LSI Industries : Q1 2023 LSI Industries Inc Earnings

First Quarter Fiscal

2023 Results

Conference Call

November 2, 2022

DISCLAIMER

This presentation contains "forward-lookingstatements"-that is, statements related to future events within the meaning of the Private Securities Litigation Reform Act of 1995. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements. In this context, forward-looking statements often address our expected future business, financial performance, financial condition and results of operations, often contain words such as "estimates," "targets," "anticipates," "hopes," "projects," "plans," "expects," "intends," "believes," "seeks," "may," "will," "see," "should" and similar expressions and the negative versions of those words, and may be identified by the context in which they are used.

Such statements, whether expressed or implied, are based upon current expectations of LSI and speak only as of the date made. Reliance should not be placed on forward-looking statements because they involve known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements to differ materially from those expressed or implied. Forward-looking statements include statements that address activities, events or developments that LSI expects, believes or anticipates will or may occur in the future, such as earnings estimates (including projections and guidance) and other predictions of financial performance. Forward-looking statements are based on LSI's experience and perception of current conditions, trends, expected future developments and other factors it believes are appropriate under the circumstances and are subject to numerous risks and uncertainties, many of which are beyond LSI's control.

These risks and uncertainties include, but are not limited to the following: the impact of competitive products and services; product and pricing demands, and market acceptance risks; LSI's reliance on third-party manufacturers and suppliers; substantial changes to the refueling and convenience store and grocery markets; LSI's stock price volatility; potential costs associated with litigation, other proceedings and regulatory compliance; LSI's ability to develop, produce and market quality products that meet customers' needs; LSI's ability to adequately protect intellectual property; information technology security threats and computer crime; reliance on customers and partner relationships; financial difficulties experienced by customers; the cyclical and seasonal nature of our business; the adequacy of reserves and allowances for doubtful accounts; the failure of investments, acquisitions or acquired companies to achieve their plans or objectives generally; unexpected difficulties in integrating acquired businesses; the inability to effectively execute our business strategies; the ability to retain key employees, including key employees of acquired businesses; labor shortages or an increase in labor costs; changes in shift in product mix; unfavorable economic, political, and market conditions, including interest rate fluctuations; changes in U.S. trade policy; the results of asset impairment assessments; risks related to disruptions or reductions in business operations or prospects due to international conflicts and wars, pandemics, epidemics, widespread health emergencies, or outbreaks of infectious diseases such as the coronavirus disease COVID-19; price increases of materials; significant shortages of materials; shortages in transportation; increases in fuel prices; sudden or unexpected changes in customer creditworthiness; not recognizing all revenue or not receiving all customer payments; write-offs or impairment of capitalized costs or intangible assets in the future or restructuring costs; anti-takeover provisions in LSI's organizational documents and in Ohio law; and the other risk factors LSI describes from time to time in SEC filings. There may be additional risks of which we are not presently aware or that we currently believe are immaterial which could have an adverse impact on our business.

You are cautioned to not place undue reliance on these forward-looking statements. LSI does not guarantee any forward-looking statement, and actual results may differ materially from those projected. LSI undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events, circumstances or otherwise. Additional descriptions of risks, uncertainties and other matters can be found in our annual reports on Form 10-K and quarterly reports on Form 10-Q that we file with the SEC and are incorporated herein by reference. Our public communications and other reports may contain forward-looking projected financial information that is based on current estimates and forecasts. Actual results could differ materially.

©2022 LSI INDUSTRIES

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KEY MESSAGES

1	Strong growth across key performance metrics. F1Q23 sales +19% y/y; adjusted operating income +118% y/y to $10.9 million;
	Adjusted EBITDA +76% y/y to $13.3 million; adjusted net income +100% y/y to $7.1 million
2	Achieved sixth consecutive quarter of double-digit sales growth. Our vertical markets remain very active, and our products,
	supply chain capabilities and selling approach have all contributed to sales growth
3	Significant margin rate expansion. Benefits of scale, cost controls and recent price actions contributing to improved margin
	realization; Adjusted gross margin rate +430 bps y/y to 27.3%; Adjusted EBITDA margin rate +340 bps y/y to 10.5%
4	Improved free cash flow generation. Free cash flow increased $18 million on a y/y basis to $10.1 million, as increasingly stable
	supply chain contributed to lower inventory levels, resulting in a higher conversion of earnings to cash
5	Continued reduction in net leverage. On a TTM basis, net debt has declined $17 million to $68.5 million; net debt to trailing
	twelve-month Adjusted EBITDA exited F1Q23 at 1.7x; anticipate further net debt reduction given strong FCF generation
6	Favorable F2Q23 Outlook. Market indicators remain favorable; Lighting and Display enter F2Q23 with healthy backlog; orders
	increased year-over-year in both segments

©2022 LSI INDUSTRIES

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CONSOLIDATED FINANCIAL RESULTS

• Strong price and volume growth across both reporting segments
• Net sales growth of +19% y/y; Adjusted EBITDA +76% y/y; Adjusted net income +100% y/y
• Gross Profit and Adjusted EBITDA Margin rate +430 bps and 340 bps y/y, respectively
• Margin realization benefiting from moderating commodity costs, strategic pricing actions, and more favorable product mix
• Market indicators remain favorable; Activity in key vertical markets remains high

54

Total Net Sales ($M)

$127.1

$106.4

F1Q22F1Q23

Net Income ($M)

					$7.1
					$6.3
$3.1	$3.5	$0.25/
		Share
				$0.13/
				Share
				F1Q22		F1Q23
			Reported Net Income		Adjusted Net Income

Operating Income ($M)

								$10.0	$10.9
	$4.4	$5.0
						F1Q22				F1Q23
				Reported Operating Income		Adjusted Operating Income
	Non-GAAP Adjusted EBITDA ($M)
											$13.3
						$7.6
									Adj. EBITDA
										Margin Rate
						Adj. EBITDA
										10.5%
						Margin Rate
						7.1%
						F1Q22				F1Q23

©2022 LSI INDUSTRIES

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LIGHTING SEGMENT UPDATE

• Lighting sales increased 32% y/y, supported by improved supply chain and demand growth within vertical markets
• F1Q23 adjusted gross margin rate of 33.0%, +290 bps vs. PY
• Segment Adjusted EBITDA growth+81% y/y to $10.6 million
• Segment EBITDA margin +430 bps y/y to 15.7%
• Volume leverage, benefit of recent price actions and moderating raw materials costs contributing to improved segment profitability

54

Lighting Sales ($M)

$67.5

$51.3

F1Q22

F1Q23

Lighting Adj. Operating Income ($M)

$9.2

$4.4

F1Q22

F1Q23

Lighting Adj. Gross Margin ($M)

			$22.3
$15.5
	Adj. Gross
				Adj. Gross
		Adj. Gross		Margin Rate
			Margin Rate
		Margin Rate		51.5%
			33.0%
		30.2%
		F1Q22		F1Q23

Lighting Adj. EBITDA ($M)

$10.6

$5.9

Adj. EBITDA

Margin Rate

Adj. EBITDA15.7%

Margin Rate

11.4%

F1Q22

F1Q23

©2022 LSI INDUSTRIES

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