LSI(US:LYTS)2022-08-18 19:47Financial Data and Key Metrics Changes - The company reported record net sales of $127 million for Q4 2022, representing a 31% growth year-over-year and a 16% sequential increase from Q3 [28] - For the full fiscal year, sales increased by 44% to a record $455 million, with adjusted net income improving to $18 million, an 84% increase from the prior year [30][31] - Adjusted EBITDA for Q4 was $10.6 million, a 56% increase year-over-year, with an adjusted EBITDA margin of 8.3% [28][29] Business Line Data and Key Metrics Changes - The Lighting segment saw a 29% year-over-year sales increase in Q4, with a gross margin rate of 31%, up 210 basis points from the previous year [34] - The Display Solutions segment experienced a 35% increase in sales for Q4, driven by strong demand in the grocery and quick-serve restaurant verticals [36] - For the full fiscal year, Display Solutions sales increased by 75%, significantly aided by the JSI acquisition [38] Market Data and Key Metrics Changes - The grocery vertical became the company's number one market for the first time, surpassing convenience stores and refueling stations [15] - The company has shifted its sourcing strategy, reducing overseas material sourcing from 80% to 30%, while increasing domestic sourcing to 70% [18][59] Company Strategy and Development Direction - The company aims to reach $500 million in sales with double-digit EBITDA by 2025, focusing on operational improvements and market-specific strategies [9][17] - The management emphasized the importance of maintaining a robust supply chain and inventory levels to ensure timely product delivery [20][22] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the first quarter of 2023, citing strong order activity and a positive outlook despite broader economic challenges [63][81] - The company is prepared for potential economic downturns but has not yet seen a slowdown in demand or quote activity [63][81] Other Important Information - The company declared a regular cash dividend of $0.05 per share, payable on September 7 for shareholders of record on August 30 [33] - The company has strategically increased inventory levels to mitigate supply chain disruptions, impacting free cash flow in the first half of the year but improving overall profitability [20][32] Q&A Session Summary Question: Is it too aggressive to assume the $500 million revenue target could be hit in fiscal 2023? - Management is optimistic but does not commit to hitting the target in fiscal 2023, citing ongoing environmental challenges [43] Question: Can the adjusted EBITDA margins be expected to remain steady in fiscal 2023? - Management believes they can maintain and enhance operating and EBITDA margins moving forward due to previous initiatives [45] Question: What led to the decision to reduce inventory? - The company is seeing improvements in supply chain reliability, allowing for a reduction in inventory levels while still maintaining a competitive advantage [52][56] Question: How does the company balance inventory levels with potential technology obsolescence? - The company manages inventory based on availability, technology obsolescence, and supply chain reliability, having shifted from offshore to domestic sourcing [58][59] Question: How does the company view the strength of its business amidst economic weakness? - Management acknowledges broader economic challenges but reports strong demand and order activity, indicating resilience in their business model [62][81] Question: What is the outlook for geographic growth, particularly in Mexico? - Mexico has reopened but is still underperforming expectations due to government approvals, while activity in Canada has picked up significantly [91] Question: Are there opportunities for higher-margin add-on sales? - The company is focused on expanding its share of wallet by solving multiple customer problems and is exploring additional verticals for growth [94][96]