Q1 2025 LSI Industries Inc Earnings Call
Good day and welcome to the LSI Industries fiscal first quarter 2025 results conference call. Today all participants will be in a listen-only mode. Should you need assistance during today's call please signal for a conference specialist by pressing the star key followed by zero.
Speaker Change: I would now like to turn the conference over to Mr. Jim Galeese, CFO. Please go ahead, sir.
Jim Galeese: Welcome everyone and thank you for joining today's call. We issued a press release before the market opened this morning detailing our fiscal 25 first quarter results.
Speaker Change: In addition to this release, we also posted a conference call presentation in the Investor Relations section of our corporate website.
Speaker Change: Information contained in this presentation will be referenced throughout today's conference call. Included are certain non-GAP measures for improved transparency of our operating results.
Speaker Change: A complete reconciliation of GAAP and non-GAAP results is contained in our press release and 10-Q.
Speaker Change: Please note that management's commentary and responses to questions on today's conference call may include forward-looking statements about our business outlook.
Speaker Change: 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, for more details.
Speaker Change: 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 to LSI President and Chief Executive Officer Jim Clark.
Jim Clark: Thank you, Jim, and good morning, all. Thank you for joining us this morning. Today, we'll be discussing our first quarter 2025 earning results.
Jim Clark: As you have likely noted from our earnings release, sales are up 12% year-over-year thanks to very robust project activity in our refueling C-Store space.
Jim Clark: increased activity in our grocery market in our display solutions segment, along with strong sales from EMI, which we acquired back in April of 2024.
Jim Clark: EBITDA for the quarter was in excess of $13 million, with recash flow over $11 million. Net debt is under one times at $0.8. Jim Galeese will give more specifics in a few minutes.
Speaker Change: We continue to have a very strong project and quote activity level across all vertical segments.
Speaker Change: but order timing remains a bit choppy as large project activity continues to push from a timing perspective and Grocery remains mired in court hearings, which we expect will resolve by the end of this calendar year
Speaker Change: Our thesis around vertical market orientation remains very attractive to us and the durability of our model continues to gain strength as we work to offer more and more goods and services to the markets and customers we focus on.
Speaker Change: Within our display solution segment, we continue to execute on an elevated backlog and project activity in the refueling C-source phase from awards we achieved in fiscal 2024.
Speaker Change: We anticipate that that project activity will remain elevated through 2025, but thanks to investments made in prior years, we have the capacity to handle our current demand and more.
Speaker Change: Although our grocery segment continues to remain under a partial cloud of uncertainty, there has been a marked increase in activity with order rates up over 90% year-over-year and remaining strong early into the second quarter.
Speaker Change: You may have noticed in our press release I commented that our book to bill ratio is 1.3 times in the first quarter based on the success and demand of our R290 cases along with significantly increased activity in our non-refrigerated display cases.
Speaker Change: We're excited about this building activity level in grocery, and I expect the momentum will continue to build as the fiscal year progresses.
Speaker Change: Activity at EMI, which we acquired back in April, reached record performance levels in its first quarter as part of LSI.
Speaker Change: We've been working closely with the entire team at EMI to create and leverage opportunities spanning from commercial to operational, procurement to manufacturing, and we anticipate that we'll have a couple of years' worth of synergies to harvest and grow.
Speaker Change: The team at EMI has been outstanding to work with. They've been thoughtful, engaged, energetic, and the integration is going exceedingly well.
Speaker Change: On our lighting segment, lighting activity in large projects has experienced some headwinds over the last few months, mostly in regards to timing.
Speaker Change: We have not lost any of the large projects that we have been working on to the best of my knowledge, but things have remained cloudy and protracted from a timing perspective.
Speaker Change: There's not one common theme to these timing delays, but it does underline the project timing volatility we've been commenting on over the last few quarters.
Speaker Change: Staying within lighting, I'm happy to say that we recently released our next generation of our outdoor lighting product called Velocity.
Speaker Change: Velocity offers a unique approach to outdoor lighting, from its performance to aesthetics to its modular construction and build options.
Speaker Change: This is a significant investment for LSI, and Velocity builds on our very popular Murata series of outdoor products.
Speaker Change: LSI has always had a very robust indoor product lighting portfolio, but the strength of our brand has always been associated with outdoor lighting, and Velocity should pay dividends for years to come.
Speaker Change: Last month, in early October, LSI, along with JSI and EMI, attended NAX, the National Association of Convenience Stores, and PEI, the Petroleum Equipment Institute show.
Speaker Change: LSI had a record turnout at our event that we hosted through the week and the customer engagement was the strongest I can remember.
Speaker Change: The combination of LSI, JSI, and EMI created connections that span from entirely new customers to existing customers working in different departments across a wide customer base.
Speaker Change: We're encouraged by the engagement levels and we look forward to leveraging the contacts we made at this event.
Speaker Change: We accomplished a lot through this quarter. We continue to build a stronger, more capable business with a durable platform equipped to deliver profitable growth consistent with our growth objectives outlined in our Fast-Forward Plan.
Speaker Change: We are using experiences of our management team to effectively integrate EMI and optimize other parts of our operations.
Speaker Change: We believe that we have significant growth opportunities in front of us and we remain committed to growing our business while balancing the needs of our customers, shareholders, and employees alike.
Speaker Change: With that, I'll turn the call over to Jim Galeese for a closer look at our financials.
Jim. Thank you, Jim.
Jim Galeese: Q1 was a solid start to the 2025 fiscal year, with sales of $138 million, adjusted EVA to over $13 million, strong cash flow, an increased order rate, and EMI integration progressing at an accelerated pace.
Jim Galeese: Sales increased 12% in Q1, including the first full quarter of EMI performance.
Jim Galeese: Comparable sales, which exclude EMI, reflect continued growth in multiple verticals, including refueling C-store, QSR, and parking.
Speaker Change: offset by ongoing soft sales in the grocery vertical and less large project activity in lighting.
Speaker Change: Total first quarter comparable orders increased 6% over prior year, led by the grocery vertical, where orders rebounded in a strong way.
Speaker Change: Our total comparable backlog exiting Q1 increased over 10% compared to the prior year period.
Speaker Change: A higher earnings conversion to cash generated strong cash flow of $11 million in the quarter. Our balance sheet remains healthy as the high level of cash flow reduced net debt to $42 million, a TTM leverage ratio of 0.8 times.
Speaker Change: Adjusted net income of $8 million resulted in adjusted earnings per share of $0.26 for the quarter.
Speaker Change: Please note that at the beginning of the fiscal 25 first quarter, we are including amortization expense related to the acquired intangible assets as an add-back to our non-GAAP reconciliation.
Speaker Change: With our increased level of acquisition activity in recent years and inorganic growth being integral part of our strategic growth plan, this change will provide increased transparency to our core operating performance.
Speaker Change: Next, a few comments on each of our two reportable segments.
Speaker Change: It was a very active quarter for display solutions, as total sales increased 43%, including the first full quarter VMI.
Speaker Change: Comparable sales for Q1 increased 17% sequentially from the June ending quarter while finishing several points below prior year.
Speaker Change: The refueling C-Store vertical had a robust quarter, with comparable sales increasing 16 percent, demonstrating the high level of new store and store renovation market activity combined with LSI's recent large program wins.
Speaker Change: EMI contributed additional sales, increasing the overall growth rate for this vertical.
Speaker Change: We're encouraged by the resumption of order activity in the grocery vertical. We previously commented on our ongoing engagement with grocery customers on planned programs and program release activity is finally beginning to occur.
Speaker Change: Order activity was broad-based from both a customer and product perspective.
Speaker Change: New DOE refrigerant standards are effective January 1, 2025, and grocery companies are beginning the transition to the environmentally friendly R290 refrigerant.
Speaker Change: We exit Q1 with a significantly increased backlog in grocery and expect favorable order levels to continue. We're currently ramping up production capabilities at both our refrigeration and millwork display facilities to support anticipated demand.
Speaker Change: QSR sales also increased substantially in Q1, led by incremental impact of EMI. Project code activity is steady, and the backlog in QSR also increased.
Speaker Change: Operating margin for display solutions was 10.1%, reflecting the mix of market, vertical, and product sales, as well as the addition of EMI.
Speaker Change: In summary, for display solutions, comparable orders increased 22% in Q1 versus last year, exiting Q1 with a measurably increased backlog.
Speaker Change: We expect double-digit organic sales growth in Q2 versus the prior year. Operating margins will improve with the expected increase in volume and more favorable mix.
Speaker Change: For lighting, we're seeing market performance fluctuate across verticals and project size.
Speaker Change: Q1 sales increased double digits in refueling C-Store and parking applications also increased. This was offset by fewer large projects, specifically in the warehouse and automotive verticals.
Speaker Change: The number of large projects termed hold for release by contractors has increased over the last quarter. This is known committed business but part of the lengthen quote to order conversion process.
Speaker Change: Smaller project activity remains very healthy, and overall quote levels remain at a consistent rate. Looking forward, we expect large project activity releases to begin in Q2, improving the sales outlook for the second half of fiscal 25.
Speaker Change: Operating margin was 10.1% in Q1, with selling prices and material input costs remaining stable, supporting margin development as sales volume improves.
Speaker Change: For both segments, one of our capital allocation priorities is continued investment in commercial growth initiatives.
Speaker Change: both capital for new products as well as working with our channel partners and customers on accelerating the adoption rate of new products and expanding and realizing our substantial cross-selling opportunities.
Speaker Change: I'll now turn the call back to the moderator for the question and answer session.
Speaker Change: Thank you. We will now begin the question and answer session.
Speaker Change: As a reminder, to ask a question, you may press star, then 1 on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw it, please press star, then 2.
Speaker Change: At this time, we will pause momentarily to assemble our roster.
Speaker Change: And today's first question comes from Aaron Spychala with Craig Hellam. Please proceed.
Aaron Spychala: Yeah, good morning, Jim and Jim. Thanks for taking the questions. You know, maybe first on CSTOR, you know, obviously commentary on the strong backlog there. Can you just give an update on where you're at with the rollouts of a couple of those larger programs?
Aaron Spychala: How does that pipeline look overall given industry dynamics like the move to fresh food and some of the M&A that we've been seeing there?
Speaker Change: Yeah, well, good morning, Aaron, and thanks for being on the call. Yeah, CSTOR, I think that we've talked about it the last two quarters. The order volume that we got in 2024 is going to carry us out.
Speaker Change: you know even back then is 12 to 18 months and we've
Speaker Change: added a number of projects on top of that. So, I mean, the simplest terms, the backlog we have is going to carry us through 2025, fiscal 2025.
Speaker Change: And as I mentioned in my comments just a few minutes ago, thanks to some planning we did over the last two prior years, we have the capacity to handle more, but we have a pretty full slate for 12 to 18 months at this point.
[inaudible]
Speaker Change: Alright, understood. Can you just give us an update on some of the pilots that you've had refrigerated in CSTORS and some of the other broader pilots in QSR? An update there on how those have been going and if you're seeing or expect any of those to turn into larger projects moving forward?
Speaker Change: Yeah, so you know as you've probably seen and I think you just mentioned there's a lot of activity in the CSTOR space
Speaker Change: and there's a lot of pent-up demand in the grocery space.
Speaker Change: I think that, you know, with the administrative change, the administration changing and the...
in Washington, you know, on a go-forward basis.
We're hopeful that...
Speaker Change: The headwinds that we've had with grocery will resolve itself here by the end of the year.
But in terms of pilots, our big pilot programs
Speaker Change: have been in place now for better than six months. They're all based around.
Speaker Change: the transition from our 448 and 449 solution over to our R290.
environmentally friendly refrigerated solution.
Speaker Change: and everything on those testing and on those projects has gone stellar. We're into a normal, what I call a normalized...
kind of distribution curve now using R290.
and 448, we will abandon the use of the hydrocarbon
Speaker Change: refrigerants here at the end of December and we'll be going on a go-forward basis with R-290, you know, starting January 1st on a go-forward basis. But the feedback we've received, the manufacturing process, our workforce,
Speaker Change: Our availability in terms of components and parts, our testing have all gone very well, and we're very excited about, you know, being able to offer this product and having a very competitive position.
Speaker Change: to compete against traditional refrigerants, some of the central rack stuff. We feel very strong about our opportunities going into calendar year 25.
Speaker Change: Aaron, Jim G. here. Just to add to what Jim said, you know, we are now in multiple different C-Store chains, you know, with our refrigerated and non-refrigerated displays.
Speaker Change: Customer acceptance of that has gone very well. They're very pleased with the sell-through that that's generating. And we're very optimistic about the continued growth and penetration in the C-store chains utilizing mobile display units.
Speaker Change: Great, thanks for the color there. And then just maybe last for me, you know on EMI, strong performance, good start there. Can you just kind of give some maybe early examples of some of the commercial synergies and just how you're thinking about those and then also cost synergies with some of the margin expansion targets you've laid out there?
Speaker Change: Well, we've always been excited about, you know, our thesis is really about that kind of multiple arrows, one target, you know, being centered around vertical markets and being able to solve a lot of the customer's problems with kind of one belly button to push on.
Speaker Change: And, you know, I will say that we walked into JSI very excited about that and, you know, we were able to aggregate together our dimensional signage in grocery, our lighting in grocery, and then our refrigerated, you know, and non-refrigerated products in grocery.
Speaker Change: We learned a lot through the acquisition and the integration of JSI and I think going into EMI we were much earlier, you know, much more directful in terms of the type of relationships and the way we wanted the introductions to happen.
Speaker Change: And I will give EMI credit, their relationships with the customer were probably at a little bit of a higher strategic level and that, from a commercial standpoint, it couldn't have gone better.
These things take
Speaker Change: you know, 12 to 18 months to kind of develop, digest, and execute. It doesn't mean that we won't pick up...
Speaker Change: you know, a dozen locations here or two dozen there or anything like that. But to get into the very large project business
Speaker Change: I do want to just say everybody should have some patience, it will take some time.
Speaker Change: And we saw that play out with JSI, you know, it took...
Speaker Change: probably closer to two years for us to really get traction.
where the customers understood.
Speaker Change: Our relationship and the compatibility and the ability to kind of come out of the factory, you know, with, with signage already pre installed with, you know, with lighting products that are associated with that to get the uniformity we talked about in terms of the look and feel of the project.
Speaker Change: of the products that are in there. So I'm very encouraged commercially on the introductions.
I mentioned in my call, NAAQS.
I will tell you that
We had all the brands in there, EMI, JSI, LSI.
Speaker Change: And we had all of our customers coming, but it was almost like a family reunion a little bit where we had a customer coming from a particular company, and then their co-
Speaker Change: co-workers coming and meeting across the, you know, the trade show booth, so to speak.
It was really pretty exciting to see.
Speaker Change: and lay that groundwork about that we're one company, you're buying from one source, the senior management teams here, the divisional people are here, you have access, so it was very exciting. On the operational side,
You know
Speaker Change: EMI is a very well-run company. We're very proud and happy to have, you know, the management team stayed there. Allen and Dave Mueller, Allen Harville and Dave Mueller are staying with the company. They've run the company very well.
Speaker Change: But as a larger company, you know, and particularly one that's brought in all this operational discipline, we're able to share a lot of those learnings and a lot of those activities and a lot of those programs with them.
and the receptivity on EMI side has been outstanding.
Speaker Change: I was down in the factory two weeks ago, I had an opportunity to walk the floor and talk to a lot of people on the floor, and I will tell you consistently...
The one comment was, the first comment was...
Speaker Change: Wow, your guys coming from JSI are really good guys. We really like them. They didn't come in here and start, you know, barking out orders or anything. They came in here. They're a good partnership.
Speaker Change: And then the second comment was universally really excited about, you know, the continuing improvements we can make. And I will tell you that, you know, some of the improvements we've made already just in terms of layout and in.
Speaker Change: product flow and material on the floor and in small things like that have already yielded improvements.
Speaker Change: and the bigger things, the procurement, the kind of consolidated purchasing, those type of things. Those will continue to go.
Speaker Change: Like I said in my comments, I think we have, you know, years of synergy here that we're going to be able to harvest and we'll harvest it at the right pace so that we don't exhaust anybody or create friction, but we're really excited about it and they've done an outstanding job. Very proud of the whole team there.
Speaker Change: That's good to hear. Great color. Thank you both. I'll turn it over.
Speaker Change: And our next question comes from George Gianarchus with Canaccord. Please proceed.
George Gianarchus: Good morning, guys, and thank you so much for taking my questions.
Speaker Change: I'm just curious as to, you mentioned that there are fluctuating demand levels within some of your vertical markets. You did.
Speaker Change: provided some detail around that, but is there, to the extent you can tell, a common thread?
Speaker Change: between the markets that have strength and those that don't? Is it just maybe size-related? Can you kind of unpack a little bit what particular verticals are showing varying trends? Thank you.
Yeah, George, thanks for attending. Thanks for the question.
Speaker Change: I mean, you know, there's always fluctuations that we see within all these verticals.
Speaker Change: I would say if I was going to call any out, and I did make a comment, you know, earlier I was saying that there doesn't seem to be any kind of common thread between, you know, these projects, although I will say from a project standpoint, our larger projects seem to be moving at a slower pace.
Speaker Change: regardless of vertical market or you know one-off kind of large project activity, they just seem to be more choppy than I've ever seen you know or I've seen in the last 10 years certainly.
Speaker Change: Specific to verticals, there are a couple that are definitely feeling, you know, I think have a little bit more headwind. Warehousing is definitely down.
Speaker Change: You know, there's some other markets that have picked up. QSR is up. CSTOR is up spectacularly. I mean, you know, I couldn't overstate.
Speaker Change: the activity in C-Store. Grocery is recovering nicely. You saw the numbers here in this quarter. Early indicators coming into the second quarter say it will continue to do very well.
Speaker Change: automotive is flat maybe slightly downish and you know automotive I think I've talked about it since the pandemic automotive has resisted every
Speaker Change: absolutely 180 degrees out to the story that was written. It's been very strong but it is it is a little flat right now over the last two quarters we've seen that.
Speaker Change: No other market, no other vertical market stands out to me. I'd say that the majority of the impact in lighting are the large projects.
You know, we had some really large projects.
consistently last year, and those just seem to be
Speaker Change: None of them. I don't feel like we've lost any of them, but they've consistently been pushing out pushing out
Speaker Change: Quote activity has still remained at that very elevated level. It hasn't dropped at all It's not it hasn't grown right now, but it hasn't dropped and it's a very elevated level
Requoting has slowed down a little bit.
Speaker Change: We re-quote, you know, our quotes have an expiration to them. And that has been pretty steady. It hasn't, that activity, that re-quote activity, hasn't come back a lot, and that's usually an indicator to us that the commitment's there, the timing's not right.
Speaker Change: And so I would just say most of the headwinds we had in lighting have been large project activity, or small project, and our multi-site project activities remain pretty steady, but large project has been off.
Speaker Change: Thank you for that. And as a follow-up, you know, obviously, inorganic growth is...
Speaker Change: A big part of your strategy, you define net leverage as of the first fiscal quarter at less than one turn.
Speaker Change: To what extent does a certain amount of time need to pass for you to consider additional bolt-on acquisitions, or should we just assume that given that EMI appears to have gone well that you'll consider those in the near term? Thank you.
Speaker Change: Yeah, I you know, I'm actually glad you brought up the question. I think that we've touched on it in the past You know, we want to be you know very fiscally responsible and we also want to look at our resources within the company our ability to To integrate our ability to make sure that we have a plan and we're executing against it
certainly with a project like EMI, it...
Speaker Change: It shortens that window that we would normally kind of look at. They're very receptive to the changes. We have a lot of opportunity. We have our time horizon that gives us.
Speaker Change: So, you know, the best thing I could say is, is that we were consistently looking. We have a funnel of opportunities. We've been working.
Speaker Change: I don't see anything that would stop us from moving forward if the right opportunity came in front of us, if we could execute at it, with the same type of...
Speaker Change: strategies that we had with JSI and EMI, I would say that, you know, it's very likely we're doing something in, you know, calendar year 25.
Thank you.
Speaker Change: The next question comes from Amit Dayal with H.C. Wainwright. Please proceed.
Thank you. Good morning, everyone.
Speaker Change: Nice to see the execution continue to come through despite some challenges in some of the end markets, Jim. On the gross margins this quarter it seemed it was a little bit lower than you know the prior quarter. Any particular reason for that or is it just the product mix that you saw this quarter?
Speaker Change: Yeah, so I mean, I think we've talked about this before, you know, when you look at the two segments, the gross margin performance lighting versus display solutions are significantly different.
Speaker Change: But when you look at, you know, operating side, when you look down in the EBITDA, you know, they kind of balance out, right? And a lot of that is because of...
Speaker Change: Our channel in lighting versus our channel in display solutions, where we're direct in display solutions, where we have some direct in partnerships in lighting, the models are just different.
Speaker Change: Also in display solutions you saw the recovery occur in our grocery side
Speaker Change: It was, a good piece of it was refrigeration, but an equal piece was non-refrigerated, and the margins are generally lower in that non-refrigerated millwork type display side.
Speaker Change: Also, I would say that we took corrective actions last year when things began to slow down in grocery.
Speaker Change: As quickly as they slowed down, you can see from the numbers, they picked up almost equally in Q1, 90% improvement. We had to ramp back up and there were costs associated with that and there's inefficiencies associated with that.
So, I think that that...
Speaker Change: I think it's important to realize that the two segments have...
Speaker Change: very different margin profiles on gross margin, but when you look down at the bottom line
Speaker Change: They all come together, so I would encourage you to make sure you're looking at the two components.
Speaker Change: And then in terms of any of the weakness in gross margin, I think it's temporary as we work through that ramp up and as we get a better balance between refrigerated, non-refrigerated, and some of our dimensional.
graphic sales, so.
Speaker Change: You know, given the ramp up we had to do, I'm pretty happy with it.
Speaker Change: Thank you for that comment. You commented earlier that you're expecting WGE growth year-over-year for 2Q fiscal. With EMI now...
Speaker Change: going sort of, you know, full-fledged. Should we expect sort of that type of performance or year-over-year improvement compared to last year's quarters through this fiscal year?
Speaker Change: All right, well, I'm going to have to hit the rewind button because I don't remember saying double-digit growth. I want double-digit growth. For display. Oh, for display. Yes. Yeah. Yeah, I mean, I think that, you know, if you, I mean, you have to add in there's a recovery going on. We feel, you know, certainly based on Q1,
Speaker Change: and the early indicators in Q2, we feel like grocery, just as we've discussed for, you know, the better part of a year, there was going to be a tipping point at some point where they, you know, our grocery market in general was going to have to start to reinvest and not be able to stay on the sidelines.
Speaker Change: We've also commented that we fully believe that there wasn't going to be any decisions prior to the election.
Speaker Change: And I think given the incoming administration, it probably favors that that project moves forward or at least the obstacle, the mountain, isn't as big as it was maybe a week ago.
Speaker Change: But with all of that said, we're starting to see that cork come out of the barrel with just maintenance and required investments.
Speaker Change: and strategic execution by a broad base of our customers in that display solution side. So we do think that coupled with EMI, we are going to have that kind of growth in display solution.
Speaker Change: And, you know, I never like to give too much guidance or forecasting looking out, but we feel pretty strong about, you know, almost...
Speaker Change: We would rather always over-deliver and under-commit than do the other way around. There's a lot of variables, there's a lot of things that could happen, but we feel pretty strongly about what's going on in display solutions.
Speaker Change: Yeah, makes sense. Thank you for that, Gene. Just last one from me, you know, for this new refrigerant product...
Speaker Change: I'm wondering if there are other markets you could potentially enter outside of the core grocery segment you are targeting initially for this?
Speaker Change: So there absolutely is, you know, and remember part of our thesis is that these displays become a grab-and-grow center.
Speaker Change: for the convenience store market, which continues to expand the goods and services they're offering.
Speaker Change: in their engagement with their customer. And we've already had a number of customers.
Speaker Change: that have, you know, that we're in pilots with or that have just...
Speaker Change: assumed regular purchase rhythm with putting these refrigerated R290 displays in their facilities.
Speaker Change: We think that there is a long-term opportunity there that could match and be on par with grocery. It's just what the speed of that looks like, because this is kind of a transformational change for them and something that they're adding.
Speaker Change: I will say that, you know, coming off of NAAQS, it was a common and consistent topic of discussion.
Speaker Change: And, you know, I don't want to get too far ahead of myself.
Speaker Change: But we're taking the technology that we have right now, particularly combining it with what EMI has done, and I brought this up when we...
when we acquired EMI.
Remember our specialty is open door. I mean open
Speaker Change: Open Air, Open Case Refrigeration, EMI does a lot of closed door refrigeration. I will give you some insight.
Speaker Change: JSI will be the center of excellence for refrigeration in terms of the technology, the design, and all of that.
Speaker Change: EMI will continue to be the center of excellence in the construction of the, you know, displays of the cases.
Speaker Change: Our ability to manufacture and customize these cases, now with both open and closed door cases, is something that will evolve over the next couple of years, and we will definitely leverage it.
Speaker Change: Got it. Thank you for all that, Colerje. I'll get back in queue.
Speaker Change: The next question is from Rick Fearon with Accretive Capital Partners. Please proceed.
Rick Fearon: Good morning, Jim and Jim, and congrats on another solid quarter. So the 90% increase in order rates on the grocery side sounds incredibly promising, and you mentioned
Speaker Change: the stronger margins from refrigerated displays. Just wondered if you had any additional color you could share on the nature of incoming orders, sort of refrigerated versus non-refrigerated in the backlog you're working through now as compared to first quarter.
Speaker Change: It's a complicated question, right, because it's, what we see before an order is, you know, the quote, the pilot, the project design, those discussions.
Speaker Change: What we're always kind of blind to, and it accelerated a little bit through this, you know, Albertson-Kroger merger, is the timing.
Speaker Change: I would say, you know, I would, I can comfortably say that the activity level in terms of those conversations, test systems, evaluation, have all been going very strong. The non-refrigerated displays...
Speaker Change: That accounts for a big piece of that uptick we had in Q1, and we can see out into Q2 and a little bit into Q3. We expect that demand to remain.
Speaker Change: very solid, you know, going out into, you know, Q2 into Q3.
What's still a little bit murky is...
Speaker Change: the, you know, speed at which the refrigerated displays come, and it doesn't...
It doesn't surprise me because
Speaker Change: We're going into what we call a quiet period, right, as we come into November.
Speaker Change: December, January, a lot of our grocery market, they won't, they're not doing a lot of work in the stores. They are really focused on holiday activity from
Speaker Change: Halloween, right through Thanksgiving, Christmas, into New Year's, and in some cases all the way in through February and March with Easter and that type of thing.
Speaker Change: But what we do start to see in the beginning of the year, in the beginning of the calendar year, January, February timeframe, we start to see that planning and that activity getting ready for the seasonal vegetables, blueberries, strawberries, all those type of things which really lend themselves.
Speaker Change: very well to that open air casing. So I think we're probably a quarter early in terms of having great visibility.
Speaker Change: but we're encouraged at what we see so far and we expect that we'll continue to see an uptick in the refrigerated sales side of things. Certainly we had a lot of activity in Q1 and everything says it will continue to have that in Q2.
Speaker Change: But we're really excited about what we could be shipping in Q3.
That's helpful. Thanks, Jim.
Speaker Change: solution of the Corbett-Robinson merger will hopefully release a lot of that demand that's
It's been pent up
Speaker Change: So you answered a question about bulletin acquisitions and inorganic growth and excited to be here.
Speaker Change: you know, that process continues to be active and your expectation of something.
Speaker Change: Otherwise, you may have kind of put on hold until you felt, okay, we're on really solid footing. I mean, EBITDA, a debt-to-EBITDA ratio below 1% or 1 times is exciting stuff.
Speaker Change: Yeah, I mean the answer is absolutely yes. I'll use EMI, just a conversation we were just having, I'll use it as an example.
EMI has, you know, closed-door refrigerated cases.
Speaker Change: But JSI has more of the, we'll call it the technical capability to execute in...
and improve those cases and...
and understand, you know, their testing and their design side.
and our lead engineer and his team up at...
at JSI, it becomes an immediate opportunity organically for EMI.
Speaker Change: EMI enables us to do it, or EMI creates the opportunity, JSI's.
Speaker Change: technology and engineering resources allow us to execute against it. So we are very well and very much invested in trying to leverage a lot of those things. And as we've talked about consistently in our fast-forward plan and in our execution, we look at growth in two ways.
Speaker Change: One is creating and acquiring more of the share of Wallet and the customers in the segments we're in, and the second is expanding or adding additional vertical markets.
Speaker Change: And I think there's a segment of those vertical markets that are always in a kind of an ebb and flow. And I talked about automotive as an example. Automotive is kind of flat right now, and we're there prepared. We have the products, and we have the relationships, and we have the relationships.
Speaker Change: with the automobile manufacturers. We have the relationship with the large auto groups. We have the relationships with the large integrators that work on auto dealerships. As that slow...
Speaker Change: Warehouse is slow. We turn our attention to different markets where we go in and experiment.
Speaker Change: parking, as an example, after a couple years of being slow, you know, particularly coming out of the pandemic.
Speaker Change: Parking is showing increased activity. So we look to move between some of those verticals and by having a portfolio of them we can we can move with the ebbs and flows and hope that they're that they're you know, they're kind of
Speaker Change: their sine waves are kind of opposed to each other well one's down another one's up and so within our portfolio we have those additional vertical markets that we look to expand on and we look to kind of put more investment more energy into while another vertical markets down
Speaker Change: That's helpful, Jim. Thanks for all the wonderful color and the hard work from you and the team. Appreciate it.
Yeah, thank you.
Speaker Change: At this time, we are showing no further questioners in the queue, and this does conclude our question and answer session. I would now like to turn the conference back over to Mr. Jim Clark for any closing remarks.
Jim Clark: I really think we covered a lot in this call, so I don't have any extensive comments here to close the call except to say
Jim Clark: I'm sure you can all see the activity, you know, this was before, you know, this existed last month and a few months before, but
There's a lot of activity in the C-STOR space.
Jim Clark: We're engaged in all of it. There is a lot of synergies that have been created with EMI coming on board, you know, both commercially and operationally. We talked about them, but I'm very excited about it.
Jim Clark: And I'm glad that we feel like we're coming to some resolution on grocery, and much that we've spoken about over the last year is kind of executing exactly in the timing that we've been kind of anticipating.
Jim Clark: We do anticipate by year's end that there'll be great clarity to this, one way or the other. And regardless of which way it goes, we feel like there's an opportunity for us. So, we're very excited about, you know, the outlook. We're, you know, we don't feel as though...
Jim Clark: Lighting is under any particular pressure. It's just a timing thing. We're very excited about display solutions. I think that we have.
Jim Clark: some real good opportunity in front of us and we're excited as a team to continue to execute and look for those opportunities and maximize it. I just want to say to everybody that's on the call, thank you for your continued interest, your continued confidence, and your continued support.
Jim Clark: And with that, we'll draw the call to a close. Thank you.
Speaker Change: The conference is now concluded. Thank you for attending today's presentation and you may now disconnect.
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