Q1 2024 LSI Industries Inc Earnings Call

Greetings and welcome to LSI industries fiscal first quarter 'twenty 'twenty four results conference call. At this time all participants are in a listen only 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 Jim Police Chief Financial Officer. Thank you. Mr. <unk> you may begin.

Good morning, everyone and thank you for joining.

We issued a press release before the market opened this morning detailing our fiscal 'twenty four first quarter results.

In addition to this release, we also posted a conference call presentation in the Investor Relations section of our corporate website.

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 GAAP and non-GAAP results is contained in our press release and 10-Q.

Please note that managements commentary and responses to today's questions on today's conference call May include forward looking statements about our business outlook.

Such statements involve risks and opportunities 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 quarter results.

At the conclusion of these prepared remarks, we will open the line for questions.

With that I'll turn the call over it all aside president and Chief Executive Officer, Kevin Clark.

Thank you Jim.

Good morning to all and thank you for joining us today.

As you have likely noted from our press release, we had solid results from our first quarter fiscal year 2024.

We continue to improve business operations nearly every category.

Commitment of our team and their ability to execute.

It'd be demonstrated each day.

Adjusted net income for the quarter was up 23% adjusted.

Adjusted EBITDA came.

Came in at 12, 2%.

We had an EPS of <unk> 29 cents, which was up four from last year.

And free cash flow was better than $9 million for the quarter, bringing our net debt to $25 million, while sales remained steady.

As you May recall from my last call I spoke about our fast forward plan at LSI.

This plan outlines our business goals and objectives of extending out the fiscal year 'twenty 'twenty eight.

And it is regularly shared with our entire management team and company personnel.

It is also posted on our website under our Investor Relations section.

The plan has some ambitious goals and topline sales margin performance profitability and the markets that we intend to share.

With any goal or acquired skill you plan and practice their craft to advance to the point, where you are proficient in the execution, you're confident in your ability to repeat and control of emotions and activities at advance us towards your goal.

In some cases progress as Swift.

Others, It will require repeated effort and fine tuning in order to advance.

I'm sure that all of you have experienced a journey like this before.

Anyone that has your tried to develop a new skill habit or advanced toward some goal understands its the speed in which you progress can vary and external factors are always in play.

Along those lines.

Wanted to remind everyone that our goal is to be an $800 million company with 12, 5% adjusted EBITDA performance or better in 2028.

The reason I point this out this quarter, we achieved 12, 2% and adjusted EBITDA for the quarter.

This accomplishment helps demonstrate the team at LSI that this level of performance is well within our reach.

And if we continue to focus in practice.

Can sustain that level of performance and.

And reach even further in the future.

Now with that said I want to remind you all that much like our path to 10% EBITDA, there will be ups and downs in our journey to 12, 5% or better.

Some quarters will be better than others, but we will learn from me.

I do not expect that we will regularly perform at this elevated 12 plus percent level, just quite yet but.

But I do know that we can get there.

And I think this quarter shows it.

As I look out short term, we know that Q2, and Q3 are typically seasonally affected and lower utilization puts pressure on our margin.

Last year, we had the best Q2 performance in the company's history.

In fact, it was our single best quarter ever and.

And as I mentioned in the past, we do not expect that every Q2 will be like that.

I expect that we will have some settling in realignment this year.

As I've mentioned over the last four or five quarters, our quote activity remains at very high level, but our quote to conversion time has been extended and it continues to be less predictable than it has in the past.

Permitting issues have stabilized, but theres still unpredictable supply from other trades, particularly electrical switch gear remains unsteady.

And this proposed project time.

Our automotive vertical which interestingly enough is had a very strong demand for the last few years is a bit less predictable right now, which I'm sure. It's connected to the big Three's labor negotiation.

Our grocery segment has a lot of potential and program of interest.

But it's also a bit constrained right now due to a probable merger and divestitures.

Seasonal pause it occurs as the holidays approach.

As I look forward to the next few quarters, we have some challenges, but we also have some exciting and meaningful opportunities in front of us.

We have a number of new product.

New commercial efforts.

A number of focused marketing programs and continued progress in our operational efforts.

Last week, we were awarded the second phase of lighting in our ongoing involvement in the new E V power plant.

Or a manufacturing facility in Kentucky.

This award was even larger than the first award and it goes to underlying customer confidence in our product quality and our ability to deliver.

In addition, we also noted last week, we have been awarded a large 7000 site.

Ear brand refresh program for a major oil retailer.

This is all good news it speaks well for continued opportunities in front of them.

From an operational perspective, just yesterday I was in our new Bangor, Maine facility.

This is a location that will be responsible for the production of our new zero ozone depleting, our 290 refrigerated solution.

I'm happy to say that things are progressing well and as we stand right now we will begin production in this facility and delivery in Q3.

Customer interest in this product is high and our team is excited to have this offering in our full solution.

I also had the chance to visit our Milo mean millwork facility.

We've been putting time injury, forming this factory.

Had the opportunity to see the results of our ongoing changes to our manufacturing process, which helps us to optimize production and reduce waste improve margins, all while adding additional capacity and capability.

Two weeks ago I was in our Burlington North Carolina facility.

This location is responsible for our stock and for Whiting.

Atlas lighting.

We're in the middle of what we call lighting season within this business.

Typically this is the time of year, we see an increase in maintenance and repair of outdoor lighting in preparation for shorter days and longer nights as winter sets in across the U S.

This is an area where atlas tends to shine.

There's a lot of potential opportunity here and are very confident in this team's ability to deliver and I'm looking forward to seeing the results of this coming quarter.

Lastly, I wanted to make note that we have recently completed a number of changes to our print graphics Division Akron, Ohio.

Whereas over the summer, we consolidated print operations into our Houston, Texas plant, which.

Which we expect will yield a number of cost and operational efficiencies along with increased capability.

Our adapt project management group and our digital menu Board program management team remains an accurate.

All in all we expect a strong year in 2024, but we are aware of a number of external factors that could affect timing and progress.

Our automotive vertical our grocery vertical and are working warehousing could all be affected over the next few quarters as mergers labor talks progressed and the holiday seasons at BEC project time.

We do not see any of these disruptions as structural risk and we are confident that any impact would be eliminated the timing though.

Our team is committed and innovative and we expect to continue our journey to $800 million in 2028.

I want to thank you all again for joining into the call and with that I will turn the call back over to Jim <unk> for a deeper look at our financials.

Thank you Jim.

For the quarter LSI generated increased earnings and earnings per share margin rate expansion strong cash flow and working capital efficiency.

And increased gross margin rate contributed significantly to our improved earnings and margin expansion with the rate improving for both the lighting and display solutions segment.

Several factors contributed to the 260 basis point improvement.

By improved program pricing and moderating material input and operating costs.

We exhibited strong commercial operational execution in the quarter <unk>.

Commercially our team continued to work closely with partners and customers to exploit opportunities in key vertical markets.

Operationally, we effectively manage the timing fluctuation of several programs.

Our supply chain capabilities continue to be an effective force for our business.

Strong cash flow of over 9 million served to reduce net debt with 25 million.

Lowered our TTM ratio of adjusted EBITDA to net debt of <unk> five times.

This provides the balance sheet flexibility to support our capital allocation priorities, which include debt reduction.

Inorganic growth initiatives inorganic growth opportunities and return of capital.

No comments on segment performance.

Lighting Q1 sales team strong prior year levels.

Our vertical markets continue to generate favorable activity in.

And reassess our share position growing.

Lighting adjusted gross margin rate increased 110 basis points to 34, 9%.

Pricing project mix favorable material input costs all contributing.

It was a strong quarter for outdoor project activity led by high value area lighting and parking garage applications.

Operating expenses increased somewhat versus prior year, driven by planned investments and commercial growth initiatives.

Q1 project levels for lighting were 4% above prior year, despite fluctuating on a daily and weekly basis.

Oh, two conversion period remains linked to.

Project pricing across most verticals remain stable.

Looking forward, we expect logging activity to remain steady in the near term with Q2 sales at several points above prior year levels.

Moving to display solutions adjusted operating income increased considerably.

Honestly lower sales.

Operating income increased 19% with the gross margin rate, increasing a substantial 360 basis points.

Sales growth was realized across multiple customers and the refueling C store and <unk>.

Sales in grocery slowed in the quarter as the pending merger with the nation's top two.

Grocery chain is causing timing disruptions on certain programs.

The significant improvement in gross margin rate reflects our ongoing focus and effectiveness on program pricing and high value mix.

It was an eventful quarter for new activity highlighted by the program award from one of the nation's largest oil company.

To deliver our brand refresh for 7000 domestic locations covering seven brand banners.

All to be completed in four and a half years.

Challenging task.

Our proven solutions and trusted long term relationship with this customer positioned to LSI as the partner of choice.

We were also awarded programs by several oil companies, where brand conversions in six central American countries and Jamaica.

It's pertinent to note the Archer and forward throw technologies referenced in our press release will be prominently apply in both programs.

An example of innovative solutions for customer problems.

We talk about the Lumpiness and volatility of program activity and the 7005 program is a good example.

This program has been in the gestation period for 14 months begin.

Beginning with our involvement in the concept phase two final award.

While this program is very large the cycle from our initial involvement.

Ward on these custom programs can range from several months well over a year.

We have early concept involvement with many display solution customers and the program proposal activity continues to advance and major vertical including refueling C store grocery and <unk>.

Currently in grocery we have several customers deferring major brand and image expenditures until there is clarity on the pending merger the outcome and potential disposition involving hundreds of stores.

While the broader outlook for our display solutions business is strong the near term will be impacted by grocery industry events.

Entering the second quarter, we will continue to be diligent.

Again, focusing on commercial and operational execution margin management and cash.

I'll now turn the call back to the moderator for the question and answer session.

Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.

Information tone will indicate your line is in the question queue.

But I stopped stool, if you would like to remove your questions from the Q4.

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One moment, please pull for questions.

The first question comes from the line of Adam Spatula with Craig Hallum Capital Group. Please go ahead.

Yeah, Good morning, Jim and Jim Thanks for all the color and for taking the questions.

You know first for me.

You talked about Hum on the refueling opportunity can you just share a little bit more on the cadence of the rollout. There you know is that pretty even or how might that look and then you referenced several new significant programs secured during the quarter. Our many other details to share there based on you know size and market timing et cetera.

Right.

Yeah, Good morning, Aaron and thanks for the call and thanks for the question and thanks for participating in the call.

Yeah, the refueling opportunity I think really goes to underlying something we've been talking about for some time, which is remember we're we're trusted with the branding with the identity of these locations and if we went back just five years ago, we were talking about a seven to 10 year refresh cycle and we have been talking for some time.

About how we're seeing that refresh cycle.

Fresh and were now solidly into the five year trend.

Trending you know kind of three to five and this particular customer 7000 locations.

They just we just completed a refresh program with them not long ago.

Hum.

It helps underline that were right at that five year, Mark where there are you know they look and they say hey, five years is long enough. So we just finished one this one that we are that were just recently awarded is right now scheduled to be four and a half years in length and.

It really be a you know under their direction with us as a partner.

But I think theyre very purposeful about how the timing of it they're going to take the sites that were just completed those sites would be on the tail end of this you know four and a half years and the sites at our four five to five years old it would be the first one stop date, so where we're very happy about that it's a great program. It was a hard fought hard fought.

That hard fought a win and one will pitch right up our alley.

The second project, we mentioned was the <unk>.

<unk> phase of the E V power plant you know Theres a lot going on right now in the automotive industry as you know.

But you know.

We received the order early last week and we're very excited about that it just goes to continue to underline our ability to serve very large projects.

To be local to be domestic here, we're not looking at a foreign tourist supply chain or anything like that.

We're able to be a real partner on these projects accommodate changes it may happen.

Even you know things that may cause the customer to change their entire initial thought.

With our ability to manufacture here domestically, we're able to really react to those type of things I think it just goes to underline that a lot of customers are recognizing that value and we're able to capitalize on them.

Great. Thanks for the color on that and then just second you know the execution on the margins as it has been really impressive you know could you just kind of talk a little bit about some of the initiatives. There you mentioned you know, making the business more flexible based on this kind of demand timing. So any details there and you kind of touched on.

And at the beginning but just you know how might margins kind of progress. This year, just as we're thinking about the kind of FY 'twenty eight goals as well.

Yeah, I mean, I think the thing on margins is it a we've been pretty consistent and underlining that we think we have opportunities to continue to improve margins just incrementally quarter after quarter end.

And we don't see a shortage of runway for us to do that it's really about efficiency and it covers everything.

You know all the way it starts with the initial order process setting customer expectations relative to delivery working closer with the customers.

It goes right into our supply chain and procurement and supply chain management. It follows right through in manufacturing and all the way out the door and you know even the shipping partners. We're choosing so every one of those levers as an opportunity to be polled it's really getting you know getting in a rhythm where we're pulling them all at the right.

<unk> and that our customer are that our suppliers and all our partners that are part of that are executing on their commitments I've talked already about there's still a lot of lumpiness, just kind of globally and domestically and supply chain. There's unevenness, you know where one supplier is.

Rock solid the other ones still has a lot of ups and downs those are what we call what we refer to as kind of unnatural inefficiencies that exist in the supply chain right. Now we are not going to bend over backwards trying to fix those we will let the natural course of things fix themselves, but we will do.

Do things to mitigate that you know buying additional inventory, having multiple suppliers that type of thing.

And that causes extra work and inefficiency. So when those things continue to stabilize and get back to the level that or give it to the level, we want them to be at there'll be even more opportunity for margin improvement. So it's really kind of a you know a mix of a lot of ingredients at Cree.

That margin efficiency, but we're looking to pull all those levers.

Consistently and you know.

Are there headwinds the way, we look at them and we're prepared to.

Fight against those headwinds and when they turn into a tailwind will benefit even more.

Yeah.

Understood. Thanks for taking the questions I'll turn it over.

Thank you next question comes from the line of Amit Dayal with H C. Wainwright. Please go ahead.

Thank you good morning, everyone and thank you for taking my questions.

Jim on the display side, you know revenues were lower year over year, but margins improved quite a bit so going forward you know sort of X grocery is that helping.

<unk> margins are potentially.

Potentially continuing to remain elevated while revenues for the display segment may slow down a little bit.

No I wouldn't characterize it as that I mean, I think that the margin improvement you're seeing is through a management and a team initiatives. We would much rather have you know those are sales that are just kind of deferred right now if you will in grocery.

We would rather have those in there and I think that if we had those in there you would even see.

A greater improvement remember for us probably the thing that causes the most drag as our fixed costs and fixed investments and utilization is key for us. So the more we're able to utilize all of those.

So all of those resources, we have the more efficient we can be so I think what youre seeing there or I know what youre seeing there is really the work of a.

Broad team to make sure we're executing well.

Amit. Thank him go lease here you know it really starts also with our value proposition is shelf.

A key part of our vertical market strategy, obviously and the end of the level of innovation of things. We've done in the last few years and we referenced those things like the already Mount the Archer forward through and so forth.

Value is recognized by our customers.

As part of our pricing program.

And in fact attached recognized it allows US then to get the appropriate price Jim mentioned, we have an effective product cost so all in all positions us well.

For margin generation and.

With the appropriate volume, yes, we feel we can absolutely sustain and grow.

Our margin our margin expansion in our margin development.

Understood.

And just comments around.

The grocery side of things impacted by you know ongoing M&A activity, maybe some seasonality.

Do you anticipate this to continue sort of maybe.

Impacting the performance from that vertical for the next one or two quarters or is that something that is potentially coming to a close sooner than you may be able to.

Zoom, you know sort of the normal.

Activity with those types of customers.

Yeah, I would say that we don't have a crystal ball on this and I don't think there's a playbook you know there really hasn't been kind of a merger of this scale.

In decades, if if if.

Sure.

Were occurred at all are we.

Do have you know the.

Customers that are affected and involved in this are doing their best to communicate timing and what their thoughts are but it's a very dynamic and fluid situation.

<unk> from regulatory approval is to you know final disposal this and changes and all those type of things what I will say that he is unable to be controlled.

Program side of it what they intend to do when all of these hurdles are.

Our accomplished are achieved.

I think he is pretty robust and they know where they're going.

They've talked about different formats and different changes and we're very aware of what those programs are going to look like so I would categorize it just as timing related issues with you know potentially a very big upside here, but trying to guess the timing is just beyond our scope.

We feel like we get good solid credible information and you know they are treating us well in terms of the information they share with us, but I think there's an aspect they don't know either.

And so we're all we're all going through this together.

Okay. Thank you that was helpful and just last one for me any cost increases from the new production facilities coming on and then you mentioned you know the ozone solutions and you lose one solution.

Facility coming online shortly how should we think about and eat it.

Costs et cetera from those types of activities in the future quarters.

Short answer is very minimal impact them from a cost standpoint, and just so I can touch on it a little bit broader this is our our 290 ozone free ozone depleting.

You know negative votes on depleting no ozone depletion a refrigerant. So we're moving from a manmade chemical to our natural gas.

Natural refrigerant and it doesn't have any negative ozone impact no emissions no emissions.

But the what we did with that is we already had a facility that was supporting our primary refrigeration facility, we exited that and moved into the newer facility and because it was kind of a ground up effort for US we were able to re engineer.

Engineer our manufacturing line, we improved we believe we will get a pretty good improvement in terms of efficiency, which will be which will be recognized as margin improvement in that type of thing, but we also got a pretty solid bumping capacity to and that's going to be important, particularly if things.

The way, we we think theyre going to play out we will need that capacity. So short answer to your question is cost impact should be minimal, but some real benefits hidden under here not just in terms of a new category.

Your product for us, but in terms of our ability to manufacture total unit volume and that type of thing and that extends across both our traditional platform and our new our 290 platform.

Understood.

Okay. Thank you so much.

Thank you Nick.

Next question comes from the line of George genetic tests.

Canaccord Genuity. Please go ahead.

Hi.

Thank you for taking my questions.

I'd like to understand a little bit about.

Some of the volatility youre, describing in and end markets I mean, you talked about.

Three and that seems.

Fairly idiosyncratic and related to the mergers there.

Also I think you mentioned auto do you have a pretty diversified business. So could you. Please just sort of describe what you're seeing in broad strokes from the various end markets that you participate in thank you.

Yeah, Good morning, George and thanks for the question I mean listen I think in general I mean, if you look at the performance in the last quarter, you know lighting had a strong quarter and kind of resisted a lot of you know kind of.

Market trends, if you will providing I think that we continue to execute well we've got product line in that and a strategy that is continuing to be rewarded and we don't.

We're able to kind of pivot more quickly in terms of you know.

Uh huh.

Customers that are impacted by some of these macro events and things a little bit.

Easier for us on the display solution side. You know these are typically very project oriented large large projects.

And anything that pause is M for any length of time has a disruption.

Not really about any type of concentration no one customer makes up more than 10% number is actually likely.

Likely far below that it's just that the thing that when one thing pauses and it's a program pause.

It's not a cancellation or anything but it just kicks the things down the road and we've talked a lot about timing you know over the last year, maybe year and a half.

What we initially started talking about with things like permitting and things like that we still see a lot of project timing disruptions because of other trades I've mentioned electrical switch gear for earlier those type of things.

We don't see them as as anything it's going to be disruptive in the long term.

We see them as things that could be disruptive you know in a quarter or in a month or things like that and we're feeling that I think it's a you know what I said.

You know in my comments earlier, I think it's really limited to grocery right now for obvious reasons and extends beyond just the two that are involved.

Involved it extends kind of through the industry to see what do we what do we need to compete against she was going to be our competitor in a certain segment.

Is there an opportunity here to desert competitor need to refresh their brand. So there's a lot of kind of extra thinking if you will going on in that segment automotive is probably pretty easy to understand.

You know I think that even if you're not in even if you're with one of the competitors.

The disruption in terms of supply chain, and just having units available and what the used car market is going to do and how this is gonna be impacted and you know right now there's no tentative agreements across how quickly will production resume how 'bout suppliers in that supply chain there.

Maybe you're affected I think a lot of that is just causing a pause you start to see a couple of these segments being paused and you know they account for 235 whatever percent a topline.

Top line pressures that we have and so I think we're just trying to make everybody aware, we don't see anything that is.

That is a significant threat in terms of overall and long term.

We do see some timing disruptions right now that we're just trying to comment on.

I appreciate the transparency and you had been talking about this for a little while as you referenced in and so to the extent that there are timing issues. Some of them are related to maybe.

Macroeconomic some of them related to M&A some of them are related to permitting.

And supply chain issues and it feels like is it right.

They constitute or theyre in each one of those buckets separately.

Yeah, I mean, I think that it's a you know like I was saying and kind of like a cookie mix right. There's a lot of ingredients that go into it.

Some of them are being impacted right now so that you know the recipe doesn't look quite the same but.

I would also say that are you know not giving any forward looking statements, but I would also say that if you think there is through a little bit there could be a huge opportunity on the backside of this timing disruption.

One that I'll underline you know, we're ready for and we think we can absorb.

And help our.

Customers when they are.

They do get to that point I would also say that you know a majority of our business still remains very stable and you know I mentioned in my comments earlier, the quote activity I mean listen I keep looking you know based on macroeconomic things that just impacts to the economy.

Are you now looking at the Abi and AIA statistics, and all of that we say okay.

Maybe some of this is going to slow down and it is not it.

Just not slowing down that quote activity still remains very high that would be something that we would might consider you know kind of a leading indicator and it's not turning on us.

But what we are seeing is that quote to order conversion time. It just continues to be lumpy and its lumpy on the longer end, but we're also aware that that could change like that.

And we have had some customers inquire and say how quickly you know.

So we're we're ready on both sides is what I would say.

Thanks, and maybe as a final question you guys have done a good.

Admirable job.

Bringing down the debt paying off.

Securities now you're at a very reasonable.

Level of leverage you continue to generate.

Free cash flow, how do you how should we think about.

No the M&A opportunity as you discussed in the past.

The instruments through which you make that happen I mean, if youre seeing any sort of macroeconomic impact I'm sure others are as well and so any broad characterization of what's going on in the M&A market would be appreciated. Thank you.

Yeah, I mean, I'll break that up into two pieces first we're very committed.

To doing something.

Much as we're going to grow organically, which will likely be the larger part of our whole total growth story, we're equally as committed on the M&A side.

And I would sum it up and say.

We're in a really good position I think not just from a debt standpoint, where we are right now in our current leverage.

And our cash flow, but also our partners both financial partners and our broader M&A partners and then lastly, I would say the activity level and the willingness to have conversations that are more grounded and realistic.

Ben have X potentially improve it's not just been a small check in it's been a big check and I will say that I enjoy this environment a much more I think the conversations or more grounded I think you know the companies and the opportunities we've been looking at.

Have been much more of a you know much more well thought out.

And the management teams on the on the other side are much better prepared in the meetings.

And you know.

We're able to construct.

And look at opportunities with a lot more data and a lot more a kind of a.

Forward book than we have in the past so.

You know I would just say, we're very committed to it and we're going to continue to look for that right opportunity and I'll also underlying as we've said before we're very disciplined it's got to work for us and for the other company and as a whole.

And we're excited.

Though I would say that.

Thank you.

Thank you next question comes from the line of Rick Fearon with accretive capital Partners. Please go ahead.

Good morning, Jim and Jim and congratulations on another very solid quarter.

Particularly those program wins.

7000 petroleum units in 1400.

Entry into Central America, Jamaica, really speaks to the durability of <unk> modeling and a lot of the initiatives that you set in place a few years ago, Jim So.

Great to see tangible results.

I have to believe that that new business.

Should help smooth some of the cycles that you've talked about today.

You know the same way you know having multiple industry verticals, probably does but.

Anyhow.

Kind of given a lot of good color on that thanks, and I just my main question revolves around the M&A.

And while the new product development is really impressive and impactful.

I have to believe that the levered balance sheet, it's really opened up some exciting opportunities for acquisitions in depth.

This is where you have a unique skill set.

Crude yourself are capable of assimilating.

Another business with J S. I really successful so it sounds like the M&A funnel now is is open and you're reviewing.

Some interesting things and just wondered if there's any personnel adjustments or engagements with investment bankers or anything of the sort that you think you could use for that you may be considering at this point or do you feel like you're in a good spot in terms of Youre reviewing process.

Well, Rick good morning, and thank you for the question listen Here's what I would say is our ears are always open theres plenty of partnership opportunities out there and we're always listening.

To the folks that we work with today and you know and others are you know from a banking standpoint and that type of thing I think the current environment.

None of us have really had to face these kind of headwinds in decades. So you know the financial partners that are aware of you know that can react to the current environment and have perspective on what the future looks like in the past are our most valuable partners.

In terms of personnel in the company, we have been training for this since day. One you know everybody. That's here are truly hands on people there are no.

There's kind of no ivory tower positions here everybody.

Has the skill set and they can be called.

To action at any time, and they're not only are they available and capable they're willing and we I think we've got a diverse group of people here that would really help with any type of integration and value extraction, and you know our ability to kind of get feet on the ground and you know and immediately start working on the value we see in any type of M&A.

Work.

And then lastly.

All of this backwards.

As he just mentioned with George's comment or question the environment, just feels Richard to US right now I like the the folks that are able to talk about how they've grown but how they see their future and how we could work together and it's not just you know here you go add on to this it's here you go in here.

How I think we can accelerate each other's business and I really value that are in the folks that we are.

We meet with and then lastly, I would say and I think you're aware of it and everyone on the call. This vertical strategy allows us to really kind of cast a wide net relative to the things. We're looking at it's focused don't get me wrong. It's focused in it it's got you now.

A good point to it.

But it's not so narrow that.

Where we're just looking at a lighting company or were you just looking at a.

Our display solution company, I mean, I think that.

J S. I. It was a great example, where it got some folks that they didn't see the you know they didn't see it immediately but I think they.

They see it now and and we've had a number of conversations like that also so I'm excited you know it never moves as quickly as you wanted to and you know and it has to be right for us and right for the other company and we need that value out of it.

It could be next quarter or it could be next year.

Thanks for the additional color, Jim and Doug regarding that the GSI and the great fit that's kind of evolved there you see.

Our 290 capabilities that the company has.

Helping to open up some new doors, especially as you look to penetrate the C store vertical with with those displaced.

Yeah.

Yeah, absolutely you know the inquiry rate on yard to 90 is very high it is.

Got it there's a lot of complexity behind it aside from you know the product itself and the benefits you know there's field service capabilities and you know enough enough of the HVAC industry being trained with <unk>.

Natural gas is and things like that so there is a great excitement.

But there are also challenges I'd put it.

This is not a great analogy, but it's one I think.

People can understand its just like electric cars right.

Maybe some people feel the underlying.

Proposal is solid but the infrastructure is not there you know all the charging stations all the things you need to really make it take off including the generation of just power, but same thing in the yard to 90, I think the value proposition is well understood our ability to manufacture it and everything but there are other components that need to make sure.

We're keeping pace with it or that is keeping pace with our ability to deliver and all of those are always part of the conversation so I.

I would say the interest is very high.

And we expect that this is a product that will have legs for many years to come.

That's exciting.

Yes.

Slash question revolves the.

Sort of evolves.

Grocery vertical that you spent a lot of time talking about today.

You made mention of this but.

It just seems that the massive merger here that's been.

Disruptive at the moment has the potential to creating some some massive refresh programs and yeah I guess.

Do you think that's a fair way of thinking about the possible outcome of this of this grocery merger.

Yeah, I do I do I mean, Oh wholeheartedly I do I mean, you got to think that we look at you know kind of three pieces. If you were to <unk>.

It down one.

It's clear that there is going to be a disposition of somewhere between four and 600 locations that are no longer going to be part of those primary banners. So those four to 600 locations unquestionably will need.

Brand image refresh that at that goes without saying.

Then you know the merger itself.

You know we don't have all the details on this but that will create.

You know that's going to create intermediate opportunity just for the work that has been sidelined for a while right now I mean, you can imagine you don't want to do a lot of capital spending and be moving things around and I think they're you know they're doing a very good job of keeping their business going and serving their customers and stuff, but he's longer program.

<unk> without knowing what the final result is kind of look like I don't think people are rushing.

Do you know a lot of work in that arena. So the way we look at it as a court could literally come out of the barrel you know on the back side of this thing and we'll be ready.

To support them in whatever direction. They want they decided to go in and we do look at it and say there could be a very sizeable upside on the back end of this.

Not just doing like from source of business not just normal course of business stuff heat either but.

It just.

To fit in with whatever this new look is going to be or whatever it is.

New brand or image is gonna be.

Well it does sound very predictable and very tangible so yeah, that's that's pretty exciting to think about.

The quote activity remains high and <unk>.

Apart from this delay it sounds like things continue to move in the right direction. Just wanted to thank you and Jim and your team for the hard work.

Yeah. Thank you yeah. It is a whole team here I try to make sure we always comment on it but there's you know six to 800 people here, who make it all happen every day and they're just as excited about what the future holds as we are so.

Thanks again.

Thank you.

There are no further questions at this time I would now like to turn the floor over to Jim Clark for closing comments.

I think we had a pretty complete conversation here I think that are you know between our results here in Q1, which we felt were very strong.

And you know the conversation that we had in the questions that we had about future outlook kind of encapsulate everything.

We're seeing it we we you know we're on a path to our 2028 goal I was very excited that we were able to get EBITDA results up above 12%. It goes to demonstrate and show to our team that this is well within our reach as I mentioned, you know I don't expect it to stay at that elevated level.

But just being able to reach near that Bell shows that we have that we have the capability of doing that.

Things that we have some really good forward looking opportunities and you know, although you know the timing maybe a little disrupted we are really confident that it's going to serve us well.

7000 location site, we talked about you know what.

It will be a four to four and a half year project really goes to underline you know things that we've talked about over the last year to two years about how there was a compression in the whole up updating upgrading of image and brand across so much of our customer base.

So a pretty exciting quarter, we're looking forward to the next quarter and we're looking forward to it.

Good year in 2024, and I appreciate everyone's interest and with that we'll say a good day.

Thank you. This concludes today's teleconference. You may disconnect. Your lines at this time. Thank you for your parts.

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