What changed in this filing

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Item 9A. Controls and Procedures

2025-09-11 compared with 2024-09-11 · 321 added, 203 removed, 1047 unchanged (33% of the section changed)

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Management believes that the consolidated financial statements included in this Annual Report on Form 10-K are fairly presented in all material respects in accordance with U.S GAAP, and the Company’s Chief Executive Officer and Chief Financial Officer have certified that, based on their knowledge, the consolidated financial statements included in this report fairly present in all material respects the Company’s financial condition, results of operations, statement of shareholders’ equity, and cash flows for each of the periods presented in this report.

The Company acquired EMI Industries, LLC (“EMI”) on April 18, 2024.

Management excluded EMI from its evaluation of the effectiveness of the internal control over financial reporting as of June 30, 2024.

Including goodwill and acquired intangible assets, EMI represented 21% of the Company’s total consolidated assets as of June 30, 2024, and 4% of the Company’s total consolidated sales for the fiscal year ended June 30, 2024.

The Company acquired Canada’s Best Holdings (“CBH”) on March 11, 2025.

Management excluded CBH from its evaluation of the effectiveness of internal control over financial reporting as of June 30, 2025.

Including goodwill and acquired intangible assets, CBH represented 10% of the Company’s total consolidated assets as of June 30, 2025, and 1% of the Company’s total consolidated sales for the fiscal year ended June 30, 2025.

Management's Report on Internal Control over Financial Reporting appearing on page 31 of this report is incorporated by reference in this Item 9A.

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OTHER INFORMATION

During the three months ended June 30, 2024, none of our directors or officers (as defined in Rule 16a-1(f) of the Securities Exchange Act of 1934) informed us of the adoption or termination of a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as defined in Item 408 of Regulation S-K.

During the three months ended June 30, 2025, none of our directors or officers (as defined in Rule 16a-1(f) of the Securities Exchange Act of 1934) adopted or terminated “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as defined in Item 408 of Regulation S-K.

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

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That information is incorporated herein by reference.

We have adopted a code of ethics that applies to all of our employees, including our Chief Executive Officer, Chief Financial, and other finance organization employees.

The code of ethics is publicly available on our website at lsicorp.com.

If we make any substantive amendments to the code of ethics or grant any waiver, including any implicit waiver, from a provision of the code to our Chief Executive Officer and Chief Financial Officer, we will disclose the nature of the amendment or waiver on our website or in a report on Form 8-K.

Information about our trading policies and procedures can be found under the caption “Long-Term Incentive Plan” in the proxy statement.

That information is incorporated herein by reference.

We have adopted a code of business conduct that applies to all of our employees, including our Chief Executive Officer, Chief Financial, and other finance organization employees.

The code of business conduct is publicly available on our website at lsicorp.com.

If we make any substantive amendments to the code of business conduct or grant any waiver, including any implicit waiver, from a provision of the code to our Chief Executive Officer and Chief Financial Officer, we will disclose the nature of the amendment or waiver on our website or in a report on Form 8-K.

We will provide disclosures of delinquent Section 16(a) reports, if any, in our Proxy Statement under the caption “Delinquent Section 16(a) Reports,” and such disclosures, if any, in incorporated herein by reference.

EXECUTIVE COMPENSATION

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Fiscal Year 2025 Long-Term Incentive Plan (LTIP) ++ (Incorporated by reference to Exhibit 10.1 of LSI’ s Form 10-Q filed on November 8, 2024)

Code of Conduct (incorporated by reference to Exhibit 14 to LSI’s Form 10-K filed on September 10, 2021)

Insider Trading Policy and Anti-Hedging and Pledging Policy (incorporated by reference to Exhibit 19 to LSI’s Form 10-K filed on September 8, 2023).

Code of Business Conduct

Insider Trading Policy and Anti-Hedging and Pledging Policy (incorporated by reference to Exhibit 19 to LSI’ s Form 10-Q filed on February 7, 2025).

Subsidiaries of the Registrant

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Total Operating Income

Fiscal 2024 net sales of $469.6 million decreased 6% as compared to fiscal 2023 net sales of $497.0 million.

The change in net sales were driven by a 4% decrease in net sales in the Lighting Segment and by an 8% decrease in net sales in the Display Solutions Segment.

Within the Lighting Segment, the Company maintained a relatively stable demand for its lighting products while outperforming the broader market.

Within the Display Solutions segment, the decline in sales is due largely to lower demand in the grocery vertical primarily driven by the lengthy regulatory review of the proposed merger of two large grocery store chains.

Fiscal 2024 operating income of $35.5 million represents a 4% decrease from fiscal 2023 operating income of $37.0 million.

Non-GAAP adjusted operating income in fiscal 2024 of $41.4 million was comparable to adjusted fiscal 2023 operating income of $42.0 million.

Fiscal 2025 net sales of $573.4 million increased 22% compared to fiscal 2024 net sales of $470.0 million.

The increase in net sales was attributed to a $117.8 million or 57% increase in net sales of the Display Solutions Segment, partially offset by a $14.1 or 5% decline in net sales of the Lighting Segment.

The Display Solutions Segment generated organic growth of 17% driven by increased sales across all product categories and vertical markets supported mostly by the grocery and refueling/ C-Store verticals.

The Company’s acquisition of EMI and CBH contributed an additional $85.3 million of the year-over-year sales growth of the Display Solutions Segment.

The decline in sales in the Lighting Segment is attributed to the comparison of year-over-year sales of large lighting projects.

In fiscal 2024, the Company had several large lighting projects that did not repeat in fiscal 2025.

While there was a year-over-year decline in large lighting projects, small project activity continued to increase over the prior year period while large lighting projects order activity increased in the fourth quarter of fiscal 2025.

Fiscal 2025 operating income of $35.8 million represents a 1% increase from fiscal 2024 operating income of $35.5 million.

Fiscal 2025 adjusted operating income, a Non-GAAP financial measure, was $48.4 million compared to adjusted fiscal 2024 operating income of $46.4 million.

While sales increased 22% compared to the same period last year, Non-GAAP operating income rose 4%.

The increase in sales was partially offset by the dilutive impact of acquisitions and by customer mix.

Refer to “Non-GAAP Financial Measures” below for a reconciliation of Non-GAAP financial measures to U.S.

GAAP measures

Despite a decline in sales, the Company was able to improve its operating margin with strong operational disciplines and effective cost controls.

Non-GAAP Financial Measures

We believe it is appropriate to evaluate our performance after making adjustments to the as-reported U.S.

GAAP operating income, net income, and earnings per share.

Adjusted operating income, net income, and earnings per share, which exclude the impact of acquisition costs, long-term performance based compensation expense, severance and restructuring costs, and commercial growth opportunity expense, are Non-GAAP financial measures.

Also included below are Non-GAAP financial measures including Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA and Adjusted EBITDA), Free Cash Flow, and Net Debt to adjusted EBITDA.

We believe that these adjusted supplemental measures are useful in assessing the operating performance of our business.

These supplemental measures are used by our management, including our chief operating decision maker, to evaluate business results.

We exclude these items because they are not representative of the ongoing results of operations of our business.

This report includes adjustments to GAAP operating income, net income, and earnings per share for the fiscal years 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.

This report includes additional non-GAAP financial measures, including Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA and Adjusted EBITDA), Net Debt to Adjusted EBITDA, Free Cash Flow, and organic sales growth.

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.

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Non-GAAP measures have limitations, in that they do not reflect all amounts associated with our results as determined in accordance with U.S.

Therefore, these measures should only be used to evaluate our results in conjunction with corresponding GAAP measures.

Below is a reconciliation of these non-GAAP measures to operating income, net income, and earnings per share for the periods indicated along with the calculation of EBITDA and Adjusted EBITDA, Free Cash Flow, and Net Debt to adjusted EBITDA.

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.

Non-GAAP Financial Measures

Reconciliation of net income to adjusted net income:

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Long-term performance based compensation

Restructuring/severance costs

Acquisition costs

Consulting expense:

commercial growth opportunities

Acquisition costs

Lease expense on the step-up basis of acquired leases

Restructuring/severance costs

Amortization expense of acquired intangible assets

Foreign currency transaction gain on intercompany loan

Tax rate difference between reported and adjusted net income

Net income adjusted

Effective in the first quarter of fiscal 2025, LSI includes the amortization expense related to acquired intangible assets as an add-back to its non-GAAP reconciliation.

Prior quarter non-GAAP reconciliations have been adjusted accordingly.

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:

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Operating income as reported

Acquisition costs

Long-term performance based compensation

Restructuring/severance costs

Consulting expense:

commercial growth opportunities

Acquisition costs

Lease expense on the step-up basis of acquired leases

Restructuring/severance costs

Amortization expense of acquired intangible assets

Adjusted operating income

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Restructuring/severance costs

Lease expense on the step-up basis of acquired leases

Consulting expense:

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Net debt to adjusted EBITDA

Twelve Months Ended

Organic compared to inorganic Sales

Lighting Segment

Display Solutions Segment

- Comparable Display Solutions Sales

- Canada's Best

Total Diplay Solutions Sales

Total net sales

Canada's Best

Total organic net sales

Results of Operations

2025 Compared to 2024

Lighting Segment

Display Solutions Segment

(In thousands)

Operating Income

Lighting Segment net sales of $262.4 million in fiscal 2024 decreased 4% from fiscal 2023 net sales of $272.5 million.

Despite a decline in net sales, the Company maintained a relatively stable demand for its lighting products while outperforming the broader market.

Gross profit of $89.0 million in fiscal 2024 increased 3% from fiscal 2023 gross profit.

Gross profit as a percentage of net sales increased 210 bps from 31.8% in fiscal 2023 to 33.9% in fiscal 2024.

The improved gross profit margins were driven by sustained price disciplines, a higher value sales mix, and strong operational disciplines.

Operating expenses of $55.7 million in fiscal 2024 was comparable to fiscal 2023 operating expenses.

Cost control measures were in place in fiscal 2024 and is the primary reason operating expenses remained comparable to last year operating expenses.

Fiscal 2024 Lighting Segment operating income of $33.3 million increased 5% from operating income of $31.6 million in fiscal 2023 primarily due to an improvement in gross profit on lower sales and effective operating expense cost controls.

Display Solutions Segment

Display Solutions net sales of $325.0 million increased 57% from same period in fiscal 2024.

This segment generated organic growth of 17% driven by increased sales across all major product categories and vertical markets supported mostly by the grocery and refueling/ C-Store verticals.

The Company’s acquisitions of EMI and CBH also contributed $85.3 million of the year-over-year sales growth of the Display Solutions Segment.

Gross profit of $57.5 million in fiscal 2025 increased 30% from the same period of fiscal 2024.

Gross profit as a percentage of net sales decreased to 18% from 21% in the same period of fiscal 2024 as a result of the dilutive impact of acquisitions and by customer mix.

Operating expenses of $31.1 million in fiscal 2025 increased 29% from the same period of fiscal 2024, primarily driven by the acquisitions of EMI and CBH and by continued investment in commercial initiatives to drive growth.

Fiscal 2025 operating income of $26.4 million in fiscal 2025 increased 32% from the same period of fiscal 2024.

The increase in operating income of 6.4 million was driven by the net effect of an increase in net sales partially offset by the dilutive impact of acquisitions and by customer mix.

Lighting Segment

(In thousands)

Operating Income

Display Solutions Segment net sales of $207.2 million in fiscal 2024 decreased 8% from fiscal 2023 net sales of $224.5 million.

The decline in sales is due largely to lower demand in the grocery vertical primarily driven by the lengthy regulatory review of the proposed merger of two large grocery store chains.

Gross profit of $44.2 million in fiscal 2024 decreased 12% from fiscal 2023.

Gross profit as a percentage of net sales decreased to 21.3% in fiscal 2024 compared from 22.3% in fiscal 2023.

The decrease in gross profit and corresponding decline in gross profit as a percentage of sales was driven mostly by lower volume and by a shift in product mix.

Operating expenses of 24.2 million in fiscal 2024 decreased 4% from fiscal 2023.

The decrease in operating expenses was primarily driven by efforts to manage costs in line with the decline in net sales.

Fiscal 2024 Display Solutions Segment operating income of $20.0 million decreased 20% from operating income of $24.9 million in fiscal 2023.

The decrease in operating income was primarily driven by the decrease in net sales.

Lighting Segment net sales of $248.4 million in fiscal 2025 decreased 5% compared to net sales of $262.4 million in the same period in fiscal 2024.

In fiscal 2024, the Company had several large lighting projects that did not repeat in fiscal 2025.

Gross profit of $84.4 million in fiscal 2025 decreased 5% from the same period of fiscal 2024.

The decline in gross profit is attributed to the decline in sales.

Despite a decline in gross profit due to a decline in sales, gross profit as a percentage of sales improved marginally.

Maintaining a comparable gross margin rate on lower sales was the result of an increase in a higher mix of value applications, and effective cost management.

Operating expenses of $54.1 million in fiscal 2025 decreased 3% from the same period of fiscal 2024, driven mostly by lower commission expense from lower sales, and effective cost management.

Fiscal 2025 Lighting Segment operating income of $30.3 million decreased 9% from operating income of $33.3 million in the same period of fiscal 2024 primarily driven by decreased net sales partially offset by an increase in a higher mix of value applications, stable pricing, and effective cost management.

Corporate and Eliminations

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Operating (Loss)

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

Operating expenses of $17.8 million in fiscal 2024 decreased 9% from fiscal 2023.

The decrease was primarily the result of cost containment initiatives across several of the Company’s cost categories to align with a decline in sales.

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

Operating expenses of $20.8 million in fiscal 2025 increased 17% from the same period of fiscal 2024.

The increase in expense is the result of an increase in investment in commercial initiatives to support the growth of the Company, including the cost associated with acquisitions, and performance related compensation programs.

Consolidated Results

Net interest expense of $2.2 million in fiscal 2024 compared to $3.7 million net interest expense in fiscal 2023.

The decrease in interest expense was the net result of the Company’s repayment of debt from cash generated by operations through the third quarter of fiscal 2024 partially offset by the debt incurred related to the acquisition of EMI Industries, LLC in the fourth quarter.

The Company also recorded $0.3 million of other expense in fiscal 2024 compared to a negligible amount of other expense in fiscal 2023, related to net foreign exchange currency transaction net losses through our Mexican and Canadian subsidiaries.

The $8.1million of tax expense in fiscal 2024 reflects a consolidated effective tax rate of 24.5% compared to the $7.6 million of income tax expense in fiscal 2023 which represents a consolidated effective tax rate of 22.7%.

The increase in the effective tax rate is primarily driven by an increase in state, local and foreign income taxes across the multiple tax jurisdictions where LSI has a physical presence.

Reported net income of $25.0 million in fiscal 2024 compared to net income of $25.8 million in fiscal 2023.

Non-GAAP adjusted net income was $28.6 million in fiscal 2024 compared to adjusted net income of $29.0 million in fiscal 2023 (Refer to the Non-GAAP tables above).

Fiscal 2024 Non-GAAP adjusted net income was approximately equal to the same period last year on a 6% decline in net sales.

Diluted earnings per share of $0.83 was reported in fiscal 2024 compared to $0.88 diluted earnings per share in fiscal 2023.

The weighted average common shares outstanding for purposes of computing diluted earnings per share in fiscal 2024 were 30,068,000 shares compared to 29,316,000 shares in fiscal 2023.

The Company reported $3.1 million and $2.2 million of net interest expense in fiscal 2025 and 2024, respectively.

The increase in interest expense is the result of the funds borrowed to acquire EMI in the fourth quarter of fiscal 2024 along with the funds borrowed to acquire CBH in the third quarter of fiscal 2025, partially offset by decreased borrowing costs.

The Company also recorded other (income)/expense of ($0.4) million and $0.3 million in fiscal 2025 and 2024, respectively, both of which is related to net foreign exchange currency transaction gains and losses through the Company’s Mexican and Canadian subsidiaries.

The $8.7 million of income tax expense in fiscal 2025 represents a consolidated effective tax rate of 26.2%.

The $8.1 million of income tax expense in fiscal 2024 represents a consolidated effective tax rate of 24.5%.

The increase in the effective tax rate from fiscal 2024 to fiscal 2025 is primarily driven by an increase in state, local and foreign income taxes across the multiple tax jurisdictions where LSI has a physical presence partially offset by the favorable tax treatment of the Company’s long-term performance-based compensation.

The Company reported net income of $24.4 million in fiscal 2025, compared to net income of $25.0 million in fiscal 2024.

Non-GAAP adjusted net income was $32.9 million for fiscal 2025, compared to adjusted net income of $32.3 million for fiscal 2024 (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 partially offset by unfavorable product mix.

Diluted adjusted earnings per share of $1.07 was reported in fiscal 2025, compared to the same diluted adjusted earnings per share of $1.07 in the same period of fiscal 2024.

The weighted average common shares outstanding for purposes of computing diluted earnings per share in fiscal 2025, were 30,832,000 shares compared to 30,068,000 shares in the same period last year.

Liquidity and Capital Resources

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The ratio of current assets to current liabilities was 2.0 to 1 as of June 30, 2025, compared to a ratio of 2.1 to 1 as of June 30, 2024.

The acquisition of EMI Industries, LLC (EMI) in the fourth quarter of fiscal 2024 accounted for $12.7 million of the increase in net working capital.

When the impact of the acquisition of EMI is removed from the year-over-year comparison, net working capital decreased $2.7 million.

The net decrease in net working capital excluding EMI was mostly due to a $12.4 million decrease in net accounts receivable, a decrease of $4.0 million in net inventory, partially offset by a $12.4 million decrease in accounts payable and accrued expenses.

Net accounts receivable were $78.6 million and $77.7 million at June 30, 2024, and June 30, 2023, respectively with EMI accounting for $13.3 million of net accounts receivable as of June 30, 2024.

Net accounts receivable decreased $12.4 million excluding EMI’s net accounts receivable.

The acquisition of Canada’s Best Holding (CBH) in the third quarter of fiscal 2025 accounted for $9.7 million of the increase in net working capital.

When the impact of the acquisition of CBH is removed from the year-over-year comparison, net working capital increased $5.4 million.

The net increase in net working capital excluding CBH was mostly due to a $18.8 million increase in net accounts receivable, an increase of $4.0 million in net inventory, partially offset by a $13.6 million increase in accounts payable and accrued expenses and a 3.2 million reduction in refundable income taxes.

Net accounts receivable were $104.3 million and $78.6 million at June 30, 2025, and June 30, 2024, respectively with CBH accounting for $6.9 million of net accounts receivable as of June 30, 2025.

Net accounts receivable increased $18.8 million excluding CBH’s net accounts receivable, primarily the result of a period-over period increase in sales.

Days Sales Outstanding (DSO) was 57 days and 58 days as of June 30, 2025, and June 30, 2024, respectively.

We believe that our receivables are ultimately collectible or recoverable, net of certain reserves, and that aggregate allowances for credit losses are adequate.

Net inventories were $70.9 million and $63.7 million at June 30, 2024, and June 30, 2023, respectively, with EMI accounting for $11.2 million of the $70.9 million total net inventory at June 30, 2024.

Net inventory decreased $4.0 million excluding EMI’s net inventory.

The decrease of $4.0 million is the net result of a $5.9 million decrease in Lighting Segment inventory partially offset by a $1.8 million increase in Display Solutions Segment inventory.

Display Solutions inventory increased to support program initiatives.

Net inventories were $79.8 million and $70.9 million at June 30, 2025, and June 30, 2024, respectively, with CBH accounting for $5.0 million of the $79.8 million total net inventory at June 30, 2025.

Net inventory increased $3.9 million excluding CBH’s net inventory.

The increase of $3.9 million is the result of a $1.7 million increase in Lighting Segment inventory and a $2.2 million increase in Display Solutions Segment inventory.

Inventory levels increased in both reportable segments to support the growth in sales.

Cash generated from operations and borrowing capacity under our credit facility is our primary source of liquidity.

In September 2021, we amended our previous $100 million secured line of credit, to a $25 million term loan and the remaining $75 million as a secured revolving line of credit.

Both facilities expire in the third quarter of fiscal 2026.

As of June 30, 2024, $36.2 million of the line of credit was available.

Our credit facility consists of a $25 million term loan and $75 million secured revolving line of credit.

Both facilities expire in the first quarter of fiscal 2027.

As of June 30, 2025, $35.7 million of the revolving line of credit was available.

As of June 30, 2025, we are in compliance with all of our loan covenants.

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The Company continues to effectively manage its working capital while generating cash flow from earnings, resulting in strong cash flow from operations.

The Company used $55.3 million of cash from investing activities in fiscal 2024 compared to a use of cash of $3.2 million in fiscal 2023.

The Company acquired EMI Industries, LLC in the fourth quarter of fiscal 2024 for $49.9 million which contributed significantly to the $55.3 million investing activities in fiscal 2024.

Capital expenditures accounted for the remainder of the fiscal 2024 use of cash for investing purposes totaling $5.4 million compared to $3.2 million in fiscal 2023.

The Company has increased its investment in equipment and tooling year-over-year to support sales growth and new products.

The Company generated cash of $14.3 million related to financing activities in fiscal 2024 compared to a net use of cash of $47.1 million in fiscal 2023.

The acquisition of EMI in the fourth quarter of fiscal 2024 resulted in the need to borrow from the Company’s revolving line of credit which contributed to the net increase in borrowings in fiscal 2024 and resulted in the generation of cash related to financing activities.

With the exception of the acquisition of EMI and the need to borrow against the Company’s credit facility, the Company continues to generate positive cash flow and effectively manages working capital to pay down its line of credit.

The Company also received $1.8 million and $3.9 million of cash payments in fiscal 2024 and fiscal 2023, respectively, related to the exercise of employee stock options.

The Company consumed $28.0 million of cash from investing activities in fiscal 2025 compared to a consumption of cash of $55.3 million in fiscal 2024.

The Company acquired Canada’s Best Holdings for $24.6 million in the third quarter of fiscal 2025 and acquired EMI Industries, LLC in the fourth quarter of fiscal 2024 for $49.9 million which contributed significantly to the consumption of cash in both reporting periods.

The Company also invested $3.5 million and $5.4 million of cash related to purchases of equipment and tooling in fiscal 2025 and 2024, respectively, to support sales growth initiatives.

The Company had a net consumption of cash of $11.4 million in fiscal 2025 compared to a net generation of cash of $14.3 million in fiscal 2024 related to financing activities.

While the cash generated from operating activities continues to pay down its debt, the Company borrowed funds from its line of credit to acquire EMI and CBH, which impacted net debt activity over the course of the two fiscal years.

The Company has on its balance sheet financial instruments consisting primarily of cash and cash equivalents, revolving lines of credit, and long-term debt.

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Cash Dividends

In August 2024, the Board of Directors declared a regular quarterly cash dividend of $0.05 per share payable September 3, 2024, to shareholders of record as of August 26, 2024.

In August 2025, the Board of Directors declared a regular quarterly cash dividend of $0.05 per share payable September 10, 2025, to shareholders of record as of September 2, 2025.

The indicated annual cash dividend rate for fiscal 2025 was $0.20 per share.

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The Company calculates its liability for warranty claims by applying estimates based upon historical claims as a percentage of sales to cover unknown claims, as well as estimating the total amount to be incurred for known warranty issues.

Warranty reserves are subject to large reserve adjustments when actual warranty costs differ significantly from cost estimates.

Warranty reserves are subject to large reserve adjustments when actual warranty costs differ significantly from cost estimates due to unforeseen claim activity which exceeds historical claim activity such as product failures across several customers or over a wide geographic area.

The Company also periodically assesses the adequacy of its recorded warranty liabilities and adjusts the amount as necessary, which can also cause large reserve adjustments.

These adjustments may be required in the future, which could adversely affect our gross profit and results of operations.

The same methodology was used for calculating warranty reserves in fiscal 2023 and fiscal 2024 which resulted in a modest increase in the reserve in fiscal 2024.

The same methodology was used for calculating warranty reserves in fiscal 2024 and fiscal 2025 which resulted in an increase in the reserves in fiscal 2025.

Business Combination:

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Grant Thornton LLP has full access to the Audit Committee to discuss the results of their audit work, the adequacy of internal accounting controls, and the quality of financial reporting.

The Company acquired EMI Industries, LLC (EMI) on April 18, 2024.

Management excluded EMI from its evaluation of the effectiveness of the internal control over financial reporting as of June 30, 2024.

The Company acquired Canada’s Best Holding (CBH) on March 11, 2025.

Management excluded CBH from its evaluation of the effectiveness of internal control over financial reporting as of June 30, 2025.

Based upon LSI’s evaluation, the Company’s principal executive officer and principal financial officer concluded that internal control over financial reporting was effective as of June 30, 2025.

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We have audited the accompanying consolidated balance sheets of LSI Industries Inc.

(an Ohio corporation) and subsidiaries (the “Company”) as of June 30, 2024 and 2023, the related consolidated statements of operations, comprehensive income, shareholders’ equity, and cash flows for each of the two years in the period ended June 30, 2024, and the related notes and financial statement schedule included under Item 8 (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2024 and 2023, and the results of its operations and its cash flows for each of the two years in the period ended June 30, 2024, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of June 30, 2024, based on criteria established in the 2013 Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated September 11, 2024 expressed unqualified opinion.

(an Ohio corporation) and subsidiaries (the “Company”) as of June 30, 2025 and 2024, the related consolidated statements of operations, comprehensive income, shareholders’ equity, and cash flows for each of the two years in the period ended June 30, 2025, and the related notes and financial statement schedule included under Item 8 (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2025 and 2024, and the results of its operations and its cash flows for each of the two years in the period ended June 30, 2025, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of June 30, 2025, based on criteria established in the 2013 Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated September 11, 2025 expressed an unqualified opinion.

Basis for opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

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We believe that our audits provide a reasonable basis for our opinion.

Critical audit matters

Critical audit matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

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The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Acquisition of EMI Industries, LLC

As discussed in Note 2 to the consolidated financial statements, the Company completed an acquisition agreement wherein the Company acquired 100% ownership of EMI Industries, LLC in April 2024 for total consideration of $49.9M resulting in the addition of $15.7M of intangible assets.

Acquisition of Canada ’ s Best Holdings

As discussed in Note 3 to the consolidated financial statements, the Company completed an acquisition agreement wherein the Company acquired 100% ownership of Canada’s Best Holdings on March 11, 2025 for total consideration of $25.9M resulting in the addition of $9.6M of intangible assets.

The acquisition was accounted for as a business combination.

We identified the valuation of the acquired trade name and customer relationships as a critical audit matter.

The principal considerations for our determination that the valuation of the acquired trade name and customer relationships is a critical audit matter is that the valuation of the acquired trade name and customer relationships was considered especially challenging and required significant auditor judgment due to the complex determination by management of the appropriate assumptions, which includes prospective financial information and discount rate for the valuation of the acquired trade name and customer relationships.

The Company, utilizing third-party specialists, used income valuation models including Relief from Royalty Method and the Multi-Period Excess Earning Method (MPEEM) to measure the identified trade name and customer relationships, respectively.

This required a high degree of auditor judgment and an increased extent of effort, including the need to involve professionals having expertise in the valuation of acquired intangible assets, when performing audit procedures to evaluate management’s judgments and conclusions related to the valuation of the acquired trade name and customer relationships.

Our audit procedures related to the valuation of the acquired trade name and customer relationships included the following, among others:

Tested management’s process and related internal controls for developing fair value estimates including the development of key assumptions, including prospective financial information and discount rate for the valuation of the acquired trade name and customer relationships

Tested the completeness and accuracy of the underlying data used to develop the fair value estimates

Evaluated the appropriateness of the valuation models and methodologies used by management with the assistance of professionals with specialized skills and knowledge

Assessed the reasonableness of management’s forecast by comparing the projections to historical results and external sources, including industry trends

Involved professionals with specialized skills and knowledge to assist in the evaluation of the significant assumptions used by management including prospective financial information and discount rate for the valuation of the acquired trade name and customer relationships

We identified the valuation of the acquired customer relationships as a critical audit matter.

The principal considerations for our determination that the valuation of the acquired customer relationships is a critical audit matter is that the valuation of the acquired customer relationships was considered especially challenging and required significant auditor judgment due to the judgmental assumptions established by management in determining fair value measurements of the acquired customers relationships, which includes prospective financial information and discount rate.

The Company, utilizing third-party specialists, used an income approach – excess earnings to measure the identified customer relationships.

Our audit procedures related to the valuation of the acquired customer relationships included the following, among others:

Tested management’s process and related internal controls for developing the fair value estimate, including the development of key assumptions, including prospective financial information and discount rate for the valuation of the acquired customer relationships

Tested the completeness and accuracy of the underlying data used to develop the fair value estimate

Evaluated the appropriateness of the valuation model and methodology used by management with the assistance of professionals with specialized skills and knowledge

Assessed the reasonableness of management’s prospective financial information by comparing the projections to historical results and industry trends

/s/ GRANT THORNTON LLP

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We believe that our audit provides a reasonable basis for our opinion.

Our audit of, and opinion on, the Company’s internal control over financial reporting does not include the internal control over financial reporting of EMI Industries, LLC (“EMI”), a wholly-owned subsidiary, whose financial statements reflect total assets and revenues constituting 21 percent and 4 percent, respectively, of the related consolidated financial statement amounts as of and for the year ended June 30, 2024.

As indicated in Management’s Report on Internal Control Over Financial Reporting, EMI was acquired during fiscal year 2024.

Management’s assertion on the effectiveness of the Company’s internal control over financial reporting excluded internal control over financial reporting of EMI.

Our audit of, and opinion on, the Company’s internal control over financial reporting does not include the internal control over financial reporting of Canada’s Best Holdings (“CBH”), a wholly-owned subsidiary, whose financial statements reflect total assets and revenues constituting 10 percent and 1 percent, respectively, of the related consolidated financial statement amounts as of and for the year ended June 30, 2025.

As indicated in Management’s Report on Internal Control Over Financial Reporting, CBH was acquired during fiscal year 2025.

Management’s assertion on the effectiveness of the Company’s internal control over financial reporting excluded internal control over financial reporting of CBH.

Definition and limitations of internal control over financial reporting

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Selling and administrative expenses

Severance costs

Restructuring/Severance costs

Operating income

Interest expense

Other expense

Other (income) and expense

Income before income taxes

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Operating lease right-of-use assets

Deferred tax assets

Other long-term Assets, net

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Other long-term liabilities

Deferred tax liabilities

Commitments and contingencies (Note 15)

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Key Executive

Accumulated Other

Comprehensive

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Balance at June 30, 2023

Other comprehensive gain

Other comprehensive (loss)

Board stock compensation

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Balance at June 30, 2024

Other comprehensive (loss)

Other comprehensive gain

Board stock compensation

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Cash Flows from Investing Activities

Acquisition of EMI

Acquisition of EMI and CBH, net of cash acquired

Purchases of property, plant, and equipment

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Consolidation:

The consolidated financial statements include the accounts of LSI Industries Inc.

The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.

GAAP”) and include the accounts of LSI Industries Inc.

(an Ohio corporation) and its subsidiaries (collectively, the “Company”), all of which are wholly owned.

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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 time of shipment when title and risk of ownership passes 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.

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The customized product types are as follows:

Customer specific branded print graphics

Customer specific metal and millwork branded products and branded print graphics

Electrical components based on customer specifications

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Changes in the Company’s warranty liabilities, which are included in accrued expenses in the accompanying consolidated balance sheets, during the periods indicated below were as follows:

Product Warranties

(In thousands)

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The 401(k)-match program covers substantially all of its employees.

The Company also has a nonqualified deferred compensation plan covering certain employees.

The Company also has a non-qualified deferred compensation plan covering certain employees.

The costs of employee benefit plans are charged to expense and funded annually.

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The Company accounts for stock-based compensation to certain employees in accordance with accounting guidance for stock-based compensation.

The accounting guidance requires companies to measure the cost of employee services received in exchange for an award of equity instruments, including stock options, restricted stock units, and performance stock unites, based on the grant date fair value of the award and to recognize it as compensation expense over the period the employee is required to provide service in exchange for the award, usually the vesting period.

The accounting guidance requires companies to measure the cost of employee services received in exchange for an award of equity instruments, including stock options, restricted stock units, and performance stock units, based on the grant date fair value of the award and to recognize it as compensation expense over the period the employee is required to provide service in exchange for the award, usually the vesting period.

Equity award forfeitures are recognized at the date of employee termination.

Earnings Per Common Share:

The computation of basic earnings per common share is based on the weighted average common shares outstanding for the period net of treasury shares held in the Company’s nonqualified deferred compensation plan.

The computation of basic earnings per common share is based on the weighted average common shares outstanding for the period net of treasury shares held in the Company’s non-qualified deferred compensation plan.

The computation of diluted earnings per share is based on the weighted average common shares outstanding for the period and includes common share equivalents.

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The Company recognizes foreign currency transaction (gains) and losses on certain assets and liabilities that are denominated in the Mexican Peso and Canadian Dollar.

These transaction (gains) and losses are reported in other expense in the consolidated statements of operations and was $ 0.3 million for the fiscal year ended June 30, 2024, and was a nominal amount for the fiscal year ended June 30, 2023.

These transaction (gains) and losses are reported in other expense in the consolidated statements of operations and was ($ 0.4 ) and $ 0.3 million for the fiscal year ended June 30, 2025 and June 30, 2024, respectively.

New Accounting Pronouncements:

In October 2021, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2021-08, “Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers,” creating an exception to the recognition and measurement principles in ASC 805.

The amendment requires that entities apply ASC 606, “Revenue from Contracts with Customers,” rather than using fair value, to recognize and measure contracts assets and contract liabilities from contracts with customers acquired in a business combination.

The ASU is effective for fiscal years beginning after December 15, 2022, and interim periods therein.

Early adoption is permitted, including adoption in an interim period, regardless of whether a business combination occurs in that period.

The guidance should be applied prospectively;

however, an entity that elects to early adopt in an interim period should apply the amendments to all business combinations that occurred during the fiscal year that includes that interim period.

There has not been a material impact on the Company’s consolidated financial statements and related disclosures as a result of its adoption of the guidance on July 1, 2023.

In October 2023, the FASB issued ASU 2023 - 06, Disclosure Improvements:

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This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.

The Company is currently evaluating the effect of this new guidance on its consolidated financial statements and related disclosures.

The Company has adopted this new guidance on its consolidated financial statements and related disclosures by providing greater visibility of the metrics used by the CODM to measure performance by each reportable segment.

Refer to Note 4 – Business Segment Information.

The adoption of ASU 2023-07 did not have a significant impact on the Company’s consolidated financial statements

In December 2023, the FASB issued ASU 2023 - 09 , Income Taxes (Topic 740 ):

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This ASU is effective for fiscal years beginning after December 15, 2024 , and interim periods within fiscal years beginning after December 15, 2025 , with early adoption permitted.

The Company is currently evaluating the effect of this new guidance on its consolidated financial statements and related disclosures.

Use of Estimates:

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The Company has evaluated subsequent events for potential recognition and disclosure through the date the consolidated financial statements were filed.

No items were identified during this evaluation that required adjustment to or disclosure in the accompanying consolidated financial statements.

See Note 13 for the assessment of the One Big Beautiful Bill Act (the Act), which was signed into law on July 4, 2025.

No other items were identified during this evaluation that required adjustment to or disclosure in the accompanying consolidated financial statements.

NOTE 2 — ACQUISITION OF EMI INDUSTRIES, LLC

On April 18, 2024, the Company entered into and consummated the transactions contemplated by an asset purchase agreement with EMI Industries, LLC.

(EMI), a Florida-based metal and millwork manufacturer of standard and customized fixtures, displays and equipment for the convenience store, supermarket and restaurant industries, for $ 50.0 million, of which $ 0.1 million of the purchase price was retained pending a review of the acquired working capital.

The Company incurred acquisition-related costs totaling $ 1.0 million which are included in the selling and administrative expense line of the consolidated statements of operations.

The acquisition of EMI is expected to increase the Company’s total addressable markets within the grocery, quick service restaurant and convenience store verticals.

The Company funded the acquisition with a combination of cash on hand and from the $ 75 million revolving line of credit totaling $ 49.9 million.

On April 18, 2024, the Company acquired EMI Industries, LLC (EMI), a Florida-based metal and millwork manufacturer of standard and customized fixtures, displays and equipment for the convenience store, supermarket and restaurant industries, for $ 50.0 million, of which $ 0.1 million of the purchase price was retained pending a review of the acquired working capital.

In the first quarter of fiscal 2025, the company funded an additional $ 59,000 related to the final settlement of the acquired working capital.

The Company incurred acquisition-related costs totaling $ 1.0 million which are included in the selling and administrative expense line of the consolidated statements of operations during fiscal year 2024.

The acquisition of EMI will further expand LSI’s vertical market presence within Grocery, C-Store, and QSR/Restaurant, while providing a compelling entry point into other diverse markets.

The Company funded the acquisition totaling $ 49.9 million with a combination of cash on hand and from the $ 75 million revolving line of credit.

The Company accounted for this transaction as a business combination.

The Company has preliminarily allocated the purchase price of approximately $ 49.9 million which includes an estimate of customary post-closing purchase price adjustments to the assets acquired and liabilities assumed at estimated fair values, and the excess of the purchase price over the aggregate fair values is recorded as goodwill.

This preliminary allocation is subject to the final determination of the purchase price which will be finalized in fiscal 2025, as well as the potential revision resulting from the finalization of pre-acquisition tax filings.

The Company is in the process of finalizing third party valuations of certain assets, as well as finalizing the value of the assets acquired and liabilities assumed.

The Company has allocated the purchase price of approximately $ 49.9 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 of the final determination of the purchase price was finalized in fiscal 2025, as well as the potential revision resulting from the finalization of pre-acquisition tax filings.

The preliminary allocation of the purchase consideration to the fair value of the assets acquired and liabilities assumed as of April 18, 2024, is as follows:

(In thousands)

April 18, 2024 as

initially reported

period adjustments

April 18, 2024 as

Accounts Receivable

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The following table presents the details of the intangible assets acquired at the date of acquisition:

(in thousands)

Estimated Fair

Estimated Useful

(in thousands)

Indefinite life

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Furthermore, the unaudited pro forma financial information does not reflect the impact of any synergies or operating efficiencies resulting from the acquisition of EMI .

The unaudited pro forma financial information for the twelve months ended June 30, 2024, and June 30, 2023, is prepared using the acquisition method of accounting and has been adjusted to effect to the pro forma events that are:

The unaudited pro forma financial information for the twelve months ended June 30, 2024 is prepared using the acquisition method of accounting and has been adjusted to reflect the pro forma events that are:

(1) directly attributable to the acquisition;

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The fiscal 2024 unaudited pro forma operating income of $ 36.3 million excludes acquisition-related expenses of $ 1.0 million.

Twelve Month Ended

(in thousands;

Twelve Months Ended

Operating Income

NOTE 3 — ACQUISITION OF CANADA ’ S BEST HOLDINGS

On March 11, 2025, the Company acquired Canada’s Best Holdings (CBH), an Ontario Canada-based leading provider of retail fixtures and custom store design solutions for grocery, quick service restaurant, c-store, banking, and specialty retail environments, for $ 25.9 million, subject to a working capital adjustment and future potential earnout payments up to $ 7.0 million.

As of the acquisition date, total purchase consideration of $ 29.1 million includes the current fair value of the contingent consideration related to future earnout payments of $ 3.3 million.

The future earnout payments include revenue and EBITDA goals for the fiscal years ending June 30,2026 and June 30, 2027.

The Company incurred acquisition-related costs totaling $ 1.0 million which are included in the selling and administrative expense line of the consolidated statements of operations.

The Company funded the initial purchase consideration totaling $ 25.9 million with a combination of cash on hand and from the $ 75 million revolving line of credit.

The Company accounted for this transaction as a business combination.

The Company has preliminarily allocated the purchase price of $ 29.1 million, which includes an estimate of customary post-closing purchase price adjustments to the assets acquired and liabilities assumed at estimated fair values, and the excess of the purchase price over the aggregate fair values is recorded as goodwill.

This preliminary allocation is subject to the final determination of the purchase price which will be finalized in fiscal 2026, as well as potential revision resulting from the finalization of pre-acquisition tax filings and earnout payment calculations.

The Company has finalized the third-party valuations of certain assets including fixed assets and intangible assets.

The allocation of the purchase consideration to the fair value of the assets acquired and liabilities assumed as of March 11, 2025, is as follows:

(In thousands)

March 11, 2025

period adjustments

March 11, 2025

Cash and cash equivalents

Accounts receivable

Property, plant and equipment

Operating lease right-of-use assets

Intangible assets

Accounts payable

Accrued expenses

Operating lease liabilities

Other long-term liabilities

Deferred tax liability

Identifiable assets

Net purchase consideration

The gross amount of accounts receivable is $ 4.3 million.

Goodwill recorded from the acquisition of CBH is attributable to the impact of the positive cash flow from CBH in addition to expected synergies from the business combination.

The intangible assets include amounts recognized for the fair value of the trade name, non-compete agreements and customer relationships.

The fair value of the intangible assets was determined based upon the income (discounted cash flow) approach.

The following table presents the details of the intangible assets acquired at the date of acquisition:

Estimated Fair

Estimated Useful Life

(in thousands)

Non-compete agreements

Customer relationships

CBH’s post-acquisition results of operations for the period from March 11, 2025, through June 30, 2025, are included in the Company’s Consolidated Statements of Operations.

Since the acquisition date, net sales of CBH for the period from March 11, 2025, through June 30, 2025, were $ 8.5 million and operating income was $ 1.2 million.

The operating results of CBH are included in the Display Solutions Segment.

Pro Forma Impact of the Acquisition of CBH (Unaudited)

The following table represents unaudited pro forma results of operations and gives effect to the acquisition of CBH as if the transaction had occurred on July 1, 2023.

The unaudited pro forma results of operations have been prepared for comparative purposes only and are not necessarily indicative of what would have occurred had the business combination been completed at the beginning of the period or the results that may occur in the future.

Furthermore, the unaudited pro forma financial information does not reflect the impact of any synergies or operating efficiencies resulting from the acquisition of CBH .

The unaudited pro forma financial information for the twelve months ended June 30, 2025, and June 30, 2024, is prepared using the acquisition method of accounting and has been adjusted to reflect the pro forma events that are:

(1) directly attributable to the acquisition;

(2) factually supportable;

and (3) expected to have a continuing impact on the combined results.

The unaudited pro-form operating income of $ 37.8 million excludes acquisition-related expenses of $ 1.0 million.

Twelve Months Ended

(in thousands;

Operating Income

NOTE 4 — BUSINESS SEGMENT INFORMATION

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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 (formerly known as the Graphics Segment), with one executive team under the organizational structure reporting directly to the CODM with responsibilities for managing each segment.

The Company’s two operating segments are Lighting and Display Solutions, with one executive team under the organizational structure reporting directly to the CODM with responsibilities for managing each segment.

Corporate and Eliminations, which captures the Company’s corporate administrative activities, is also reported in the segment information.

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

These measurements are used to monitor performance compared to prior periods and forecasted results.

The Lighting Segment includes non-residential outdoor and indoor lighting fixtures utilizing LED light sources that have been fabricated and assembled for the Company’s markets, primarily the refueling and convenience store markets, parking lot and garage markets, quick-service restaurant market, retail and grocery store markets, the automotive market, the warehouse market, and the sports court and field market.

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The Lighting Segment also includes the design, engineering and manufacturing of electronic circuit boards, assemblies and sub-assemblies which are sold directly to customers.

The Display Solutions Segment manufactures, sells and installs exterior and interior visual image and display elements, including printed graphics, structural graphics, digital signage, menu board systems, display fixtures, refrigerated displays, and custom display elements.

These products are used in visual image programs in several markets including 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 Display Solutions Segment manufactures, sells and installs exterior and interior visual image and display elements, including printed graphics, structural graphics, digital signage, menu board systems, millwork display fixtures, refrigerated displays, food equipment, countertops, and other custom display elements.

These products are used in visual image programs in several markets including the refueling and convenience store markets, quick-service and casual restaurant market, retail and grocery store, and other retail markets.

The Company accesses its customers primarily through a direct sale model utilizing its own sales force.

Sales through distribution represent a small portion of Display Solutions sales.

The Display Solutions Segment also provides a variety of project management services to complement our display elements, such as installation management, site surveys, permitting, and content management which are offered to our customers to support our digital signage.

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Twelve Months Ended

Lighting Segment

Display Solutions Segment

Operating Income (Loss):

Lighting Segment

Display Solutions Segment

Corporate and Eliminations

June 30, 2025

Operating income

Long-term performance based compensation

Severance costs and restructuring costs

Amortization expense of acquired intangible assets

Acquisition costs

Expense on step-up basis of acquired assets

Consulting expense:

commercial growth initiatives

Adjusted operating income

Depreciation Expense

Adjusted EBITDA

(In thousands)

Twelve Months Ended

June 30, 2024

Operating income

Long-term performance based compensation

Severance costs and restructuring costs

Amortization expense of acquired intangible assets

Acquisition costs

Adjusted operating income

Depreciation Expense

Adjusted EBITDA

Twelve Months Ended

(In thousands)

Capital Expenditures:

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The segment net sales reported above represent sales to external customers.

Segment operating income, which is used in management’s evaluation of segment performance, represents net sales less all operating expenses.

Identifiable assets are those assets used by each segment in its operations.

The Company does have sales and assets in other geographic locations outside of the United States which are immaterial to the consolidated sales and assets.

The Company records a 10 % mark-up on most intersegment revenues.

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(in thousands, except per share data)

BASIC EARNINGS PER SHARE

BASIC EARNINGS PER SHAR E

Weighted average shares outstanding during the period, net of treasury shares

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Finance lease liabilities

Accrued income taxes

Other accrued expenses

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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 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 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.

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The Company identified its reporting units in conjunction with its annual goodwill impairment testing.

The Company has a total of three reporting units that contain goodwill.

One reporting unit is within the Lighting Segment and two reporting units are within the Display Solutions Segment.

The Company has a total of five reporting units that contain goodwill.

One reporting unit is within the Lighting Segment and four reporting units are within the Display Solutions Segment.

The tradename intangible assets have an indefinite life and are also tested separately on an annual basis.

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There are inherent uncertainties related to these factors and judgments in applying them to the analysis of goodwill impairment.

As of March 1, 2024 , the Company performed its annual goodwill impairment test on the three reporting units that contain goodwill.

As of March 1, 2025 , the Company performed its annual goodwill impairment test on the four reporting units that contain goodwill.

The goodwill impairment test of the reporting unit in the Lighting Segment passed with a business enterprise value of $ 30.1 million or 6 % above the carrying value of the reporting unit including goodwill.

1 unchanged sentence

The goodwill impairment test of the second reporting unit with goodwill in the Display Solutions Segment passed with an estimated business enterprise value of $ 106.6 million or 29 % above the carrying value of the reporting unit including goodwill.

The Company has two indefinite-lived intangible assets.

The Company performed its annual review of indefinite-lived intangible assets utilizing qualitative factors associated with the step zero methodology, as of March 1, 2024, and determined there was no impairment.

The goodwill impairment test of the third reporting unit with goodwill in the Display Solutions Segment passed with an estimated business enterprise value of $ 63.1 million or 39 % above the carrying value of the reporting unit including goodwill.

The Company has three indefinite-lived intangible assets.

The Company performed its annual review of two of our indefinite-lived intangible assets utilizing qualitative factors associated with the step zero methodology, as of March 1, 2025, and determined there was no impairment.

The Company engaged a third-party valuation specialist to perform a quantitative annual impairment assessment of one of our indefinite-lived intangible assets as of March 1, 2025, and determined there was no impairment.

As of March 1, 2024 , the Company performed its annual goodwill impairment test on the three reporting units that contain goodwill.

3 unchanged sentences

The Company has two indefinite-lived intangible assets.

The Company performed its annual review of indefinite-lived intangible assets as of March 1, 2023, and determined there was no impairment.

The impairment test of the first indefinite-lived intangible asset passed with a fair market value of $ 17.0 million or 399 % above its carrying value.

The impairment test of the second indefinite-lived intangible asset passed with a fair market value of and $ 10.5 million or 21 % above its carrying value.

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

(In thousands)

Lighting Segment

Balance as of June 30, 2024

Goodwill acquired

Accumulated impairment losses

1 unchanged sentence

Balance as of June 30, 2025

Goodwill acquired

Goodwill acquired, net of adjustments

Foreign currency translation

Accumulated impairment losses

Goodwill, net as of June 30, 2025

In fiscal 2024, the Company acquired EMI Industries, LLC, which impacted the amount of goodwill reported.

In fiscal 2025, the Company acquired Canada’s Best Holdings (CBH), which impacted the amount of goodwill reported.

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

1 unchanged sentence

June 30, 2024

Gross Carrying Amount

Accumulated Amortization

Gross Carrying

Amortized Intangible Assets

8 unchanged sentences

June 30, 2025

Gross Carrying Amount

Accumulated Amortization

Gross Carrying

Amortized Intangible Assets

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In September 2021, the Company amended its existing $ 100 million secured line of credit, to a $ 25 million term loan and $ 75 million remaining as a secured revolving line of credit.

Both facilities expire in the third quarter of fiscal 2026.

The principal of the term loan is repaid annually in the amount of $ 3.6 million over a five-year period with a balloon payment of the remaining balance due on the last month.

Both facilities expire in the first quarter of fiscal 2027.

The principal of the term loan is repaid annually in the amount of $ 3.6 million over a five -year period with a balloon payment of the remaining balance due last month.

Interest on both the revolving line of credit and the term loan is charged based upon an increment over the Secured Overnight Financing Rate (SOFR) or a base rate, at the Company’s option.

1 unchanged sentence

The increment over the SOFR borrowing rate fluctuates between 100 and 225 basis points, and the increment over the Base Rate fluctuates between 0 and 125 basis points, both of which depend upon the ratio of indebtedness to earnings before interest, taxes, depreciation, and amortization (“EBITDA”), as defined in the line of credit agreement.

As of June 30, 2024, the Company’s borrowing rate against its revolving line of credit was 6.5 %.The increment over the SOFR borrowing rate will be 125 basis points for the first quarter of fiscal 2025.

As of June 30, 2025, the Company’s borrowing rate against its revolving line of credit was 5.4 %.

The increment over the SOFR borrowing rate will be 100 basis points for the first quarter of fiscal 2026.

The fee on the unused balance of the $ 75 million committed line of credit fluctuates between 15 and 25 basis points.

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These dividends are paid upon the vesting of the restricted stock units when shares are issued to the award recipients.

In August 2024, the Board of Directors declared a regular quarterly cash dividend of $ 0.05 per share payable September 3, 2024, to shareholders of record August 26, 2024.

In August 2025 , the Board of Directors declared a regular quarterly cash dividend of $ 0.05 per share payable September 10, 2025 , to shareholders of record September 2, 2025 .

NOTE 11 — EQUITY COMPENSATION

35 unchanged sentences

A summary of stock option activity as of June 30, 2025, and changes during the period from July 1, 2024, through June 30, 2025, are as follows:

Weighted Average Exercise Price

Weighted Average Remaining Contractual Term

Aggregate Intrinsic

Outstanding at June 30, 2024

7 unchanged sentences

For fiscal year 2024, the Company recognized a current income tax benefit of $ 1.4 million for tax deductions related to equity compensation.

A discrete tax expense of $ 0.1 million was recognized to reduce deferred tax assets for cancelled awards and detriments in excess of the tax deductions.

Restricted Stock Units

39 unchanged sentences

The lease agreements do not contain any material residual guarantees or material variable lease payments.

The number of operating leases increased in fiscal 2024 as a result of the acquisition of EMI mostly which are building leases.

The number of operating leases increased in fiscal 2025 as a result of the acquisition of CBH;

most of CBH’s operating leases are building leases.

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 fiscal years 2024 and 2023.

The rent expense for these leases was immaterial for June 30, 2025, and 2024.

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

34 unchanged sentences

Weighted Average Discount Rate

In fiscal 2025, the Company terminated its finance lease as of June 30, 2025.

In conjunction with the termination of the finance lease, the Company entered into a new lease to expand its production capabilities in its Houston, Texas location.

The new lease is effective October 1, 2025, and expires September 30, 2035.

Maturities of Lease Liability:

Operating Lease Liabilities

Operating Subleases

Net Lease Commitments

Operating Lease

Finance Lease

Total lease payments

1 unchanged sentence

NOTE 13 — INCOME TAXES

The following information is provided for the years ended June 30:

The following information is provided for the years ended June 30, 2025, and 2024:

(In thousands)

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Officer's Compensation

Transaction costs

Uncertain tax position activity

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Net deferred income tax asset

The Company has U.S.

federal net operating loss carry forward deferred tax asset of $ 0.2 million at June 30, 2023, with no remaining operating loss carryforward as of June 30, 2024.

The Company has deferred tax assets for research and development credits of $ 0.1 million for both fiscal years ended June 30, 2024, and June 30, 2023.

Utilization of the federal net operating losses and research and development credits are limited by Internal Revenue Code Section 382 but are expected to be realized before expiration.

The Company has Canadian net operating loss carry forward deferred tax assets of $ 0.3 million for both fiscal years ending June 30, 2024, and June 30, 2023.

The $ 0.3 million deferred tax asset was from the acquisition of JSI and has a 20 year carryforward period.

The Company has state net operating loss carryovers and tax credit deferred tax assets of $ 0.1 million for both fiscal years ending June 30, 2024, and June 30, 2023.

A portion of the sate net operating loss carry forward was from the acquisition of JSI in May 2021.

The Company has deferred tax assets for US research and development credits of $ 0 and $ 0.1 million at June 30, 2025, and June 30, 2024, respectively.

The Company has Canadian net operating loss carry forward deferred tax assets of $ 0.1 and $ .3 million at June 30, 2025, and June 30, 2024, respectively.

The Company has state net operating loss carryovers and tax credit deferred tax assets of $ 0 and $ 0.1 million at June 30, 2025, and June 30, 2024, respectively.

A valuation allowance of $ 0.1 million exists at June 30, 2025, against Oregon tax credits not expected to be used.

2 unchanged sentences

The entire uncertain tax position of $ 1.8 million net of federal tax benefit, would impact the effective tax rate if recognized.

An uncertain tax position and tax indemnification receivable of $ 1.1 million was recognized as a result of the CBH acquisition.

The liability for uncertain tax position is included in Other Long-Term Liabilities.

At June 30, 2024, tax, interest, and penalties, net of potential federal tax benefits, were $ 0.6 million, $ 0.3 million, and $ 0.2 million, respectively, of the total reserve for uncertain tax positions of $ 1.1 million.

The entire uncertain tax position of $ 0.6 million, net of federal tax benefit, would impact the effective tax rate if recognized.

The liability for uncertain tax position is included in Other Long-Term Liabilities.

The Company is recording estimated interest and penalties related to potential underpayment of income taxes as a component of tax expense in the Consolidated Statements of Operations.

3 unchanged sentences

The tax activity in the liability for uncertain tax positions was as follows:

Uncertain tax positions

(In thousands)

1 unchanged sentence

Decreases - tax positions in prior period

Increase - tax positions from acquired company

Increase - tax positions in current period

Balance at end of the fiscal year

The Company files a consolidated federal income tax return in the United States, and files various combined and separate tax returns in several state and local jurisdictions, and also in Canada, Mexico, Jamaica, and Puerto Rico.

In general, the Company is no longer subject to U.S.

Federal, state, and local tax examinations by tax authorities for fiscal years ending prior to June 30, 2022.

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the U.S.

The OBBBA includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions.

There are a variety of effective dates in the Act and only certain key provisions with financial reporting implications are expected to affect our financial statements for the year ending June 30, 2026.

We expect to monetize our capitalized R&D deferred tax asset of $ 3,885 in the next fiscal year as a result of the recently enacted legislation.

NOTE 14 — SUPPLEMENTAL CASH FLOW INFORMATION

10 unchanged sentences

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 may occasionally issue a standby letter of credit in favor of third parties.

As of June 30, 2024, there were no such standby letters of credit issued.

The Company recorded a $ 3.4 million contingent liability related to the future earnout payments as part of the acquisition of Canada’s Best Holding (CBH).

(Refer to Footnote 3.) The $ 3.4 million represents the value of the earnout converted from its functional currency to USD as of June 30, 2025.

NOTE 16 — FAIR VALUE MEASUREMENTS

Fair value measurements are categorized into one of three levels based on the lowest level of significant input used:

Level 1 (unadjusted quoted prices in active markets);

Level 2 (observable market inputs available at the measurement date, other than quoted prices included in Level 1);

and Level 3 (unobservable inputs that cannot be corroborated by observable market data).

Assets and Liabilities Measured at Fair Value on a Recurring Basis

As of June 30, 2025, and 2024, the estimated fair value of the Company's cash, cash equivalents, receivables, inventory, debt, and accounts payable approximated their carrying values.

The Company recorded the estimated fair value of the contingent consideration liability assumed with the acquisition of CBH.

The estimated fair value of the contingent consideration liability is included in the Consolidated Balance Sheets within other noncurrent liabilities, totaling $3.4 million at June 30, 2025.

The earnout liability is adjusted at fair value quarterly until settled, and changes in fair value will be reported in our Consolidated Statements of Operations.

Changes in the earn-out liability measured at fair value using Level 3 inputs were as follows:

(in thousands)

Earnout liability at June 30, 2024

Addition for acquisition

Earnout liability at June 30, 2025

The following provides information regarding fair value measurements for our remaining contingent earnout liability as of June 30, 2025, according to the three-level fair value hierarchy:

Quoted Prices in Active Markets for

Identical Assets (Level 1)

Significant Other Observable

Inputs (Level 2)

Significant Unobservable Inputs

(in thousands)

Recurring Fair Value Measurement

Earnout liability

NOTE 17 — SUMMARY OF QUARTERLY RESULTS (UNAUDITED)

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Range of share prices

The total of the earnings per share for each of the four quarters does not equal the total earnings per share for the full year because the calculations are based on the average shares outstanding during each of the individual periods.

There is no difference between basic and diluted shares due to losses.

LSI INDUSTRIES INC.

3 unchanged sentences

(In thousands)

Balance Beginning

Additions Charged to Costs and Expenses

Company Acquired

Allowance for Credit Losses:

9 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures