Greetings, and welcome to LSI Industries' Fiscal First Quarter 2024 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. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Jim Galeese, Chief Financial Officer. Thank you, Mr. Galeese, 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 '24 first quarter results. In addition to this release, we also posted a conference call presentation in the Investor Relations section of our corporate Web site.

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 management's 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 to LSI President and Chief Executive Officer, Jim Clark..

Thank you, Jim. Good morning, all, and thank you for joining us today. As you have likely noted from our press release, we had solid results in our first quarter of fiscal year 2024. We continue to improve business operations in nearly every category and the commitment of our team and their ability to execute continues to be demonstrated each day.

Adjusted net income for the quarter was up 23%. Adjusted EBITDA came in at 12.2%. We had an EPS of $0.29, which was up $0.04 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 extending out the fiscal year 2028, and it is regularly shared with our entire management team and company personnel. It is also posted on our Web site under our Investor Relations section.

The plan has some ambitious goals in top line sales, margin performance, profitability, and the markets that we intend to serve.

With any goal or acquired skill, you plan and practice your craft to advance to the point where you're proficient in the execution and confident in your ability to repeat and control emotions and activities that advance you towards your goal. In some cases, progress is swift.

And in others, it will require repeated effort in fine-tuning in order to advance. I'm sure that all of you have experienced a journey like this before. Anyone in the history tried to develop a new skill, a habit or advance towards some goal understands it's the speed in which you progress can vary and external factors are always at play.

Along those lines, I 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% in adjusted EBITDA for the quarter.

This accomplishment helps demonstrate to the team at LSI that this level of performance is well within our REIT. And if we continue to focus and practice, we can sustain that level of performance 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 each.

I do not expect that we will regularly perform at this elevated 12%-plus level just quite yet, 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 as I mentioned in the past, we do not expect that every Q2 will be like that. In fact, I expect that we will have some settling and realignment this year.

As I 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 they're still unpredictable.

Supply from other trades, particularly electrical switch gear, remains unsteady and this slows project time. Our Automotive vertical, which interestingly enough has had a very strong demand for the last few years is a bit less predictable right now, which I'm sure is connected to the Big 3's labor negotiation.

Our Grocery segment has a lot of potential and program interest, but is also a bit constrained right now due to a probable merger and divestitures and a seasonal pause that 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 products, 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 EV power plant, battery 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 that we have been awarded a large 7,000 site multiyear brand refresh program for a major oil retailer.

This is all good news, and it speaks well for continued opportunities in front of us. 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 R-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 arsenal of solution. I also had the chance to visit our Milo, Maine [indiscernible] facility.

We've been putting time into reforming this factory, and I 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 flow lighting business, Atlas Lighting. We're in the middle of what we call lighting season within this business, typically, this is the time of the 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 are looking forward to seeing the results of this coming quarter.

Lastly, I want 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 we expect will yield a number of costs and operational efficiencies, along with increased capability.

Our ADAPT project management group and our digital menu board program management team remains in Akron. 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 our work in warehousing could all be affected over the next few quarters as mergers, labor tax progress, and the holiday seasons effect project time. We do not see any of these disruptions as structural risk, and we are confident that any impact would be limited to timing only.

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 turning into the call. And with that, I will turn the call back over to Jim Galeese for a deeper look at our financial..

Thank you, Jim. For the quarter, LSI generated increased earnings and earnings per share, margin rate expansion, strong cash flow, and working capital efficiency. An 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, led by improved program pricing and moderating material input and operating costs. We exhibited strong commercial and operational execution in the quarter.

Commercially, our team continued to work closely with partners and customers to exploit opportunities in key vertical markets, while 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 to $25 million and lowered our TTM ratio of adjusted EBITDA to net debt to 0.5x.

This provides the balance sheet flexibility to support our capital allocation priorities, which include debt reduction, investment in organic growth initiatives, inorganic growth opportunities, and return of capital.

Now comments on segment performance, for Lighting, Q1 sales obtained strong prior year levels as our vertical markets continue to generate favorable activity and reassess our share position growing. For Lighting, adjusted gross margin rate increased 110 basis points to 34.9%. Pricing, project mix, and 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 quote levels for Lighting were 4% above prior year, despite fluctuating on a daily and weekly basis as opposed to conversion period remains lengthened. Project pricing across most verticals remain stable.

Looking forward, we expect Lighting activity to remain steady in the near-term with Q2 sales at or several points above prior year levels. Moving to Display Solutions, adjusted operating income increased considerably on modestly lower sales. Operating income increased 19%, with the gross margin rate increasing a substantial 360 basis points.

Sales growth was realized across multiple customers in the refueling C-store and QSR vertical. Sales in Grocery slowed in the quarter as the pending merger of the nation's top two grocery chains 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 a brand refresh for 7,000 domestic locations covering seven brand banners, all to be completed in 4.5 years, a challenging task.

Our proven solutions and trusted long-term relationship with this customer positioned LSI as the partner of choice. We were also awarded programs by several oil companies for 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 applied in both programs, an example of innovative solutions to customer problem. We talk about the lumpiness and volatility of program activity and the 7,000 site program is a good example.

This program has been in the gestation period for 14 months, beginning with our involvement in the concept phase to final award. While this program is very large, the cycle from our initial involvement to award on these custom programs can range from several months to well over a year.

We have early concept involvement with many display solution customers, and the program proposal activity continues to advance in major verticals, including Refueling & C-Store, Grocery, and QSR.

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. [Operator Instructions] The first question comes from the line of Aaron Spychalla with Craig-Hallum Capital Group. Please go ahead..

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

First for me, you talked about -- on the refueling opportunity can you just share a little bit more on the cadence of the rollout there? Is that pretty even or how might that look? And then you referenced on several new significant programs secured during the quarter.

Any other details to share there based on size, end market timing, et cetera?.

Good morning, Aaron. And thanks for the call -- thanks for the question and thanks for participating in the call. Yes, the refueling opportunity, I think, really goes to underlying something we've been talking about for some time, which is -- remember, 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 7- to 10-year refresh cycle. And we have been talking for some time about how we're seeing that refresh cycle compress. And we're now solidly into the five trending kind of 3% to 5%.

And this particular customer, 7,000 locations, they just -- we just completed a refresh program with them not long ago.

It helps underline that we're right at that five-year mark, where they look and they say, "Hey, five years is long enough." So we just finished one -- this one that we are -- that we were just recently awarded is right now scheduled to be 4.5 years in length. And it'd really be under their direction with us as a partner.

But I think they're very purposeful about how the timing of it. They're going to take the sites that were just completed. Those sites will be on the tail end of this 4.5 years, and the sites that are 4.5 to five years old will be the first ones to update. So, we're very happy about that. It's a great program.

It was a hard-fought win and one will fit right up our alley. The second project we mentioned was the second phase of the EV power plant. There's a lot going on right now in the automotive industry, as you know. But this -- 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 source supply chain or anything like that. We're able to be a real partner on these projects, accommodate changes that may happen.

Even 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 types 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 it..

Great. Thanks for the color on that. And then, just second, the execution on the margins has been really impressive.

Can you just kind of talk a little bit about some of the initiatives there you mentioned making the business more flexible based on this kind of demand timing, so any details there? And you kind of touched on it at the beginning, but just how might margins kind of progress this year just as we're thinking about the kind of FY '28 goals as well?.

Yes. I mean, I think the thing on margins is that we've been pretty consistent in underlining that we think we have opportunities to continue to improve margins just incrementally quarter-after-quarter, and we don't see a shortage of runway for us to do that. It's really about efficiency. And it covers everything.

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 even the shipping partners we're choosing.

So, every one of those levers as an opportunity to be pulled, it's really getting in a rhythm where we're pulling them all at the right time and that our customer -- 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 in supply chain. There's unevenness where one supplier is rock solid. The other one 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 things to mitigate that, 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 or get 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 mix of a lot of ingredients that create that margin efficiency. But we're looking to pull all those levers consistently.

And there are headwinds the way we look at them, and we're prepared to fight against those headwinds. And when they turn into tailwinds, we'll benefit even more..

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 question. Jim, on the Display side, revenues were lower year-over-year, but margins improved quite a bit.

So, going forward, sort of ex-grocery, is that helping margins 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 management and team initiatives, we would much rather have those 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 is our fixed cost and fixed investments and utilization is key for us. So, the more we're able to utilize all those resources we have, the more efficient we can be.

So, I think what you're seeing there or I know what you're seeing there is really the work of a broad team to make sure we're executing well..

Understood. Thank you for that..

And Amit, Jim Galeese here. It really starts also with our value proposition itself.

It's a key part of our vertical market strategy, obviously, and the level of innovation, the things we've done in the last few years, and we referenced those things like the REDiMount, the Archer and the Forward Throw and so forth, that value is recognized by the customers.

So, it's part of our pricing program and the fact that that's recognized 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 expansion and our margin development..

Understood. And just comments around the grocery side of things impacted by 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 and then you may be able to resume sort of normal activity with those types of customers?.

Yes. I would say that we don't have a crystal ball on this, and I don't think there's a playbook. There really hasn't been kind of a merger of this scale in decades, if it's ever occurred at all.

We do have -- the customers that are affected and involved in this or doing their best to communicate timing and what their thoughts are, but it's a very dynamic and fluid situation, everything from regulatory approvals to final disposal list and changes and all those types of things. What I will say, that is unable to be controlled.

The program side of it, what they intend to do when all these hurdles are accomplished or achieved, I think, 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.

o I would categorize it just as timing-related issues with potentially a very big upside here. But trying to guess the timing is just beyond our scope. We -- I feel like we get good solid credible information and they're 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 going through this together..

Okay, thank you. That was helpful. And this last one from me. Any cost increases from the new production facilities coming on, maybe you mentioned the ozone solution, the new ozone solution facility coming online shortly.

How should we think about any costs, et cetera, from those types of activities in the future quarters?.

The short answer is very minimal impact and from a cost standpoint. And just so I can touch on it a little bit broader. This is our R-29 free ozone-depleting -- negative ozone-depleting, no ozone depletion refrigerant. So, we're moving from a man-made chemical to a natural refrigerant and it doesn't have any negative ozone impact..

No emissions..

No emissions. What we did with that is we already had a facility that was supporting our primary refrigeration facility. We exited that and moved into this newer facility. And because it was kind of a ground-up effort for us, we were able to reengineer our manufacturing line.

We improved -- we believe we will get a pretty good improvement in terms of efficiency, which will be recognized as margin improvement and that type of thing. But we also got a pretty solid bump in capacity, too.And that's going to be important, particularly if things play out the way we think they're 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 hitting under here, not just in terms of a new category or 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 R-290 platform..

Understood. That's all I have, guys. Thank you so much..

Thank you. Next question comes from the line of George Gianarikas with 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 you're describing in end markets. I mean, you talked about Grocery and that seems fairly idiosyncratic and related to the mergers there. Also, I think you mentioned auto. 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..

Yes, 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, Lighting had a strong quarter and kind of resisted a lot of kind of market trends, if you will, for Lighting. I think that we continue to execute well.

We've got a product line 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 customers that are impacted by some of these macro events and things a little bit easier for us. On the Display Solutions side, these are typically very project-oriented..

Large..

A large project in anything that pauses them for any length of time has a disruption. It's not really about any type of concentration. No one customer makes up more than 10%, the numbers actually likely far below that.

It's just that the things that when one thing pauses and it's a program pause, it's not a cancellation or anything, but it's just kicks the things down the road and we've talked a lot about timing over the last year, maybe year and a half.

What we initially started talking about was things like permitting and things like that, we still see a lot of project timing disruptions because of order trades. I mentioned electrical switch gear earlier, those type of things.

We don't see them as anything that's going to be disruptive in a long-term, but we see them as things could be disruptive in a quarter or in a month or things like that, and we're feeling that. I think that it's -- what I said in my comments earlier, I think it's really limited to grocery right now for obvious reasons.

And it extends beyond just the two that are involved, it extends kind of through the industry to see what do we need to compete against? Who's going to be our competitor in a certain segment? Is there an opportunity here? Does a 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. I think that even if you're not -- 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 going to be impacted.

And right now, there is tentative agreements across how quickly will production resume, how about suppliers in that supply chain that maybe are affected. I think a lot of that is just causing a pause, you start to see a couple of these segments being paused. And they account for 2, 3, 5, whatever percent top line pressure that we have.

And so, I think we're just trying to make everybody aware, we don't see anything that is a significant threat in terms of overall and long-term, but we do see some timing disruptions right now that we're just trying to comment on..

I appreciate the transparency. And you have been talking about this for a little while as you referenced. And so, to the extent that there are timing issues, some of them are related to maybe macroeconomics, some of them are related to M&A, some of them are related to permitting and supply chain issues.

And it feels like -- is it right that they constitute or -- in each one of those buckets separately?.

Yes. I mean, I think that it's -- like I was saying in kind of a cookie mix, right, there's a lot of ingredients that go into it. And some of them are being impacted right now, so the recipe doesn't look quite the same, but I would also say that not giving any forward-looking statements.

But I would also say that if you think there's still a little bit, there could be a huge opportunity on the back of this timing disruption. One that I underline, we'll ready for and we think we can absorb and help our customer when they are -- when they do get to that point. I would also say that a majority of our business still remains very stable.

And I mentioned in my comments earlier, the quote activity. I mean, listen, I keep looking based on macroeconomic things and just impacts to the economy, 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's not." It's just not slowing down that quote activity still remains very high.

That would be something that we would might consider 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 it's 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?" And so we're ready on both sides is what I would say..

Thanks. And maybe as a final question, you guys have done an admirable job bringing down the debt, paying off maturities. Now you're at a very reasonable level of leverage. You continue to generate strong free cash flow.

How do you -- how should we think about the M&A opportunity as you discussed in the past and the instrument through which you'd make that happen? I mean, if you're 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..

Yes. I mean, I will break that up into two pieces. First, we are very committed to doing something from as much as we're going to grow organically, which will likely be the larger part of our own total growth story was 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 but we are right now in our current leverage in cash flow, but also our partners, both our 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 have been -- have exponentially improved. It's not just been a small tick. It's been a big tick. And I will say that I enjoy this environment much more. I think the conversations are more grounded.

I think that the companies and the opportunities we've been looking at have been much more -- much more well thought out. And the management teams on the other side are much better prepared in the meetings. And we're able to construct and look at opportunities with a lot more data and a lot more kind of forward look than in the past.

So, 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 underline, 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, the 7,000 petroleum units and 1,400 unit entry into Central America, Jamaica. It really speaks to the durability of LSI's model and a lot of the initiatives that you set in place a few years ago, Jim.

So, great to see tangible results, and I have to believe that, that new business should help smooth some of the cycles that you've talked about today in the same way that having multiple industry verticals probably does. But anyhow you've kind of given a lot of good color on that. 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 the de-levered balance sheet has really opened up some exciting opportunities for acquisitions. And this is where you have a unique skill set. You kind of proved yourself capable of assimilating another business with JSI really successfully.

So, it sounds like the M&A funnel now is open and you're reviewing some interesting things.

And I just wondered if there's any personnel adjustments or engagements with investment bankers or anything of the sort that you think could be used for that you may be considering at this point, or do you feel like you're in a good spot in terms of your reviewing process?.

Rick, good morning, and thank you for the question. Listen, here's what I would say is our ears are always open. There's plenty of partnership opportunities out there, and we're always listening to the folks that we work with today and others 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, the financial partners that are aware of that can react to the current environment and have a perspective on what the future looks like in the past or are our most valuable partners.

In terms of personnel in the company, we have been training for this since day 1. Everybody that's here are truly hands-on people. There are no -- there's kind of no ivory tower positions here. Everybody has a skill set and they can be called to action at any time and the -- 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 our ability to kind of get feet on the ground and immediately start working on the value we see in any type of M&A work.

And then lastly, taking all of this backwards, as I just mentioned with George's comments or question, the environment just feels richer to us right now. I like 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 here you go, add on to this.

It's here you go, and here's how I think we can accelerate each other's business. And I really value that in the folks that 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 and it's got a good point to it, but it's not so narrow that we're just looking at a lighting company or we're just looking at a display solution company. I mean, I think that JSI was a great example where it caught some folks, they didn't see -- they didn't see it immediately, but I think they see it now.

And we've had a number of conversations like that also. So, I'm excited. It never moves as quickly as you wanted to 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 regarding the JSI and the great fit that's kind of evolved there, you see new R-290 capabilities that the company has helping to open up some new doors, especially as you look to penetrate the C-Store vertical with those displays?.

Yes, absolutely. The inquiry rate on the R-290 is very high. It's got to -- there's a lot of complexity behind it aside from the product itself and the benefits. There's field service capabilities and enough of the HVAC industry being trained with natural gases 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 that people can understand, it's just like electric cars, right? Maybe some people feel the underlying proposal is solid, but the infrastructure is not there, 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 R-290, 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 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. And the last comment/question, evolves this sort of involves the grocery vertical that you spent a lot of time talking about today, and you may mention of this, but it just seems that the massive merger here that's been disruptive at the moment. It has the potential of creating some massive refresh programs.

And I guess, do you think that's a fair way of thinking about the possible outcome of this grocery merger?.

I do. I do. I mean, wholeheartedly, I do. I mean, you got to think -- we look at kind of three pieces, if you were to break it down. One, it's clear that there's going to be a disposition of somewhere between 400 and 600 locations that are no longer going to be part of those primary banners.

So, those 400 to 600 locations unquestionably will need a brand image refresh. That goes without saying. Then the merger itself, we don't have all the details on this, but that will create -- that's going to create an immediate 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 spend and be moving things around.

I think they're doing a very good job of keeping their business going and serving their customers and stuff, but these longer program initiatives without knowing what the final result is going to look like, I don't think people are rushing to do a lot of work in that arena.

So, the way we look at it is the quote could literally come out of the barrel on the back side of this thing and we'll be ready to support them in whatever direction they want -- they decide to go. And we do look at it and say there could be a very sizable upside on the back end of this.

Not just normal course of business -- not just normal course of business stuff, either, but it just to fit in with whatever this new look is going to be or whatever this new brand or image is going to be..

Well, it does sound very predictable and very tangible. So, that's pretty exciting to think about. And so, the quote activity remains high. And apart from this delay, it sounds like things continue to move in the right direction. And I just wanted to thank you and Jim and your team for the hard work..

Yes. Thank you. It is a whole team here. I try to make sure we always comment on it, but there's 1,600 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..

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 between our results here in Q1, which we felt were very strong in the conversation that we had and the questions that we had about future outlook kind of encapsulate everything. The way we're seeing it, we're on our 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, I don't expect it to stay at that elevated level. But just being able to reach near that bell shows that we have the capability of doing that.

We think that we have some really good forward-looking opportunities. And although the timing may be a little disrupted, we are really confident that it's going to serve us well.

The 7,000 location site we talked about, which will be a four to 4.5-year project, really goes to underlying things that we've talked about over the last year to two years about how there's a compression in the whole 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 a good year in 2024, and I appreciate everyone's interest. And with that, we'll say a good day. Thank you..

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