PART I.  FINANCIAL INFORMATION

 

ITEM 1.  FINANCIAL STATEMENTS

 

LSI INDUSTRIES INC.

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

 

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements.

 

 

LSI INDUSTRIES INC.

 

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

 

 

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements.

 

 

LSI INDUSTRIES INC.

 

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

 

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements.

 

 

LSI INDUSTRIES INC.

 

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

 

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements.

 

 

LSI INDUSTRIES INC.

 

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Unaudited)

 

 

 

 

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements.

 

 

LSI INDUSTRIES INC.

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements.

 

 

LSI INDUSTRIES INC.

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 1 - INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

The interim condensed consolidated financial statements are unaudited and are prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information, and rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, the interim financial statements include all normal adjustments and disclosures necessary to present fairly the Company’s financial position as of September 30, 2025, the results of its operations for the three-month periods ended September 30, 2025, and 2024, and its cash flows for the three-month periods ended September 30, 2025, and 2024. These statements should be read in conjunction with the financial statements and footnotes included in the fiscal 2025 Annual Report on Form 10-K. Financial information as of June 30, 2025, has been derived from the Company’s audited consolidated financial statements.

 

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Consolidation:

 

A summary of the Company’s significant accounting policies is included in Note 1 to the audited consolidated financial statements of the Company’s fiscal 2025 Annual Report on Form 10-K.

 

Revenue Recognition:

 

The Company recognizes revenue when it satisfies the performance obligation in its customer contracts or purchase orders. Most of the Company’s products have a single performance obligation which is satisfied at a point in time when control is transferred to the customer. Control is generally transferred at the time of shipment when title and risk of ownership passes to the customer. For customer contracts with multiple performance obligations, the Company allocates the transaction price and any discounts to each performance obligation based on relative standalone selling prices. Payment terms are typically within 30 to 90 days from the shipping date, depending on the terms with the customer. The Company offers standard warranties that do not represent separate performance obligations.

 

Installation is a separate performance obligation, except for the Company’s digital signage products. For digital signage products, installation is not a separate performance obligation as the product and installation is the combined item promised in digital signage contracts. The Company is not always responsible for installation of products it sells and has no post-installation responsibilities other than standard warranties.

 

A number of the Company's display solutions and select lighting products are customized for specific customers. As a result, these customized products do not have an alternative use. For these products, the Company has a legal right to payment for performance to date and generally does not accept returns on these items. The measurement of performance is based upon cost plus a reasonable profit margin for work completed. Because there is no alternative use and there is a legal right to payment, the Company transfers control of the item as the item is being produced and therefore recognizes revenue over time. The customized product types are as follows:

 

●

Customer specific metal and millwork branded products and branded print graphics

●

Electrical components based on customer specifications

●

Digital signage and related media content

 

 

The Company also offers installation services for its display solutions elements and select lighting products. Installation revenue is recognized over time as the customer simultaneously receives and consumes the benefits provided through the installation process.

 

For these customized products and installation services, revenue is recognized using a cost-based input method: recognizing revenue and gross profit as work is performed based on the relationship between the actual cost incurred and the total estimated cost for the performance obligation.

 

On occasion, the Company enters into bill-and-hold arrangements on a limited basis. Each bill-and-hold arrangement is reviewed and revenue is recognized only when certain criteria have been met: (1) the customer has requested delayed delivery and storage of the products by the Company because the customer wants to secure a supply of the products but lacks storage space; (ii) the risk of ownership has passed to the customer; (iii) the products are segregated from the Company’s other inventory items held for sale; (iv) the products are ready for shipment to the customer; and (v) the Company does not have the ability to use the products or direct them to another customer.

 

Disaggregation of Revenue

 

The Company disaggregates the revenue from contracts with customers by the timing of revenue recognition because the Company believes it best depicts the nature, amount, and timing of its revenue and cash flows. The table below presents a reconciliation of the disaggregation by reportable segments:

 

		Three Months Ended
(In thousands)		September 30, 2025
		Lighting Segment				Display Solutions Segment
Timing of revenue recognition
Products and services transferred at a point in time		$	57,310			$	77,663
Products and services transferred over time			11,744				10,532
		$	69,054			$	88,195
Type of Product and Services
LED lighting, digital signage solutions, electronic circuit boards		$	55,749			$	3,350
Poles and other display solutions elements			12,733				70,359
Project management, installation services, shipping and handling			572				14,486
		$	69,054			$	88,195

 

		Three Months Ended
(In thousands)		September 30, 2024
		Lighting Segment				Display Solutions Segment
Timing of revenue recognition
Products and services transferred at a point in time		$	48,211			$	62,094
Products and services transferred over time			10,226				17,564
		$	58,437			$	79,658
Type of Product and Services
LED lighting, digital signage solutions, electronic circuit boards		$	47,429			$	8,436
Poles and other display solutions elements			10,393				55,703
Project management, installation services, shipping and handling			615				15,519
		$	58,437			$	79,658

 

 

Practical Expedients and Exemptions

 

●

The Company’s contracts with customers have an expected duration of one year or less, as such, the Company applies the practical expedient to expense sales commissions as incurred and has omitted disclosures on the amount of remaining performance obligations.

●

Shipping costs that are not material in context of the delivery of products are expensed as incurred.

●

The Company’s accounts receivable balance represents the Company’s unconditional right to receive payment from its customers with contracts. Payments are generally due within 30 to 90 days of completion of the performance obligation and invoicing; therefore, payments do not contain significant financing components.

●

The Company collects sales tax and other taxes concurrent with revenue-producing activities which are excluded from revenue. Shipping and handling costs are treated as fulfillment activities and included in cost of products and services sold on the Consolidated Statements of Operations.

 

 

New Accounting Pronouncements:

 

In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements: Codification Amendments in Response to SEC's Disclosure Update and Simplification Initiative. This ASU amends the disclosure or presentation requirements related to various subtopics in the FASB Accounting Standards Codification. The effective date for each amendment will be the date on which the SEC's removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited. The Company will monitor the removal of various requirements from the current regulations in order to determine when to adopt the related amendments, but it does not anticipate that the adoption of the new guidance will have a material impact on the Company’s consolidated financial statements and related disclosures. The Company will continue to evaluate the impact of this guidance on its consolidated financial statements.

 

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This ASU requires additional disclosures of various income tax components that affect the rate reconciliation based on the applicable taxing jurisdictions, as well as the qualitative and quantitative aspects of those components. The standard also requires information pertaining to taxes paid to be disaggregated for federal, state and foreign taxes, and contains other disclosure requirements. This ASU is effective for fiscal years beginning after December 15, 2024, and interim periods within fiscal years beginning after December 15, 2025, with early adoption permitted. The Company is currently evaluating the effect of this new guidance on its consolidated financial statements and related disclosures.

 

NOTE 3 — ACQUISITION OF CANADA’S BEST HOLDINGS

 

On March 11, 2025, the Company acquired Canada’s Best Holdings (CBH), an Ontario Canada-based leading provider of retail fixtures and custom store design solutions for grocery, quick service restaurant, c-store, banking, and specialty retail environments, for $25.9 million, subject to a working capital adjustment and future potential earnout payments up to $7.0 million. As of the acquisition date, total purchase consideration of $29.1 million includes the current fair value of the contingent consideration related to future earnout payments of $3.3 million. The future earnout payments include revenue and EBITDA goals for the fiscal years ending June 30,2026 and June 30, 2027. The Company incurred acquisition-related costs totaling $1.0 million which are included in the selling and administrative expense line of the consolidated statements of operations. The Company funded the initial purchase consideration totaling $25.9 million with a combination of cash on hand and from the $75 million revolving line of credit.

 

 

The Company accounted for this transaction as a business combination. The Company has preliminarily allocated the purchase price of $29.1 million, which includes an estimate of customary post-closing purchase price adjustments to the assets acquired and liabilities assumed at estimated fair values, and the excess of the purchase price over the aggregate fair values is recorded as goodwill. This preliminary allocation is subject to the final determination of the purchase price which will be finalized in fiscal 2026, as well as potential revision resulting from the finalization of pre-acquisition tax filings and earnout payment calculations. The Company has finalized the third-party valuations of certain assets including fixed assets and intangible assets. The allocation of the purchase consideration to the fair value of the assets acquired and liabilities assumed as of March 11, 2025, is as follows:

 

(In thousands)		March 11, 2025 as initially reported				Measurement period adjustments				March 11, 2025 as adjusted
Cash and cash equivalents		$	4,592			$	-			$	4,592
Accounts receivable			3,907				(55	)			3,852
Inventory			4,287				(104	)			4,183
Property, plant and equipment			640				1,422				2,062
Operating lease right-of-use assets			5,211				(386	)			4,825
Other assets			204				1,790				1,994
Intangible assets			9,955				(353	)			9,602
Accounts payable			(29	)			2				(27	)
Accrued expenses			(472	)			(639	)			(1,111	)
Operating lease liabilities			(2,954	)			-				(2,954	)
Other long-term liabilities			-				(1,515	)			(1,515	)
Deferred tax liability			(3,700	)			573				(3,127	)
Identifiable Assets			21,641				735				22,376
Goodwill			5,748				709				6,457
Net Purchase Consideration		$	27,389			$	1,444			$	28,833

 

The gross amount of accounts receivable is $4.3 million.

 

Goodwill recorded from the acquisition of CBH is attributable to the impact of the positive cash flow from CBH in addition to expected synergies from the business combination. The intangible assets include amounts recognized for the fair value of the trade name, non-compete agreements and customer relationships. The fair value of the intangible assets was determined based upon the income (discounted cash flow) approach. The following table presents the details of the intangible assets acquired at the date of acquisition:

 

(in thousands)		Estimated Fair Value				Estimated Useful Life (Years)
Tradename		$	991			10
Non-compete agreements			180			3	-	5
Customer relationships			8,431			20
		$	9,602

 

CBH’s post-acquisition results of operations for the period from July 1, 2025, through September 30, 2025, are included in the Company’s Consolidated Statements of Operations. Since the acquisition date, net sales of CBH for the period from July 1, 2025, through September 30, 2025, were $8.9 million and operating income was $1.3 million. The operating results of CBH are included in the Display Solutions Segment.

 

Pro Forma Impact of the Acquisition of CBH (Unaudited)

 

The following table represents unaudited pro forma results of operations and gives effect to the acquisition of CBH as if the transaction had occurred on July 1, 2023. The unaudited pro forma results of operations have been prepared for comparative purposes only and are not necessarily indicative of what would have occurred had the business combination been completed at the beginning of the period or the results that may occur in the future. Furthermore, the unaudited pro forma financial information does not reflect the impact of any synergies or operating efficiencies resulting from the acquisition of CBH.

 

 

The unaudited pro forma financial information for the three months ended September 30, 2024, is prepared using the acquisition method of accounting and has been adjusted to reflect the pro forma events that are: (1) directly attributable to the acquisition; (2) factually supportable; and (3) expected to have a continuing impact on the combined results. The unaudited pro-form operating income of $10.8 million excludes acquisition-related expenses of $0.1 million.

 

(in thousands; unaudited)		Three Months Ended September 30,
		2024
Sales		$	145,397
Gross Profit		$	36,206
Operating Income		$	10,794

  

NOTE 4 - SEGMENT REPORTING INFORMATION

 

The accounting guidance on Segment Reporting establishes standards for reporting information regarding operating segments in annual financial statements and requires selected information of those segments to be presented in financial statements. Operating segments are identified as components of an enterprise for which separate discrete financial information is available for evaluation by the chief operating decision maker (the Company’s Chief Executive Officer or “CODM”) in making decisions on how to allocate resources and assess performance. The Company’s two operating segments are Lighting and Display Solutions, with one executive team under the organizational structure reporting directly to the CODM with responsibilities for managing each segment. Corporate and Eliminations, which captures the Company’s corporate administrative activities, is also reported in the segment information.

 

The Company’s method for measuring profitability on a reportable segment basis and used by the CODM to assess performance is adjusted operating income and adjusted earnings before interest, tax, depreciation, amortization, along with other non-GAAP adjustments (adjusted EBITDA). These measurements are used to monitor performance compared to prior periods and forecasted results.

 

The Lighting Segment includes non-residential outdoor and indoor lighting fixtures utilizing LED light sources that have been fabricated and assembled for the Company’s markets, primarily the refueling and convenience store markets, parking lot and garage markets, quick-service restaurant market, retail and grocery store markets, the automotive market, the warehouse market, and the sports court and field market. The Company also services lighting product customers through the commercial and industrial project, stock and flow, and renovation channels. In addition to the manufacture and sale of lighting fixtures, the Company offers a variety of lighting controls to complement its lighting fixtures which include sensors, photocontrols, dimmers, motion detection and Bluetooth systems. The Lighting Segment also includes the design, engineering and manufacturing of electronic circuit boards, assemblies and sub-assemblies which are sold directly to customers.

 

The Display Solutions Segment manufactures, sells and installs exterior and interior visual image and display elements, including printed graphics, structural graphics, digital signage, menu board systems, millwork display fixtures, refrigerated displays, food equipment, countertops, and other custom display elements. These products are used in visual image programs in several markets including the refueling and convenience store markets, quick-service and casual restaurant market, retail and grocery store, and other retail markets. The Company accesses its customers primarily through a direct sale model utilizing its own sales force. Sales through distribution represent a small portion of Display Solutions sales. The Display Solutions Segment also provides a variety of project management services to complement our display elements, such as installation management, site surveys, permitting, and content management which are offered to our customers to support our digital signage.

 

 

The Company’s corporate administration activities are reported in the Corporate and Eliminations line item. These activities primarily include intercompany profit in inventory eliminations, expense related to certain corporate officers and support staff, the Company’s internal audit staff, expense related to the Company’s Board of Directors, equity compensation expense for various equity awards granted to corporate administration employees, certain consulting expenses, investor relations activities, and a portion of the Company’s legal, auditing, and professional fee expenses. Corporate identifiable assets primarily consist of cash, invested cash (if any), refundable income taxes (if any), and deferred income taxes. 

 

There were no customers or customer programs representing a concentration of 10% or more of the Company’s consolidated net sales in the three months ended September 30, 2025, or 2024. There was no concentration of accounts receivable at September 30, 2025, or 2024.

 

Summarized financial information for the Company’s operating segments is provided for the indicated periods and as of September 30, 2025, and September 30, 2024:

 

 

(In thousands)		Three Months Ended
		September 30, 2025
										Corporate
		Lighting				Display				& Elims				Total
Net sales		$	69,054			$	88,195			$	-			$	157,249
Operating income			8,549				8,592				(6,169	)			10,972
Long-term performance based compensation			109				215				958				1,282
Severance costs and restructuring costs			18				(90	)			1				(71	)
Amortization expense of acquired intangible assets			603				951				-				1,554
Acquisition costs			-				-				220				220
Expense on step-up basis of acquired assets			-				68				-				68
Adjusted operating income			9,279				9,738				(4,990	)			14,027
Depreciation Expense			673				888				85				1,646
Adjusted EBITDA		$	9,952			$	10,624			$	(4,905	)		$	15,671

 

(In thousands)		Three Months Ended
		September 30, 2024
										Corporate
		Lighting				Display				& Elims				Total
Net sales		$	58,437			$	79,658			$	-			$	138,095
Operating income			5,759				7,708				(4,336	)			9,131
Long-term performance based compensation			69				285				830				1,184
Severance costs and restructuring costs			60				-				-				60
Amortization expense of acquired intangible assets			603				805				-				1,408
Acquisition costs			-				-				48				48
Expense on step-up basis of acquired assets			-				67				-				67
Adjusted operating income			6,491				8,865				(3,458	)			11,898
Depreciation Expense			644				847				41				1,532
Adjusted EBITDA		$	7,135			$	9,712			$	(3,417	)		$	13,430

 

 

(In thousands)		Three Months Ended
		September 30
		2025				2024
Capital Expenditures:
Lighting Segment		$	289			$	712
Display Solutions Segment			611				47
Corporate and Eliminations			67				-
		$	967			$	759
Depreciation and Amortization:
Lighting Segment		$	1,262			$	1,212
Display Solutions Segment			1,841				1,635
Corporate and Eliminations			97				93
		$	3,200			$	2,940

 

		September 30, 2025				June 30, 2025
Identifiable Assets:
Lighting Segment		$	136,399			$	132,960
Display Solutions Segment			259,566				253,299
Corporate and Eliminations			8,908				10,103
		$	404,873			$	396,362

 

The segment net sales reported above represent sales to external customers. Identifiable assets are those assets used by each segment in its operations.

 

The Company records a 10% mark-up on intersegment revenues. Any intersegment profit in inventory is eliminated in consolidation. Intersegment revenues were eliminated in consolidation as follows:

 

Inter-segment sales
		Three Months Ended
(In thousands)		September 30
		2025				2024
Lighting Segment inter-segment net sales		$	3,245			$	5,984
Display Solutions Segment inter-segment net sales		$	114			$	171

 

  

NOTE 5 - EARNINGS PER COMMON SHARE

 

The following table presents the amounts used to compute basic and diluted earnings per common share, as well as the effect of dilutive potential common shares on weighted average shares outstanding:

 

(in thousands, except per share data)		Three Months Ended
		September 30
BASIC EARNINGS PER SHARE		2025				2024
Net Income		$	7,264			$	6,682
Weighted average shares outstanding during the period, net of treasury shares			29,345				28,514
Weighted average vested restricted stock units outstanding			42				90
Weighted average shares outstanding in the Deferred Compensation Plan during the period			1,062				989
Weighted average shares outstanding			30,449				29,593
Basic income per share		$	0.24			$	0.23
DILUTED EARNINGS PER SHARE
Net Income		$	7,264			$	6,682
Weighted average shares outstanding
Basic			30,449				29,593
Effect of dilutive securities (a):
Impact of common shares to be issued under stock option plans, and Contingently issuable shares, if any			932				937
Weighted average shares outstanding			31,381				30,530
Diluted income per share		$	0.23			$	0.22
Anti-dilutive securities (b)			-				265

 

(a)

Calculated using the “Treasury Stock” method as if dilutive securities were exercised and the funds were used to purchase common shares at the average market price during the period.

 

(b)

Anti-dilutive securities were excluded from the computation of diluted net income per share for the three months ended September 30, 2024, because the exercise price was greater than the average fair market price of the common shares or because the assumed proceeds from the award’s exercise or vesting was greater than the average fair market price of the common shares.

 

  

NOTE 6 – INVENTORIES, NET

 

The following information is provided as of the dates indicated:

 

(In thousands)		September 30, 2025				June 30, 2025
Inventories:
Raw materials		$	59,078			$	60,726
Work-in-progress			7,000				7,942
Finished goods			12,832				11,150
Total Inventories		$	78,910			$	79,818

  

NOTE 7 - ACCRUED EXPENSES

 

The following information is provided as of the dates indicated:

 

(In thousands)		September 30, 2025				June 30, 2025
Accrued Expenses:
Customer prepayments		$	4,896			$	4,070
Compensation and benefits			10,851				12,471
Accrued warranty			8,068				7,505
Accrued sales commissions			3,479				3,956
Accrued freight			2,320				1,978
Operating lease liabilities			5,695				6,037
Income taxes			1,502				1,848
Other accrued expenses			7,285				7,387
Total Accrued Expenses		$	44,096			$	45,252

  

NOTE 8 - GOODWILL AND OTHER INTANGIBLE ASSETS

 

The carrying values of goodwill and other intangible assets with indefinite lives are reviewed at least annually for possible impairment. The Company may first assess qualitative factors in order to determine if goodwill and indefinite-lived intangible assets are impaired. If through the qualitative assessment it is determined that it is more likely than not that goodwill and indefinite-lived assets are not impaired, no further testing is required. If it is determined more likely than not that goodwill and indefinite-lived assets are impaired, or if the Company elects not to first assess qualitative factors, the Company’s impairment testing continues with the estimation of the fair value of the reporting unit using a combination of a market approach and an income (discounted cash flow) approach, at the reporting unit level. The estimation of the fair value of the reporting unit requires significant management judgment with respect to revenue and expense growth rates, changes in working capital and the selection and use of an appropriate discount rate. The estimates of the fair value of reporting units are based on the best information available as of the date of the assessment. The use of different assumptions would increase or decrease estimated discounted future operating cash flows and could increase or decrease an impairment charge. Company management uses its judgment in assessing whether assets may have become impaired between annual impairment tests. Indicators such as adverse business conditions, economic factors and technological change or competitive activities may signal that an asset has become impaired. 

 

The Company identified its reporting units in conjunction with its annual goodwill impairment testing. The Company has a total of five reporting units that contain goodwill. One reporting unit is within the Lighting Segment and four reporting units are within the Display Solutions Segment. The tradename intangible assets have an indefinite life and are also tested separately on an annual basis. The Company relies upon a number of factors, judgments and estimates when conducting its impairment testing including, but not limited to, the Company’s stock price, operating results, forecasts, anticipated future cash flows, and marketplace data. There are inherent uncertainties related to these factors and judgments in applying them to the analysis of goodwill impairment.

 

 

The following table presents information about the Company's goodwill on the dates or for the periods indicated:

 

(In thousands)		Lighting Segment				Display Solutions Segment				Total
Balance as of September 30, 2025
Goodwill		$	70,971			$	82,865			$	153,836
Measurement period adjustments			-				(262	)			(262	)
Foreign currency translation			-				(218	)			(218	)
Accumulated impairment losses			(61,763	)			(27,525	)			(89,288	)
Goodwill, net as of September 30, 2025		$	9,208			$	54,860			$	64,068
Balance as of June 30, 2025
Goodwill		$	70,971			$	75,714			$	146,685
Goodwill acquired, net of adjustments			-				6,769				6,769
Foreign currency translation			-				382				382
Accumulated impairment losses			(61,763	)			(27,525	)			(89,288	)
Goodwill, net as of June 30, 2025		$	9,208			$	55,340			$	64,548

 

The gross carrying amount and accumulated amortization by each major intangible asset class is as follows:

 

(In thousands)		September 30, 2025
		Gross Carrying Amount				Accumulated Amortization				Net Amount
Amortized Intangible Assets
Customer relationships		$	78,315			$	26,307			$	52,008
Patents			268				268				-
LED technology, software			24,126				19,103				5,023
Trade name			3,685				1,456				2,229
Non-compete			587				317				270
Total Amortized Intangible Assets		$	106,981			$	47,451			$	59,530
Indefinite-lived Intangible Assets
Trademarks and trade names			16,982				-				16,982
Total indefinite-lived Intangible Assets			16,982				-				16,982
Total Other Intangible Assets		$	123,963			$	47,451			$	76,512

 

 

(In thousands)		June 30, 2025
		Gross Carrying Amount				Accumulated Amortization				Net Amount
Amortized Intangible Assets
Customer relationships		$	78,485			$	25,251			$	53,234
Patents			268				268				-
LED technology, software			24,126				18,694				5,432
Trade name			3,704				1,404				2,300
Non-compete			590				280				310
Total Amortized Intangible Assets		$	107,173			$	45,897			$	61,276
Indefinite-lived Intangible Assets
Trademarks and trade names			16,982				-				16,982
Total indefinite-lived Intangible Assets			16,982				-				16,982
Total Other Intangible Assets		$	124,155			$	45,897			$	78,258

 

		Three Months Ended
		September 30
(In thousands)		2025				2024
Amortization expense of other intangible assets		$	1,554			$	1,408

 

The Company expects to record annual amortization expense as follows:

 

(In thousands)
2026		$	6,226
2027		$	6,008
2028		$	5,568
2029		$	4,927
2030		$	4,921
After 2030		$	33,626

  

NOTE 9 – DEBT

 

The Company’s long-term debt as of September 30, 2025, and June 30, 2025, consisted of the following:

 

		September 30,				June 30,
(In thousands)		2025				2025
Secured line of credit		$	39,965			$	36,956
Term loan, net of debt issuance costs of $8 and $10, respectively			10,711				11,601
Total debt			50,676				48,557
Less: amounts due within one year			3,571				3,571
Total amounts due after one year, net		$	47,105			$	44,986

 

 

In September 2025, the Company amended its existing $100 million credit facility which consisted of a $25 million term loan and a $75 million revolving credit line to a $125 million revolving credit line. The $125 million credit facility will expire in the first quarter of fiscal 2031. Interest on the revolving line of credit is charged based upon an increment over the Secured Overnight Financing Rate (SOFR). The increment over the SOFR borrowing rate fluctuates between 100 and 225 basis points of which depend upon the ratio of indebtedness to earnings before interest, taxes, depreciation, and amortization (“EBITDA”), as defined in the line of credit agreement. As of September 30, 2025, the Company’s borrowing rate against its revolving line of credit was 5.5%. The increment over the SOFR borrowing rate will be 100 basis points for the second quarter of fiscal 2026. The fee on the unused balance of the $125 million committed line of credit fluctuates between 15 and 25 basis points. Under the terms of the credit agreement, the Company is required to comply with a financial covenant that limits the ratio of indebtedness to EBITDA. The Company is also required to maintain an interest coverage ratio equal to or above the minimum set forth in the agreement. Under the amended credit facility, there was $73 million available for borrowing under the $125 million line of credit.

 

The Company is in compliance with all of its loan covenants as of September 30, 2025.

 

NOTE 10 - CASH DIVIDENDS

 

The Company paid cash dividends of $1.5 million for the three months ended September 30, 2025, and September 30, 2024, respectively. Dividends on restricted stock units in the amount of $0.2 million and $0.1 million were accrued as of both September 30, 2025, and 2024, respectively. These dividends will be paid upon the vesting of the restricted stock units when shares are issued to the award recipients. In November 2025, the Board of Directors declared a regular quarterly cash dividend of $0.05 per share payable November 25, 2025, to shareholders of record as of November 17, 2025. The indicated annual cash dividend rate is $0.20 per share.

 

NOTE 11 – EQUITY COMPENSATION

 

In November 2022, the Company's shareholders approved the amendment and restatement of the 2019 Omnibus Award Plan ("2019 Omnibus Plan") which increased the number of shares authorized for issuance under the plan by 2,350,000 and removed the Plan's fungible share counting feature. The purpose of the 2019 Omnibus Plan is to provide a means to attract and retain key personnel and to align the interests of the directors, officers, and employees with the Company's shareholders. The plan also provides a vehicle whereby directors and officers may acquire shares in order to meet the ownership requirements under the Company's Stock Ownership Policy. The 2019 Omnibus Plan allows for the grant of stock options, stock appreciation rights, restricted stock awards, restricted stock units RSUs, performance stock units ("PSUs") and other awards. Except for Restricted Stock Unit ("RSU") grants which are time-based, participants in the Company's Long-Term Equity Compensation Plans are awarded the opportunity to acquire shares over a three-year performance measurement period tied to specific company performance metrics. The number of shares that remain reserved for issuance under the 2019 Omnibus Plan is 1,047,885 as of September 30, 2025.

 

In the three months ended September 30, 2025, the Company granted 121,440 PSUs and 80,958 RSUs, both with a weighted average market value of $19.30. Stock compensation expense was $1.1 million for both the three months ended September 30, 2025, and 2024, respectively.

 

In November of 2021, our board of directors approved the LSI Employee Stock Purchase Plan (“ESPP”). A total of 270,000 shares of common stock were provided for issuance under the ESPP. Employees may participate at their discretion and are able to purchase, through payroll deduction, common stock at a 10% discount on a quarterly basis. Employees may end their participation at any time during the offering period, and participation ends automatically upon termination of employment with the company. During fiscal year 2026, employees purchased 4,000 shares. At September 30, 2025, 221,000 shares remained available for purchase under the ESPP.

 

  

NOTE 12 - SUPPLEMENTAL CASH FLOW INFORMATION

 

(in thousands)		Three Months Ended
		September 30
Cash Payments:		2025				2024
Interest		$	601			$	865
Income taxes		$	2,126			$	40
Non-cash investing and financing activities
Issuance of common shares as compensation		$	135			$	113
Issuance of common shares to fund deferred compensation plan		$	443			$	487
Issuance of common shares to fund ESPP plan		$	55			$	45

  

NOTE 13 - COMMITMENTS AND CONTINGENCIES

 

The Company is party to various negotiations, customer bankruptcies, and legal proceedings arising in the normal course of business. The Company provides reserves for these matters when a loss is probable and reasonably estimable. The Company does not disclose a range of potential loss because the likelihood of such a loss is remote. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Company’s financial position, results of operations, cash flows or liquidity.

 

The Company recorded a $3.4 million contingent liability related to the future earnout payments as part of the acquisition of Canada’s Best Holding (CBH). (Refer to Footnote 3.) The $3.3 million, and $3.4 million represents the value of the earnout converted from its functional currency to USD as of September 30, 2025, and June 30, 2025, respectively.

 

NOTE 14 - LEASES

 

The Company leases certain manufacturing facilities along with a small office space, several forklifts, several small tooling items, and various items of office equipment. All but two of the Company’s leases are operating leases. Leases have a remaining term of one to seven years some of which have an option to renew. The Company does not assume renewals in determining the lease term unless the renewals are deemed reasonably certain. The lease agreements do not contain any material residual guarantees or material variable lease payments.

 

The Company has periodically entered into short-term operating leases with an initial term of twelve months or less. The Company elected not to record these leases on the balance sheet. The rent expense for these leases was immaterial for September 30, 2025, and 2024.

 

The Company has certain leases that contain lease and non-lease components and has elected to utilize the practical expedient to account for these components together as a single lease component.

 

 

Lease expense is recognized on a straight-line basis over the lease term. The Company used its incremental borrowing rate when determining the present value of lease payments.

 

		Three Months Ended
		September 30
(In thousands)		2025				2024
Operating lease cost		$	1,875			$	1,622
Financing lease cost:
Amortization of right of use assets			-				73
Interest on lease liabilities			-				11
Variable lease cost			-				7
Sublease income			-				(39	)
Total lease cost		$	1,875			$	1,674

 

		Three Months Ended
Supplemental Cash Flow Information		September 30
(in thousands)		2025				2024
Cash flows from operating leases
Fixed payments - operating lease cash flows		$	1,753			$	1,629
Liability reduction - operating cash flows		$	1,687			$	1,380
Cash flows from finance leases
Interest - operating cash flows		$	-			$	11
Repayments of principal portion - financing cash flows		$	-			$	83

 

Operating Leases:		September 30, 2025				June 30, 2025
Total operating right-of-use assets		$	16,570			$	17,187
Accrued Expenses			5,695				6,037
Long-term operating lease liability			11,687				12,047
Total operating lease liabilities		$	17,382			$	18,084
Weighted Average remaining Lease Term (in years)			3.32				3.49
Weighted Average Discount Rate			5.78	%			5.70	%

 

 

In fiscal 2025, the Company terminated its finance lease in Akron, Ohio as of June 30, 2025. In conjunction with the termination of the finance lease, the Company entered into a new lease to expand its production capabilities in its Houston, Texas location. The new lease is effective October 1, 2025, and expires September 30, 2035.

 

Maturities of Lease Liability:		Operating Lease Liabilities				Finance Lease Liabilities				Net Lease Commitments
2026		$	6,357			$	-			$	6,357
2027			5,931				-				5,931
2028			3,544				-				3,544
2029			2,039				-				2,039
2030			1,212				-				1,212
Thereafter			68				-				68
Total lease payments		$	19,151			$	-			$	19,151
Less: Interest			(1,769	)			-				(1,769	)
Present Value of Lease Liabilities		$	17,382			$	-			$	17,382

  

NOTE 15 – INCOME TAXES

 

The Company's effective income tax rate is based on expected income, statutory rates, and tax planning opportunities available in the various jurisdictions in which it operates. For interim financial reporting, the Company estimates the annual income tax rate based on projected taxable income for the full year and records a quarterly income tax provision or benefit in accordance with the anticipated annual rate. The Company refines the estimates of the year's taxable income as new information becomes available, including actual year-to-date financial results. This continual estimation process often results in a change to the expected effective income tax rate for the year. When this occurs, the Company adjusts the income tax provision during the quarter in which the change in estimate occurs so that the year-to-date provision reflects the expected income tax rate. Significant judgment is required in determining the effective tax rate and in evaluating tax positions.

 

		Three Months Ended
		September 30
		2025				2024
Reconciliation of effective tax rate:
Provision for income taxes at the anticipated annual tax rate			24.7	%			25.8	%
Uncertain tax positions			1.3				0.8
Deferred income tax adjustment			-				2.2
Share-based compensation			(0.9	)			(9.1	)
Effective tax rate			25.1	%			19.7	%

  

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Note About Forward-Looking Statements

 

This report includes estimates, projections, statements relating to our business plans, objectives, and expected operating results that are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements may appear throughout this report, including this section. These forward-looking statements generally are identified by the words “believe,” “project,” “expect,” “anticipate,” “focus,” “estimate,” “intend,” “strategy,” “future,” “opportunity,” “plan,” “may,” “should,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties that may cause actual results to differ materially. We describe risks and uncertainties that could cause actual results and events to differ materially in in our Annual Report on Form 10-K in the following sections: “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Quantitative and Qualitative Disclosures about Market Risk,” and “Risk Factors.” All of those risks and uncertainties are incorporated herein by reference. We undertake no obligation to update or revise publicly any forward-looking statements, whether because of new information, future events, or otherwise.

 

 

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand the results of operations and financial condition of LSI Industries Inc. MD&A is provided as a supplement to, and should be read in conjunction with, our Annual Report on Form 10-K for the year ended June 30, 2025, and our financial statements and the accompanying Notes to Financial Statements (Part I, Item 1 of this Form 10-Q).

 

Our condensed consolidated financial statements, accompanying notes and the “Safe Harbor” Statement, each as appearing earlier in this report, should be referred to in conjunction with this Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

Summary of Consolidated Results

 

Net Sales by Business Segment		Three Months Ended
		September 30
(In thousands)		2025				2024
Lighting Segment		$	69,053			$	58,437
Display Solutions Segment			88,196				79,658
Total Net Sales		$	157,249			$	138,095

 

Operating Income (Loss) by Business Segment		Three Months Ended
		September 30
(In thousands)		2025				2024
Lighting Segment		$	8,549			$	5,759
Display Solutions Segment			8,592				7,708
Corporate and Eliminations			(6,169	)			(4,336	)
Total Operating Income		$	10,972			$	9,131

 

Net sales of $157.2 million for the three months ended September 30, 2025, increased 14% as compared to net sales of $138.1 million for the three months ended September 30, 2024. Lighting segment net sales of $69.1 million increased 18% compared to prior year quarter net sales of $58.4 million. Strong Lighting t net sales were driven by the introduction of several new products and the Company’s ability to convert multiple competitor accounts to LSI. Net sales in the Display Solutions segment of $88.2 million increased 11% compared to the same quarter last year sales of $79.7 million. The increase in net sales in the Display Solutions segment is the result of continued steady demand in the refueling/c-store and grocery markets and from the acquisition of Canada’s Best Holdings which contributed $8.9 million of the quarter-over-quarter sales growth.

 

Operating income of $11.0 million for the three months ended September 30, 2025, represents a 20% increase from operating income of $9.1 million in the three months ended September 30, 2024. Adjusted operating income, a Non-GAAP measure, was $14.1 million in the three months ended September 30, 2025, represents an 18% increase compared to $11.9 million in the three months ended September 30, 2024. Refer to “Non-GAAP Financial Measures” below for a reconciliation of Non-GAAP financial measures to U.S. GAAP measures. The increase in operating income is the result of an increase in net sales in both segments coupled with improved price realization and disciplined cost management.

 

 

Non-GAAP Financial Measures

 

This report includes adjustments to GAAP operating income, net income, and earnings per share for the three months ended September 30, 2025, and 2024.  Operating income, net income, and earnings per share, which exclude the impact of long-term performance-based compensation expense, the amortization expense of acquired intangible assets, commercial growth opportunity expense, acquisition costs, the lease expense on the step-up basis of acquired leases, and restructuring and severance costs, are non-GAAP financial measures.  We further note that while the amortization expense of acquired intangible assets is excluded from the non-GAAP financial measures, the revenue of the acquired companies is included in the measures, and the acquired assets contribute to the generation of revenue. We believe these non-GAAP measures will provide increased transparency to our core operating performance of the business. Also included in this report are non-GAAP financial measures, including Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA and Adjusted EBITDA), Net Debt to Adjusted EBITDA, and Free Cash Flow.  We believe that these are useful as supplemental measures in assessing the operating performance of our business.  These measures are used by our management, including our chief operating decision maker, to evaluate business results, and are frequently referenced by those who follow the Company.  These non-GAAP measures may be different from non-GAAP measures used by other companies.  In addition, the non-GAAP measures are not based on any comprehensive set of accounting rules or principles.  Non-GAAP measures have limitations, in that they do not reflect all amounts associated with our results as determined in accordance with U.S. GAAP.  Therefore, these measures should be used only to evaluate our results in conjunction with corresponding GAAP measures.  Below is a reconciliation of these non-GAAP measures to net income and earnings per share reported for the periods indicated along with the calculation of EBITDA, Adjusted EBITDA, Free Cash Flow, Net Debt to Adjusted EBITDA, and organic sales growth.

 

		Three Months Ended
Reconciliation of operating income to adjusted operating income:		September 30
		2025				2024
(In thousands)
Operating income as reported		$	10,972			$	9,131
Long-term performance based compensation			1,282				1,184
Amortization expense of acquired intangible assets			1,554				1,408
Restructuring/severance costs			(71	)			60
Acquisition costs			220				48
Lease expense on the step-up basis of acquired leases			68				67
Adjusted operating income		$	14,025			$	11,898

 

Reconciliation of net income to adjusted net income		Three Months Ended
		September 30
(In thousands, except per share data)		2025								2024
						Diluted EPS								Diluted EPS
Net income as reported		$	7,264			$	0.23			$	6,682			$	0.22
Long-term performance based compensation			954	(1)			0.03				881	(6)			0.03
Amortization expense of acquired intangible assets			1,117	(2)			0.04				1,042	(7)			0.03
Restructuring/severance costs			(53	)    (3)			-				45	(8)			-
Acquisition costs			165	(4)			-				36	(9)			-
Lease expense on the step-up basis of acquired leases			51	(5)			-				50	(10)			-
Foreign Currency transaction loss on intercompany loan			326				0.01				-				-
Tax rate difference between reported and adjusted net income			(93	)			-				(755	)			(0.02	)
Net income adjusted		$	9,731			$	0.31			$	7,981			$	0.26

 

 

The following represents the income tax effects of the adjustments in the tables above, which were calculated using the estimated combined U.S., Canada and Mexico effective income tax rates for the periods indicated (in thousands):

 

(1) $328

(2) $437

(3) ($18)

(4) $55

(5) $17

(6) $267

(7) $366

(8) $15

(9) $12

(10) $17

 

		Three Months Ended
Reconciliation of net income to EBITDA and adjusted EBITDA		September 30
		2025				2024
(In thousands)
Net income - reported		$	7,264			$	6,682
Income tax			2,431				1,635
Interest expense, net			747				875
Other expense (income)			530				(61	)
Operating income as reported		$	10,972			$	9,131
Depreciation and amortization			3,200				2,940
EBITDA		$	14,172			$	12,071
Acquisition costs			220				48
Long-term performance based compensation			1,282				1,184
Restructuring/severance costs			(71	)			60
Lease expense on the step-up basis of acquired leases			68				67
Adjusted EBITDA		$	15,671			$	13,430

 

		Three Months Ended
Reconciliation of cash flow from operations to free cash flow		September 30
		2025				2024
(In thousands)
Cash flow from operations		$	676			$	11,846
Capital expenditures			(967	)			(759	)
Free cash flow		$	(291	)		$	11,087

 

Net debt to adjusted EBITDA		September 30
(In thousands)		2025				2024
Current portion and long-term debt as reported		$	3,571			$	3,571
Long-Term Debt			47,105				44,118
Debt as reported		$	50,676			$	47,689
Less:
Cash and cash equivalents as reported			7,143				6,969
Net debt		$	43,533			$	40,720
Adjusted EBITDA - Trailing 12 Months		$	57,308			$	49,770
Net debt to adjusted EBITDA			0.8				0.8

 

 

Results of Operations

 

THREE MONTHS ENDED SEPTEMBER 30, 2025, COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 2024

 

Display Solutions Segment
(In thousands)		2025				2024
Net Sales		$	88,196			$	79,658
Gross Profit		$	17,095			$	15,030
Operating Income		$	8,592			$	7,708

 

Display Solutions Segment net sales of $88.2 million in the three months ended September 30, 2025, increased 11% from net sales of $79.7 million in the same period in fiscal 2025. The increase in net sales in the Display Solutions segment is the result of favorable demand in the refueling/c-store and grocery markets and from the acquisition of Canada’s Best Holdings which contributed $8.9 million of the quarter-over-quarter sales growth.

 

Gross profit of $17.1 million in the three months ended September 30, 2025, increased 14% from the same period of fiscal 2025. Gross profit as a percentage of net sales in the three months ended September 30, 2025, increased to 19.4% from 18.9% in the same period of fiscal 2025 impacted by favorable product and vertical market mix. The Company continues to maintain favorable program pricing and prudent cost management.

 

Operating expenses of $8.5 million in the three months ended September 30, 2025, increased 16% from the same period of fiscal 2025, primarily driven by the acquisition of CBH and by continued investment in commercial initiatives to drive growth.

 

Display Solutions Segment operating income of $8.6 million in the three months ended September 30, 2025, increased 12% from the same period of fiscal 2025. The increase in operating income was driven by the increase in net sales and an improvement in gross profit margin.

 

Lighting Segment
(In thousands)		2025				2024
Net Sales		$	69,053			$	58,437
Gross Profit		$	23,182			$	18,626
Operating Income		$	8,549			$	5,759

 

Lighting Segment net sales of $69.1 million in the three months ended September 30, 2025, increased 18% compared to net sales of $58.4 million in the same period in fiscal 2025. Strong Lighting net sales were driven by the introduction of several new products and the Company’s ability to convert multiple competitor accounts to LSI.   

 

Gross profit of $23.2 million in the three months ended September 30, 2025, increased 25% from the same period of fiscal 2025 while gross profit as a percentage of sales improved from 31.9% in the first quarter of fiscal 2025 to 33.6% in the first quarter of fiscal 2026. The improved gross margin reflects increased volume, but also the ability to successfully align selling prices with changes in material input costs.

 

Operating expenses of $14.6 million in the three months ended September 30, 2025, increased 14% from the same period of fiscal 2025, driven mostly by agent commission expense resulting from higher sales.

 

Lighting Segment operating income of $8.5 million for the three months ended September 30, 2025, increased 48% from operating income of $5.8 million in the same period of fiscal 2025 primarily driven by increased net sales and an improvement in gross profit margin.

 

 

Corporate and Eliminations
(In thousands)		2025				2024
Gross (Loss)		$	-			$	(9	)
Operating (Loss)		$	(6,169	)		$	(4,336	)

 

The gross (loss) relates to the change in the intercompany profit in inventory elimination.

 

Operating expenses of $6.2 million in the three months ended September 30, 2025, increased from operating expenses of 4.3 in the three months ended September 30, 2024. The increase was primarily the result of the investment in commercial initiatives to support the growth of the Company, including the cost associated with acquisitions, and performance related compensation programs.

 

Consolidated Results

 

The Company reported $0.7 million and $0.8 million of net interest expense in the three months ended September 30, 2025, and September 30, 2024, respectively. The decrease in interest expense is the result of positive cash flow to pay down the of funds borrowed to acquire EMI Industries, LLC in the fourth quarter of fiscal 2024 and Canada’s Best Holdings in the third quarter of fiscal 2025, and by lower borrowing costs. The Company also recorded other expense/(income) of $0.5 million and ($0.1) million in the three months ended September 30, 2025, and September 30, 2024, respectively, both of which is related to net foreign exchange currency transaction gains and losses through the Company’s Mexican and Canadian subsidiaries.

 

The $2.4 million of income tax expense in the three months ended September 30, 2025, represents a consolidated effective tax rate of 25.1%. The $1.6 million of income tax expense in the three months ended September 30, 2024, represents a consolidated effective tax rate of 19.7%. Impacting the effective tax rate of both reported periods was the favorable tax treatment of the Company’s long-term performance-based compensation.

 

The Company reported net income of $7.3 million in the three months ended September 30, 2025, compared to net income of $6.7 million in the three months ended September 30, 2024. Non-GAAP adjusted net income was $9.7 million for the three months ended September 30, 2025, compared to adjusted net income of $8.0 million for the three months ended September 30, 2024 (Refer to the Non-GAAP tables above). The increase in Non-GAAP adjusted net income is primarily the result of an increase in net sales and by the favorable profit margin impact of product mix. Diluted adjusted earnings per share of $0.23 was reported in the three months ended September 30, 2025, compared to $0.22 diluted adjusted earnings per share in the same period of fiscal 2025. The weighted average common shares outstanding for purposes of computing diluted earnings per share in the three months ended September 30, 2025, were 31,381,000 shares compared to 30,530,000 shares in the same period last year.

 

Liquidity and Capital Resources

 

The Company considers its level of cash on hand, borrowing capacity, current ratio and working capital levels to be its most important measures of short-term liquidity. For long-term liquidity indicators, the Company believes its ratio of long-term debt to equity and our historical levels of net cash flows from operating activities to be the most important measures.

 

At September 30, 2025, the Company had working capital of $112.4 million compared to $96.8 million at June 30, 2025. The ratio of current assets to current liabilities was 2.2 to 1 as of September 30, 2025, and 2.0 to 1 as of June 30, 2025. The increase in working capital from June 30, 2025, to September 30, 2025, is primarily driven by a $10.4 million increase in net accounts receivable and a $3.7 million increase in cash.

 

Net accounts receivable was $114.8 million and $104.3 million at September 30, 2025, and June 30, 2025, respectively. DSO increased to 65 days at September 30, 2025, from 57 days at June 30, 2025. The increase in net accounts receivable and the corresponding increase in DSO is directly related to strong sales in the last month of the quarter, and an inadvertent delay in project billing for a large customer.   

 

 

Net inventories of $78.9 million at September 30, 2025, decreased $0.9 million from $79.8 million at June 30, 2025. Lighting Segment net inventory increased $3.0 million to support the growth in backlog, whereas net inventory in the Display Solutions Segment decreased $3.9 million as a result of several shipments supporting several customer rollout programs.

 

Cash generated from operations and borrowing capacity under the Company’s line of credit is its primary source of liquidity. In September 2025, the Company amended its existing $100 million credit facility which consisted of a $25 million term loan and a $75 million revolving credit line to a $125 million revolving credit line. The $125 million credit facility will expire in the first quarter of fiscal 2031. As of September 30, 2025, $73 million of the credit line was available. The Company is in compliance with all of its loan covenants. The $100 million credit facility plus cash flows from operating activities are adequate for operational and capital expenditure needs for the remainder of fiscal 2026.

 

The Company generated $0.7 million of cash from operating activities in the three months ended September 30, 2025, compared to $11.8 million of cash generated from operating activities in the same period in fiscal 2025. While cash flow from earnings was positive in the first quarter of fiscal 2026, the growth in net accounts receivable partially offset the cash flow generated from earnings. The Company continues to proactively manage its working capital while generating positive cash flow from earnings.

 

The Company consumed $0.7 million and $0.8 million of cash related to investing activities in the three months ended September 30, 2025, and September 30, 2025, respectively, most of which related to investments in equipment and tooling to support sales growth.

 

The Company generated cash of $3.9 million in the three months ended September 30, 2025, compared to a consumption of cash of $8.1 million in the three months ended September 30, 2024, related to financing activities. The decline in cash flow from operations from the first quarter of fiscal 2025 to the first quarter of fiscal 2026 contributed to the period-over-period comparison of cash flow from financing activities whereby the Company borrowed from its credit facility to fund the operating cashflow shortfall in the current quarter. Contributing favorably to cash flow from financing activities was the generation of cash related to the proceeds from the exercise of stock options of $3.0 million in the first quarter of fiscal 2026 compared to $0.2 million of proceeds from the exercise of stock option in the prior period.

 

The Company has on its balance sheet financial instruments consisting primarily of cash and cash equivalents, revolving lines of credit, and long-term debt. The fair value of these financial instruments approximates carrying value because of their short-term maturity and/or variable, market-driven interest rates.

 

Off-Balance Sheet Arrangements

 

The Company has no financial instruments with off-balance sheet risk and have no off-balance sheet arrangements.

 

Cash Dividends

 

In November 2025, the Board of Directors declared a regular quarterly cash dividend of $0.05 per share payable November 25, 2025, to shareholders of record as of November 17, 2025. The indicated annual cash dividend rate for fiscal 2026 is $0.20 per share. The Board of Directors has adopted a policy regarding dividends which indicates that dividends will be determined by the Board of Directors in its discretion based upon its evaluation of earnings, cash flow requirements, financial condition, debt levels, stock repurchases, future business developments and opportunities, and other factors deemed relevant.

 

Critical Accounting Policies and Estimates

 

A summary of our significant accounting policies is included in Note 1 to the audited consolidated financial statements of the Company’s fiscal 2025 Annual Report on Form 10-K.

 

 

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

There have been no material changes in our exposure to market risk since June 30, 2025. Additional information can be found in Item 7A, Quantitative and Qualitative Disclosures About Market Risk, which appears on page 16 of the Annual Report on Form 10-K for the fiscal year ended June 30, 2025.

 

ITEM 4.  CONTROLS AND PROCEDURES

 

Disclosure Controls and Procedures

 

We maintain disclosure controls and procedures (as such term is defined Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), that are designed to ensure that information required to be disclosed by a company in the reports that it files under the Exchange Act is recorded, processed, summarized, and reported within required time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

 

We conducted, under the supervision of our management, including the Chief Executive Officer and Chief Financial Officer, an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Based upon our evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, 2024, our disclosure controls and procedures were effective. Management believes that the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q are fairly presented in all material respects in accordance with GAAP for interim financial statements, and the Company’s Chief Executive Officer and Chief Financial Officer have certified that, based on their knowledge, the condensed consolidated financial statements included in this report fairly present in all material respects the Company’s financial condition, results of operations and cash flows for each of the periods presented in this report.

 

Changes in Internal Control

 

There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter ended September 30, 2025, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 

PART II.  OTHER INFORMATION

 

ITEM 5. OTHER INFORMATION

 

None.

 

ITEM 6.  EXHIBITS

 

Exhibits:

 

10.1	Fiscal Year 2026 Long-Term Incentive Plan (LTIP)*++

 

10.2	Fiscal Year 2026 Short-Term Incentive Plan (STIP)*++

 

31.1	Certification of Principal Executive Officer required by Rule 13a-14(a)

 

31.2	Certification of Principal Financial Officer required by Rule 13a-14(a)

 

32.1	Section 1350 Certification of Principal Executive Officer

 

32.2	Section 1350 Certification of Principal Financial Officer

 

101.INS Inline XBRL Instance Document

 

101.SCH Inline XBRL Taxonomy Extension Schema Document

 

101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document

 

101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document

 

101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document

 

101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document

 

104	Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101)

 

* Management compensatory agreement.

++ Certain portions of this exhibit have been omitted pursuant to Item 601(b)(10) of Regulation S-K. The omitted information is not material and would likely cause competitive harm to the Registrant if publicly disclosed. The Registrant hereby agrees to furnish a copy of any omitted portion to the SEC upon request.

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

	LSI Industries Inc.
	By:	/s/ James A. Clark
		James A. Clark
		Chief Executive Officer and President
		(Principal Executive Officer)
	By:	/s/ James E. Galeese
		James E. Galeese
		Executive Vice President and Chief Financial Officer
		(Principal Financial Officer)
November 7, 2025