Exchange: NASDAQ | Sector: Technology | Industry: Hardware Equipment Parts
Q4 2024
Published: Sep 11, 2024
Earnings Highlights
Revenue of $129.01M up 4.3% year-over-year
EPS of $0.19 decreased by 36.7% from previous year
Gross margin of 26.2%
Net income of 5.67M
""In 2025, we'll introduce an entirely new Lighting product line called Velocity."" - Jim Clark
LSI Industries Inc (LYTS) Q4 2024 Results Analysis: Backlog Strength, EMI Integration Progress, and Margin Expansion Outlook
Executive Summary
LSI Industries reported a solid Q4 2024, delivering a 4% year-over-year increase in quarterly revenue to $129.0 million, aided by the EMI acquisition that contributed in the quarter. Management highlighted that the full-year 2024 EBITDA margin expanded 60 basis points to 11%, with free cash flow of $38 million, and a strong balance sheet (net debt roughly $50 million, or 1x trailing twelve months EBITDA). The quarter’s results reflect a constructive mix shift and disciplined cost management, even as the grocery vertical faced demand headwinds linked to a merger-related disruption. Management signaled an investment-led growth trajectory for 2025, anchored by a robust Display Solutions backlog (notably refueling C-store programs), a ramp in EMI integration, and an expanded product roadmap including Velocity, an entirely new Lighting line set for launch in 2025. The company expects continued growth in key verticals and over 30% projected growth in Project Services for fiscal 2025, with material opportunities arising from R290 refrigerant adoption and a potential grocery-upturn that could drive higher order velocity in the back half of 2025. While macro uncertainty persists, LYTS entered 2025 with a strengthened solution set, a disciplined balance sheet, and a clear path to margin expansion through product mix, pricing discipline, and ongoing productivity initiatives.
Key Performance Indicators
Revenue
129.01M
QoQ: 19.24% | YoY:4.34%
Gross Profit
33.83M
26.23% margin
QoQ: 7.95% | YoY:-5.66%
Operating Income
10.00M
QoQ: 28.22% | YoY:-2.28%
Net Income
5.67M
QoQ: 5.45% | YoY:-32.64%
EPS
0.19
QoQ: 5.56% | YoY:-36.67%
Revenue Trend
Margin Analysis
Key Insights
Q4 2024 Revenue: $129.0 million; gross profit $33.833 million; gross margin 26.23%. YoY revenue up 4.34%; QoQ revenue up 19.24%. - Operating income: $10.004 million; operating margin 7.75% ( YoY margin change -2.28%, QoQ +28.22%). - EBITDA: $12.86 million; EBITDA margin ≈ 9.97%. - Net income: $5.669 million; net margin 4.39%. YoY net income margin down 32.64% (reflecting mix and non-operating items) and QoQ up 5.45%. - EPS: $0.19 (basic); diluted $0.19. YoY EPS change -36.67%; QoQ +5.56%. - Key cash flow: operating cash flow $11.10 million; free cash flow (LTM) $10.33 million for Q4; full-year free cash flow was $38 million. - Balance sheet (as of 6/30/2024 results): total assets $348.8 million; total liabilities $144.45 million; stockholders’ equity $204.36 million; cash and cash equivalents $4.11 million; net debt $50.12 million; long-term debt $62.56 million. - Leverage: net debt to TTM adjusted EBITDA ≈ 1.0x. - Liquidity ratios (ratio snapshot): current 2.05x, quick 1.16x, cash ratio 0.052x.
Financial Highlights
- Q4 2024 Revenue: $129.0 million; gross profit $33.833 million; gross margin 26.23%. YoY revenue up 4.34%; QoQ revenue up 19.24%. - Operating income: $10.004 million; operating margin 7.75% ( YoY margin change -2.28%, QoQ +28.22%). - EBITDA: $12.86 million; EBITDA margin ≈ 9.97%. - Net income: $5.669 million; net margin 4.39%. YoY net income margin down 32.64% (reflecting mix and non-operating items) and QoQ up 5.45%. - EPS: $0.19 (basic); diluted $0.19. YoY EPS change -36.67%; QoQ +5.56%. - Key cash flow: operating cash flow $11.10 million; free cash flow (LTM) $10.33 million for Q4; full-year free cash flow was $38 million. - Balance sheet (as of 6/30/2024 results): total assets $348.8 million; total liabilities $144.45 million; stockholders’ equity $204.36 million; cash and cash equivalents $4.11 million; net debt $50.12 million; long-term debt $62.56 million. - Leverage: net debt to TTM adjusted EBITDA ≈ 1.0x. - Liquidity ratios (ratio snapshot): current 2.05x, quick 1.16x, cash ratio 0.052x.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
129.01M
4.34%
19.24%
Gross Profit
33.83M
-5.66%
7.95%
Operating Income
10.00M
-2.28%
28.22%
Net Income
5.67M
-32.64%
5.45%
EPS
0.19
-36.67%
5.56%
Key Financial Ratios
currentRatio
2.05
grossProfitMargin
26.2%
operatingProfitMargin
7.75%
netProfitMargin
4.39%
returnOnAssets
1.63%
returnOnEquity
2.77%
debtEquityRatio
0.35
operatingCashFlowPerShare
$0.38
freeCashFlowPerShare
$0.35
dividendPayoutRatio
25.7%
priceToBookRatio
2.01
priceEarningsRatio
18.14
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Theme: Strategy and product pipeline — LYTS remains focused on expanding its solution set. Management reiterated that Velocity, a new Lighting product line, will be launched in 2025 as part of the Fast Forward strategy to enhance performance at a range of price points. Theme: Backlog and market conditions — Display Solutions backlog is strong entering fiscal 2025, particularly in the refueling C-store vertical, with Q4 2024 orders up vs. prior year. Grocery remains a mixed backdrop but signs of recovery emerged, with book-to-bill for grocery improving (book-to-bill well over 1 in July–August). Theme: EMI integration and synergies — EMI integration is progressing well; management highlighted cross-selling opportunities and the potential for margin uplift through discipline and procurement improvements, despite EMI’s still-lower margin profile versus LYTS pre-EMI. Theme: R290 refrigerant rollout — Initial shipments in Q4 with several large customers indicating full conversions; management sees significant longer-term demand tied to environmental regulations and grocery-store modernization. Theme: Operating discipline and capital allocation — EBITDA margin target of 11% for FY2024 sustained into 2025 with ongoing cost management; capex was elevated in 2024 (investment in Bangor refrigeration facility and capacity expansion); disciplined cash flow management remains a priority with strong free cash flow generation and a 1x net debt to EBITDA ratio. Quote-derived takeaways: Jim Clark emphasized Velocity’s forthcoming launch as a growth catalyst for 2025, while James Galeese highlighted EMI’s smooth integration and cross-selling potential as a near-term growth accelerant.
"In 2025, we'll introduce an entirely new Lighting product line called Velocity."
— Jim Clark
"our Project Services business, part of our end-to-end solutions model, is forecast to grow over 30% in fiscal 2025."
— James Galeese
Forward Guidance
LSI’s forward guidance centers on a growth-led 2025 characterized by: (1) Display Solutions backlog strength sustaining near-term revenue momentum; (2) EMI integration delivering accretion through cost synergies and cross-selling with LYTS’ customer base, with margin improvement expected as procurement and operational disciplines are applied; (3) a non-recurring, but strategically important, R290 refrigerant program driving new product penetration in grocery and C-store environments; (4) Project Services growth projected to exceed 30% in fiscal 2025, supported by expanding end-to-end solutions capabilities and a growing installation management footprint; (5) the Velocity lighting line slated for launch in 2025 to improve mix, performance, and price realization. Management indicated margin discipline will remain a priority in 2025 with material input costs expected to be flat to slightly favorable, and utilization improvements expected to lift margins as capacity is better matched to demand. Risks include macroeconomic volatility, continued grocery-market headwinds tied to merger dynamics, integration execution risk with EMI, and potential shifts in capital expenditure cycles by customers. Investor monitoring should focus on: EMI synergy realization (cost and revenue cross-sell), grocery retail backlogs and book-to-bill trajectory, R290 adoption uptake, and progress toward the targeted long-term EBITDA margin (12.5% via the Fast Forward plan) and free cash flow generation.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
LYTS Focus
26.23%
7.75%
2.77%
18.14%
PLXS
10.30%
5.13%
3.11%
22.51%
OSIS
33.00%
13.90%
5.17%
13.06%
CTS
33.70%
13.90%
2.91%
22.14%
BHE
10.30%
4.94%
1.63%
14.04%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
LSI enters fiscal 2025 with a constructive setup: a diversified, two-segment platform (Lighting and Display Solutions) underpinned by a strong backlog, ongoing margin discipline, and a meaningful strategic acquisition (EMI) that expands the customer base and cross-sell opportunities. The anticipated Velocity lighting launch and the Center-of-Excellence initiatives are designed to elevate product value and operating efficiency, supporting a targeted EBITDA margin progression toward the long-term goal of 12.5%. Management’s guidance points to a 2025 growth path with Project Services expected to grow >30% and grocery-channel improvements, aided by R290 refrigerant rollout, which could accelerate order velocity in the back half of 2025. The EMI integration represents a key near-term driver of margin expansion through procurement improvements and cost synergies, though it carries execution risk and a temporary drag to reported margins. LYTS’ solid balance sheet (1x net debt to EBITDA, $38m annual free cash flow) provides flexibility for continued capex, potential tuck-in acquisitions, and share of market gains in a fragmented industry. Key investor takeaways: (1) monitor EMI synergy realization and cross-sell traction, (2) track grocery/backlog momentum (book-to-bill >1 signals undercooking demand revival), (3) evaluate R290 uptake by major grocers, and (4) assess progress toward the 12.5% long-term EBITDA margin target as utilization and pricing discipline compound over 2025–2028.
Key Investment Factors
Growth Potential
Backlog strength in Display Solutions (notably refueling C-store programs) and a disciplined price/mix strategy support margin expansion. Velocity lighting launch in 2025 could lift ASP and product differentiation. EMI integration offers significant cross-selling opportunities across a broader customer base and potential margin uplift through procurement and operational improvements. Project Services growth (>30% in FY2025) emphasizes LYTS’ end-to-end capabilities and higher project-based revenue visibility.
Profitability Risk
Grocery vertical exposure remains sensitive to merger-related demand disruptions and broader retail remodeling cycles. EMI integration carries execution risk and near-term margin dilution as the acquired entity rationalizes its cost structure. Macro uncertainty could impact capex cycles and demand in key verticals. Large, multi-site installations can elongate project cycles and complicate revenue recognition.
Financial Position
Solid balance sheet with net debt ≈ $50 million and net-debt-to-EBITDA ≈ 1.0x. Free cash flow generation robust ($38 million for FY2024) supports deleveraging and reinvestment. Capital expenditure in 2024 was elevated (Bangor refrigeration facility; electronics manufacturing expansion), signaling sustained investment to enable growth. Liquidity indicators (current ratio ≈ 2.05x; quick ratio ≈ 1.16x) support ongoing working capital needs and potential M&A activity.
SWOT Analysis
Strengths
Backlog strength in Display Solutions, especially refueling C-store programs entering fiscal 2025
EMI acquisition expanding addressable market and cross-selling opportunities
Margin discipline and pricing power, evidenced by 11% FY2024 EBITDA margin and stable pricing
Diversified exposure across Lighting and Display Solutions with growth in multiple verticals
Product and process innovations (Velocity, ADAPT services, Center-of-Excellence) enhancing competitive differentiation
Strong cash flow generation and a conservative balance sheet (net debt ~1x EBITDA)
Management culture anchored by a high say-do ratio and strategic capital investment (Bangor facility, digital graphics Center)
Weaknesses
Grocery vertical sensitivity to merger dynamics and demand disruption
EMI integration initially dilutive on a percentage basis and requires successful execution to achieve full ROI
Capital-intensive expansion (new facilities and electronics manufacturing) raises near-term leverage risk
Longer quote-to-order cycles for large projects may damp near-term revenue visibility
Reliance on project-based revenue can introduce timing volatility in bookings and revenue recognition
Opportunities
R290 refrigerant adoption driving new product adoption and potential market share gains
Recovery in grocery remodel activity could amplify both display and refrigeration opportunities
Velocity lighting line could lift product mix, pricing power, and gross margins
Project Services expansion enhances cross-selling and higher-margin service revenue
Houston-based Center-of-Excellence enables scalable, efficient production and graphics solutions
Accelerated EBITDA margin improvement through EMI integration and supply-chain discipline
Threats
Macro uncertainty affecting capex cycles and end-market demand
Competitive intensity in lighting and display solutions could pressure pricing
Regulatory and environmental shifts affecting refrigerant regulations and compliance timelines
Integration risks with EMI and potential delays in realizing synergies
Potential delays or disruptions from macro events impacting spending in grocery/retail sectors