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA and Adjusted EBITDA), Free Cash Flow and Organic Net Sales. We believe that these are useful as supplemental measures in assessing the operating performance of our business. These measures are used by our management, including our chief operating decision maker, to evaluate business results, and are frequently referenced by those who follow the Company. These non-GAAP measures may be different from non-GAAP measures used by other companies. In addition, the non-GAAP measures are not based on any comprehensive set of accounting rules or principles. Non-GAAP measures have limitations, in that they do not reflect all amounts associated with our results as determined in accordance with U.S. GAAP. Therefore, these measures should be used only to evaluate our results in conjunction with corresponding GAAP measures. Below is a reconciliation of these non-GAAP measures to net income and earnings per share reported for the periods indicated along with the calculation of EBITDA, Adjusted EBITDA, Free Cash Flow and Organic Net Sales.

Three Months Ended									Nine Months Ended
March 31									March 31
2022				2021				(In thousands, except per share data)	2022				2021
		Diluted EPS				Diluted EPS		Reconciliation of net income to adjusted net income			Diluted EPS					Diluted EPS
$	3,618	$	0.13	$	1,472	$	0.05	Net income as reported	$	9,856	$	0.35	$	5,670		$	0.21

	576		0.02		314		0.01	Stock compensation expense		1,850		0.07		1,012			0.04

	16		-		-		-	Acquisition costs		285		0.01		-			-

	4		-		-		-	Severance costs		4		-		17			-

	-		-		-		-	Restructuring costs		-		-		2			-

	-		-		44		-	Tax impact due to the change in the estimated annual tax rate used for GAAP reporting purposes		-		-		(254	)		(0.01	)

$	4,214	$	0.15	$	1,830	$	0.07	Net income adjusted	$	11,995	$	0.43	$	6,447		$	0.24
NOTE: All adjustments are net of tax except for the adjustment of the tax impact from the change in the estimated annual tax rate

Three Months Ended March 31						(Unaudited; In thousands)	Nine Months Ended March 31
Three Months Ended March 31						EBITDA and Adjusted EBITDA	Nine Months Ended March 31
2022		2021		% Change		EBITDA and Adjusted EBITDA	2022		2021		% Change
$	5,161	$	2,096	146	%	Operating Income as reported	$	14,027	$	6,984	101	%

	2,531		1,920			Depreciation and amortization		7,632		5,943
$	7,692	$	4,016	92	%	EBITDA	$	21,659	$	12,927	68	%

	780		415			Stock compensation expense		2,466		1,317
	21		-			Acquisition costs		361		-
	5		-			Severance costs		5		21
	-		-			Restructuring costs		-		3
$	8,498	$	4,431	92	%	Adjusted EBITDA	$	24,491	$	14,268	72	%

Three Months Ended

March 31

(Unaudited; In thousands)

Nine Months Ended

March 31

Free Cash Flow

2022

2021

% Change

2022

2021

% Change

3,875

11,217

-65

Cash flow from operations

(12,668

)

24,634

-151

(531

)

(637

)

Capital expenditures

(1,276

)

(1,517

)

3,344

10,580

-68

Free cash flow

(13,944

)

23,117

-160

Three Months Ended

March 31

(Unaudited; In thousands)

Nine Months Ended

March 31

Reconciliation of net sales to organic net sales

2022

2021

% Change

2022

2021

% Change

57,126

45,740

24.9

Lighting Segment

165,663

136,271

21.6

52,985

26,464

100.2

Display Solutions Segment

161,988

82,326

96.8

110,111

72,204

52.5

Total Net Sales

327,651

218,597

49.9

29,045

JSI

72,952

81,066

72,204

12.3

Total organic net sales

254,699

218,597

16.5

Condensed Consolidated Statement of Operations

Three Months Ended

March 31

Nine Months Ended

March 31

(Unaudited)

2022

2021

(In thousands, except per share data)

2022

2021

110,111

72,204

Net sales

327,651

218,597

83,318

54,112

Cost of products sold

250,900

162,519

Severance costs

Restructuring costs

26,793

18,092

Gross profit

76,751

56,070

21,627

15,996

Selling and administrative costs

62,719

49,070

Severance costs

5,161

2,096

Operating Income

14,027

6,984

(55

)

Other expense (income)

(197

)

524

Interest expense, net

1,287

171

4,692

2,001

Income before taxes

12,707

7,010

1,074

529

Income tax

2,851

1,340

3,618

1,472

Net income

9,856

5,670

Weighted Average Common Shares Outstanding

27,378

26,771

Basic

27,220

26,642

28,083

27,727

Diluted

27,945

27,352

Earnings Per Share

0.13

0.05

Basic

0.36

0.21

0.13

0.05

Diluted

0.35

0.21

Condensed Balance Sheet

	(amounts in thousands)
	March 31,		June 30,
	2022		2021
Current assets	$	158,558	$	125,008
Property, plant and equipment, net		27,982		30,552
Other assets		126,015		131,261
Total assets	$	312,555	$	286,821

Current maturities of long-term debt	$	3,571	$	-
Other current liabilities		71,600		70,895
Long-term debt		81,387		68,178
Other long-term liabilities		13,452		16,578
Shareholders' equity		142,545		131,170
	$	312,555	$	286,821

View source version on businesswire.com: https://www.businesswire.com/news/home/20220428005357/en/

LSI Industries Reports Fiscal Third Quarter 2022 Results