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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2025, OR

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ________________ TO ________________.

Commission File No. 0-13375

LSI Industries Inc.

(Exact name of registrant as specified in its charter)

Ohio

31-0888951

(State or other jurisdiction

of incorporation or organization)

(I.R.S. Employer Identification No.)

10000 Alliance Road, Cincinnati, Ohio		45242
(Address of principal executive offices)		(Zip Code)
(513) 793-3200
Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which

registered

Common Stock, no par value

LYTS

NASDAQ Global Select Market

Indicate by checkmark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ NO ☐

Indicate by checkmark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ NO ☐

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

	Large accelerated filer ☐	Accelerated filer ☒	Emerging growth company ☐
	Non-accelerated filer ☐	Smaller reporting company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO ☒

As of January 30, 2026, there were 31,133,195 shares of the registrant's common stock, no par value per share, outstanding.

Table of Contents

LSI INDUSTRIES INC.

FORM 10-Q

FOR THE QUARTER ENDED DECEMBER 31, 2025

INDEX

PART I. FINANCIAL INFORMATION		3

ITEM 1.	FINANCIAL STATEMENTS	3

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS		3

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME		4

CONDENSED CONSOLIDATED BALANCE SHEETS		5

CONDENSED CONSOLIDATED BALANCE SHEETS		6

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDER’S EQUITY		7

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS		8

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS		9

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	23

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	32

ITEM 4.	CONTROLS AND PROCEDURES	32

PART II. OTHER INFORMATION		33

ITEM 5.	OTHER INFORMATION	33

ITEM 6.	EXHIBITS	33

SIGNATURES		34

Page 2

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

LSI INDUSTRIES INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended					Six Months Ended
	December 31					December 31
(In thousands, except per share data)	2025			2024		2025		2024

Net sales	$	147,002		$	147,734	$	304,251	$	285,829

Cost of products and services sold		109,568			112,873		226,540		217,321

Gross profit		37,434			34,861		77,711		68,508

Selling and administrative expenses		28,569			26,402		57,874		50,918

Operating income		8,865			8,459		19,837		17,590

Interest expense		573			728		1,320		1,603
Other expense (income)		(103	)		382		427		322

Income before income taxes		8,395			7,349		18,090		15,665

Income tax expense		2,047			1,702		4,478		3,336

Net income	$	6,348		$	5,647	$	13,612	$	12,329


Earnings per common share (see Note 5)
Basic	$	0.20		$	0.19	$	0.44	$	0.41
Diluted	$	0.20		$	0.18	$	0.43	$	0.40


Weighted average common shares outstanding
Basic		31,157			29,930		30,803		29,761
Diluted		32,004			30,876		31,685		30,709

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

Page 3

Table of Contents

LSI INDUSTRIES INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

	Three Months Ended					Six Months Ended
	December 31					December 31
(In thousands)	2025		2024			2025		2024

Net income	$	6,348	$	5,647		$	13,612	$	12,329

Foreign currency translation adjustment		243		(48	)		46		(157	)

Comprehensive income	$	6,591	$	5,599		$	13,658	$	12,172

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

Page 4

Table of Contents

LSI INDUSTRIES INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	December 31,			June 30,
(In thousands, except shares)	2025			2025

ASSETS

Current assets

Cash and cash equivalents	$	6,407		$	3,457

Accounts receivable, less allowance for credit losses of $975 and $1,152, respectively		90,618			104,347

Inventories		82,023			79,818

Refundable income taxes		998			-

Other current assets		7,213			6,544

Total current assets		187,259			194,166

Property, Plant and Equipment, at cost
Land		4,029			4,029
Buildings		24,928			24,575
Machinery and equipment		78,769			77,858
Construction in progress		1,913			989
		109,639			107,451
Less accumulated depreciation		(79,267	)		(76,297	)
Net property, plant and equipment		30,372			31,154

Goodwill		64,089			64,548

Other intangible assets, net		75,106			78,258

Operating lease right-of-use assets		30,080			17,187

Deferred tax assets		5,561			7,302

Other long-term assets, net		3,839			3,747

Total assets	$	396,306		$	396,362

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

Page 5

Table of Contents

LSI INDUSTRIES INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	December 31,			June 30,
(In thousands, except shares)	2025			2025

LIABILITIES & SHAREHOLDERS' EQUITY

Current liabilities
Current maturities of long-term debt	$	-		$	3,571
Accounts payable		43,334			48,526
Accrued expenses		43,841			45,252

Total current liabilities		87,175			97,349

Long-term debt		27,939			44,986

Operating lease liabilities		23,247			12,047

Other long-term liabilities		3,310			4,695

Deferred tax liabilities		3,197			3,209

Commitments and contingencies (Note 13)		3,341			3,354

Shareholders' Equity
Preferred shares, without par value; Authorized 1,000,000 shares, none issued		-			-
Common shares, without par value; Authorized 50,000,000 shares; Outstanding 31,113,681 and 30,054,532 shares, respectively		170,489			163,692
Treasury shares, without par value		(10,845	)		(10,011	)
Deferred compensation plan		10,845			10,011
Retained earnings		76,733			66,201
Accumulated other comprehensive income		875			829

Total shareholders' equity		248,097			230,722

Total liabilities & shareholders' equity	$	396,306		$	396,362

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

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LSI INDUSTRIES INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(Unaudited)

	Common Shares					Treasury Shares						Key Executive			Accumulated Other						Total
	Number Of					Number Of						Compensation			Comprehensive			Retained			Shareholders'
	Shares		Amount			Shares			Amount			Amount			Income/(Loss)			Earnings			Equity

Balance at June 30, 2024		29,222	$	156,365			(1,036	)	$	(8,895	)	$	8,895			202		$	47,788		$	204,355

Net Income		-		-			-			-			-			-			6,682			6,682
Other comprehensive loss		-		-			-			-			-			(109	)		-			(109	)
Board stock compensation awards		8		113			-			-			-			-			-			113
ESPP stock Awards		3		45			-			-			-			-			-			45
Restricted stock units issued, net of shares withheld for tax withholdings		492		(204	)		-			-			-			-			-			(204	)
Shares issued for deferred compensation		32		487			-			-			-			-			-			487
Activity of treasury shares, net		-		-			42			140			-			-			-			140
Deferred stock compensation		-		-			-			-			(140	)		-			-			(140	)
Stock-based compensation expense				1,047			-			-			-			-			-			1,047
Stock options exercised, net		39		248			-			-			-			-			-			248
Dividends — $0.20 per share		-		-			-			-			-			-			(1,481	)		(1,481	)

Balance at September 30, 2024		29,796	$	158,101			(994	)	$	(8,755	)	$	8,755		$	93		$	52,989		$	211,183

Net Income		-		-			-			-			-			-			5,647			5,647
Other comprehensive loss		-		-			-			-			-			(48	)		-			(48	)
Board stock compensation awards		7		112			-			-			-			-			-			112
ESPP stock Awards		5		65			-			-			-			-			-			65
Restricted stock units issued, net of shares withheld for tax withholdings		26		(374	)																	(374	)
Shares issued for deferred compensation		27		507			-			-			-			-			-			507
Activity of treasury shares, net		-		-			(28	)		(506	)		-			-			-			(506	)
Deferred stock compensation		-		-			-			-			506			-			-			506
Stock-based compensation expense		-		1,141			-			-			-			-			-			1,141
Stock options exercised, net		30		374			-			-			-			-			-			374
Dividends — $0.20 per share		-		-			-			-			-			-			(1,492	)		(1,492	)

Balance at December 31, 2024		29,891	$	159,926			(1,022	)	$	(9,261	)	$	9,261		$	45		$	57,144		$	217,115

	Common Shares				Treasury Shares						Key Executive		Accumulated Other						Total
	Number Of				Number Of						Compensation		Comprehensive			Retained			Shareholders'
	Shares		Amount		Shares			Amount			Amount		Income/(Loss)			Earnings			Equity

Balance at June 30, 2025		30,054	$	163,692		(1,052	)	$	(10,011	)	$	10,011	$	829			66,201		$	230,722

Net Income		-		-		-			-			-					7,264			7,264
Other comprehensive loss		-		-		-			-			-		(197	)					(197	)
Board stock compensation awards		8		135		-			-			-		-			-			135
ESPP stock Awards		4		55		-			-			-		-			-			55
Restricted stock units issued, net of shares withheld for tax withholdings		377		297		-			-			-		-			-			297
Shares issued for deferred compensation		22		443		-			-			-		-			-			443
Activity of treasury shares, net		-		-		(13	)		(341	)		-		-			-			(341	)
Deferred stock compensation		-		-		-			-			341		-			-			341
Stock-based compensation expense				1,109		-			-			-		-			-			1,109
Stock options exercised, net		613		3,023		-			-			-		-			-			3,023
Dividends — $0.20 per share		-		-		-			-			-					(1,525	)		(1,525	)

Balance at September 30, 2025		31,078	$	168,754		(1,065	)	$	(10,352	)	$	10,352	$	632		$	71,940		$	241,326

Net Income		-		-		-			-			-		-			6,348			6,348
Other comprehensive loss		-		-		-			-			-		243			-			243
Board stock compensation awards		6		135		-			-			-		-			-			135
ESPP stock Awards		6		94		-			-			-		-			-			94
Restricted stock units issued, net of shares withheld for tax withholdings		-		13																13
Shares issued for deferred compensation		24		492		-			-			-		-			-			492
Activity of treasury shares, net		-		-		(24	)		(493	)		-		-			-			(493	)
Deferred stock compensation		-		-		-			-			493		-			-			493
Stock-based compensation expense		-		1,001		-			-			-		-			-			1,001
Stock options exercised, net		-		-		-			-			-		-			-			-
Dividends — $0.20 per share		-		-		-			-			-		-			(1,555	)		(1,555	)

Balance at December 31, 2025		31,114	$	170,489		(1,089	)	$	(10,845	)	$	10,845	$	875		$	76,733		$	248,097

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

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LSI INDUSTRIES INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Six Months Ended
	December 31
(In thousands)	2025			2024

Cash Flows from Operating Activities
Net income	$	13,612		$	12,329
Non-cash items included in net income
Depreciation and amortization		6,427			5,958
Deferred income taxes		1,741			558
Deferred compensation plan		935			994
ESPP discount		149			110
Stock compensation expense		2,110			2,188
Issuance of common shares as compensation		270			225
(Gain) loss on disposition of fixed assets		43			(17	)
Allowance for credit losses		(178	)		21
Inventory obsolescence reserve		(687	)		131

Changes in certain assets and liabilities
Accounts receivable		13,907			(2,661	)
Inventories		(1,518	)		1,356
Refundable income taxes		(998	)		223
Accounts payable		(5,192	)		130
Accrued expenses and other		(4,868	)		(44	)
Customer prepayments		(94	)		236
Net cash flows provided by operating activities		25,659			21,737

Cash Flows from Investing Activities
Acquisition of business		262			(59	)
Proceeds from the sale of fixed assets		-			46
Purchases of property, plant and equipment		(2,651	)		(1,825	)
Net cash flows used in investing activities		(2,389	)		(1,838	)

Cash Flows from Financing Activities
Payments of long-term debt		(107,927	)		(96,265	)
Borrowings of long-term debt		87,308			80,222
Cash dividends paid		(3,080	)		(2,973	)
Shares withheld for employees' taxes		310			(578	)
Payments on financing lease obligations		-			(168	)
Proceeds from stock option exercises		3,023			622
Net cash flows used in financing activities		(20,366	)		(19,140	)

Change related to foreign currency		46			(157	)
Increase in cash and cash equivalents		2,950			602
Cash and cash equivalents at beginning of period		3,457			4,110

Cash and cash equivalents at end of period	$	6,407		$	4,712

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

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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 December 31, 2025, the results of its operations for the three and six-month periods ended December 31, 2025, and 2024, and its cash flows for the six-month periods ended December 31, 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.

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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)	December 31, 2025				December 31, 2024
	Lighting Segment		Display Solutions Segment		Lighting Segment		Display Solutions Segment
Timing of revenue recognition
Products and services transferred at a point in time	$	55,724	$	67,543	$	48,366	$	68,046
Products and services transferred over time		10,949		12,786		9,844		21,478
	$	66,673	$	80,329	$	58,210	$	89,524

	Three Months Ended
	December 31, 2025				December 31, 2024
	Lighting Segment		Display Solutions Segment		Lighting Segment		Display Solutions Segment
Type of Product and Services
LED lighting, digital signage solutions, electronic circuit boards	$	54,554	$	4,739	$	47,580	$	9,310
Poles, other display solution elements		11,510		61,719		9,945		60,726
Project management, installation services, shipping and handling		609		13,871		685		19,488
	$	66,673	$	80,329	$	58,210	$	89,524

	Six Months Ended
	December 31, 2025				December 31, 2024
	Lighting Segment		Display Solutions Segment		Lighting Segment		Display Solutions Segment
Timing of revenue recognition
Products and services transferred at a point in time	$	113,034	$	145,206	$	96,577	$	130,140
Products and services transferred over time		22,692		23,319		20,069		39,043
	$	135,726	$	168,525	$	116,646	$	169,183

	Six Months Ended
	December 31, 2025				December 31, 2024
	Lighting Segment		Display Solutions Segment		Lighting Segment		Display Solutions Segment
Type of Product and Services
LED lighting, digital signage solutions, electronic circuit boards	$	110,301	$	8,089	$	95,009	$	17,746
Poles, other display solution elements		24,244		132,079		20,338		116,429
Project management, installation services, shipping and handling		1,181		28,357		1,299		35,008
	$	135,726	$	168,525	$	116,646	$	169,183

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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 $28.8 million includes the current fair value of the contingent consideration related to future earnout payments of $3.4 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 $28.8 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

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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
Technology assets		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 December 31, 2025, are included in the Company’s Condensed Consolidated Statements of Operations. Since the acquisition date, net sales of CBH for the period from July 1, 2025, through December 31, 2025, were $15.2 million and operating income was $1.7 million, and net sales of CBH for the period from October 1, 2025, through December 31, 2025, were $6.3 million and operating income was $0.4 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 and six months ended December 31, 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 for the three months ended December 31, 2024 of $10.3 million excludes acquisition-related expenses of $0.1 million. The unaudited pro-form operating income for the six months ended December 31, 2024 of $23.4 million excludes acquisition-related expenses of $0.2 million.

(in thousands; unaudited)	Three Months Ended December 31, 2024		Six Months Ended December 31, 2024
Sales	$	155,070	$	313,156

Gross Profit	$	37,810	$	78,324

Operating Income	$	10,330	$	23,410

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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 and six months ended December 31, 2025, or 2024. There was no concentration of accounts receivable at December 31, 2025, or 2024.

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Summarized financial information for the Company’s operating segments is provided for the indicated periods and as of December 31, 2025, and December 31, 2024:

(In thousands)	Three Months Ended
	December 31, 2025
						Corporate
	Lighting			Display		& Elims			Total
Net sales	$	66,673		$	80,329	$	-		$	147,002

Operating income		7,547			6,076		(4,758	)		8,865

Long-term performance based compensation		81			259		662			1,002
Severance costs and restructuring costs		(1	)		2		(1	)		-
Amortization expense of acquired intangible assets		603			955		-			1,558
Acquisition costs		-			-		200			200
Expense on step-up basis of acquired assets		-			68		-			68

Adjusted operating income		8,230			7,360		(3,897	)		11,693

Depreciation Expense		658			896		115			1,669

Adjusted EBITDA	$	8,888		$	8,256	$	(3,782	)	$	13,362

(In thousands)	Six Months Ended
	December 31, 2025
						Corporate
	Lighting		Display			& Elims			Total
Net sales		135,726		168,525			-		$	304,251

Operating income		16,096		14,667			(10,926	)		19,837

Long-term performance based compensation		190		474			1,620			2,284
Severance costs and restructuring costs		17		(88	)		-			(71	)
Amortization expense of acquired intangible assets		1,206		1,906			-			3,112
Acquisition costs		-		-			420			420
Expense on step-up basis of acquired assets		-		136			-			136

Adjusted operating income		17,509		17,095			(8,886	)		25,718

Depreciation Expense		1,331		1,784			200			3,315

Adjusted EBITDA	$	18,840	$	18,879		$	(8,686	)	$	29,033

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(In thousands)	Three Months Ended
	December 31, 2024
					Corporate
	Lighting		Display		& Elims			Total
Net sales	$	58,210	$	89,524	$	-		$	147,734

Operating income		5,971		8,125		(5,637	)		8,459

Long-term performance based compensation		141		358		1,170			1,669
Consulting expense: commercial growth initiatives		-		-		81			81
Amortization expense of acquired intangible assets		603		805		-			1,408
Expense on step-up basis of acquired assets		-		69		-			69

Adjusted operating income		6,715		9,357		(4,386	)		11,686

Depreciation Expense		642		835		133			1,610

Adjusted EBITDA	$	7,357	$	10,192	$	(4,253	)	$	13,296

	Six Months Ended
	December 31, 2024
(In thousands)					*Corporate*
	*Lighting*		*Display*		*& Elims*			*Total*
Net sales		116,646		169,183		-		$	285,829

Operating income		11,730		15,833		(9,973	)		17,590

Long-term performance based compensation		210		643		2,000			2,853
Consulting expense: commercial growth initiatives		-		-		81			81
Severance costs and restructuring costs		60		-		-			60
Amortization expense of acquired intangible assets		1,206		1,610		-			2,816
Acquisition costs		-		-		48			48
Expense on step-up basis of acquired assets		-		136		-			136

Adjusted operating income		13,206		18,222		(7,844	)		23,584

Depreciation Expense		1,286		1,682		174			3,142

Adjusted EBITDA	$	14,492	$	19,904	$	(7,670	)	$	26,726

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	Three Months Ended				Six Months Ended
(In thousands)	December 31				December 31
	2025		2024		2025		2024
Capital Expenditures:
Lighting Segment	$	449	$	509	$	738	$	1,221
Display Solutions Segment		1,200		529		1,811		576
Corporate and Eliminations		35		28		102		28
	$	1,684	$	1,066	$	2,651	$	1,825

Depreciation and Amortization:
Lighting Segment	$	1,275	$	1,281	$	2,537	$	2,493
Display Solutions Segment		1,849		1,656		3,690		3,291
Corporate and Eliminations		103		81		200		174
	$	3,227	$	3,018	$	6,427	$	5,958

	December 31, 2025		June 30, 2025
Total Assets:
Lighting Segment	$	130,671	$	132,960
Display Solutions Segment		255,739		253,299
Corporate and Eliminations		9,896		10,103
	$	396,306	$	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				Six Months Ended
(In thousands)	December 31				December 31
	2025		2024		2025		2024
Lighting Segment inter-segment net sales	$	3,249	$	6,053	$	6,494	$	12,037

Display Solutions Segment inter-segment net sales	$	429	$	133	$	543	$	304

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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:

	Three Months Ended				Six Months Ended
	December 31				December 31
	2025		2024		2025		2024

BASIC EARNINGS PER SHARE

Net income	$	6,348	$	5,647	$	13,612	$	12,329

Weighted average shares outstanding during the period, net of treasury shares		30,019		28,848		29,682		28,681
Weighted average vested restricted stock units outstanding		61		72		52		81
Weighted average shares outstanding in the Deferred Compensation Plan during the period		1,077		1,010		1,069		999
Weighted average shares outstanding		31,157		29,930		30,803		29,761

Basic earnings per common share	$	0.20	$	0.19	$	0.44	$	0.41


DILUTED EARNINGS PER SHARE

Net income	$	6,348	$	5,647	$	13,612	$	12,329

Weighted average shares outstanding:

Basic		31,157		29,930		30,803		29,761

Effect of dilutive securities (a):
Impact of common shares to be issued under stock option plans, and contingently issuable shares, if any		847		946		882		948
Weighted average shares outstanding		32,004		30,876		31,685		30,709

Diluted earnings per common share	$	0.20	$	0.18	$	0.43	$	0.40

Anti-dilutive securities (b)		4		265		2		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 and six months ended December 31, 2025, and December 31, 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.

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NOTE 6 – INVENTORIES, NET

The following information is provided as of the dates indicated:

	December 31,		June 30,
(In thousands)	2025		2025

Inventories:
Raw materials	$	61,329	$	60,726
Work-in-progress		5,803		7,942
Finished goods		14,891		11,150
Total Inventories	$	82,023	$	79,818

NOTE 7 - ACCRUED EXPENSES

The following information is provided as of the dates indicated:

	December 31,		June 30,
(In thousands)	2025		2025

Accrued Expenses:
Customer prepayments	$	3,976	$	4,070
Compensation and benefits		10,212		12,471
Accrued warranty		7,874		7,505
Operating lease liabilities		7,650		6,037
Accrued sales commissions		3,943		3,956
Accrued freight		2,279		1,978
Income taxes		-		1,848
Other accrued expenses		7,907		7,387
Total Accrued Expenses	$	43,841	$	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.

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

Goodwill				Display
(In thousands)	Lighting			Solutions
	Segment			Segment			Total
Balance as of December 31, 2025
Goodwill	$	70,971		$	82,865		$	153,836
Goodwill acquired, net of adjustements		-			(262	)		(262	)
Foreign currency translation		-			(197	)		(197	)
Accumulated impairment losses		(61,763	)		(27,525	)		(89,288	)
Goodwill, net as of December 31, 2025	$	9,208		$	54,881		$	64,089

Balance as of June 30, 2025
Goodwill	$	70,971		$	75,714		$	146,685
Goodwill acquired, net of adjustements		-			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:

Other Intangible Assets	December 31, 2025
(In thousands)	Gross
	Carrying		Accumulated		Net
	Amount		Amortization		Amount
Amortized Intangible Assets
Customer relationships	$	78,441	$	27,360	$	51,081
Patents		268		268		-
LED technology firmware, software		24,126		19,512		4,614
Trade name		3,700		1,508		2,192
Non-compete		590		353		237
Total Amortized Intangible Assets		107,125		49,001		58,124

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	$	124,107	$	49,001	$	75,106

Other Intangible Assets	June 30, 2025
(In thousands)	Gross
	Carrying		Accumulated		Net
	Amount		Amortization		Amount
Amortized Intangible Assets
Customer relationships	$	78,485	$	25,251	$	53,234
Patents		268		268		-
LED technology firmware, 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

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	Three Months Ended				Six Months Ended
	December 31				December 31
(In thousands)	2025		2024		2025		2024

Amortization Expense of Other Intangible Assets	$	1,558	$	1,408	$	3,112	$	2,816

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 December 31, 2025, and June 30, 2025, consisted of the following:

	December 31,		June 30,
(In thousands)	2025		2025

Secured line of credit	$	27,939	$	36,956
Term loan, net of debt issuance costs of $0 and $14, respectively		-		11,601
Total debt	$	27,939	$	48,557
Less: amounts due within one year		-		3,571
Total amounts due after one year, net	$	27,939	$	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 December 31, 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 third 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 $104.6 available for borrowing under the $125 million line of credit.

The Company is in compliance with all of its loan covenants as of December 31, 2025.

NOTE 10 - CASH DIVIDENDS

The Company paid cash dividends of $3.1 million and $3.0 million for the six months ended December 31, 2025, and December 31, 2024, respectively. Dividends on restricted stock units in the amount of $0.2 million and $0.2 million were accrued as of both December 31, 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 January 2026, the Board of Directors declared a regular quarterly cash dividend of $0.05 per share payable February 10, 2026, to shareholders of record as February 2, 2026. The indicated annual cash dividend rate is $0.20 per share.

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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 1,012,769 as of December 31, 2025.

In the six months ended December 31, 2025, the Company granted 121,440 PSUs and 85,958 RSUs, both with a weighted average market value of $19.54. Stock compensation expense was $1.0 million and $1.1 million for the three months ended December 31, 2025, and 2024, respectively, and $2.1 million and $2.2 million in the six months ended December 31, 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 9,000 shares. At December 31, 2025, 216,000 shares remained available for purchase under the ESPP.

NOTE 12 - SUPPLEMENTAL CASH FLOW INFORMATION

	Six Months Ended
(In thousands)	December 31
	2025		2024
Cash Payments:
Interest	$	1,226	$	1,460
Income taxes	$	5,113	$	2,321

Non-cash investing and financing activities
Issuance of common shares as compensation	$	270	$	225
Issuance of common shares to fund deferred compensation plan	$	935	$	994
Issuance of common shares to fund ESPP plan	$	149	$	110

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 $3.4 million represents the value of the earnout converted from its functional currency to USD as of December 31, 2025, and June 30, 2025.

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 December 31, 2025, and 2024.

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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				Six Months Ended
	December 31				December 31
(In thousands)	2025		2024		2025		2024

Operating lease cost	$	2,222	$	1,610	$	4,097	$	3,231
Financing lease cost:
Amortization of right of use assets		-		73		-		145
Interest on lease liabilities		-		10		-		22
Variable lease cost		-		-		-		7
Sublease income		-		-		-		(39	)
Total lease cost	$	2,222	$	1,693	$	4,097	$	3,366

Supplemental Cash Flow Information:	Six Months Ended
	December 31
(In thousands)	2025		2024

Cash flows from operating leases
Fixed payments - operating cash flows	$	3,900	$	3,298
Liability reduction - operating cash flows	$	3,405	$	2,813
Assets obtained in exchange for operating lease obligations	$	18,568	$	2,441

Cash flows from finance leases
Interest - operating cash flows	$	-	$	21
Repayments of principal portion - financing cash flows	$	-	$	168

Operating Leases:	December 31,			June 30,
	2025			2025

Total operating right-of-use assets	$	30,080		$	17,187

Accrued expenses (Current liabilities)	$	7,650		$	6,037
Long-term operating lease liability		23,247			12,047
Total operating lease liabilities	$	30,897		$	18,084

Weighted Average remaining Lease Term (in years)		6.07			3.49

Weighted Average Discount Rate		5.58	%		5.70	%

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Maturities of Lease Liability:	Operating Lease Liabilities			Finance Lease Liabilities		Operating Subleases		Net Lease Commitments
2026	$	7,650		$	-	$	-	$	7,650
2027		8,296			-		-		8,296
2028		4,479			-		-		4,479
2029		3,888			-		-		3,888
2030		2,751			-		-		2,751
Thereafter		9,635			-		-		9,635
Total lease payments	$	36,699		$	-	$	-	$	36,699
Less: Interest		(5,802	)		-				(5,802	)
Present Value of Lease Liabilities	$	30,897		$	-			$	30,897

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						Six Months Ended
	December 31						December 31
	2025			2024			2025			2024
Reconciliation of effective tax rate:

Provision for income taxes at the anticipated annual tax rate		24.9	%		26.7	%		24.8	%		26.2	%
Uncertain tax positions		(0.5	)		(1.5	)		0.5			(0.2	)
Deferred income tax adjustment		-			-			-			1.1
Share-based compensation		-			(2.0	)		(0.5	)		(5.8	)
Effective tax rate		24.4	%		23.2	%		24.8	%		21.3	%

NOTE 16 – SUBSEQUENT EVENTS

A limited liability company owned and controlled by LSI's Chief Executive Officer, James A. Clark, owns an aircraft that is dry leased to an unrelated third party. Pursuant to a separate arrangement, the third-party dry leases the aircraft to LSI for NEO business travel. Payments made by LSI depends on actual usage. For the period from July 2025 through January 2026, the LLC received aggregate payments of $102,000 in connection with this arrangement.

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).

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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				Six Months Ended
	December 31				December 31
(In thousands)	2025		2024		2025		2024

Lighting Segment	$	66,673	$	58,210	$	135,726	$	116,646
Display Solutions Segment		80,329		89,524		168,525		169,183
	$	147,002	$	147,734	$	304,251	$	285,829

Operating Income (Loss) by Business Segment	Three Months Ended						Six Months Ended
	December 31						December 31
(In thousands)	2025			2024			2025			2024

Lighting Segment	$	7,547		$	5,972		$	16,096		$	11,731
Display Solutions Segment		6,076			8,127			14,667			15,834
Corporate and Eliminations		(4,758	)		(5,640	)		(10,926	)		(9,975	)
	$	8,865		$	8,459		$	19,837		$	17,590

Net sales of $147.0 million for the three months ended December 31, 2025, decreased less than 1% as compared to net sales of $147.7 million for the three months ended December 31, 2024. Lighting Segment net sales of $66.7 million increased 15% and Display Solutions Segment net sales of $80.3 million decreased 10% from last year’s second quarter net sales. The 15% second quarter sales growth of Lighting Segment sales follows 18% growth in the first quarter, with several factors contributing to the improving momentum, including the increased number of large project shipments, which doubled from the second quarter last year. Within the Display Solutions segment, we continue to maintain a high level of project execution across large, multi-year customer programs in the refueling/c-store and QSR verticals. In addition, our grocery vertical continues to stabilize, with demand patterns returning to seasonal levels after two years of significant disruption.

Net sales of $304.3 million for the six months ended December 31, 2025, increased 6% as compared to net sales of $285.8 million for the six months ended December 31, 2024. Lighting Segment net sales of $135.7 million increased 16% and Display Solutions Segment net sales of $168.5 million decreased less than 1 percent from last year’s net sales As stated in the overview of second quarter sales, the momentum in the Lighting Segment from the first quarter carried over to the second quarter with strong lighting net sales driven by the increased number of large project shipments and by the introduction of several new products and the Company’s ability to convert multiple competitor accounts to LSI. Within the Display Solutions segment we continue to experience a steady demand in the refueling/c-store and grocery markets as customers continue to recognize the value of our broad service capabilities.

Operating income of $8.9 million for the three months ended December 31, 2025, represents a 5% increase in operating income from $8.5 million in the three months ended December 31, 2024. Adjusted operating income, a Non-GAAP measure, was $11.7 million in the three months ended December 31, 2025, compared to $11.7 million in the three months ended December 31, 2024. Refer to “Non-GAAP Financial Measures” below for a reconciliation of Non-GAAP financial measures to U.S. GAAP measures. While net sales were relatively flat compared to the same time in the prior year, operating income improved. Margin management remains a priority for us, with a strong focus on project pricing, productivity, and cost discipline.

Operating income of $19.8 million for the six months ended December 31, 2025, represents a 13% increase from operating income of $17.6 million in the six months ended December 31, 2024. Adjusted operating income, a Non-GAAP financial measure, was $25.7 million in the six months ended December 31, 2025, compared to adjusted operating income of $23.6 million in the six months ended December 31, 2024. The increase in net sales coupled with focused margin management contributed to the period over period improvement in operating income. Refer to “Non-GAAP Financial Measures” below for a reconciliation of Non-GAAP financial measures to U.S. GAAP measures.

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Non-GAAP Financial Measures

This report includes adjustments to GAAP operating income, net income, and earnings per share for the three months ended December 31, 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:	December 31
	2025		2024
(In thousands)

Operating income as reported	$	8,865	$	8,459

Long-term performance based compensation		1,002		1,669

Amortization expense of acquired intangible assets		1,558		1,408

Lease expense on the step-up basis of acquired leases		68		69

Acquisition costs		200		-

Consulting expense: commercial growth opportunities		-		81

Adjusted operating income	$	11,693	$	11,686

Reconciliation of net income to adjusted net income	Three Months Ended
	December 31
(In thousands, except per share data)	2025					2024
				Diluted EPS						Diluted EPS

Net income as reported	$	6,348		$	0.20	$	5,647			$	0.18

Long-term performance based compensation		713	(1)		0.02		1,294		(6)		0.04

Amortization expense of acquired intangible assets		1,159	(2)		0.04		1,090		(7)		0.04

Lease expense on the step-up basis of acquired leases		48	(3)		-		53		(8)		-

Acquisition costs		142	(4)		-		-				-

Consulting expense: commercial growth opportunities		-			-		62		(9)		-

Foreign currency transaction loss on intercompany loan		28	(5)		-		-				-

Tax rate difference between reported and adjusted net income		-			-		(150	)			-

Net income adjusted	$	8,438		$	0.26	$	7,996			$	0.26

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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⁾ $289

⁽²⁾$399

⁽³⁾$20

⁽⁴⁾$58

^{(5) (}$28)

⁽⁶⁾$375

⁽⁷⁾$318

⁽⁸⁾$16

⁽⁹⁾$19

	Six Months Ended
Reconciliation of operating income to adjusted operating income:	December 31
	2025		2024
(In thousands)

Operating income as reported	$	19,837	$	17,590

Acquisition costs		420		48

Long-term performance based compensation		2,284		2,853

Amortization expense of acquired intangible assets		3,112		2,816

LSI INDUSTRIES INC 10-Q