Table of Contents
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 September 30, 2026, 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 ☒
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 October 30, 2026, there were 37,321,843 shares of the registrant's common stock, no par value per share, outstanding.
LSI INDUSTRIES INC.
FOR THE QUARTER ENDED September 30, 2026
INDEX
PART I. FINANCIAL INFORMATION
4
ITEM 1.
FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
5
CONDENSED CONSOLIDATED BALANCE SHEETS (ASSETS)
6
CONDENSED CONSOLIDATED BALANCE SHEETS (LIABILITIES & SHAREHOLDERS' EQUITY)
7
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
8
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
10
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
11
ITEM 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
26
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
33
ITEM 4.
CONTROLS AND PROCEDURES
PART II. OTHER INFORMATION
34
ITEM 5.
OTHER INFORMATION
ITEM 6.
EXHIBITS
SIGNATURES
35
Page 3
ITEM 1. FINANCIAL STATEMENTS
(Unaudited)
(In thousands, except per share data)
Three Months Ended
September 30,
2026
2025
Net sales
225,855
157,249
Cost of products and services sold
173,624
116,972
Gross profit
52,231
40,277
Selling and administrative expenses
38,070
29,305
Operating income
14,161
10,972
Interest expense
3,860
747
Other expense
115
530
Income before income taxes
10,186
9,695
Income tax expense
3,059
2,431
Net income
7,127
7,264
Earnings per common share (see Note 5)
Basic
0.19
0.24
Diluted
0.23
Weighted average common shares outstanding
37,189
30,449
37,888
31,381
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements.
Page 4
(In thousands)
Foreign currency translation adjustment
(41
)
(197
Comprehensive income
7,086
7,067
Page 5
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except shares)
June 30,
ASSETS
Current assets
Cash and cash equivalents
12,805
14,249
Accounts receivable, less allowance for credit losses of $2,078 and $1,895, respectively
143,487
151,231
Inventories
114,417
112,291
Refundable income tax
3,689
6,331
Other current assets
13,872
11,783
Total current assets
288,270
295,885
Property, plant and equipment, at cost
Land
4,010
Buildings
31,097
30,871
Machinery and equipment
100,399
100,133
Construction in progress
2,163
2,094
137,669
137,108
Less accumulated depreciation
(82,251
(80,394
Net property, plant and equipment
55,418
56,714
Goodwill
170,046
172,125
Intangible assets, net
245,419
249,183
Operating lease right-of-use assets
47,553
49,490
Other long-term assets, net
6,452
6,467
Total assets
813,158
829,864
Page 6
LIABILITIES & SHAREHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt
10,000
Accounts payable
73,470
71,998
Accrued expenses
60,809
67,921
Total current liabilities
144,279
149,919
Long-term debt, less current maturities
230,195
245,931
Operating lease liabilities
38,183
38,462
Other long-term liabilities
3,050
2,948
Deferred tax liabilities
29,406
27,001
Commitments and contingencies (Note 13)
-
4,926
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 37,309,712 and 36,972,819 shares, respectively
280,004
277,860
Treasury shares, without par value
(11,424
(11,240
Key Executive Compensation
11,424
11,240
Retained earnings
87,584
82,319
Accumulated other comprehensive income
457
498
Total shareholders' equity
368,045
360,677
Total liabilities & shareholders' equity
Page 7
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
Accumulated
Common Shares
Treasury Shares
Key Executive
Other
Total
Number Of
Compensation
Retained
Comprehensive
Shareholders'
Shares
Amount
Earnings
Income
Equity
Balance at June 30, 2025
30,054
163,692
(1,052
(10,011
10,011
66,201
829
230,722
Net Income
Other comprehensive (loss)
Board stock compensation
135
ESPP stock awards
55
Restricted stock units issued, net of shares withheld for tax withholdings
377
297
Shares issued for deferred compensation
22
443
Activity of treasury shares, net
(13
(341
Deferred stock compensation
341
Stock-based compensation expense
1,109
Stock options exercised, net
613
3,023
Dividends — $0.20 per share
(1,525
Balance at September 30, 2025
31,078
168,754
(1,065
(10,352
10,352
71,940
632
241,326
Page 8
Balance at June 30, 2026
36,972
(1,083
175
81
20
442
2
(184
184
283
1,049
30
438
(1,862
Balance at September 30, 2026
37,310
(1,081
Page 9
Cash Flows from Operating Activities
Non-cash items included in net income
Depreciation and amortization
6,540
3,200
Deferred income taxes
2,405
1,164
Deferred compensation plan
Stock compensation expense
ESPP discount
Loss on disposition of fixed assets
(1
Allowance for credit losses
182
73
Inventory obsolescence reserve
(513
(488
Changes in certain assets and liabilities:
Accounts receivable
7,562
(10,526
(1,613
1,397
Refundable income taxes
2,642
(215
1,472
(1,210
Accrued expenses and other
(11,714
(2,550
Customer prepayments
(605
825
Net cash flows provided by operating activities
15,231
676
Cash Flows from Investing Activities
Proceeds from the sale of fixed assets
Acquisition of Royston (net of cash acquired and shares used in purchase)
2,009
Acquisition of business
260
Purchases of property, plant, and equipment
(1,444
(967
Net cash flows provided by (used in) investing activities
567
(707
Cash Flows from Financing Activities
Payments on long-term debt
(235,071
(52,878
Borrowings on long-term debt
219,335
54,997
Cash dividends paid
Shares withheld on employees' taxes
Proceeds from stock option exercises
Net cash flows (used in) provided by financing activities
(17,201
3,914
Change related to foreign currency
(Decrease) / increase in cash and cash equivalents
3,686
Cash and cash equivalents at beginning of period
3,457
Cash and cash equivalents at end of period
7,143
Page 10
NOTE 1 - INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The interim condensed consolidated financial statements are unaudited and are prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information, and rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, the interim financial statements include all normal adjustments and disclosures necessary to present fairly the Company’s financial position as of September 30, 2026, the results of its operations for the three-month periods ended September 30, 2026, and 2025, and its cash flows for the three-month periods ended September 30, 2026, and 2025. These statements should be read in conjunction with the financial statements and footnotes included in the fiscal 2026 Annual Report on Form 10-K. Financial information as of June 30, 2026, 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 2026 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:
●
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.
Page 11
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: (i) 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:
September 30, 2026
Display
Lighting
Solutions
Segment
Timing of revenue recognition
Products and services transferred at a point in time
51,941
145,218
Products and services transferred over time
12,882
15,814
64,823
161,032
Type of Product and Services
Lighting, poles, electronic components
63,828
Signage and display Products
136,425
Project management, installation services, shipping and handling
995
24,607
September 30, 2025
57,310
77,663
11,743
10,533
69,053
88,196
68,482
73,709
571
14,487
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.
Page 12
New Accounting Pronouncements:
In November 2024, the FASB issued Accounting Standards Update 2024-03, Income Statement – Reporting Comprehensive Income: Disaggregation of Income Statement Expenses (ASU 2024-03). This ASU requires disaggregated income statement expense disclosures on an annual and interim basis, including inventory purchases, employee compensation, depreciation, and intangible asset amortization for each income statement line item that contains these expenses. The standard also requires disclosure of total selling expenses on an annual and interim basis, and the definition of those expenses disclosed annually. ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027, and may be applied prospectively or retrospectively. The Company is evaluating the impact of ASU 2024-03 and expects the standard will only impact its disclosures with no material impact to the consolidated financial statements
NOTE 3 — ACQUISITION OF ROYSTON GROUP
On February 20, 2026 the Company entered into an agreement and a plan of merger to acquire SRR Holdings, Inc. (Royston) which was completed on March 24, 2026. Royston is a leading U.S.-based designer and manufacturer of cabinetry and store fixtures, refrigerated and heated cases, and signage for multiple end markets. Royston’s customer base spans across large, attractive end-markets of convenience, grocery and gas stations and other retail. Royston was acquired for $325.0 million; $320.0 million in cash and $5.0 million in the Company’s common stock, subject to a working capital adjustment, which was finalized in the first quarter of the 2027 fiscal year for $2.0 million returned to Company. The Company prefunded $13.2 million as an estimate of the cash and working capital acquired, followed by a $2.0 million refund in the first quarter of fiscal 2027, which brings the total purchase consideration to $336.2 million. The Company incurred acquisition-related costs totaling $6.5 million which are included in the selling and administrative expense line of the consolidated statements of operations. The Company funded the purchase consideration totaling $336.2 million with a combination of cash on hand, approximately $38 million of the $150 million revolving line of credit, the $200 million five-year term loan, and the $98.1 million of net proceeds from the Company’s February 26, 2026 public common stock offering.
The Company accounted for this transaction as a business combination. The Company has allocated the purchase price of $336.2 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 allocation is subject to the final determination of the purchase price which will be finalized in fiscal 2027, as well as potential revision resulting from the finalization of pre-acquisition tax filings and net working capital adjustments. 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 24, 2026, is as follows:
March 24, 2026
Measurement
as initially reported
period adjustments
as adjusted
1,353
36,990
(514
36,476
Inventory
32,400
(2,992
29,408
Property, plant and equipment
28,500
464
28,964
Prepaids expenses and other current assets
8,135
Income tax provision refund
1,792
450
2,242
22,538
Other assets
1,291
Intangible assets
127,000
52,940
179,940
(16,861
(18,558
66
(18,492
(19,638
Deferred tax liability
(10,919
(14,386
(25,305
Identifiable Assets
194,023
36,028
230,051
144,176
(38,037
106,139
Net Purchase Consideration
338,199
(2,009
336,190
The gross amount of accounts receivable is $37.2 million.
Page 13
Goodwill recorded from the acquisition of Royston is attributable to the impact of the positive cash flow from Royston in addition to expected synergies from the business combination. As a result of the acquisition, goodwill of $20.3 million recognized in the United States is expected to be deductible for tax purposes. The intangible assets include amounts recognized for the fair value of the trade name, technology assets, 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:
Estimated Fair
Estimated Useful
(in thousands)
Value
Life (Years)
Tradename
23,780
Indefinite
Technology assets
12,160
Customer relationships
144,000
15
Royston’s post-acquisition results of operations for the period from July 1, 2026, through September 30, 2026, are included in the Company’s Condensed Consolidated Statements of Operations. Since the acquisition date, net sales of Royston for the period from July 1, 2026, through September 30, 2026, were $72.4 million and operating income was $4.9 million. The operating results of Royston are included in the Display Solutions Segment.
Pro Forma Impact of the Acquisition of Royston (Unaudited)
The following table represents unaudited pro forma results of operations and gives effect to the acquisition of Royston as if the transaction had occurred on July 1, 2024. 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 Royston.
The unaudited pro forma financial information for the three months ended September 30, 2025, 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 forma operating income for the three months ended September 30, 2025 of $15.5 million excludes acquisition-related expenses of $0.2 million.
(in thousands; unaudited)
Sales
$
221,978
Gross Profit
56,015
Operating Income
15,496
Page 14
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 leadership team reporting directly to the CODM with responsibilities for managing the performance across the segments.
The Company’s methods for measuring profitability under GAAP on a reportable segment basis and used by the CODM to assess performance is adjusted net income. These measurements are used to monitor performance compared to prior periods and forecasted results. The CODM does not look at disaggregated expenses at the segment level. The CODM does review expenses on a consolidated basis which is consistent with the categories of expense reported on the consolidated statements of operations.
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, non-digital signage, menu board systems, millwork and metal display fixtures, refrigerated displays, heated 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 Unallocated corporate expenses net of tax line item. These activities primarily include expense related to certain corporate officers and support staff, the Company’s internal audit staff, expense related to the Company’s Board of Directors, equity compensation expense for various equity awards granted to corporate administration employees, certain consulting expenses, investor relations activities, and a portion of the Company’s legal, auditing, and professional fee expenses. Corporate identifiable assets primarily consist of cash, invested cash (if any), refundable income taxes (if any), and deferred income taxes.
There were no customers or customer programs representing a concentration of 10% or more of the Company’s consolidated net sales in the three months ended September 30, 2026, or 2025. There was no concentration of accounts receivable at September 30, 2026, or 2025.
Page 15
Summarized financial information for the Company’s operating segments is provided for the indicated periods and as of September 30, 2026, and September 30, 2025:
Total sales
68,280
162,252
230,532
Inter-segment sales
(3,457
(1,220
(4,677
Other segment items *
(58,172
(148,099
(206,271
Adjusted net income
6,651
12,933
19,584
Unallocated corporate expenses
(4,122
(3,860
Long-term performance based compensation
(787
Amortization expense on acquired intangible assets
(2,853
Restructuring / severance costs
(10
Acquisition costs
(189
Lease expense on the step-up basis of acquired leases
(114
Foreign currency transaction loss on intercompany loan
(14
Tax rate difference between reported and adjusted net income
(508
* Costs of products and services sold, selling and administrative expenses, other income and expense, and income tax expense
72,299
88,309
160,608
(3,245
(3,359
69,054
88,195
(61,939
(80,878
(142,817
7,115
7,317
14,432
(3,954
(747
(954
(1,117
53
(165
(51
(326
93
Page 16
Capital Expenditures:
Lighting Segment
819
289
Display Solutions Segment
587
611
1,406
900
Total segment capital expenditures
Other unallocated capital expenditures
38
67
Consolidated capital expenditures
1,444
967
Income Tax Expense:
1,579
2,772
2,110
4,351
4,273
Total segment income tax expense
Other unallocated income tax (credit)
(1,292
(1,842
Consolidated income tax expense
Depreciation and Amortization:
1,243
1,262
5,199
1,841
6,442
3,103
Total segment depreciation and amortization
Other unallocated depreciation and amortization
98
97
Consolidated depreciation and amortization
June 30, 2026
Identifiable Assets:
136,653
139,921
669,675
675,628
806,328
815,549
Total Segment assets
Corporate and Eliminations
6,830
14,315
Consolidated assets
The segment net sales reported above represent sales to external customers. Identifiable assets are those assets used by each segment in its operations.
Page 17
NOTE 5 - EARNINGS PER COMMON SHARE
The following table presents the amounts used to compute basic and diluted earnings per common share, as well as the effect of dilutive potential common shares on weighted average shares outstanding:
(in thousands, except per share data)
BASIC EARNINGS PER SHARE
Weighted average shares outstanding during the period, net of treasury shares
36,032
29,345
Weighted average vested restricted stock units outstanding
71
42
Weighted average shares outstanding in the Deferred Compensation Plan during the period
1,086
1,062
Weighted average shares outstanding
Basic income per share
DILUTED EARNINGS PER SHARE
Effect of dilutive securities (a):
Impact of common shares to be issued under stock option plans, and contingently issuable shares, if any
699
932
Diluted income per share
Anti-dilutive securities (b)
121
(a)
Calculated using the “Treasury Stock” method as if dilutive securities were exercised and the funds were used to purchase common shares at the average market price during the period.
(b)
Anti-dilutive securities were excluded from the computation of diluted net income per share for the three months ended September 30, 2026, 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.
Page 18
NOTE 6 – INVENTORIES, NET
The following information is provided as of the dates indicated:
Inventories:
Raw materials
82,558
85,258
Work-in-progress
10,912
9,721
Finished goods
20,947
17,312
Total Inventories
NOTE 7 - ACCRUED EXPENSES
Accrued Expenses:
5,828
6,432
Compensation and benefits
11,830
16,690
Accrued warranty
7,630
7,331
Accrued sales commissions
2,271
3,761
Accrued freight
1,681
2,230
Accrued FICA
352
597
11,748
12,333
Accrued rebate
3,998
4,126
Accrued sales and use tax
2,069
2,457
Accrued commitments and contingency
7,045
2,114
Accrued income taxes
2,284
Other accrued expenses
6,357
7,566
Total Accrued Expenses
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 eight reporting units that contain goodwill. One reporting unit is within the Lighting Segment and seven 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:
Activity for three-month period ended September 30, 2026
Goodwill, gross as of June 30, 2026
70,971
190,442
261,413
Goodwill acquired, net of adjustments
Foreign currency translation
(70
Goodwill, gross as of September 30, 2026
188,363
259,334
Accumulated impairment losses
(61,763
(27,525
(89,288
Goodwill, net as of September 30, 2026
9,208
160,838
Activity for three-month period ended September 30, 2025
Goodwill, gross as of June 30, 2025
82,865
153,836
(262
(218
Goodwill, gross as of September 30, 2025
82,385
153,356
Goodwill, net as of September 30, 2025
54,860
64,068
The gross carrying amount and accumulated amortization by each major intangible asset class is as follows:
Gross
Carrying
Net
Amortization
Amortized Intangible Assets
222,146
34,279
187,867
Patents
268
LED technology, software
36,286
21,640
14,646
Trade name
3,665
1,662
2,003
Non-compete
583
141
Total Amortized Intangible Assets
262,948
58,291
204,657
Indefinite-lived Intangible Assets
Trademarks and trade names
40,762
Total indefinite-lived Intangible Assets
Total Other Intangible Assets
303,710
Page 20
31,426
190,720
20,801
15,485
1,612
2,053
420
163
54,527
208,421
Amortization expense of other intangible assets
3,780
1,554
The Company expects to record annual amortization expense as follows:
2027
14,921
2028
14,482
2029
13,841
2030
13,834
2031
13,729
After 2031
137,614
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NOTE 9 - DEBT
The Company’s long-term debt as of September 30, 2026, and June 30, 2026, consisted of the following:
Secured line of credit
46,626
60,000
Term loan, net of debt issuance costs of $1,486 and $1,569, respectively
193,569
195,931
Total debt
240,195
255,931
Less: amounts due within one year
Total amounts due after one year, net
In March of 2026, the Company entered into a $350 million senior secured credit facility consisting of a $200 million five-year term loan and a $150 million revolving credit facility. The Company is required to make quarterly amortization payments of $2.5 million against the term loan, with the balance of the term loan due at maturity on March 24, 2031. The revolving credit facility is also scheduled to expire on March 24, 2031. Interest on the term loan and any loans made under the revolving credit facility is based on the Secured Overnight Financing Rate (“SOFR”) or a customary base rate (which may include Daily Simple SOFR or the Prime Rate), to be determined by reference to customary market benchmarks, plus an applicable margin that is anticipated to vary based on the Company’s consolidated total net leverage ratio, which is calculated to be consolidated funded debt minus unrestricted cash and cash equivalents against earnings before interest, taxes, depreciation, and amortization (“EBITDA”), as defined in the line of credit agreement. As of September 30, 2026, the interest rate applicable to the term loan was 5.9% and the Company’s borrowing rate against its revolving line of credit was 5.9%. The increment over the SOFR borrowing rate is 200 basis points for the first quarter of fiscal year 2027. In addition to interest on outstanding amounts, the Company also pays a commitment fee on the unused balance of the revolving credit facility, which fluctuates between 17.5 and 27.5 basis points based on the Company’s consolidated total net leverage ratio. Under the terms of the credit agreement, the Company is required to comply with a financial covenant that limits the ratio of indebtedness and unrestricted cash to EBITDA measured on a quarterly basis, with a maximum net leverage ratio of 4.00 to 1.00 at closing, which then steps down to 3.75 to 1.00 as of the fiscal quarter ending December 31, 2026 and which further steps down to 3.50 to 1.00 in the fiscal quarter ending September 30, 2027. The Company is also required to maintain an interest coverage ratio, measured on a quarterly basis, equal to or above the minimum set forth in the agreement, which as of closing was 1.15 to 1.00. As of September 30, 2026, there was $109.8 million available for borrowing under the credit facility for general business purposes.
The Company is in compliance with all of its loan covenants as of September 30, 2026.
NOTE 10 - CASH DIVIDENDS
The Company paid cash dividends of $1.9 million and $1.5 million for the three months ended September 30, 2026, and September 30, 2025, respectively. Dividends on restricted stock units in the amount of $0.1 million and $0.2 million were accrued as of both September 30, 2026, and 2025, respectively. These dividends will be paid upon the vesting of the restricted stock units when shares are issued to the award recipients. In November 2026, the Board of Directors declared a regular quarterly cash dividend of $0.05 per share payable November 24, 2026, to shareholders of record as November 16, 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 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 579,240 as of September 30, 2026.
In the three months ended September 30, 2026, the Company granted 156,115 PSUs and 239,274 RSUs, both with a weighted average market value of $24.06. Stock compensation expense was $1.1 million for the three months ended September 30, 2026, and 2025, 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 2027, employees purchased 5,000 shares. At September 30, 2026, 201,000 shares remained available for purchase under the ESPP.
NOTE 12 - SUPPLEMENTAL CASH FLOW INFORMATION
Cash Payments:
Interest
3,244
601
Income taxes
25
2,126
Non-cash investing and financing activities
Issuance of common shares as compensation
Issuance of common shares to fund deferred compensation plan
Issuance of common shares to fund ESPP plan
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 $7.0 million contingent liability related to the future earnout payments as part of the acquisition of Canada’s Best Holding (CBH), which is classified as short term. The $7.0 million represents the value of the earnout converted from its functional currency to USD as of September 30, 2026, and June 30, 2026, respectively.
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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. The Company’s leases are operating leases and have a remaining term of one to nine years, some of which have an option to renew. The Company does not assume renewals in determining the lease term unless the renewals are deemed reasonably certain. The lease agreements do not contain any material residual guarantees or material variable lease payments.
The Company has periodically entered into short-term operating leases with an initial term of twelve months or less. The Company elected not to record these leases on the balance sheet. The rent expense for these leases was immaterial for September 30, 2026, and 2025. As of September 30, 2026 and 2025, the Company has no finance leases.
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.
Operating lease cost
3,522
1,875
Variable lease cost
Sublease income
Total lease cost
Supplemental Cash Flow Information:
Cash flows from operating leases
Fixed payments - operating lease cash flows
3,498
1,753
Liability reduction - operating cash flows
2,827
1,687
Assets obtained in exchange for operating lease obligations
1,394
3,415
Operating Leases:
Total operating right-of-use assets
Accrued Expenses
Long-term operating lease liability
Total operating lease liabilities
49,931
50,795
Weighted Average remaining Lease Term (in years)
6.17
6.28
Weighted Average Discount Rate
5.29
%
5.30
Page 24
Operating
Lease
Maturities of Lease Liability:
Liabilities
11,574
7,647
5,757
4,622
Thereafter
17,471
Total lease payments
58,819
Less: Interest
(8,888
Present Value of Lease Liabilities
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. For the three months ended September 30, 2026 the effective tax rate is higher than the statutory tax rate primarily because of the non-deductible tax treatment of executive compensation.
Reconciliation of effective tax rate:
Provision for income taxes at the anticipated annual tax rate
24.3
24.7
Uncertain tax positions
0.7
1.3
Share-based compensation
5.0
(0.9
Effective tax rate
30.0
25.1
Page 25
NOTE 16 – SUBSEQUENT EVENTS
In October of 2026, the Company announced the consolidation of manufacturing operations of our leased facility in Collingwood, Ontario, into an existing Toronto-area facility that serves as the headquarters of our Canada’s Best Store Fixtures business. The transition is expected to be completed in the third quarter of fiscal 2027, after which the Company will vacate the Collingwood Ontario facility.
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 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, 2026, and our financial statements and the accompanying Notes to Financial Statements (Part I, Item 1 of this Form 10-Q).
Our condensed consolidated financial statements, accompanying notes and the “Safe Harbor” Statement, each as appearing earlier in this report, should be referred to in conjunction with this Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Summary of Consolidated Results
Net Sales by Business Segment
Total Net Sales
Operating Income (Loss) by Business Segment
12,996
8,592
7,548
8,549
(6,383
(6,169
Total Operating Income
Net sales of $225.9 million for the three months ended September 30, 2026, increased 44% as compared to net sales of $157.2 million for the three months ended September 30, 2025. Lighting segment net sales of $64.8 million decreased 6% compared to prior year quarter net sales of $69.1 million. The 6% decline in net sales reflects soft demand across the broader commercial and industrial markets. Net sales in the Display Solutions segment of $161.0 million increased 83% compared to the same quarter last year sales of $88.2 million. The Company’s acquisition of Royston contributed most of the increase in Display Solutions segment sales. Excluding Royston sales, net sales increased 1%. Quarter-over-quarter sales to the refueling/c-store and grocery verticals increased and were partially offset by softness in the quick service restaurant ("QSR") vertical.
Page 26
Operating income of $14.2 million for the three months ended September 30, 2026, represents a 29% increase in operating income from $11.0 million in the three months ended September 30, 2025. Adjusted operating income, a Non-GAAP measure, was $19.4 million in the three months ended September 30, 2026, represents a 38% increase compared to $14.0 million in the three months ended September 30, 2025. Refer to “Non-GAAP Financial Measures” below for a reconciliation of Non-GAAP financial measures to U.S. GAAP measures. The increase in operating income is primarily the result of an increase in net sales in the Display solutions segment driven mostly by the impact of the Royston acquisition.
Non-GAAP Financial Measures
This report includes adjustments to GAAP operating income, net income, and earnings per share for the three months ended September 30, 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, restructuring and severance costs, and organic sales growth 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.
Reconciliation of operating income to adjusted operating income:
Operating income as reported
1,282
Amortization expense of acquired intangible assets
3,779
Restructuring/severance costs
13
(71
252
220
152
68
Adjusted operating income
19,406
14,025
Page 27
Reconciliation of net income to adjusted net income
Diluted EPS
Net income as reported
787
(1)
0.03
954
(6)
2,853
(2)
0.08
1,117
(7)
0.04
(3)
(53
(8)
189
(4)
165
(9)
114
(5)
51
(10)
Foreign Currency transaction loss on intercompany loan
14
326
0.01
508
(93
Net income adjusted
11,602
0.31
9,731
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) $262
(2) $926
(3) $3
(4) $63
(5) $38
(6) $328
(7) $437
(8) ($18)
(9) $55
(10) $17
Page 28
Reconciliation of net income to EBITDA and adjusted EBITDA
Net income - reported
Income tax
Interest expense, net
EBITDA
20,701
14,172
Adjusted EBITDA
22,167
15,671
Reconciliation of cash flow from operations to free cash flow
Cash flow from operations
Capital expenditures
Free cash flow
13,787
(291
Page 29
Net debt to adjusted EBITDA
Current portion and long-term debt as reported
3,571
Long-Term Debt
47,105
Debt as reported
50,676
Less:
Cash and cash equivalents as reported
(12,805
(7,143
Net debt
227,390
43,533
Adjusted EBITDA - Trailing 12 Months
87,640
57,308
2.6
0.8
Adjusted EBITDA for the trailing twelve months ended September 30, 2026, includes proforma results for the Royston acquisition.
Organic compared to inorganic sales
% Variance
Lighting segment
-6
Display solutions segment
- Comparable display solutions sales
88,620
1
- Royston
72,412
n/m
Total display solutions sales
83
Total net sales
44
Total organic net sales
153,443
-2
Results of Operations
THREE MONTHS ENDED September 30, 2026, COMPARED TO THREE MONTHS ENDED September 30, 2025
Net Sales
30,374
17,095
Display Solutions Segment net sales of $161.0 million in the three months ended September 30, 2026, increased 83% from net sales of $88.2 million in the same period in fiscal 2026. The Company’s acquisition of Royston contributed to most of the increase in Display Solutions segment sales. Excluding Royston sales, net sales increased 1%. Quarter-over-quarter sales to the refueling/c-store and grocery verticals increased and were partially offset by softness in the QSR vertical.
Gross profit of $30.4 million in the three months ended September 30, 2026, increased 78% from the same period of fiscal 2026. Gross profit as a percentage of net sales in the three months ended September 30, 2026, decreased to 18.9% from 19.4% in the same period of fiscal 2026. The decrease in gross profit as a percentage of sales was the result of increased material input costs in several product lines, and customer mix. The Company continues to maintain favorable program pricing and prudent cost management.
Operating expenses of $17.4 million in the three months ended September 30, 2026, increased from $8.5 million from the same period of fiscal 2026, primarily driven by the acquisition of Royston and by continued investment in commercial initiatives to drive growth.
Display Solutions Segment operating income of $13.0 million in the three months ended September 30, 2026, increased 51% from the same period of fiscal 2026. The increase in operating income was driven by the increase in net sales and favorable program pricing and prudent cost management.
21,855
23,182
Page 30
Lighting Segment net sales of $64.8 million in the three months ended September 30, 2026, decreased 6% compared to net sales of $69.1 million in the same period in fiscal 2026. The 6% decline in net sales reflects soft demand across the broader commercial and industrial markets. Sales to the refueling/c-store, banking, and sports vertical increased from the same quarter last fiscal year and were offset by a decline in sales in other verticals. The Company maintains a favorable position in the parking, small retail, warehouse, and automotive verticals.
Gross profit of $21.9 million in the three months ended September 30, 2026, decreased 6% from the same period of fiscal 2026. While sales declined, gross profit margin was maintained as a result of aligning selling price with material input costs inflation.
Operating expenses of $14.3 million in the three months ended September 30, 2026, decreased 2% from the same period of fiscal 2026, driven mostly by a decrease in agent commission expense resulting from lower sales.
Lighting Segment operating income of $7.5 million for the three months ended September 30, 2026, decreased 12% from operating income of $8.5 million in the same period of fiscal 2026 primarily driven by decreased net sales.
Operating (Loss)
The gross profit relates to the change in the intercompany profit in inventory elimination.
Operating expenses of $6.4 million in the three months ended September 30, 2026, increased 3% from $6.2 million from the same period of fiscal 2026. The increase was primarily driven by an increase in wage and benefit costs.
Consolidated Results
The Company reported $3.9 million and $0.7 million of net interest expense in the three months ended September 30, 2026, and September 30, 2025, respectively. The increase in interest expense is the result of the acquisition of Royston in the third quarter of fiscal 2026. The Company also recorded other expense of $0.1 million and $0.5 million in the three months ended September 30, 2026, and September 30, 2025, respectively, both of which is related to net foreign exchange currency transaction gains and losses through the Company’s Mexican and Canadian subsidiaries.
The $3.1 million of income tax expense in the three months ended September 30, 2026, represents a consolidated effective tax rate of 30.0%. The $2.4 million of income tax expense in the three months ended September 30, 2025, represents a consolidated effective tax rate of 25.1%. Impacting the fiscal 2027 first quarter effective tax rate was the unfavorable tax treatment of executive compensation.
The Company reported net income of $7.1 million in the three months ended September 30, 2026, compared to net income of $7.3 million in the three months ended September 30, 2025. Non-GAAP adjusted net income was $11.6 million for the three months ended September 30, 2026, compared to adjusted net income of $9.7 million for the three months ended September 30, 2025 (Refer to the Non-GAAP tables above). The increase in Non-GAAP adjusted net income is primarily the result of an increase in net sales. Diluted adjusted earnings per share of $0.19 was reported in the three months ended September 30, 2026, compared to $0.23 diluted adjusted earnings per share in the same period of fiscal 2026. The weighted average common shares outstanding for purposes of computing diluted earnings per share in the three months ended September 30, 2026, were 37,888,000 shares compared to 31,381,000 shares in the same period last year.
Page 31
Liquidity and Capital Resources
The Company considers its level of cash on hand, borrowing capacity, current ratio and working capital levels to be its most important measures of short-term liquidity. For long-term liquidity indicators, the Company believes its ratio of long-term debt to equity and our historical levels of net cash flows from operating activities to be the most important measures.
At September 30, 2026, the Company had working capital of $144.0 million compared to $146.0 million at June 30, 2026. The ratio of current assets to current liabilities was 2.0 to 1 as of September 30, 2026, and as of June 30, 2026. The decrease in working capital from June 30, 2026, to September 30, 2026, is primarily driven by a $7.7 million decrease in net accounts receivable partially offset by a $5.6 million decrease in current liabilities.
Net accounts receivable was $143.5 million and $151.2 million at September 30, 2026, and June 30, 2026, respectively. DSO decreased to 61 days at September 30, 2026, from 65 days at June 30, 2026. The decrease in net accounts receivable is the result of lower sales in the first quarter of fiscal 2027 compared to the fourth quarter of fiscal 2026.
Net inventories of $114.4 million at September 30, 2026, increased $2.1 million from $112.3 million at June 30, 2026. Lighting Segment net inventory increased $1.7 million, and net inventory in the Display Solutions Segment increased $0.4 million. The Company manages inventory levels to meet customer demands.
Cash generated from operations and borrowing capacity under the Company’s line of credit is its primary source of liquidity. Our credit facility consists of a $200 million term loan and $150 million secured revolving line of credit. Both facilities expire in the third quarter of fiscal 2031. As of September 30, 2026, $109.8 million of the credit facility was available. The Company is in compliance with all of its loan covenants as of September 30, 2026. The $350 million credit facility plus cash flows from operating activities are adequate for operational and capital expenditure needs for the next 12 months.
The Company generated $15.2 million of cash from operating activities in the three months ended September 30, 2026, compared to $0.7 million of cash generated from operating activities in the same period in fiscal 2026. The Company continues to proactively manage its working capital while generating positive cash flow from earnings.
The Company generated $0.6 million and consumed $0.7 million of cash related to investing activities in the three months ended September 30, 2026, and September 30, 2025, respectively. The $0.6 million generation of cash was the result of a $2.0 million recovery of purchase price related to the Royston acquisition. The Company invested $1.4 million and $1.0 million in capital assets as of during the period ending September 30, 2026, and September 30, 2025, respectively, most of which related to investments in equipment and tooling to support sales growth.
The Company consumed cash of $17.2 million in the three months ended September 30, 2026, compared to a generation of cash of $3.9 million in the three months ended September 30, 2025, related to financing activities. The improvement in the generation of cash flow from operations in the first quarter of fiscal 2027 allowed the Company to reduce its debt by $15.7 million. Contributing favorably to cash flow from financing activities was the generation of cash related to the proceeds from the exercise of stock options of $0.5 million and $3.0 million in the first quarters of fiscal 2027, and 2026, respectively. Cash dividends paid to shareholders increased from $1.5 million in the first quarter of fiscal 2026 compared to $1.9 million in the first quarter of fiscal 2027.
The Company has on its balance sheet financial instruments consisting primarily of cash and cash equivalents, revolving lines of credit, and long-term debt. The fair value of these financial instruments approximates carrying value because of their short-term maturity and/or variable, market-driven interest rates.
Page 32
Off-Balance Sheet Arrangements
The Company has no financial instruments with off-balance sheet risk and have no off-balance sheet arrangements.
Cash Dividends
In November 2026, the Board of Directors declared a regular quarterly cash dividend of $0.05 per share payable November 24, 2026, to shareholders of record as of November 16, 2026. The indicated annual cash dividend rate for fiscal 2027 is $0.20 per share. The Board of Directors has adopted a policy regarding dividends which indicates that dividends will be determined by the Board of Directors in its discretion based upon its evaluation of earnings, cash flow requirements, financial condition, debt levels, stock repurchases, future business developments and opportunities, and other factors deemed relevant.
Critical Accounting Policies and Estimates
A summary of our significant accounting policies is included in Note 1 to the audited consolidated financial statements of the Company’s fiscal 2026 Annual Report on Form 10-K.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in our exposure to market risk since June 30, 2026. Additional information can be found in Item 7A, Quantitative and Qualitative Disclosures About Market Risk, which appears on page 20 of the Annual Report on Form 10-K for the fiscal year ended June 30, 2026.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as such term is defined Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), that are designed to ensure that information required to be disclosed by a company in the reports that it files under the Exchange Act is recorded, processed, summarized, and reported within required time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
We conducted, under the supervision of our management, including the Chief Executive Officer and Chief Financial Officer, an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Based upon our evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, 2026, our disclosure controls and procedures were effective. Management believes that the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q are fairly presented in all material respects in accordance with GAAP for interim financial statements, and the Company’s Chief Executive Officer and Chief Financial Officer have certified that, based on their knowledge, the condensed consolidated financial statements included in this report fairly present in all material respects the Company’s financial condition, results of operations and cash flows for each of the periods presented in this report.
Changes in Internal Control
There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter ended September 30, 2026, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
Exhibits:
10.1
Fiscal Year 2027 Long-Term Incentive Plan (LTIP)*++
10.2
Fiscal Year 2027 Short-Term Incentive Plan (STIP)*++
10.3
2027 Special Retention Restricted Stock Unit Award Agreement between the Company and James A. Clark*
31.1
Certification of Principal Executive Officer required by Rule 13a-14(a)
31.2
Certification of Principal Financial Officer required by Rule 13a-14(a)
32.1
Section 1350 Certification of Principal Executive Officer
32.2
Section 1350 Certification of Principal Financial Officer
101.INS
Inline XBRL Instance Document
101.SCH
Inline XBRL Taxonomy Extension Schema Document
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document
104
Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101)
* Management Compensatory Agreement
++ Schedules and exhibits have been omitted pursuant to Item 601(a)(5) and / or Item 601(b)(10)(iv) of Regulation S-K. The Company hereby undertakes to furnish supplemental copies of any of the omitted schedules and exhibits to the SEC upon its request.
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Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
By:
/s/ James A. Clark
James A. Clark
Chief Executive Officer and President
(Principal Executive Officer)
/s/ James E. Galeese
James E. Galeese
Executive Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
November 6, 2026
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