LSI INDUSTRIES INC

Previous wording

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.

Current wording

Operating income of $4.1 million for the three months ended March 31, 2026, represents a 35% decrease in operating income from $6.2 million in the three months ended March 31, 2025. Operating income for the three months ended March 31, 2026, was impacted by $6.5 million of acquisition-related costs. Adjusted operating income, a Non-GAAP measure, was $13.4 million in the three months ended March 31, 2026, representing a 39% increase compared to adjusted operating income of $9.7 million in the three months ended March 31, 2025. Refer to “Non-GAAP Financial Measures” below for a reconciliation of Non-GAAP financial measures to U.S. GAAP measures. The quarter-over-quarter sales growth of 14% coupled with improved margins resulting from improved productivity and price optimization resulted in leveraged adjusted operating income growth.

Previous wording

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.** **

Current wording

Operating income of $23.9 million for the nine months ended March 31, 2026, represents a slight increase from operating income of $23.8 million in the nine months ended March 31, 2025. Operating income for the three months ended March 31, 2026, was impacted by $6.9 million of acquisition-related costs. Adjusted operating income, a Non-GAAP financial measure, was $39.1 million in the nine months ended March 31, 2026, compared to adjusted operating income of $33.2 million in the nine months ended March 31, 2025. Refer to “Non-GAAP Financial Measures” below for a reconciliation of Non-GAAP financial measures to U.S. GAAP measures.** **The year-over-year sales growth of 9% coupled with improved margins resulting from improved productivity and price optimization resulted in the growth in operating income.

Previous wording

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.

Current wording

This report includes adjustments to GAAP operating income, net income, and earnings per share for the three months and nine months ended March 31, 2026, and 2025. 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.

Previous wording

Operating expenses of $8.3 million in the three months ended December 31, 2025, increased 8% from the same period of fiscal 2025, primarily driven by the acquisition of Canada’s Best Holdings and by continued investment in commercial initiatives to drive growth.

Current wording

Operating expenses of $9.4 million in the three months ended March 31, 2026, increased 19% from the same period of fiscal 2025, primarily driven by the acquisition costs and related operating costs related to the Royston acquisition, and by continued investment in commercial initiatives to drive growth.

Previous wording

Display Solutions Segment operating income of $6.1 million in the three months ended December 31, 2025, decreased from the same period of fiscal 2025. The decrease in operating income driven by the net effect of a decrease in net sales partially offset by the gross margin impact of product mix and by favorable program pricing and prudent cost management.

Current wording

Display Solutions Segment operating income of $7.9 million in the three months ended March 31, 2026, increased 75% from the same period of fiscal 2025. The increase in operating income, driven by the net effect of an increase in net sales, improved gross margin as a percentage of sales, partially offset by an increase in operating expenses.

Previous wording

Operating expenses of $15.5 million** **in the three months ended December 31, 2025, increased from the same period of fiscal 2025, driven mostly by higher agent commission expense from higher net sales.

Current wording

Operating expenses of $14.0 million** **in the three months ended March 31, 2026, increased 6% from the same period of fiscal 2025, driven mostly by higher commission expense from improved sales along with a continued investment in sales initiatives to generate sales growth.

Previous wording

The Company reported $0.6 million and $0.7 million of net interest expense in the three months ended December 31, 2025, and December 31, 2024, respectively. The decrease in interest expense is driven by profitability and by sustained working capital management as the Company lowered its outstanding debt. The Company also recorded other income of ($0.1) million compared to other expense of $0.4 in the three months ended December 31, 2025, and December 31, 2024, respectively, of which is related to net foreign exchange currency transaction gains and losses through the Company’s Mexican and Canadian subsidiaries.

Current wording

The Company reported $0.5 million and $0.7 million of net interest expense in the three months ended March 31, 2026, and March 31, 2025, respectively. The decrease in interest expense is the result of a reduction of quarter-over-quarter average outstanding debt driven by profitability and by sustained working capital management. The overall reduction in interest expense was partially offset by the company incurred additional debt on March 24, 2026 to acquire Royston. The Company also recorded other expense of $0.2 million compared to other income of ($0.1) million in the three months ended March 31, 2026, and March 31, 2025, respectively, which is related to net foreign exchange currency transaction gains and losses through the Company’s Mexican and Canadian subsidiaries.

Previous wording

The $2.0 million of income tax expense in the three months ended December 31, 2025, represents a consolidated effective tax rate of 24.4%. The $1.7 million of income tax expense in the three months ended December 31, 2024, represents a consolidated effective tax rate of 23.2%. Impacting the effective tax rate of both reported periods was the favorable tax treatment of the Company’s long-term performance-based compensation.

Current wording

The $1.3 million of income tax expense in the three months ended March 31, 2026, represents a consolidated effective tax rate of 37.7%. The $1.7 million of income tax expense in the three months ended March 31, 2025, represents a consolidated effective tax rate of 30.6%. The effective tax rate for the three months ended March 31, 2026, was impacted by the unfavorable tax treatment related to acquisition-related costs. Impacting the effective tax rate of both reported periods was the favorable tax treatment of the Company’s long-term performance-based compensation.

Previous wording

The Company reported net income of $6.3 million in the three months ended December 31, 2025, compared to net income of $5.6 million in the three months ended December 31, 2024. Non-GAAP adjusted net income was $8.4 million for the three months ended December 31, 2025, compared to adjusted net income of $8.0 million for the three months ended December 31, 2024 (Refer to the Non-GAAP tables above). The increase in Non-GAAP adjusted net income is primarily the result of a strong focus on project pricing, productivity, and cost disciplines, on relatively flat sales. Diluted adjusted earnings per share of $0.20 were reported in the three months ended December 31, 2025, compared to $0.18 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 December 31, 2025, were 32,004,000 shares compared to 30,876,000 shares in the same period last year.

Current wording

The Company reported net income of $2.1 million in the three months ended March 31, 2026, compared to net income of $3.9 million in the three months ended March 31, 2025. Non-GAAP adjusted net income was $9.6 million for the three months ended March 31, 2026, compared to adjusted net income of $6.3 million for the three months ended March 31, 2025 (Refer to the Non-GAAP tables above). The increase in Non-GAAP adjusted net income is primarily the net result of an increase in net sales, improved gross margin rate resulting from improved productivity and price optimization, partially offset by an increase in operating expense mostly resulting from an increase in sales. Diluted adjusted earnings per share of $0.28 was reported in the three months ended March 31, 2026, compared to $0.20 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 March 31, 2026, were 33,855,000 shares compared to 30,966,000 shares in the same period last year.

Previous wording

Operating expenses of $16.8 million in the six months ended December 31, 2025, increased 12% from the same period of fiscal 2025, primarily driven by the acquisition of Canada’s Best Holdings and by continued investment in commercial initiatives to drive growth.

Current wording

Operating expenses of $26.2 million in the nine months ended March 31, 2026, increased 14% from the same period of fiscal 2025, primarily driven by the acquisition costs and related operating costs related to the Royston acquisition, and by continued investment in commercial initiatives to drive growth.

Previous wording

Operating expenses of $30.1 million** **in the six months ended December 31, 2025, increased 16% from the same period of fiscal 2025, driven mostly by higher agent commission expense.

Current wording

Operating expenses of $44.1 million** **in the nine months ended March 31, 2026, increased 16% from the same period of fiscal 2025, driven mostly by higher commission expense from higher sales along with a continued investment in sales initiatives to generate sales growth.

Previous wording

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

Current wording

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

Previous wording

Operating expenses of $10.9 million in the six months ended December 31, 2025, increased 10% from the same period of fiscal 2025. The increase in expense is the result of an increase in investment in commercial initiatives to support the growth of the Company.

Current wording

Operating expenses of $21.7 million in the nine months ended March 31, 2026, increased from $15.4 from the same period of fiscal 2025. The increase in expense is primarily the result of acquisition-related costs of $5.9 million and also by a small increase in an investment in commercial initiatives to support the growth of the Company.

Previous wording

The Company reported $1.3 million and $1.6 million of net interest expense in the six months ended December 31, 2025, and December 31, 2024, respectively. The decrease in interest expense is driven by profitability and by sustained working capital management as the Company lowered its outstanding debt. The Company also recorded other expense of $0.4 million and $0.3 million in the six months ended December 31, 2025, and December 31, 2024, respectively, both of which is related to net foreign exchange currency transaction gains and losses through the Company’s Mexican and Canadian subsidiaries.

Current wording

The Company reported $1.8 million and $2.3 million of net interest expense in the nine months ended March 31, 2026, and March 31, 2025, respectively. The decrease in interest expense is the result of a reduction of year-over-year average outstanding debt driven by profitability and by sustained working capital management. The overall reduction in interest expense was partially offset by the company incurred additional debt on March 24, 2026 to acquire Royston. The Company also recorded other expense of $0.7 million and $0.3 million in the nine months ended March 31, 2026, and March 31, 2025, respectively, both of which are related to net foreign exchange currency transaction gains and losses through the Company’s Mexican and Canadian subsidiaries.

Previous wording

The $4.5 million of income tax expense in the six months ended December 31, 2025, represents a consolidated effective tax rate of 24.8%. The $3.3 million of income tax expense in the six months ended December 31, 2024, represents a consolidated effective tax rate of 21.3%. Impacting the effective tax rate of both reported periods was the favorable tax treatment of the Company’s long-term performance-based compensation.

Current wording

The $5.7 million of income tax expense in the nine months ended March 31, 2026, represents a consolidated effective tax rate of 26.8%. The $5.0 million of income tax expense in the nine months ended March 31, 2025, represents a consolidated effective tax rate of 23.7%. The effective tax rate for the three months ended March 31, 2026, was impacted by the unfavorable tax treatment related to acquisition-related costs. Impacting the effective tax rate of both reported periods was the favorable tax treatment of the Company’s long-term performance-based compensation.

Previous wording

The Company reported net income of $13.6 million in the six months ended December 31, 2025, compared to net income of $12.3 million in the six months ended December 31, 2024. Non-GAAP adjusted net income was $18.2 million for the six months ended December 31, 2025, compared to adjusted net income of $16.0 million for the six months ended December 31, 2024 (Refer to the Non-GAAP tables above). The increase in Non-GAAP adjusted net income is primarily the result of improved sales and a strong focus on project pricing, productivity, and cost disciplines. Diluted adjusted earnings per share of $0.57 was reported in the six months ended December 31, 2025, compared to $0.52 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 six months ended December 31, 2025, were 31,685,000 shares compared to 30,709,000 shares in the same period last year.

Current wording

The Company reported net income of $15.7 million in the nine months ended March 31, 2026, compared to net income of $16.2 million in the nine months ended March 31, 2025. Non-GAAP adjusted net income was $27.8 million for the nine months ended March 31, 2026, compared to adjusted net income of $22.3 million for the nine months ended March 31, 2025 (Refer to the Non-GAAP tables above). The increase in Non-GAAP adjusted net income is primarily the net result of an increase in net sales, improved gross margin rate resulting from improved productivity and price optimization, partially offset by an increase in operating expense mainly resulting from an increase in sales. Diluted adjusted earnings per share of $0.86 was reported in the nine months ended March 31, 2026, compared to $0.72 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 nine months ended March 31, 2026, were 32,387,000 shares compared to 30,790,000 shares in the same period last year.

Previous wording

At December 31, 2025, the Company had working capital of $100.1 million compared to $96.8 million at June 30, 2025. The ratio of current assets to current liabilities was 2.2 to 1 for December 31, 2025, and 2.0 for June 30, 2025. The increase in working capital from June 30, 2025, to December 31, 2025, was primarily driven a decrease in accounts payable and accrued expenses and an increase in net inventory, partially offset by a $13.7 million decrease in net accounts receivable.

Current wording

At March 31, 2026, the Company had working capital of $90.9 million compared to $96.8 million at June 30, 2025. The ratio of current assets to current liabilities was 1.5 to 1 as of March 31, 2026, and 2.0 as of June 30, 2025. The acquisition of Royston in the third quarter of fiscal 2026 accounted for an additional $47.7 million of net working capital and also added $58 million in short-term debt. When the impact of the acquisition of Royston is removed from the year-over-year comparison, net working capital increased $4.4 million to $101.2 million. The net increase in working capital excluding Royston is the result of a $6.2 million decrease in net accounts receivable more than offset by a $4.3 million increase in inventory, a $2.3 million increase in other current assets and a $2.9 million decrease in current liabilities.

Previous wording

Net accounts receivable was $90.6 million and $104.3 million at December 31, 2025, and June 30, 2025, respectively. DSO decreased to 59 days at December 31, 2025, from 66 days at June 30, 2025.

Current wording

Net accounts receivable was $135.8 million and $104.3 million at March 31, 2026, and June 30, 2025, respectively. The acquisition of Royston accounted for $37.6 million of the year-over-year change. DSO increased to 63 days at March 31, 2026, excluding the impact of Royston, from 57 days at June 30, 2025.

Previous wording

Cash generated from operations and borrowing capacity under the Company’s line of credit is its primary source of liquidity. The Company has a $125 million a secured revolving line of credit. The revolving line of credit expires in the first quarter of fiscal 2031. As of December 31, 2025, $104.6 million of the credit line was available. The Company is in compliance with all of its loan covenants. The $125 million credit facility plus cash flows from operating activities are adequate for operational and capital expenditure needs for the remainder of fiscal 2026.

Current wording

Cash generated from operations and borrowing capacity under the Company’s line of credit is its primary source of liquidity. The Company has a $200 million term loan and a $150 million revolving line of credit. Both credit facilities commenced in the third quarter of fiscal 2026 to accommodate the acquisition of Royston. Both credit facilities expire in the third quarter of fiscal 2031. As of March 31, 2026, $89 million of the credit line was available. The Company is in compliance with all of its loan covenants as of March 31, 2026. The $350 million credit facility plus cash flows from operating activities are adequate for operational and capital expenditure needs for the remainder of fiscal 2026.

Previous wording

The Company generated $25.7 million of cash from operating activities in the six months ended December 31, 2025, compared to $21.7 million of cash generated from operating activities in the same period in fiscal 2025. The Company continues to effectively manage its working capital while generating increasing cash flow from earnings in both fiscal years, resulting in strong cash flow from operations.

Current wording

The Company generated $32.6 million of cash from operating activities in the nine months ended March 31, 2026, compared to $28.6 million of cash generated from operating activities in the same period in fiscal 2025. The Company continues to effectively manage its working capital while generating increasing cash flow from earnings in both fiscal years, resulting in strong cash flow from operations.

Previous wording

The Company invested $2.6 million and $1.8 million of cash related to investing activities in the six months ended December 31, 2025, and December 31, 2024, respectively. The Company continues to invest in equipment and tooling to support sales growth.

Current wording

The Company invested $3.2 million and $2.5 million of cash related to purchases of property, plant and equipment in the nine months ended March 31, 2026, and March 31, 2025, respectively. The Company continues to invest in equipment and tooling to support sales growth. In the third quarter of FY 2026 the Company acquired Royston for $336.8 million net of cash received.

Previous wording

The Company had a net use of cash of $20.4 million and $19.1 million related to financing activities in the six months ended December 31, 2025, and December 31, 2024, respectively. The Company continues to generate positive cash flow from its operations in order to pay down its debt and fund its dividend payments to shareholders.

Current wording

The Company had a net source of cash of $309.3 million and a net use of cash of $3.2 million related to financing activities in the nine months ended March 31, 2026, and March 31, 2025, respectively. The acquisition of Royston accounted for $238.7 million of the source of cash through the debt refinancing from the Company’s credit facility. In addition, the Company raised $98.1 million of net proceeds from the sale of common stock in a public equity offering in February of 2026. Both the debt financing along with the public equity offering served as the source of funds to acquire Royston. Not including the cost to acquire Royston, the Company continues to generate positive cash flow from its operations in order to pay down its debt and fund its dividend payments to shareholders.