Executive Summary
LSI Industries’ QQ3 2024 results demonstrate a resilient operating profile in a mixed demand environment. Revenue of $108.19 million declined 7.9% year over year and 0.75% quarter over quarter, reflecting ongoing headwinds in the grocery vertical tied to the industry merger process, while adjusted EBITDA margin expanded by ~80 basis points to 10.4% and adjusted gross margin improved by 160 basis points. Net income rose 15.1% year over year to $5.38 million, and EPS stood at $0.18, supported by favorable mix, stable pricing, and productive capacity. The quarter also showcased robust cash generation, with free cash flow of $11.15 million and operating cash flow of $12.43 million, enabling net debt reduction to roughly $9.18 million and a leverage ratio (adjusted EBITDA to net debt) of 0.2x.
Management continues to execute the Fast Forward Plan to reach $800 million in sales and 12.5% EBITDA by 2028, highlighted by the EMI Industries acquisition for $50 million. EMI adds five manufacturing locations and expands the company’s presence in grocery, C-store, and QSR verticals, creating a substantial cross-selling opportunity across a broadened customer base. While the grocery/Merger-related disruption remains a near-term drag, management expects continued growth in refueling C-store programs and broad-based lighting activity, with EMI expected to be accretive to EPS immediately and to realize meaningful synergies over the next 12–24 months. Investors should monitor EMI integration progress, the progress and outcome of the grocery merger divestiture plan (including potential new store opportunities and rebranding), supply chain dynamics, and the pace of recovery in large project quote-to-order cycles.
Key Performance Indicators
Key Insights
Revenue: $108.186 million, YoY -7.90%, QoQ -0.75%
Gross profit: $31.34 million, YoY -2.68%, QoQ -0.62%
Gross margin: 28.97%
Operating income: $7.802 million, YoY 47.85%, QoQ -0.22%
Net income: $5.375 million, YoY 15.12%, QoQ -8.99%
EPS: $0.18, YoY 5.88%, QoQ -10.0%
EBITDA: $10.00 million, EBITDA margin 9.24% (EBITDA / Revenue)
Adjusted EBITDA margin: 10.4%
Free cash flow: $11.15 million in the quarter; LTM cash flow >$43 million
Cash from operations: $12.43 million
Net debt: $9.18 m...
Financial Highlights
Revenue: $108.186 million, YoY -7.90%, QoQ -0.75%
Gross profit: $31.34 million, YoY -2.68%, QoQ -0.62%
Gross margin: 28.97%
Operating income: $7.802 million, YoY 47.85%, QoQ -0.22%
Net income: $5.375 million, YoY 15.12%, QoQ -8.99%
EPS: $0.18, YoY 5.88%, QoQ -10.0%
EBITDA: $10.00 million, EBITDA margin 9.24% (EBITDA / Revenue)
Adjusted EBITDA margin: 10.4%
Free cash flow: $11.15 million in the quarter; LTM cash flow >$43 million
Cash from operations: $12.43 million
Net debt: $9.18 million
Total debt: $16.35 million
Current ratio: 2.17; Quick ratio: 1.26
DSO/DIO/DPO: 59.38/70.66/30.58 days; CCC: 99.46 days
P/Book: 2.23; P/S: 4.10; P/E: 20.62
Dividend: $0.05 per share declared (May 14 payment)
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
108.19M |
-7.90% |
-0.75% |
| Gross Profit |
31.34M |
-2.68% |
-0.62% |
| Operating Income |
7.80M |
47.85% |
-0.22% |
| Net Income |
5.38M |
15.12% |
-8.99% |
| EPS |
0.18 |
5.88% |
-10.00% |
Key Financial Ratios
operatingProfitMargin
7.21%
operatingCashFlowPerShare
$0.43
freeCashFlowPerShare
$0.38
dividendPayoutRatio
27.1%
Management Commentary
Strategic and operational themes from management:
- Strategic plan and growth target: “LSI has developed and published our strategic plan to grow the company and its earnings $800 million in sales and 12.5% in EBITDA in 2028” (CEO James Clark). This Fast Forward Plan frames EMI integration as a meaningful accelerant to long-term growth.
- EMI acquisition and integration: “Late last week, LSI announced the acquisition of EMI Industries... purchase price of $50 million... net debt at approximately 1.3x” and “EMI will become part of LSI's display solutions segment, beginning with a partial impact beginning in fiscal Q4.” The team sees multiple synergies spanning cost, operations, and cross-selling opportunities.
- Cross-selling and customer mix: “a customer basis about a third, a third, and a third” across EMI-new, LSI-new, and shared customers, implying substantial cross-sell potential with the expanded base.
- Grocery vertical headwinds: management notes a “pause in grocery” and that interior refresh programs are deferred pending merger clarity, yet underlying grocery fundamentals remain solid with multi-year investment in store programs.
- Margin and cash flow drivers: “adjusted gross margin rate improved 160 basis points versus last year” and “lighting adjusted operating income increased 11% for the quarter on 3% lower sales”; free cash flow of $11 million highlights strong cash generation supporting deleveraging.
- Technological and product synergies: EMI and JSI collaboration on R290 solutions and shared refrigeration technology opportunities highlight the roadmap to product enhancements and expanded addressable markets.
- Dividend and capital allocation: Management highlighted capital return and the planned EMI integration as part of the broader plan to bolster shareholder value.
- Short-term caveats: merger-related timing and supply chain constraints continue to influence order cycles and project timing, but management remains confident in the mid- to long-term opportunity.
“EMI will be immediately accretive to LSI on an adjusted earnings per share basis.”
— James Clark
“In terms of commercial synergies, we see a customer basis about a third, a third, and a third.”
— James Clark
Forward Guidance
Outlook and assessment:
- Organic and inorganic growth trajectory: The company reaffirmed its Fast Forward Plan targeting $800 million in sales and 12.5% EBITDA by 2028. EMI adds a meaningful inorganic growth pillar, with EMI revenues of about $87 million in 2023 and EBITDA of $5.5 million, expected to be immediately EPS-accretive and deleveraging over time.
- Margin trajectory: Near-term gross margin benefited from mix and pricing, with additional upside anticipated from EMI integration (purchasing synergies, back-office efficiencies, and manufacturing integration) over 12–24 months. Lighting segment book-to-bill above 1 supports a constructive demand backdrop, albeit with longer quote-to-order cycles for larger projects.
- Revenue mix and verticals: Expect continued strength in refueling C-store programs and broader display solutions, complemented by EMI’s presence in grocery, C-store, and QSR verticals. R290 refrigerant solutions and cross-selling across EMI/LSI/JSI platforms are key growth levers.
- Shareholder value and risk: The management team highlighted a disciplined capital allocation framework and an earn-to-invest model. Investors should monitor EMI integration milestones, the timing and scope of the grocery merger divestiture (including potential rebranding across ~600 stores), supply chain stabilization, and progress against the $800M/DM target.
- Key factors to monitor: EMI integration pace and synergies (cost, purchasing, and commercial momentum), grocery merger outcomes and associated store rebranding opportunities, commodity/input cost trends, and overall demand dynamics across lighting and display solutions.