LSI(LYTS) - 2023 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements Unaudited statements show significant growth in net sales, net income, and operating cash flow for the quarter Condensed Consolidated Statements of Operations Quarterly net sales grew 19.4% to $127.1 million, driving a 100.6% increase in net income to $6.3 million Consolidated Statements of Operations Highlights (Unaudited) | (In thousands, except per share data) | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Net Sales | $127,069 | $106,397 | | Gross Profit | $34,738 | $24,510 | | Operating Income | $10,021 | $4,444 | | Net Income | $6,262 | $3,133 | | Diluted EPS | $0.22 | $0.11 | Condensed Consolidated Balance Sheets Total assets grew to $319.5 million, supported by increased shareholders' equity from retained earnings Condensed Consolidated Balance Sheet Highlights (Unaudited) | (In thousands) | September 30, 2022 | June 30, 2022 | | :--- | :--- | :--- | | Total Current Assets | $170,407 | $158,917 | | Total Assets | $319,501 | $311,080 | | Total Current Liabilities | $79,935 | $74,618 | | Total Liabilities | $165,772 | $163,311 | | Total Shareholders' Equity | $153,729 | $147,769 | Condensed Consolidated Statements of Cash Flows Net cash from operations improved significantly to $10.6 million from a $7.9 million use in the prior year Consolidated Statements of Cash Flows Highlights (Unaudited) | (In thousands) | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $10,583 | $(7,889) | | Net cash (used in) investing activities | $(434) | $(297) | | Net cash (used in) provided by financing activities | $(3,590) | $8,505 | | Increase in cash and cash equivalents | $6,566 | $288 | Notes to Condensed Consolidated Financial Statements Notes detail key accounting policies, segment operations, debt compliance, and dividend declarations - Revenue is recognized when control transfers to the customer, which is at the time of shipment for most products. For customized products and installation services, revenue is recognized over time using a cost-based input method[31][33][34] - The company operates through two reportable segments: Lighting and Display Solutions. The Lighting segment focuses on non-residential lighting fixtures and controls, while the Display Solutions segment provides visual image and display elements[42][43][44] - As of September 30, 2022, the company had a $75 million secured revolving line of credit and a $25 million term loan, with $18.9 million available for borrowing. The company was in compliance with all loan covenants[61][62] - In November 2022, the Board of Directors declared a quarterly cash dividend of $0.05 per share, indicating an annual rate of $0.20 per share[63] Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management attributes strong sales and income growth to robust demand and effective cost management Summary of Consolidated Results Consolidated net sales rose 19% to $127.1 million, driven by growth in both business segments - Net sales increased by $20.7 million (19%) YoY, driven by growth in both the Lighting (32%) and Display Solutions (8%) segments[81] - Operating income increased by $5.6 million, attributed to higher volume, a better sales mix, pricing actions offsetting inflation, and cost management[82] Non-GAAP Financial Measures Non-GAAP measures show improved Adjusted EBITDA and a reduced Net Debt to Adjusted EBITDA ratio of 1.7x Reconciliation of Operating Income to Adjusted EBITDA | (In thousands) | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Operating Income as reported | $10,021 | $4,444 | | Depreciation and Amortization | $2,421 | $2,563 | | EBITDA | $12,442 | $7,007 | | Adjustments (Stock comp, consulting, severance) | $866 | $556 | | Adjusted EBITDA | $13,308 | $7,563 | Net Debt to Adjusted EBITDA | (In thousands, except ratio) | September 30, 2022 | September 30, 2021 | | :--- | :--- | :--- | | Net Debt | $68,518 | $77,026 | | Adjusted EBITDA - Trailing 12 Months | $40,836 | $30,907 | | Net Debt to Adjusted EBITDA | 1.7 | 2.5 | Results of Operations Both Lighting and Display Solutions segments reported strong sales growth and significant margin expansion - Lighting Segment net sales increased 32% YoY, with gross margin improving to 33.0% from 30.2% due to pricing actions and cost control[91][92] - Display Solutions Segment net sales grew 8% YoY, with gross margin expanding to 20.9% from 16.4% due to pricing and favorable project mix[94][95] - Corporate operating expenses increased by $2.0 million, primarily due to higher performance-based incentive compensation driven by improved business results[99] Liquidity and Capital Resources Liquidity strengthened with increased working capital and a significant positive swing in operating cash flow - Working capital increased to $90.5 million at Sep 30, 2022, from $84.3 million at June 30, 2022[105] - Net inventories increased by $6.1 million to $80.5 million to mitigate supply chain risks and support ongoing programs[107] - The company generated $10.6 million in cash from operations, a $18.5 million positive swing from the prior year, due to improved earnings and working capital management[109] Quantitative and Qualitative Disclosures About Market Risk No material changes in the company's market risk exposure were reported for the period - There have been no material changes in the company's market risk exposure since June 30, 2022[116] Controls and Procedures Management concluded that disclosure controls and procedures were effective with no material changes - The CEO and CFO concluded that as of September 30, 2022, the company's disclosure controls and procedures were effective[118] - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[119] PART II. OTHER INFORMATION Other Information No other information was reported for the period - None[122] Exhibits This section lists all exhibits filed with the Form 10-Q, including certifications and XBRL data - Filed exhibits include the Fiscal Year 2023 Long-Term and Short-Term Incentive Plans, CEO and CFO certifications (Rule 13a-14(a) and Section 1350), and Inline XBRL documents[124] Signatures The report was duly signed by the CEO and CFO on November 4, 2022 - The report was signed on November 4, 2022, by the Principal Executive Officer and Principal Financial Officer[127][128]